Excelligence Learning Corp

SECURITIES AND EXCHANGE COMMISSION

FORM SC 13E3 Schedule filed to report going private transactions(Issuer Self-Tender Offer)

Filing Date: 2006-08-21 SEC Accession No. 0001193125-06-176268

(HTML Version on secdatabase.com)

SUBJECT COMPANY EXCELLIGENCE LEARNING CORP Mailing Address Business Address 2 LOWER RAGSDALE DRIVE 2 LOWER RAGSDALE DRIVE CIK:1130950| IRS No.: 770559897 | State of Incorp.:DE | Fiscal Year End: 1231 SUITE 200 SUITE 200 Type: SC 13E3 | Act: 34 | File No.: 005-61537 | Film No.: 061044537 MONTEREY CA 93940 MONTEREY CA 93940 SIC: 5961 Catalog & mail-order houses 8313332000 FILED BY EXCELLIGENCE LEARNING CORP Mailing Address Business Address 2 LOWER RAGSDALE DRIVE 2 LOWER RAGSDALE DRIVE CIK:1130950| IRS No.: 770559897 | State of Incorp.:DE | Fiscal Year End: 1231 SUITE 200 SUITE 200 Type: SC 13E3 MONTEREY CA 93940 MONTEREY CA 93940 SIC: 5961 Catalog & mail-order houses 8313332000

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13E-3 (Rule 13e-100)

RULE 13e-3 TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934

EXCELLIGENCE LEARNING CORPORATION (Name of the Issuer)

Excelligence Learning Corporation Ron Elliott Thoma Cressey Equity Partners Inc. TC Partners VIII, L.P. Thoma Cressey Fund VIII, L.P. ELC Holdings Corporation ELC Acquisition Corporation Carl D. Thoma (Names of Persons Filing Statement)

Common Stock, par value $0.01 per share (Title of Class of Securities)

300 684 107 (CUSIP Number of Class of Securities)

Ron Elliott Lee M. Mitchell Chief Executive Officer Managing Partner Excelligence Learning Corporation Thoma Cressey Equity Partners Inc. 2 Lower Ragsdale Drive, Suite 200 233 South Wacker Drive, 92nd Floor Monterey, California 93940 Chicago, Illinois 60606 (831) 333-2000 (312) 777-4444 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of the Persons Filing Statement)

Copies to:

Paul Tosetti, Esq. Vikas Arora, Esq. Jeffrey L. Kateman, Esq. Vice President, General Counsel and Secretary Latham & Watkins LLP Excelligence Learning Corporation 633 West 5th Street, Suite 4000 2 Lower Ragsdale Drive, Suite 200 Los Angeles, California 90071-2007 Monterey, California 93940-5743 213-485-1234 (831) 333-2000

J. Hovey Kemp, Esq. Kathy A. Fields, Esq.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Goodwin Procter LLP Goodwin Procter LLP 901 New York Avenue, N.W. 53 State Street Washington, D.C. 20001 Boston, Massachusetts 02109 Tel. (202) 346-4000 Tel. (617) 570-1000

This statement is filed in connection with (check the appropriate box):

a. The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14-C or Rule 13e-3(c) under x the Securities Exchange Act of 1934.

b. The filing of a registration statement under the Securities Act of 1933. ¨

c. A tender offer. ¨

d. None of the above. ¨

Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies: x

Check the following box if the filing is a final amendment reporting the results of the transaction: ¨

Calculation of Filing Fee

Proposed Maximum Aggregate Value of Transaction* Amount of Filing Fee** $125,270,000 $13,404

* Calculated solely for purposes of determining the filing fee. The transaction value was determined by adding (a) the product of (i) 9,055,935 shares of common stock of Excelligence Learning Corporation (Excelligence) and (ii) $13.00, and (b) the product of (i) 720,449 shares of common stock of Excelligence subject to currently outstanding options to purchase Excelligence common stock and (ii) $13.00 minus weighted average price of $2.53 per share of outstanding options to purchase Excelligence common stock. ** The filing fee, calculated in accordance with Exchange Act Rule 0-11(c)(1), was calculated by multiplying the Transaction Value by 0.000107. x Check the box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: $13,404

