-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AExHPFSGwDvO1Ufe6KExGJrF5OEzsBS94rPdrWw3Rm7dtGPbJXnQVSagoIe59scX uVw5G1BpO2Q+WEaLLzPBQQ== 0001047469-99-037495.txt : 19991018 0001047469-99-037495.hdr.sgml : 19991018 ACCESSION NUMBER: 0001047469-99-037495 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19991001 GROUP MEMBERS: DLZ CORP GROUP MEMBERS: GUPTA CHILDREN'S TRUST AGREEMENT GROUP MEMBERS: NARENDRA AND VINITA GUPTA LIVING TRUST GROUP MEMBERS: NARENDRA K. GUPTA GROUP MEMBERS: THE NAREN AND VINITA GUPTA FOUNDATION GROUP MEMBERS: VINITA GUPTA SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL LINK CORP CENTRAL INDEX KEY: 0000810467 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 770067742 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: SEC FILE NUMBER: 005-44579 FILM NUMBER: 99721579 BUSINESS ADDRESS: STREET 1: 217 HUMBOLDT COURT CITY: SUNNYVALE STATE: CA ZIP: 94089-1300 BUSINESS PHONE: 4087456200 MAIL ADDRESS: STREET 1: 217 HUMBOLDT COURT CITY: SUNNYVALE STATE: CA ZIP: 94089 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: DLZ CORP CENTRAL INDEX KEY: 0000860066 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 217 HUMBOLDT COURT CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087454570 MAIL ADDRESS: STREET 1: 217 HUMBOLDT COURT CITY: SUNNYVALE STATE: CA ZIP: 94089 SC 13E3/A 1 SC13E3/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13E-3 RULE 13E-3 TRANSACTION STATEMENT (PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934) (AMENDMENT NO. 2) DIGITAL LINK CORPORATION (Name of the Issuer) DLZ CORP. VINITA GUPTA NARENDRA K. GUPTA GUPTA CHILDREN'S TRUST AGREEMENT NARENDRA AND VINITA GUPTA LIVING TRUST THE NAREN AND VINITA GUPTA FOUNDATION (Name of the Person(s) Filing Statement) COMMON STOCK, NO PAR VALUE PER SHARE (Title of Class of Securities) 253856 10 8 (CUSIP Number of Class of Securities) ------------------------ VINITA GUPTA DLZ CORP. P.O. BOX 620154 WOODSIDE, CALIFORNIA 94062-0154 (408) 745-4550 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) COPIES TO: CHRISTOPHER KAUFMAN, ESQ. DAVID HEALY, ESQ. Latham & Watkins Fenwick & West LLP 135 Commonwealth Drive Two Palo Alto Square Menlo Park, California 94025 Palo Alto, California 94306 (650) 328-4600 (650) 494-0600 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DLZ Corp., a California corporation ("Purchaser") hereby amends and supplements its Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule 13E-3"), filed with the Securities and Exchange Commission on September 10, 1999, with respect to the offer to purchase any and all of the shares of Common Stock, no par value per share, of Digital Link Corporation, a California corporation, for a purchase price of $10.30 per share upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal. Capitalized terms not defined herein have the meaning ascribed to them in the Schedule 13E-3. ITEM 17. MATERIAL TO BE FILED AS EXHIBITS. Item 17 of the Schedule 13E-3 is hereby amended and replaced by the following: (a)(1) Commitment Letter dated September 9, 1999, between Comerica Bank-California and DLZ Corp. (filed as exhibit (b)(1) to the Schedule 14D-1 and incorporated herein by reference). (a)(2) Commitment Letter dated September 9, 1999, between Comerica Bank-California and DLZ Corp. (filed as exhibit (b)(2) to the Schedule 14D-1 and incorporated herein by reference). (b)(1) Fairness Opinion of Sutter Securities Incorporated, dated as of September 3, 1999 (attached as Schedule I to the Offer to Purchase and incorporated herein by reference). (b)(2) Fairness Opinion of Dain Rauscher Wessels, dated as of September 3, 1999. (b)(3) Presentation to the Special Committee of the Board of Directors of Digital Link Corporation by Dain Rauscher Wessels, dated September 2, 1999. (c)(1) Agreement and Plan of Merger dated as of September 3, 1999, between DLZ Corp. and Digital Link Corporation (filed as exhibit (c)(1) to the Schedule 14D-1 and incorporated herein by reference). (c)(2) Form of Subscription Agreement to be entered into by DLZ Corp. and certain members of the Gupta Family (filed as exhibit (c)(2) to the Schedule 14D-1 and incorporated herein by reference). (c)(3) Depositary Agreement dated September 9, 1999, between Harris Trust Company of New York and DLZ Corp. (filed as exhibit (c)(3) to the Schedule 14D-1 and incorporated herein by reference). (d)(1) Offer to Purchase (filed as exhibit (a)(1) to the Schedule 14D-1 and incorporated herein by reference). (d)(2) Letter of Transmittal (filed as exhibit (a)(2) to the Schedule 14D-1 and incorporated herein by reference). (d)(3) Notice of Guaranteed Delivery (filed as exhibit (a)(3) to the Schedule 14D-1 and incorporated herein by reference). (d)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (filed as exhibit (a)(4) to the Schedule 14D-1 and incorporated herein by reference). (d)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (filed as exhibit (a)(5) to