EX-99.(C)(3) 5 a2115553zex-99_c3.htm EXHIBIT 99(C)(3)

Exhibit (C)(3)

Strictly Private and Confidential

 

[GRAPHIC OMITTED]

 

Project Pyramid

Summary Board Materials

 

March 5, 2003

 

 

 

I.                 “Market Check” Process Overview

 

•                  On December 2, 2002, the Special Committee of Independent Directors of Pyramid (or the “Company”) retained Rothschild to conduct a “Market Check” for the Company after having received an indication of interest from The Riverside Company, a New York based private equity firm

 

•                  Rothschild worked with the Special Committee and its advisors to identify logical strategic and financial purchasers for Pyramid and created summary descriptive materials for distribution to them

 

•                  With the prior approval of the Special Committee, Rothschild contacted eighteen (18) potential purchasers of Pyramid

 

•                  Twelve (12) potential financial purchasers

 

•                  Six (6) potential strategic purchasers

 

•                  Rothschild distributed summary descriptive materials to eleven (11) of the potential purchasers (each of whom had signed a Confidentiality Agreement)

 

 

Page 2

 

I.                 “Market Check” Process Overview

 

•                  Rothschild received preliminary indications of interest from seven (7) potential financial purchasers and no indications of interest from the contacted strategic purchasers

 

•                  Bidder A, Bidder B, Bidder C, Leonard Green & Partners, Bidder D, Bidder E and Bidder F [**]

 

•                  Based on preliminary indications of interest, the Board of Directors and their advisors chose seven (7) (including The Riverside Company) potential purchasers to continue to the second round of bidding

 

•                  Bidder A, Bidder B, Bidder C, Leonard Green & Partners, Bidder D, The Riverside Company and Bidder F [**]

 

•                  Bidder E [**] was notified that they were no longer in the process

 

[**]  The names of certain parties contained in this exhibit have been replaced with generic references.  Such names have been filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

Page 3

 

I.                 “Market Check” Process Overview

 

•                  Rothschild and Pyramid Management offered the seven (7) potential financial purchasers the ability to attend the High School Division National Championships in Orlando, Fl (Disney World) on February 8th & 9th (five (5) of the purchasers came to Orlando)

 

•                  Management Presentations began in Phoenix on January 28th and continued through February 25th

 

•                  Data room visits were held at Rothschild offices from February 5th – 26th

 

•                  Rothschild notified the seven (7) potential purchasers that second round indications of interest were due February 26th at 12pm (EST)(1)

 

•                  Rothschild received seven (7) final, non-binding, indications of interest on February 26th (see attached schedules for details)

 

(1) The initial bid date of Monday, February 24th was extended due to inclement weather

 

Page 4

 

1.               "Market Check" Process Overview

 

•                  Based on the 2nd round indications of interest received, four (4) potential purchasers were given the opportunity to further develop relationships and discuss employment terms with management

 

•                  This group includes Bidder C, Leonard Green & Partners, The Riverside Company and Bidder F [**] (“Tier 1 Bidders”)

 

•                  Tier 1 Bidders were chosen based on a number of considerations, principally valuation and certainty of closure and also, as required by all Tier 1 Bidders, the ability to work out acceptable arrangements with Pyramid management

 

•                  Post meetings with management, each Tier 1 potential purchaser was asked to reevaluate their prior proposal and put forth their “final and best” proposal for consideration by the Board of Directors of Pyramid

 

[**]  The names of certain parties contained in this exhibit have been replaced with generic references.  Such names have been filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

Page 5

 

 

II.  Bidding Matrix

($ in Millions except per share amounts)

 

 

 

Tier 1

 

 

Bidder C [**]

 

Leonard Green & Partners

 

The Riverside Company

 

Bidder F [**]

 

 

 

 

 

 

 

 

 

Diluted Price Per Share

 

$6.75

 

$6.85

 

$7.30

 

$6.75

 

 

 

 

 

 

 

 

 

Revised Diluted Price Per Share (Adjustment for Call Premium)

 

$6.53

 

$6.85

 

$7.08

 

$6.53

 

 

 

 

 

 

 

 

 

Exclusivity Required

 

30 days exclusivity

 

30 days exclusivity

 

30 days exclusivity

 

No

 

 

 

 

 

 

 

 

 

Management Equity Participation

 

Co-investment at per share purchase price (to be discussed with management)

 

1) 15% of Common Stock for $1.5m investment
2) Additional option plan for 3% of common stock (to be discussed with management)

 

Assumes a post closing continuing investment of $2.0 million by management (to be discussed with management)

 

Co-investment at per share purchase price (to be discussed with management)

 

 

 

 

 

 

 

 

 

Financing Condition

 

Yes

 

No (Financial Institution A [**] would provide a backup financing commitment)

 

Yes

 

Yes

 

 

 

 

 

 

 

 

 

Financing Proposals

 

Received term sheet from Financial Institution B [**] (senior secured and senior sub-debt)

 

N/A

 

Received letters from Financial Institutions C, D, E, F, G and H [**]

 

Received letter from Financial Institution C [**]

 

[**]  The names of certain parties contained in this exhibit have been replaced with generic references.  Such names have been filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

Page 6

 

 

 

 

Tier 2

 

 

Bidder B [**]

 

Bidder A [**]

 

Bidder D [**]

 

 

 

 

 

 

 

Diluted Price Per Share

 

$6.75

 

$6.50

 

$5.75

 

 

 

 

 

 

 

Revised Diluted Price Per Share (Adjustment for Call Premium)