Form or Registration No.: Schedule 14A

Filing Party: Excelligence Learning Corporation

Date Filed: August 18, 2006

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Introduction This Rule 13e-3 Transaction Statement on Schedule 13E-3 (this Statement or this Schedule 13E-3) is being filed by (i) Excelligence Learning Corporation, a Delaware corporation (Excelligence), the issuer of the common stock, par value $0.01 per share (the Common Stock), that is subject to the Rule 13e-3 transaction; (ii) Thoma Cressey Equity Partners Inc., a Delaware corporation, TC Partners VIII, L.P., a Delaware limited partnership, Thoma Cressey Fund VIII, L.P., a Delaware limited partnership and the sole stockholder of ELC Holdings (as defined below) and Carl D. Thoma, an individual (collectively referred to as Thoma Cressey); (iii) ELC Holdings Corporation, a Delaware corporation (ELC Holdings); (iv) ELC Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of ELC Holdings (ELC Acquisition); and (v) Ron Elliott, an individual and director and Chief Executive Officer of Excelligence (collectively, the Filing Persons).

Pursuant to the Agreement and Plan of Merger, dated as of July 19, 2006, by and among ELC Holdings, ELC Acquisition and Excelligence (the Merger Agreement), ELC Acquisition agreed to merge with and into Excelligence, with Excelligence continuing as the surviving corporation (the Merger). In connection with the Merger, each share of Common Stock issued and outstanding immediately prior to the effective time of the Merger (other than shares held in the treasury, shares owned by ELC Holdings, ELC Acquisition, any wholly- owned subsidiary of Excelligence, ELC Acquisition or ELC Holdings or shares held by stockholders who are entitled to and who properly exercise appraisal rights under Delaware law) will automatically be cancelled and converted into the right to receive $13.00 in cash, without interest and less any applicable withholding taxes.

The Merger Agreement provides that each option to purchase shares of Common Stock issued and outstanding immediately prior to the effective time of the Merger will fully vest and become exercisable. Upon consummation of the Merger, all such options will be accelerated and cancelled in exchange for the right to receive an amount in cash equal to (i) the number of shares of common stock subject to the option, multiplied by (ii) $13.00 minus the per share exercise price of the option, net of any applicable withholding and excise taxes. Upon surrender, these options will no longer be outstanding and will cease to exist, and each former holder of the option will cease to have any rights with respect thereto, other than the right to receive the consideration set forth in the Merger Agreement.

In connection with the Merger, Excelligence has entered into a Guaranty Agreement (the Guaranty) with Thoma Cressey Fund VIII, L.P. (Fund VIII). Under the Guaranty, Fund VIII irrevocably and unconditionally guarantees to Excelligence the prompt and complete payment and performance of the obligations of ELC Holdings and ELC Acquisition to Excelligence arising under the Merger Agreement; provided, however, that the maximum aggregate liability of the Fund VIII thereunder shall not exceed $15.0 million.

As a result of the Merger, current stockholders of Excelligence, other than Ron Elliott who will contribute a portion of his equity interests to ELC Holdings prior to the Merger, will cease to have ownership interests in Excelligence or rights as stockholders of the Company, and will not participate in any future earnings or growth of the Company or benefit from any appreciation in value of the Company.

Concurrently with the filing of this Statement, Excelligence is filing with the Securities and Exchange Commission (the SEC) a preliminary Proxy Statement (the Proxy Statement) under Regulation 14A of the Securities Exchange Act of 1934, as amended (the Exchange Act), relating to the special meeting of the stockholders of Excelligence at which the stockholders of Excelligence will consider and vote upon, among other things, a proposal to adopt the Merger Agreement. The adoption of the Merger Agreement requires the affirmative vote of stockholders holding at least a majority of the voting power of the shares of Common Stock outstanding and entitled to vote as of the close of business on the record date.