the Schedule 14D-1 and incorporated herein by reference). (d)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (filed as exhibit (a)(6) to the Schedule 14D-1 and incorporated herein by reference). (d)(7) Text of Press Release issued jointly by Purchaser and by the Company, dated September 3, 1999 (filed as exhibit (a)(7) to the Schedule 14D-1 and incorporated herein by reference). (d)(8) Summary Advertisement, dated September 10, 1999 (filed as exhibit (a)(8) to the Schedule 14D-1 and incorporated herein by reference). (e)(1) Appraisal Rights of Dissenting Stockholders Under Chapter 13 of the California General Corporation Law (attached as Schedule IV to the Offer to Purchase and incorporated herein by reference). (f) Not applicable. (g)(1) Complaint in EDWARD ABOFF, ET AL. V. RICHARD C. ALBERDING, ET. AL., Case No. CV784389, filed with the Superior Court of the State of California for the County of Santa Clara (filed as exhibit (g)(1) to the Schedule 14D-1 and incorporated herein by reference). (g)(2) Complaint in WILLIAM LEVY, ET. AL. V. DIGITAL LINK CORPORATION, ET. AL., Case No. CV784407, filed with the Superior Court of the State of California for the County of Santa Clara (filed as exhibit (g)(2) to the Schedule 14D-1 and incorporated herein by reference). (g)(3) Complaint in ANDREW CURTIS WRIGHT, ET. AL. V. DIGITAL LINK CORPORATION, ET. AL., Case No. CV784405, filed with the Superior Court of the State of California for the County of Santa Clara (filed as exhibit (g)(3) to the Schedule 14D-1 and incorporated herein by reference). SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 1, 1999 DLZ CORP. By: /s/ VINITA GUPTA -------------------------------------- Name: Vinita Gupta President and Chief Executive Title: Officer GUPTA CHILDREN'S TRUST AGREEMENT By: /s/ VINITA GUPTA -------------------------------------- Name: Vinita Gupta Title: Trustee By: /s/ NARENDRA K. GUPTA -------------------------------------- Name: Narendra K. Gupta Title: Trustee NARENDRA AND VINITA GUPTA LIVING TRUST By: /s/ VINITA GUPTA -------------------------------------- Name: Vinita Gupta Title: Trustee By: /s/ NARENDRA K. GUPTA -------------------------------------- Name: Narendra K. Gupta Title: Trustee THE NAREN AND VINITA GUPTA FOUNDATION By: /s/ VINITA GUPTA -------------------------------------- Name: Vinita Gupta Title: Trustee By: /s/ NARENDRA K. GUPTA -------------------------------------- Name: Narendra Gupta Title: Trustee /s/ VINITA GUPTA --------------------------------------------- Vinita Gupta /s/ NARENDRA K. GUPTA --------------------------------------------- Narendra K. Gupta
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - --------- -------------------------------------------------------------------------------------------------------- (b)(3) Presentation to the Special Committee of the Board of Directors of Digital Link Corporation by Dain Rauscher Wessels, dated September 2, 1999.
EX-99.B(3) 2 EXHIBIT B(3) PROJECT DELTA - ------------------------------------------------------------------------------- DAIN RAUSCHER WESSELS SEPTEMBER 2, 1999 - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - -------------------------------------------------------------------------------
TAB CONTENTS PAGE - --- -------- ---- 1. Financial Overview and Transaction Summary 1 2. Comparable Company Analysis 8 3. Comparable Transaction Analysis 10 4. Discounted Cash Flow Analysis 13 A. Draft Fairness Opinion Letter
- ------------------------------------------------------------------------------- DAIN RAUSCHER WESSELS FINANCIAL OVERVIEW AND TRANSACTION SUMMARY - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- SUMMARY FINANCIAL INFORMATION
- - FINANCIAL OVERVIEW (1)(2) - - Cash & Investments (000s) - 1999 Revenue Estimate (000s) $36,200 $62,520 - Cash & Investments per Share - 2000 Revenue Estimate (000s) $4.16 $70,320 - Debt - 1999 EPS $0 $0.34 - Shareholders Equity (000s) - 2000 EPS $43,196 $0.35 - - 3 Year Projected Growth 10% - - - - STOCK PRICE OVERVIEW - Share Price @ 9/2/99 $8.19 - Market Capitalization (000s) $71,322 - 52 Week High $11.13 - Enterprise Value (000s) $35,122 - 52 Week Low $3.06 - Enterprise Value/TTM Rev. 0.60
- -------------- (1) Balance sheet data as of June 30, 1999. (2) Revenue, EPS and growth estimates provided by Dain Rauscher Wessels Institutional Research. - ------------------------------------------------------------------------------- 1 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- TRANSACTION SUMMARY
- - TRANSACTION SUMMARY - Offer Structure Cash Tender - Offer Price per Share $10.30 - - Total Transaction Value $89,724 - Cash and Investments on Hand $36,200 - Transaction Value Less Cash $53,524 - - Premium to Current Price 26% - Premium to 1 Week Price 25% - Premium to 1 Month Price 33% - - Enterprise Value/TTM Rev. 0.92x - Enterprise Value/1999 Est. Rev. 0.87x - Enterprise Value/2000 Est. Rev. 0.76x