 

$6.53

 

$6.28

 

$5.53

 

 

 

 

 

 

 

Exclusivity Required

 

21 days exclusivity

 

No

 

Exclusivity (60-90 days to sign an agreement)

 

 

 

 

 

 

 

Management Equity Participation

 

(to be discussed with management)

 

Co-investment at per share purchase price (to be discussed with management)

 

(to be discussed with management)

 

 

 

 

 

 

 

Financing Condition

 

Yes

 

Yes

 

Yes

 

 

 

 

 

 

 

Financing Proposals

 

Received letter from Financial Institution I [**], have worked with Financial Institution J [**]

 

1) Received term sheet from Financial Institution B [**]
2) Received letters from Financial Institutions E, K and C [**]

 

N/A

 

[**]  The names of certain parties contained in this exhibit have been replaced with generic references.  Such names have been filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

Page 7

 

Exhibit A

 

Bid Assessment (in alphabetical order)         

($ in millions except per share amounts)

 

 

 

 

 

Bidder B
[**]

 

Bidder A
[**]

 

Bidder C
[**]

 

Leonard Green & Partners

 

Bidder D
[**]

 

The Riverside Company

 

Bidder F
[**]

 

Pyramid Valuation Worksheet

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2002 Reported EBITDA

 

 

$19.0

 

 

$19.0

 

 

$19.0

 

 

$19.0

 

 

$19.0

 

 

$19.0

 

 

$19.0

 

Plus:

 

Add backs and Adjustments, net

 

 

1.7

 

1.7

 

1.7

 

1.7

 

1.7

 

1.7

 

1.7

 

 

 

Total EBITDA

 

 

$20.7

 

 

$20.7

 

 

$20.7

 

 

$20.7

 

 

$20.7

 

 

$20.7

 

 

$20.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Times:

 

EBITDA multiple

 

6.76

x

6.60

x

6.76

x

6.95

x

6.14

x

7.09

x

6.76

x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise Value

 

 

$139.7

 

 

$136.5

 

 

$139.7

 

 

$143.8

 

 

$127.0

 

 

$146.7

 

 

$139.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus:

 

Cash Balance at 12/31/02

 

18.8

 

18.8

 

18.8

 

18.8

 

18.8

 

18.8

 

18.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from option exercise

 

7.3

 

7.3

 

7.3

 

7.3

 

7.3

 

7.3

 

7.3

 

Less:

 

Assumed "cost" of funding working capital

 

(3.5

)

(3.5

)

(3.5

)

(3.5

)

(3.5

)

(3.5

)

(3.5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment of January 2003 Interest on Senior Notes

 

(3.5

)

(3.5

)

(3.5

)

(3.5

)

(3.5

)

(3.5

)

(3.5

)

 

 

Subtotal

 

 

$158.9

 

 

$155.7

 

 

$158.9

 

 

$162.9

 

 

$146.2

 

 

$165.8

 

 

$158.9

 

Less:

 

Senior Notes Outstanding

 

66.0

 

66.0

 

66.0

 

66.0

 

66.0

 

66.0

 

66.0

 

 

 

Net Cash (before deal costs, etc.)

 

 

$92.8

 

 

$89.7

 

 

$92.8

 

 

$96.9

 

 

$80.2

 

 

$99.8

 

 

$92.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pyramid Share Price Calculation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Cash (before deal costs, etc.)

 

 

$92.8

 

 

$89.7

 

 

$92.8

 

 

$96.9

 

 

$80.2

 

 

$99.8

 

 

$92.8

 

Less:

 

Deal Fees, including legal, etc.

 

(1.5

)

(1.5

)

(1.5

)

(1.5

)

(1.5

)

(1.5

)

(1.5

)

 

 

Call Premium on the Senior Notes

 

(0.7

)

(0.7

)

(0.7

)

(3.5

)

(0.7

)

(0.7

)

(0.7

)

 

 

Accrued Interest

 

(3.3

)

(3.3

)

(3.3

)

(3.3

)

(3.3

)

(3.3

)

(3.3

)

 

 

Tail D&O Insurance

 

(0.5

)

(0.5

)

(0.5

)

(0.5

)

(0.5

)

(0.5

)

(0.5

)

 

 

Employment Contracts

 

(1.4

)

(1.4

)

(1.4

)

(1.4

)

(1.4

)

(1.4

)

(1.4

)

Cash For Shareholders

 

 

$85.5

 

 

$82.3

 

 

$85.5

 

 

$86.7

 

 

$72.8

 

 

$92.4

 

 

$85.5

 

 

 

Number of Shares

 

12.66

 

12.66

 

12.66

 

12.66

 

12.66

 

12.66

 

12.66

 

Diluted Price Per Share

 

 

$6.75

 

 

$6.50

 

 

$6.75

 

 

$6.85

 

 

$5.75

 

 

$7.30

 

 

$6.75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revised Price Per Share

 

 

$6.53

 

 

$6.28

 

 

$6.53

 

 

$6.85

 

 

$5.53

 

 

$7.08

 

 

$6.53

 

(Adjustment for Call Premium)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note: For the purposes of this analysis, Deal Fees were estimated to be $1.5m for all potential purchasers.  However, Rothschild’s fee with respect to Riverside, as set forth in Rothschild’s contract with the Special Committee of the Board of Pyramid, is $.7m. Rothschild’s fee with respect to all other potential purchasers is 1% of the transaction value

 

[**]  The names of certain parties contained in this exhibit have been replaced with generic references.  Such names have been filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

Page 8