The cross references below are being supplied pursuant to General Instruction G to Schedule 13E-3 and show the location in the Proxy Statement of the information required to be included in response to the Items of Schedule 13E-3. The information contained in the Proxy Statement, including all appendices thereto, is incorporated in its entirety herein by this reference, and the responses to each Item in this Schedule 13E-3 are qualified in their entirety by the information contained in the Proxy Statement.

All information contained in this Statement concerning any Filing Person has been provided by such Filing Person and no other Filing Person, including Excelligence, takes responsibility for the accuracy of any information not supplied by such Filing Person.

The filing of this Statement shall not be construed as an admission by any Filing Person or by any affiliate of a Filing Person that Excelligence is controlled by any Filing Person, or that any Filing Person is an affiliate of Excelligence within the meaning of Rule 13e-3 under Section 13(e) of the Exchange Act.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Item 1. Summary Term Sheet. Regulation M-A Item 1001 The information set forth in the Proxy Statement under the caption SUMMARY TERM SHEET is incorporated herein by reference.

Item 2. Subject Company Information. Regulation M-A Item 1002 (a) Name and Address. The companys name and the address and telephone number of its principal executive office are as follows: Excelligence Learning Corporation 2 Lower Ragsdale Drive, Suite 200 Monterey, California 93940-5743 (831) 333-2000

(b) Securities. The exact title and number of shares outstanding of the subject class of equity securities are as follows: Common Stock, par value $.01 per share, of Excelligence Learning Corporation 9,055,935 shares outstanding as of August 14, 2006

(c) Trading Market and Price. The information set forth in the Proxy Statement under the caption IMPORTANT INFORMATION ABOUT EXCELLIGENCE Market Price and Dividend Data is incorporated herein by reference. (d) Dividends. The information set forth in the Proxy Statement under the caption IMPORTANT INFORMATION ABOUT EXCELLIGENCE Market Price and Dividend Data is incorporated herein by reference. (e) Prior Public Offerings. The information set forth in the Proxy Statement under the caption IMPORTANT INFORMATION ABOUT EXCELLIGENCE Prior Public Offerings is incorporated herein by reference. (f) Prior Stock Purchases. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: IMPORTANT INFORMATION ABOUT EXCELLIGENCE Transactions in Shares IMPORTANT INFORMATION ABOUT THOMA CRESSEY, ELC HOLDINGS AND ELC ACQUISITION Transactions in Shares

Item 3. Identity and Background of Filing Persons. Regulation M-A Item 1003 (a) (c) (a) Name and Address. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Applicability of Rules Related to Going Private Transactions

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document IMPORTANT INFORMATION ABOUT EXCELLIGENCE Directors and Executive Officers IMPORTANT INFORMATION ABOUT EXCELLIGENCE Security Ownership of Certain Beneficial Owners and Management IMPORTANT INFORMATION ABOUT THOMA CRESSEY, ELC HOLDINGS AND ELC ACQUISITION

(b) Business and Background of Entities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET IMPORTANT INFORMATION ABOUT EXCELLIGENCE Directors and Executive Officers IMPORTANT INFORMATION ABOUT EXCELLIGENCE Security Ownership of Certain Beneficial Owners and Management IMPORTANT INFORMATION ABOUT THOMA CRESSEY, ELC HOLDINGS AND ELC ACQUISITION

(c) Business and Background of Natural Persons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: IMPORTANT INFORMATION ABOUT EXCELLIGENCE Directors and Executive Officers IMPORTANT INFORMATION ABOUT THOMA CRESSEY, ELC HOLDINGS AND ELC ACQUISITION

Item 4. Terms of the Transaction Regulation M-A Item 1004 Items (a) and (c) (f) (a) Material Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006

(c) Different Terms. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Certain Effects of the Merger SPECIAL FACTORS Interests of Certain Persons in the Merger THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) Indemnification and Insurance

(d) Appraisal Rights. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET APPRAISAL RIGHTS ANNEX D Delaware General Corporate Law Section 262

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (e) Provisions for Unaffiliated Security Holders. SPECIAL FACTORS Provisions for Unaffiliated Stockholders

(f) Eligibility for Listing or Trading. Not applicable.