- ------------------------------------------------------------------------------- 2 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- TWO YEAR DAILY STOCK PRICE AND TRADING VOLUME [GRAPH] - -------------- Source: Instinet Corporation. - ------------------------------------------------------------------------------- 3 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- LAST TWELVE MONTH DAILY STOCK PRICE AND TRADING VOLUME [GRAPH] - -------------- Source: Instinet Corporation. - ------------------------------------------------------------------------------- 4 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- AVERAGE SHARE PRICE INFORMATION
MOVING AVERAGES PERIOD PRICE VOLUME PERIOD PRICE VOLUME 5 DAY $8.79 41,260 60 DAY $8.28 39,738 10 DAY $8.27 35,070 90 DAY $8.02 36,404 20 DAY $7.90 34,095 120 DAY $7.80 41,985 30 DAY $8.18 33,523 180 DAY $7.31 46,211
- -------------- Source: Instinet Corporation. - ------------------------------------------------------------------------------- 5 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- DAILY STOCK PRICE AND TRADING VOLUME DETAIL - LAST TWELVE MONTHS
DATE DELTA VOLUME DATE DELTA VOLUME DATE DELTA VOLUME 09/03/98 $3.75 25,000 11/03/98 $3.94 9,500 01/05/99 $6.00 52,800 09/04/98 $4.38 25,400 11/04/98 $4.00 25,800 01/06/99 $6.25 25,700 09/08/98 $4.75 7,800 11/05/98 $4.25 37,700 01/07/99 $6.25 55,900 09/09/98 $4.88 21,800 11/06/98 $4.44 316,200 01/08/99 $6.06 44,000 09/10/98 $4.69 8,900 11/09/98 $4.31 34,400 01/11/99 $5.50 96,000 09/11/98 $4.44 13,500 11/10/98 $4.38 43,200 01/12/99 $5.00 84,100 09/14/98 $4.13 25,300 11/11/98 $4.50 68,400 01/13/99 $5.25 68,300 09/15/98 $4.38 17,500 11/12/98 $4.50 400,500 01/14/99 $5.00 99,600 09/16/98 $4.31 32,200 11/13/98 $4.50 188,500 01/15/99 $5.75 47,600 09/17/98 $3.88 34,600 11/16/98 $4.50 53,200 01/19/99 $5.31 62,600 09/18/98 $4.50 49,700 11/17/98 $4.31 102,100 01/20/99 $5.19 42,600 09/21/98 $4.50 11,300 11/18/98 $4.25 69,300 01/21/99 $6.06 61,300 09/22/98 $4.69 11,900 11/19/98 $4.25 26,000 01/22/99 $8.81 327,700 09/23/98 $4.78 22,500 11/20/98 $3.81 53,500 01/25/99 $8.00 200,200 09/24/98 $4.81 16,700 11/23/98 $4.06 47,200 01/26/99 $7.69 56,800 09/25/98 $4.56 47,100 11/24/98 $4.13 29,600 01/27/99 $6.75 77,300 09/28/98 $4.44 15,600 11/25/98 $4.25 24,900 01/28/99 $7.38 59,800 09/29/98 $4.25 55,500 11/27/98 $5.00 48,600 01/29/99 $7.88 96,900 09/30/98 $3.88 37,200 11/30/98 $5.50 35,600 02/01/99 $8.31 97,100 10/01/98 $3.81 67,800 12/01/98 $5.25 16,600 02/02/99 $8.31 13,600 10/02/98 $3.75 49,800 12/02/98 $5.00 42,200 02/03/99 $8.38 63,100 10/05/98 $3.56 85,400 12/03/98 $5.50 113,300 02/04/99 $7.81 46,800 10/06/98 $4.00 67,400 12/04/98 $5.56 55,200 02/05/99 $7.50 25,800 10/07/98 $3.50 88,500 12/07/98 $5.63 58,700 02/08/99 $7.63 29,300 10/08/98 $3.56 15,900 12/08/98 $5.63 35,700 02/09/99 $7.56 44,800 10/09/98 $3.56 20,600 12/09/98 $5.56 40,400 02/10/99 $7.38 14,200 10/12/98 $3.56 36,500 12/10/98 $5.69 41,800 02/11/99 $7.38 24,100 10/13/98 $3.38 62,600 12/11/98 $5.38 45,500 02/12/99 $7.50 11,900 10/14/98 $3.48 41,100 12/14/98 $5.38 36,500 02/16/99 $7.00 15,000 10/15/98 $3.23 47,100 12/15/98 $5.38 22,300 02/17/99 $6.50 30,500 10/16/98 $3.34 91,500 12/16/98 $5.38 28,500 02/18/99 $6.50 61,500 10/19/98 $3.23 39,700 12/17/98 $5.00 21,300 02/19/99 $6.50 60,000 10/20/98 $3.56 75,000 12/18/98 $5.00 50,500 02/22/99 $6.25 78,000 10/21/98 $3.56 68,500 12/21/98 $4.88 41,100 02/23/99 $6.00 75,700 10/22/98 $4.19 321,600 12/22/98 $5.00 19,600 02/24/99 $6.00 126,700 10/23/98 $3.94 42,500 12/23/98 $5.06 107,800 02/25/99 $6.00 27,300 10/26/98 $4.13 19,800 12/24/98 $5.25 16,000 02/26/99 $6.13 22,000 10/27/98 $4.25 32,300 12/28/98 $5.19 35,400 03/01/99 $6.06 27,800 10/28/98 $4.06 26,900 12/29/98 $5.06 21,700 03/02/99 $6.19 23,600 10/29/98 $4.25 800 12/30/98 $5.13 34,900 03/03/99 $6.25 21,800 10/30/98 $4.00 80,800 12/31/98 $5.25 50,500 03/04/99 $6.25 26,900 11/02/98 $3.88 25,000 01/04/99 $5.56 17,800 03/05/99 $6.25 32,800 DATE DELTA VOLUME DATE DELTA VOLUME DATE DELTA VOLUME 03/08/99 $6.13 26,300 05/06/99 $7.53 39,900 07/07/99 $8.13 25,800 03/09/99 $6.13 140,100 05/07/99 $7.69 39,800 07/08/99 $8.63 95,600 03/10/99 $6.44 43,200 05/10/99 $7.56 37,700 07/09/99 $9.06 79,800 03/11/99 $6.34 22,300 05/11/99 $7.69 40,600 07/12/99 $11.13 144,600 03/12/99 $6.31 23,900 05/12/99 $7.44 15,200 07/13/99 $10.25 47,300 03/15/99 $6.25 19,300 05/13/99 $7.69 44,800 07/14/99 $9.50 322,600 03/16/99 $6.00 28,300 05/14/99 $7.50 23,100 07/15/99 $9.75 87,700 03/17/99 $6.31 18,800 05/17/99 $7.44 16,600 07/16/99 $9.50 51,000 03/18/99 $6.50 43,700 05/18/99 $7.81 44,600 07/19/99 $10.63 130,300 03/19/99 $6.38 21,800 05/19/99 $7.88 49,200 07/20/99 $9.75 56,300 03/22/99 $7.00 33,600 05/20/99 $7.50 26,200 07/21/99 $9.94 30,100 03/23/99 $7.44 43,400 05/21/99 $7.75 29,300 07/22/99 $9.38 24,900 03/24/99 $7.25 16,700 05/24/99 $7.44 16,500 07/23/99 $9.50 40,100 03/25/99 $7.19 129,600 05/25/99 $7.31 40,200 07/26/99 $9.38 22,400 03/26/99 $7.13 17,900 05/26/99 $7.44 21,100 