Item 5. Past Contacts, Transactions, Negotiations and Agreements. Regulation M-A Item 1005 (a) (c) and (e) (a) Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: IMPORTANT INFORMATION ABOUT EXCELLIGENCE Transactions with Management and Others IMPORTANT INFORMATION ABOUT EXCELLIGENCE Transactions in Shares IMPORTANT INFORMATION ABOUT THOMA CRESSEY, ELC HOLDINGS AND ELC ACQUISITION Transactions in Shares

(b) Significant Corporate Events. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Interests of Certain Persons in the Merger SPECIAL FACTORS Voting Agreement SPECIAL FACTORS Voting and Rollover Agreement

(c) Negotiations or Contacts. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Interests of Certain Persons in the Merger SPECIAL FACTORS Voting Agreement SPECIAL FACTORS Voting and Rollover Agreement

(e) Agreements Involving the Subject Companys Securities. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Interests of Certain Persons in the Merger SPECIAL FACTORS Voting Agreement SPECIAL FACTORS Voting and Rollover Agreement

Item 6. Purposes of the Transaction and Plans or Proposals. Regulation M-A Items 1006 (b) and (c)(1) (8) (b) Use of Securities Acquired. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SPECIAL FACTORS Certain Effects of the Merger SPECIAL FACTORS Deregistration of Excelligence Common Stock THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) Structure of the Merger ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c)(1)-(8) Plans. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger SPECIAL FACTORS Certain Effects of the Merger SPECIAL FACTORS Effects on Excelligence if the Merger is Not Completed SPECIAL FACTORS Deregistration of Excelligence Common Stock SPECIAL FACTORS Source of Funds SPECIAL FACTORS Interests of Certain Persons in the Merger SPECIAL FACTORS Voting Agreement SPECIAL FACTORS Voting and Rollover Agreement THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006

Item 7. Purposes, Alternatives, Reasons and Effects. Regulation M-A Item 1013 (a) Purposes. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger SPECIAL FACTORS Deregistration of Excelligence Common Stock

(b) Alternatives. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger SPECIAL FACTORS Effects on Excelligence if the Merger is Not Completed

(c) Reasons. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Opinion of Piper Jaffray & Co.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger SPECIAL FACTORS Effects on Excelligence if the Merger is Not Completed

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) Effects. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger SPECIAL FACTORS Certain Effects of the Merger SPECIAL FACTORS Deregistration of Excelligence Common Stock SPECIAL FACTORS Effects on Excelligence if the Merger is Not Completed SPECIAL FACTORS Interests of Certain Persons in the Merger MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006

Item 8. Fairness of the Transaction. Regulation M-A Item 1014 (a) Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Opinion of Piper Jaffray & Co. SPECIAL FACTORS Position of Ron Elliott as to Fairness SPECIAL FACTORS Position of Thoma Cressey, ELC Holdings and ELC Acquisition as to Fairness SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger ANNEX C Fairness Opinion of Piper Jaffray & Co.