07/27/99 $9.25 32,400 03/29/99 $6.38 22,900 05/27/99 $7.41 10,300 07/28/99 $9.00 25,800 03/30/99 $6.38 47,400 05/28/99 $7.34 4,200 07/29/99 $8.50 22,500 03/31/99 $6.00 33,000 06/01/99 $7.38 4,200 07/30/99 $8.75 25,000 04/01/99 $6.25 33,300 06/02/99 $7.25 24,200 08/02/99 $8.88 51,200 04/05/99 $7.50 95,100 06/03/99 $7.38 20,500 08/03/99 $8.44 26,500 04/06/99 $7.03 38,700 06/04/99 $7.56 26,400 08/04/99 $7.94 56,800 04/07/99 $7.06 67,000 06/07/99 $7.75 19,300 08/05/99 $7.75 21,100 04/08/99 $7.00 6,200 06/08/99 $7.38 1,500 08/06/99 $7.75 5,600 04/09/99 $7.19 24,500 06/09/99 $8.06 43,000 08/09/99 $7.94 43,200 04/12/99 $6.94 35,500 06/10/99 $8.00 18,000 08/10/99 $7.56 22,000 04/13/99 $7.13 31,000 06/11/99 $7.97 9,000 08/11/99 $7.63 7,600 04/14/99 $7.25 85,900 06/14/99 $7.63 7,000 08/12/99 $7.63 31,200 04/15/99 $8.13 301,500 06/15/99 $7.50 11,300 08/13/99 $7.56 20,400 04/16/99 $7.75 81,000 06/16/99 $7.50 21,200 08/16/99 $7.56 28,000 04/19/99 $7.25 62,800 06/17/99 $7.25 10,100 08/17/99 $7.25 88,800 04/20/99 $7.94 133,300 06/18/99 $7.06 13,800 08/18/99 $7.38 62,900 04/21/99 $7.88 59,400 06/21/99 $7.28 5,600 08/19/99 $7.13 21,500 04/22/99 $7.94 97,900 06/22/99 $7.50 15,900 08/20/99 $7.28 9,000 04/23/99 $7.88 78,800 06/23/99 $7.06 17,700 08/23/99 $7.44 28,200 04/26/99 $7.94 52,300 06/24/99 $7.47 5,400 08/24/99 $7.75 11,400 04/27/99 $7.88 34,400 06/25/99 $7.19 2,600 08/25/99 $8.00 65,100 04/28/99 $7.88 38,800 06/28/99 $7.63 13,300 08/26/99 $8.25 30,700 04/29/99 $7.63 15,200 06/29/99 $7.31 17,800 08/27/99 $8.38 44,200 04/30/99 $7.25 124,300 06/30/99 $7.50 17,500 08/30/99 $9.50 57,200 05/03/99 $7.00 23,400 07/01/99 $8.00 38,700 08/31/99 $9.13 22,900 05/04/99 $7.13 15,000 07/02/99 $8.06 31,900 09/01/99 $8.75 30,600 05/05/99 $7.19 23,100 07/06/99 $8.06 25,800 09/02/99 $8.19 51,400
- -------------- Source: Instinet Corporation. - ------------------------------------------------------------------------------- 6 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- HISTORICAL EPS PERFORMANCE: ACTUAL VERSUS ESTIMATED
- ----------------------------------------------------------------------------------------------- OVER/(UNDER) SHARE PRICE QUARTER INITIAL LAST ACTUAL -------------------- --------------------------- ENDED ESTIMATE ESTIMATE EPS TO INITIAL TO LAST BEFORE AFTER % CHANGE - ----------------------------------------------------------------------------------------------- 3/31/98 ($0.03) ($0.01) $0.01 $0.04 $0.02 $11.00 $10.06 -8.5% - ----------------------------------------------------------------------------------------------- 6/30/98 $0.05 ($0.06) ($0.14) ($0.19) ($0.08) $7.75 $6.88 -11.2% - ----------------------------------------------------------------------------------------------- 9/30/98 ($0.13) $0.00 ($0.09) $0.04 ($0.09) $3.88 $4.00 3.1% - ----------------------------------------------------------------------------------------------- 12/31/98 $0.06 $0.00 $0.05 ($0.01) $0.05 $5.25 $7.88 50.1% - ----------------------------------------------------------------------------------------------- 3/31/99 $0.00 $0.01 $0.11 $0.11 $0.10 $6.00 $7.25 20.8% - ----------------------------------------------------------------------------------------------- 6/30/99 $0.05 $0.08 $0.11 $0.06 $0.03 $7.50 $8.75 16.7% - -----------------------------------------------------------------------------------------------
- ----------------- (1) Initial Estimate reflects consensus estimate on first day of quarter, e.g. January 1 for March 31 quarter. (2) Last Estimate reflects last consensus estimate before actual results were announced. (3) Before Share Price reflects the share price on last day of quarter. (4) After Share Price reflects the share price on the first day of the first month after actual results were announced. - ------------------------------------------------------------------------------- 7 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- COMPARABLE COMPANY ANALYSIS
----------------------- -------------------------------- STOCK PRICE INFORMATION EPS AND P/E DATA ----------------------- -------------------------------- PRICE @ 52 WEEK RANGE EPS P/E -------------- -------------- -------------- Company Symbol FYE 9/2/99 High Low CY 99 CY 00 CY 99 CY 00 - --------------------------------------------- ------ --- ------- ------ ----- ----- ----- ----- ----- - -------------------------------------------------------------------------------------------------------------------------- DELTA DEC $8.19 $11.13 $3.94 $0.34 $0.35 24.1x 23.4x - -------------------------------------------------------------------------------------------------------------------------- 3Com (R) COMS May $27.06 $51.13 $20.00 $0.96 $1.46 28.2x 18.5x ACT Networks (R) ANET Jun $10.63 $25.63 $4.25 ($0.22) $0.57 NM 18.6x ADTRAN (R) ADTN Dec $38.63 $42.69 $15.63 $1.20 $1.55 32.2x 24.9x Digi International DGII Sep $11.50 $16.38 $6.00 $0.38 $0.80 30.3x 14.4x Larscom Inc. LARS Dec $2.28 $4.25 $0.94 $0.50 NA 4.6x NM Premisys Communications (R) PRMS Jun $6.75 $16.00 $5.38 $0.37 $0.45 18.2x 15.0x Verilink Corp. VRLK Jun $2.16 $6.75 $2.00 ($0.55) $0.22 NM 9.8x Visual Networks (M)(R) VNWK Dec $39.00 $46.38 $17.00 $0.62 $0.82 62.9x 47.6x ------------------------------------------------------------------------------------ MEAN 29.4x 21.3x MEDIAN 29.2x 18.5x ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ EXCLUDING VISUAL NETWORKS AND ADTRAN MEAN 20.3x 15.3x MEDIAN 23.2x 15.0x ------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------ VERILINK CORP AND LARSCOM, INC. MEAN 4.6x 9.8x MEDIAN 4.6x 9.8x ------------------------------------------------------------------------------------ - -------------------------------------------------------------------------------------------------------------------------- DELTA AT OFFER PRICE DEC $10.30 $11.13 $3.94 $0.34 $0.35 30.3x 29.4x - -------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------ ----------------------- ENTERPRISE VALUE & REVENUE DATA P/E TO GROWTH MULTIPLES ------------------------------------------------------------ ----------------------- ENTERPRISE MARKET ENTERPRISE REVENUE VALUE / REV. SHARES 3-YR% -------------- -------------- Company Cap. Value CY 99 CY 00 CY 99 CY 00 Out. Growth 1999 2000 - --------------------------------------------- ------ ---------- ----- ----- ----- ----- ------ ------- ---- ---- - ---------------------------------------------------------------------------------------------------------------------------------- DELTA $71 $35 $63 $70 0.6x 0.5x 8.7 10% 241% 234% - ---------------------------------------------------------------------------------------------------------------------------------- 3Com (R) $10,140 $9,226 $5,721 $6,295 1.6x 1.5x 374.7 25% 113% 74% ACT Networks (R) $107 $70 $54 $66 1.3x 1.1x 10.1 30% NM 62% ADTRAN (R) $1,489 $1,505 $355 $401 4.2x 3.8x 38.6 23% 143% 111% Digi International $169 $124 $196 $215 0.6x 0.6x 14.7 10% 303% 144% Larscom Inc. $42 $25 $103 NA 0.2x NM 18.3 27% 17% NM Premisys Communications (R) $166 $153 $83 NA 1.8x NM 24.6 15% 122% 100% Verilink Corp. $36 $15 $79 $92 0.2x 0.2x 16.7 34% NM 29% Visual Networks (M)(R) $848 $801 $78 $102 10.2x 7.9x 21.8 50% 126% 95% -------------------------------------------------------------------------------------------- MEAN 2.5x 2.5x 137% 88% MEDIAN 1.4x 1.3x 124% 95% -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- EXCLUDING VISUAL NETWORKS AND ADTRAN MEAN 1.0x 0.8x 138% 82% MEDIAN 1.0x 0.8x 117% 74% -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- VERILINK CORP AND LARSCOM, INC. MEAN 0.2x 0.2x 17% 29% MEDIAN 0.2x 0.2x 17% 29% -------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- DELTA AT OFFER PRICE $90 $54 $63 $70 0.9x 0.8x 8.7 10% 303% 294% - ----------------------------------------------------------------------------------------------------------------------------------
- --------------------------- Revenue and earnings estimates and growth rates are provided by Dain Rauscher Wessels Institutional Research, First Call and various Wall Street sources. (M) DRW managed a public offering of this company within the last three years. (R) DRW provides research on this company. - ------------------------------------------------------------------------------- 8 DAIN RAUSCHER WESSELS COMPARABLE COMPANY ANALYSIS - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- COMPARABLE COMPANY ANALYSIS - STOCK PRICE PERFORMANCE INDEX [GRAPH] - --------------------------- (1) Indexed Price per Share represents the value of $1.00 invested on 1/2/98. - ------------------------------------------------------------------------------- 9 DAIN RAUSCHER WESSELS COMPARABLE TRANSACTION ANALYSIS - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- COMPARABLE TRANSACTION ANALYSIS - ACQUISITIONS OF PUBLIC NETWORK TECHNOLOGY COMPANIES
PURCHASE PRICE PREMIUM -------------------------------- DATE DATE TRANSACTION ENT. VALUE/ ONE DAY ONE WEEK FOUR WEEKS ANNOUNCED EFFECTIVE ACQUIROR NAME TARGET NAME VALUE ($000S) TTM SALES PRIOR PRIOR PRIOR - --------- --------- ----------------- -------------------- ------------- ------------ ------- --------- ---------- 8/24/99 Pending Nortel Periphonics $436 3.2 x 15.8% 34.8% -32.2% Networks Corp. Corp. 8/17/99 Pending Lucent Excel Switching $1,534 12.4 x 35.1% 46.7% 9.9% Technologies Corp. Inc. 8/10/99 Pending Lucent International $3,052 17.8 x 13.6% 23.9% 25.4% Technologies Network Inc. Services 7/15/99 Pending Lucent Spectran Corp. $98 1.3 x -21.7% -22.6% 5.1% Technologies Inc. 6/22/99 Pending Newbridge Stanford $392 2.4 x 12.4% 27.0% 37.9% Networks Telecommunications, Corp. Inc. 6/1/99 7/13/99 Intel Corp. Dialogic Corp. $817 2.3 x 31.8% 34.4% 57.5% 4/13/99 6/25/99 Cisco Geotel $2,042 39.1 x 36.7% 33.5% 42.1 Systems Communications Inc. Corporation 4/5/99 7/16/99 Lucent Mosaix Inc $157 1.4 x 35.6% 43.1% 39.8% Technologies Inc. 3/4/99 8/10/99 Intel Corp. Level One $2,482 10.6 x 52.3% 40.7% 35.8% Communications