(b) Factors Considered in Determining Fairness. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Opinion of Piper Jaffray & Co. SPECIAL FACTORS Position of Ron Elliott as to Fairness SPECIAL FACTORS Position of Thoma Cressey, ELC Holdings and ELC Acquisition as to Fairness SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger SPECIAL FACTORS Interests of Certain Persons in the Merger ANNEX C Fairness Opinion of Piper Jaffray & Co.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) Approval of Security Holders. The transaction is not structured so that the approval of at least a majority of unaffiliated security holders is required.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) Unaffiliated Representative. An unaffiliated representative was not retained to act solely on behalf of unaffiliated security holders for purposes of negotiating the terms of the transaction and/or preparing a report concerning the fairness of the transaction.

(e) Approval of Directors. The transaction was approved by all of the directors of Excelligence, a majority of whom were not employees of the Company.

(f) Other Offers. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors

Item 9. Reports, Opinions, Appraisals and Negotiations. Regulation M-A Item 1015 (a) Report, Opinion or Appraisal. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Opinion of Piper Jaffray & Co. ANNEX C Fairness Opinion of Piper Jaffray & Co.

(b) Preparer and Summary of the Report, Opinion or Appraisal. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Opinion of Piper Jaffray & Co. ANNEX C Fairness Opinion of Piper Jaffray & Co.

(c) Availability of Documents. The reports, opinions or appraisals referenced in this Item 9 will be made available for inspection and copying at the principal executive offices of Excelligence during its regular business hours by any interested equity security holder of Excelligence or representative who has provided Excelligence its written designation as such. A copy of the reports, opinions or appraisals will be transmitted by Excelligence to any interested equity security holder of Excelligence or representative who has provided Excelligence its written designation as such upon written request and at the expense of the requesting security holder.

Item 10. Source and Amounts of Funds or Other Consideration. Regulation M-A Item 1007 (a) Source of Funds. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SPECIAL FACTORS Source of Funds SPECIAL FACTORS Guaranty SPECIAL FACTORS Fees and Expenses of the Merger THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) Termination Fees; Expense Reimbursement ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006 ANNEX B Guaranty Areement, dated July 19, 2006, by and between Excelligence Learning Corporation and Thoma Cressey Fund VIII, L.P.

(b) Conditions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Source of Funds SPECIAL FACTORS Guaranty SPECIAL FACTORS Fees and Expenses of the Merger THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) Termination of the Merger Agreement THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) Termination Fees; Expense Reimbursement ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006 ANNEX B Guaranty Agreement, dated July 19, 2006, by and between Excelligence Learning Corporation and Thoma Cressey Fund VIII, L.P.

(c) Expenses. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET THE SPECIAL MEETING Solicitation of Proxies SPECIAL FACTORS Certain Effects of the Merger SPECIAL FACTORS Source of Funds SPECIAL FACTORS Fees and Expenses of the Merger THE MERGER AGREEMENT AND THE MERGER (PROPOSAL 1) Termination Fees; Expense Reimbursement ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006

(d) Borrowed Funds. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Source of Funds ANNEX A Agreement and Plan of Merger by and among ELC Holdings, ELC Acquisition and Excelligence, dated July 19, 2006

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Item 11. Interest in Securities of the Subject Company. Regulation M-A Item 1008 (a) Securities Ownership. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET THE SPECIAL MEETING Voting by Directors and Executive Officers SPECIAL FACTORS Interests of the Certain Persons in the Merger IMPORTANT INFORMATION ABOUT EXCELLIGENCE Security Ownership of Certain Beneficial Owners and Management IMPORTANT INFORMATION ABOUT EXCELLIGENCE Transactions in Shares IMPORTANT INFORMATION ABOUT THOMA CRESSEY, ELC HOLDINGS AND ELC ACQUISITION Transactions in Shares

(b) Securities Transactions. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: IMPORTANT INFORMATION ABOUT EXCELLIGENCE Security Ownership of Certain Beneficial Owners and Management IMPORTANT INFORMATION ABOUT EXCELLIGENCE Transactions in Shares IMPORTANT INFORMATION ABOUT THOMA CRESSEY, ELC HOLDINGS AND ELC ACQUISITION Transactions in Shares

Item 12. The Solicitation or Recommendation. Regulation M-A Item 1012 (d) and (e) (d) Intent to Tender or Vote in a Going-Private Transaction. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET THE SPECIAL MEETING Voting by Directors and Executive Officers SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Interests of Certain Persons in the Merger SPECIAL FACTORS Voting Agreement SPECIAL FACTORS Voting and Rollover Agreement (e) Recommendations of Others. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET THE SPECIAL MEETING Date, Time, Place and Purpose of the Special Meeting SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Purposes and Plans for Excelligence After the Merger

Item 13. Financial Statements.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Regulation MA Item 1010 (a) and (b) (a) Financial Statements. The financial statements of Excelligence included in the Annual Report on Form 10-K for the year ended December 31, 2005 and the Quarterly Reports on Form 10-Q for the quarters ending March 31, 2006 and June 30, 2006 are incorporated herein by reference. The information set forth in the Proxy Statement under the following captions is also incorporated herein by reference: IMPORTANT INFORMATION ABOUT EXCELLIGENCE Selected Historical Financial Data

(b) Pro Forma Information. Not applicable.

Item 14. Persons/Assets, Retained, Employed, Compensated or Used. Regulation M-A Item 1009 (a) Solicitations or Recommendations. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER THE SPECIAL MEETING Date, Time, Place and Purpose of the Special Meeting THE SPECIAL MEETING Solicitation of Proxies SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Fees and Expenses of the Merger IMPORTANT INFORMATION ABOUT EXCELLIGENCE Transactions with Management and Others

(b) Employees and Corporate Assets. The information set forth in the Proxy Statement under the following captions is incorporated herein by reference: SUMMARY TERM SHEET THE SPECIAL MEETING Date, Time, Place and Purpose of the Special Meeting THE SPECIAL MEETING Solicitation of Proxies SPECIAL FACTORS Background of the Merger SPECIAL FACTORS Reasons for the Merger and Recommendation of the Special Committee and the Board of Directors SPECIAL FACTORS Certain Effects of the Merger SPECIAL FACTORS Interests of Certain Persons in the Merger

Item 15. Additional Information. Regulation M-A Item 1011 (b) (b) Other Material Information. The information set forth in the Proxy Statement and annexes thereto filed contemporaneously herewith is incorporated in its entirety herein by reference.

Item 16. Exhibits. Regulation M-A Item 1016(a)-(d), (f) and (g)

(a)(1) Letter to Stockholders of Excelligence Learning Corporation, incorporated herein by reference to the Proxy Statement.

(a)(2) Notice of Special Meeting of Stockholders of Excelligence Learning Corporation, incorporated herein by reference to the Proxy Statement.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (a)(3) Preliminary Proxy Statement of Excelligence Learning Corporation, incorporated herein by reference to the Proxy Statement.

(a)(4) Press release issued by Excelligence Learning Corporation, dated July 19, 2006, incorporated herein by reference to Exhibit 99.1 of the Current Report on Form 8-K filed by Excelligence Learning Corporation with the SEC on July 20, 2006.

(a)(5) Letter to Employees, dated July 19, 2006, incorporated herein by reference to Form DEFA14A filed by Excelligence with the SEC on July 20, 2006.

(a)(6) Employee FAQ sheet, dated July 28, 2006, incorporated herein by reference to Form DEFA14A filed by Excelligence with the SEC on July 31, 2006.

(b)(1) Commitment Letter, dated July 21, 2006, by and among Thoma Cressey, Harris, N.A and Bank of Montreal.

(c)(1) Fairness Opinion of Piper Jaffray & Co., dated July 19, 2006, incorporated herein by reference to the Proxy Statement.

(c)(2) Presentation of Piper Jaffray & Co. to the Board of Directors of Excelligence Learning Corporation, dated July 19, 2006.

(c)(3) Presentation of Piper Jaffray & Co. to the Board of Directors of Excelligence Learning Corporation, dated June 14, 2006.