Inc. 3/2/99 4/27/99 Alcatel Sa Xylan Corp. $1,823 5.7 x 37.4% 42.3% 89.1% (Remaining 93.5% Interest) 1/13/99 6/24/99 Lucent Ascend $21,423 16.3 x 29.9% 39.4% 61.7% Technologies Communications, Inc. Inc. 10/19/98 3/1/99 Intel Corp. Shiva Corp. $182 1.1 x 41.2% 92.0% 52.4% 8/3/98 10/20/98 Ascend Stratus Computer $970 1.7 x 24.4% 63.2% 43.6% Communications, Inc. Inc 7/28/98 11/5/98 Cisco Systems Summa Four Inc. $116 2.7 x 31.6% 45.2% 61.9% Inc. 6/22/98 9/25/98 Cabletron Netvantage Inc. $127 8.9 x 142.4% 120.6% 60.9% Systems, Inc. 6/15/98 8/31/98 Northern Bay Networks Inc $6,673 2.7 x 6.2% -6.7% 14.3% Telecom Ltd. 6/4/98 9/7/98 Alcatel Dsc Communications Alsthom Sa Corp. $4,685 3.3 x 35.6% 58.2% 48.3% 4/27/98 5/29/98 Lucent Yurie Systems Inc $1,044 16.7 x 11.1% 17.4% 47.4% Technologies Inc. 2/16/98 8/4/98 Tellabs Inc Coherent $664 1.3 x 30.4% 43.2% 81.4% Communications Sys 7/30/97 9/18/97 Fujitsu Ltd. Amdahl Corp $925 0.9 x 5.0% 22.5% 40.7% (Remaining 55% Interest) 7/28/97 1/21/98 Intel Corp. Chips And $405 2.2 x 25.0% 32.1% 69.7% Technologies Inc. 7/17/97 9/29/97 Lucent Octel $1,801 2.9 x 15.9% 37.4% 40.5% Technologies Communications Inc. Corporation 8/31/97 6/30/97 Ascend Cascade $3,529 10.2 x -1.2% 13.0% -9.2% Communications, Communications, Inc Corp 2/26/97 6/12/97 3Com Us Robotics $6,511 3.2 x 29.3% 31.4% 18.0% Corporation Corporation - ------------------------------------------------------------------------------------------------------------------------------ Mean $2,579 7.1 x 28.2% 38.0% 39.3% Median $1,007 3.0 x 29.6 36.1% 41.4% High $21,423 39.1 x 142.4% 120.6% 89.1% Low $98 0.9 x -21.7% -22.6% -32.2% - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ DELTA AT OFFER PRICE $89.7 0.9 x 26.0% 25.0% 33.0% - ------------------------------------------------------------------------------------------------------------------------------
- ---------- Source: CommScan LLC - ------------------------------------------------------------------------------- 10 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- COMPARABLE TRANSACTION ANALYSIS - GOING PRIVATE TRANSACTIONS
TRANSACTION PREMIUM DATE DATE VALUE ENTERPRISE PAID ANNOUNCED EFFECTIVE TARGET NAME ACQUIRER NAME ($MILS) VALUE/SALE 1 WEEK - --------- --------- ---------------------------- -------------------- ------------- ------------ -------- 5/14/99 Pending Kentek Information Systems, Inc. Undisclosed Acquiror $41.19 1.1x 8.7% 5/12/99 6/16/99 Optek Technology, Inc. Dyson-Kissner-Moran Corp. $190.97 2.1x 47.8% 5/7/99 Pending Instron Corp. Kirtland Capital Partners $182.09 0.9x 29.4% 3/31/99 Pending Precision Systems, Inc. Anschutz Corp. $27.23 0.8x 23.1% 3/8/99 Pending Enstar Inc. (Remaining 35%) Investor Group $12.79 0.8x 58.7% 1/20/99 Pending Integrated Circuit Systems Inc. Investor Group $259.19 1.4x 14.9% 11/18/98 Failed Oak Technology Inc Investors (David Tsang) $182.95 1.0x 20.0% 12/19/97 5/1/98 Ipc Information Systems Inc Cable Systems Holding, (90% Stake) Llc. $292.43 1.2x 31.3% 7/21/97 2/27/98 Zilog, Inc. Texas Pacific Group $404.32 1.3x -9.1% 1/23/97 5/19/97 Amphenol Corp. (90% Stake) Kohlberg Kravis Roberts & Co. $1,346.45 1.9x 16.9% 12/2/96 Withdrawn Zycon Corp. Hicks, Muse, Tate, And Furst $179.66 1.0x 35.4% 4/6/95 8/31/95 Intermetrics, Inc. Apollo Holding, Inc. $27.20 0.5x 60.0% 12/6/94 3/19/95 General Computer Corporation Inc. Welsh, Carson, Anderson & Stowe $16.42 NA 34.6% 10/18/93 3/1/94 Corporate Software Inc. Investor Group $94.33 0.2x 36.4% --------------------------------------- MEAN 1.1x 29.1% MEDIAN 1.0x 30.3% HIGH 2.1x 60.0% LOW 0.2x -9.1% --------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- DELTA AT OFFER PRICE $89.72 0.9x 25.0% - ---------------------------------------------------------------------------------------------------------------------------
- ---------- Source: CommScan LLC - ------------------------------------------------------------------------------ 11 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- COMPARABLE TRANSACTION ANALYSIS - ACQUISITIONS OF UNDER-PERFORMING(1) TECHNOLOGY COMPANIES
TRANSACTION DATE DATE VALUE ENTERPRISE ANNOUNCED EFFECTIVE ACQUIROR NAME TARGET NAME ($MILS) VALUE/SALES - --------- --------- -------------------------------------- ---------------------------------- ----------- ----------- 7/28/99 pending Dicom Group Plc Kofax Image Products $70.5 1.6x 7/7/99 pending Saturn Electronics & Engineering, Inc. Smartflex Systems, Inc. $67.9 0.6x 6/25/99 pending Answerthink Consulting Group, Inc. Think New Ideas, Inc. $192.8 4.3x 6/22/99 pending S3 Inc. Diamond Multimedia Systems Inc. $172.2 N/A 5/12/99 6/16/99 Dyson-Kissner-Moran Corp. Optek Technology, Inc. $191.0 2.1x 5/11/99 pending Quantum Corp Meridian Data Inc $77.6 3.7x 5/10/99 pending Act Manufacturing Inc. Omc Industries Inc. $66.2 0.2x 4/30/99 8/3/99 Box Hill Systems Corp Artecon Inc $60.7 0.9x 3/30/99 5/3/99 Sterling Software Inc. Interlink Computer Sciences Inc. $58.0 