(c)(4) Presentation of Piper Jaffray & Co. to the Board of Directors of Excelligence Learning Corporation, dated May 23, 2006.

(c)(5) Presentation of Piper Jaffray & Co. to the Board of Directors of Excelligence Learning Corporation, dated April 28, 2006.

(c)(6) Presentation of Piper Jaffray & Co. to the Board of Directors of Excelligence Learning Corporation, dated December 14, 2005.

(d)(1) Agreement and Plan of Merger by and among ELC Holdings Corporation, ELC Acquisition, Corporation and Excelligence Learning Corporation, dated July 19, 2006, incorporated herein by reference to Exhibit 2.1 of the Current Report on Form 8-K filed by Excelligence Learning Corporation with the SEC on July 25, 2006.

(d)(2) Voting Agreement among ELC Holdings Corporation and William E. Simon & Sons Private Equity Partners, L.P. , dated July 19, 2006, incorporated herein by reference to Exhibit 4-a of SC 13D/A filed on July 21, 2006.

(d)(3) Voting and Rollover Agreement by and among ELC Holdings Corporation and Ronald Elliott, dated July 19, 2006, incorporated herein by reference to Exhibit 99.3 of SC 13D filed on August 16, 2006.

(f) Section 262 of the General Corporation Law of the State of Delaware, incorporated herein by reference to the Proxy Statement.

(g) None.

After due inquiry and to the best knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

EXCELLIGENCE LEARNING CORPORATION

Date: August 18, 2006 By: /s/ Ronald Elliott Name: Ronald Elliott Title: Chief Executive Officer

RONALD ELLIOTT

Date: August 18, 2006 By: /s/ Ronald Elliott Ronald Elliott, individually

Date: August 18, 2006 THOMA CRESSEY EQUITY PARTNERS INC.

By: /s/ Lee M. Mitchell Name: Lee M. Mitchell Title: Authorized Signatory

Date: August 18, 2006 TC PARTNERS VIII, L.P.

By: Thoma Cressey Equity Partners Inc., its General Partner

By: /s/ Lee M. Mitchell Name: Lee M. Mitchell Title: Authorized Signatory

Date: August 18, 2006 THOMA CRESSEY FUND VIII, L.P.

By: TC Partners VIII L.P., its General Partner

By: Thoma Cressey Equity Partners Inc., its General Partner

By: /s/ Lee M. Mitchell Name: Lee M. Mitchell Title: Authorized Signatory

Date: August 18, 2006 ELC HOLDINGS CORPORATION

By: /s/ Carl D. Thoma Name: Carl D. Thoma Title: Authorized Signatory

Date: August 18, 2006 ELC ACQUISITION CORPORATION

By: /s/ Carl D. Thoma Name: Carl D. Thoma Title: Authorized Signatory

Date: August 18, 2006 CARL D. THOMA

Bank of Montreal

111 West Monroe Street

11th Floor West

Chicago, II 60603

July 21, 2006

Thoma Cressey Equity Partners 9200 Sears Tower 233 South Wacker Drive Chicago, IL 60606

Attention: Carl Thoma

Merrick Axel

Gentlemen:

Re: Commitment Letter

Thoma Cressey Equity Partners (you) has requested credit facilities in the aggregate principal amount of up to $88,000,000 (the Facilities). The Facilities will be used to finance the acquisition (the Acquisition) of all of the capital stock of Excelligence Learning Corporation (the Target), to refinance existing indebtedness and to provide working capital financing. The principal obligor under the Facilities, after giving effect to all transactions entered into in connection with the Acquisition, will be Excelligence Learning Corporation (the Borrower).