1.3x 1/13/99 pending Undisclosed Acquiror Axsys Technologies, Inc. $80.1 0.7x 12/14/98 5/13/99 3Dfx Interactive, Inc. Stb Systems Inc. $160.0 0.6x 9/16/98 11/6/98 Adc Telecommunications, Inc. Teledata Communications Ltd. $197.9 2.4x 9/13/98 pending Winbond Electronics Corp. Information Storage Devices Inc. $74.4 1.6x 7/28/98 11/5/98 Cisco Systems Inc. Summa Four Inc. $116.2 2.7x 6/4/98 11/30/98 World Access Inc. Telco Systems Inc. $137.4 1.2x 3/9/98 4/13/98 Ask Asa Proxima Corp. $82.0 0.5x 11/25/97 2/3/98 Davel Communications Group Inc Communications Central, Inc. $102.4 1.0x 4/15/97 6/30/97 Lemout & Hauspie Speech Products Nv Kurzweil Applied Intelligence Inc. $53.4 6.0x 4/10/97 7/2/97 Compaq Computer Corp. Microcom Inc $280.0 1.6x -------------------------- MEAN: 1.8x MEDIAN: 1.4x HIGH: 6.0x LOW: 0.2x -------------------------- - --------------------------------------------------------------------------------------------------------------------------- DELTA AT OFFER PRICE $89.7 0.9x - --------------------------------------------------------------------------------------------------------------------------- PREMIUM --------------------------- YEARS FROM DATE ONE DAY ONE WEEK 4 WEEKS CALC. ANNUAL IPO TO ANNOUNCED PRIOR PRIOR PRIOR RETURN ACQUISITION - --------- ------- -------- ------- ------------ ----------- 7/28/99 36.0% 30.8% 32.5% (7.2%) 1.8 7/7/99 108.7% 217.0% 197.3% (26.7%) 3.9 6/25/99 17.7% 13.0% 40.0% (0.3%) 2.6 6/22/99 (13.7%) 21.7% (3.7%) (25.0%) 4.2 5/12/99 29.9% 47.8% 96.2% 2.1% 1.9 5/11/99 169.0% 189.6% 220.5% (20.5%) 6.1 5/10/99 24.0% 42.9% 57.8% (10.9%) 5.4 4/30/99 1.1% 6.7% 140.0% (59.8%) 2.1 3/30/99 5.7% 21.7% 133.3% (36.8%) 2.6 1/13/99 91.6% 81.8% 60.0% (1.5%) 2.6 12/14/98 108.0% 96.3% 96.3% 3.7% 3.8 9/16/98 17.8% 46.5% 53.7% (1.1%) 6.4 9/13/98 12.1% 15.4% 6.2% (18.9%) 3.6 7/28/98 31.6% 45.2% 61.9% (8.8%) 4.8 6/4/98 29.5% 20.8% 20.8% (15.8%) 1.8 3/9/98 32.3% 29.4% 22.2% (7.0%) 5.1 11/25/97 23.5% 32.3% 13.5% (17.2%) 4.1 4/15/97 75.0% 61.5% 57.0% (25.8%) 3.7 4/10/97 54.8% 91.2% 42.9% (16.8%) 1.7 ----------------------------------------------------- 45.0% 58.5% 71.0% (15.5%) 3.6 29.9% 42.9% 57.0% (15.8%) 3.7 169.0% 217.0% 220.5% 3.7% 6.4 (13.7%) 6.7% (3.7%) (59.8%) 1.7 ----------------------------------------------------- - ------------------------------------------------------------------ DELTA AT OFFER PRICE 26.0% 25.0% 33.0% (7.4%) 5.6 - ------------------------------------------------------------------
- ------------------ (1) Under-performing was defined as a compound annual share price return since IPO of less than 10%. Source: CommScan LLC - -------------------------------------------------------------------------------- 12 DAIN RAUSCHER WESSELS DISCOUNTED CASH FLOW ANALYSIS - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS
- --------------------------------------------------------------------------------------------------------------------------- TERMINAL MULTIPLE(1) 1.0x - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- CAPITAL ASSET PRICING MODEL (CAPM): Comparable Company Beta (2) 1.5 5 Year Treasury Note (Maturity-September 2004) = Rf(3) 6.0% Average Market Risk Premium = Rm-Rf(4) 13.4% Rate of Return on a Market Portfolio of Micro-Cap Stocks (Systematic Market Risk) = Rm(5) 19.4% CAPM CALCULATION(6): = Rf+(Rm-Rf) * Beta CAPM MARKET DISCOUNT RATE FOR CASH FLOWS AND TERMINAL VALUE(7): 26.1% - ---------------------------------------------------------------------------------------------------------------------------
- ----------------------- (1) Terminal revenue multiple has been normalized to reflect comparable company multiples (2) Average Beta as calculated by Bloomberg as of 8/24/99 adjusted up 25% to reflect incremental risk of private venture backed business. (3) Source: Wall Street Journal as of August 24, 1999. (4) Source: Richard Brealy and Stewart Meyers, "Principles of Corporate Finance (The McGraw-Hill Companies, Inc., 1996). (5) Source: Richard Brealy and Stewart Meyers, "Principles of Corporate Finance (The McGraw-Hill Companies, Inc., 1996). (6) Definition: At theoretical equilibrium, a security's expected rate of return equals the expected return of a risk-less security plus a premium for risk taking. (7) Reflects implied rate of return for investors investing in Delta's stock - ------------------------------------------------------------------------------- 13 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS - CONTINUED
----------------------------- ---------------------------------------------------------------- ACTUAL MANAGEMENT PROJECTIONS ----------------------------- ---------------------------------------------------------------- YEAR ENDING 6 MONTHS ENDING YEAR ENDING ------------------- ------------------- ----------------------------------------------------- INCOME STATEMENT 12/31/97 12/31/98 6/30/99 12/31/99 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- --------- Net sales 66,008 54,627 30,855 33,145 64,000 72,000 83,000 91,300 100,430 Cost of sales 29,078 31,442 14,345 14,955 29,300 33,120 38,180 41,998 46,198 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- --------- Gross profit 36,930 23,185 16,510 18,190 34,700 38,880 44,820 49,302 54,232 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- --------- Total operating expense 36,675 36,101 15,028 15,472 30,500 33,000 37,800 42,226 46,449 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- --------- EBIT 255 (12,916) 1,482 2,718 4,200 5,880 7,020 7,076 7,783 ASSUMPTIONS Revenue Growth 26.7% -17.2% NA NA 17.2% 12.5% 15.3% 10.0% 10.0% COGS as a % of Revenue 44.1% 57.6% 46.5% 45.1% 45.8% 46.0% 46.0% 46.0% 46.0% Gross profit as a % of Revenue 55.9% 42.4% 53.5% 54.9% 54.2% 54.0% 54.0% 54.0% 54.0% R&D as a % of Revenue 16.7% 23.0% 16.8% 17.2% 17.0% 16.7% 17.1% 17.0% 17.0% SG&A as a % of Revenue 33.4% 34.3% 31.9% 29.4% 30.6% 29.2% 28.4% 29.3% 29.3% Other Charges as a % of Revenue 5.5% 8.8% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% OPEX as a % of Revenue 55.6% 66.1% 48.7% 46.7% 47.7% 45.8% 45.5% 46.3% 46.3% EBIT as a % of Revenue 0.4% -23.6% 4.8% 8.2% 6.6% 8.2% 8.5% 7.8% 7.7% ----------------------------- ---------------------------------------------------------------- ACTUAL MANAGEMENT PROJECTIONS ----------------------------- ---------------------------------------------------------------- YEAR ENDING 6 MONTHS ENDING YEAR ENDING ------------------- ------------------- ----------------------------------------------------- FREE CASH FLOW 12/31/97 12/31/98 6/30/99 12/31/99 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- --------- EBIT 255 (12,916) 1,482 2,718 4,200 5,880 7,020 7,076 7,783 Taxes on EBIT 34% 87 (4,391) 504 924 1,428 1,999 2,387 2,406 2,646 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- --------- Net Income Unlevered Firm 168 (8,525) 978 1,794 2,772 3,881 4,633 4,670 5,137 Change in Working Capital (1,476) 2,270 3,327 17 3,344 100 100 (784) (976) Less Capital Expenditures (2,402) (2,616) (490) (884) (1,374) (1,656) (1,500) (1,500) (1,500) Plus Depreciation 1,224 3,359 870 786 1,656 1,556 1,400 1,300 1,200 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- --------- Free Cash Flow (2,486) (5,512) 4,685 1,712 6,398 3,881 4,633 3,686 3,861
- -------------------------------------------------------------------------------- 14 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS - CONTINUED -------------------------------------------------------------- MANAGEMENT PROJECTIONS -------------------------------------------------------------- 6 MONTHS YEAR ENDING -------- ------------------------------------------------ 6/30/99 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 ------- -------- -------- -------- -------- -------- Free Cash Flow - $1,712 $3,881 $4,633 $3,686 $3,861 Year (6/30/99 = Year 0) - 0.5 1.5 2.5 3.5 4.5 Discount Factor - 0.890 0.705 0.559 0.444 0.352 Present Value of Future Free Cash Flows - $1,524 $2,737 $2,591 $1,635 $1,358 Discount rate 26%
Year 2003 Projected Revenue $100,430 Terminal Value Revenue Multiple 1.0x Terminal Value $100,430 Present Value of Terminal Value $35,327 Presnt Value of Firm = Sum of P.V.s of future free cash flows and terminal value $45,172 Plus Market Value of Cash and Marketable Securities $36,200 DCF Valuation of Equity $81,372 Fully Diluted Shares (000s) 8,711.07 DCF Valuation of Equity per Share $9.34
- ------------------------------------------------------------------------------- 15 DAIN RAUSCHER WESSELS - ------------------------------------------------------------------------------- [LOGO] PROJ AUGUST - ------------------------------------------------------------------------------- DISCOUNTED CASH FLOW ANALYSIS - CONTINUED YEAR 2003 TERMINAL VALUE REVENUE MULTIPLE
0.50x 0.60x 0.70x 0.80x 0.90x 1.00x 1.10x 1.20x 1.30x 1.40x 1.50x ------------------------------------------------------------------------------------------------------------- 24% $7.52 $7.96 $8.39 $8.83 $9.27 $9.70 $10.14 $10.58 $11.02 $11.45 $11.89 25% $7.42 $7.84 $8.26 $8.68 $9.10 $9.53 $9.95 $10.37 $10.79 $11.21 $11.64 26% $7.32 $7.73 $8.14 $8.54 $8.95 $9.36 $9.76 $10.17 $10.58 $10.98 $11.39 27% $7.23 $7.62 $8.02 $8.41 $8.80 $9.19 $9.59 $9.98 $10.37 $10.76 $11.16 DISCOUNT 28% $7.14 $7.52 $7.90 $8.28 $8.66 $9.04 $9.42 $9.79 $10.17 $10.55 $10.93 RATE 29% $7.06 $7.42 $7.79 $8.15 $8.52 $8.89 $9.25 $9.62 $9.98 $10.35 $10.72 30% $6.97 $7.33 $7.68 $8.04 $8.39 $8.74 $9.10 $9.45 $9.80 $10.16 $10.51 31% $6.90 $7.24 $7.58 $7.92 $8.26 $8.60 $8.94 $9.29 $9.63 $9.97 $10.31 32% $6.82 $7.15 $7.48 $7.81 $8.14 $8.47 $8.80 $9.13 $9.46 $9.79 $10.12 33% $6.75 $7.07 $7.39 $7.71 $8.02 $8.34 $8.66 $8.98 $9.30 $9.62 $9.94 34% $6.68 $6.99 $7.30 $7.60 $7.91 $8.22 $8.53 $8.84 $9.15 $9.45 $9.76 -------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- 16 DAIN RAUSCHER WESSELS DRAFT FAIRNESS OPINION LETTER - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----