We are pleased to advise you that Harris N.A. (Harris) agrees to act as administrative agent (in such capacity, the Agent) for the financial institutions and other investors who commit to lend under the Facilities (collectively with Harris, the Lenders) and that Harris hereby commits to extend up to $20,000,000 of the Facilities, upon the terms and subject to the conditions set forth in this letter (the Commitment Letter) and in the Summary of Terms and Conditions attached hereto (the Term Sheet) and the Fee Letter delivered in connection herewith (the Fee Letter). Bank of Montreal (BMO) hereby commits to extend that portion of the Facilities in excess of the portion committed to by Harris. The commitments of Harris and BMO hereunder are several and not joint.

BMO, acting under its trade name BMO Capital Markets (BMO Capital Markets or the Arranger), will act as Sole Lead Arranger and Sole Book Runner for the Facilities. You agree that no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Term Sheet and Fee Letter will be paid in connection with the Facilities unless you, the Agent and the Arranger shall so agree. While Harris and BMO have given their several commitments for the entire amount of the Facilities on a fully underwritten basis, the Arranger intends, and reserves the right to, syndicate all or a portion of the Facilities to additional Lenders as more fully described below.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In addition to the terms and conditions set forth in the Term Sheet and elsewhere in this letter, we advise you of the following terms. The commitment of Harris and each other Lender and the undertakings of the Arranger are subject to there being no material disruption of the banking and capital markets which in the Agents reasonable opinion adversely impacts in any material respect pricing or availability of credit (such as, without limitation, any material impairment of primary syndication or secondary trading of credit facilities similar to the Facilities). All tax, accounting and legal matters

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Thoma Cressey Equity Partners July 21, 2006 Page 2 of 6 incident to the transactions contemplated hereby, including, without limitation, the credit agreement evidencing the Facilities (the Credit Agreement) and the other definitive loan and security documents (the Loan Documents), and the structure of the Acquisitions and the post- Acquisition legal structure of the Borrower, must be reasonably satisfactory in form and substance to the Agent and the Lenders. Those matters not covered by the provisions of this Commitment Letter, the Term Sheet or the Fee Letter delivered in connection herewith shall be subject to the mutual agreement of the parties.

As consideration for the commitments of Harris and and BMO hereunder and their agreements to perform the services described herein, you agree to pay or to cause to be paid the fees described in the Fee Letter.

The commitment of Harris and any other Lender to extend credit and any undertaking of the Agent or Arranger to perform any services hereunder shall terminate if: (1) we fail to receive a copy of this Commitment Letter and the Fee Letter accepted in writing by you on or before 5:00 p.m. (Chicago time). July 21, 2006 (this Commitment Letter and our commitments and undertakings hereunder and the Fee Letter shall not be deemed to have been accepted in the event that you purport to accept the same subject to any change in its terms), (2) the Agent, the Arranger or any Lender does not receive any fees required to be paid to it by the terms of this Commitment Letter, the Term Sheet or the Fee Letter at the time such fees are required to be paid, (3) the parties have not executed and delivered the Credit Agreement and the other Loan Documents on or before November 30, 2006, (4) any Material Adverse Effect occurs with respect to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or any of its subsidiaries or of any guarantor contemplated hereby from that reflected in the financial statements of the Borrower dated May 31, 2006, or (5) any statements, information, materials, representations or warranties made by or on behalf of the Borrower or any of its subsidiaries or any guarantor contemplated hereby to the agent, the Arranger or the Lenders in connection with the Facilities prove inaccurate or untrue in any material respect. Material Adverse Effect shall mean any change, event, development, effect or circumstances that, individually or in the aggregate, (a) is, or would reasonably be expected to be, materially adverse to the business, operations, assets, liabilities, financial condition, results of operations, or properties of the Target and its Subsidiaries, taken as a whole or (b) materially impairs, or would reasonably be expected to materially impair, the Targets ability to perform its obligations under this Agreement and to consummate the transactions contemplated by this agreement; provided, however, that notwithstanding the foregoing, the term Material Adverse Effect shall not include any change, event, development, effect or circumstance resulting from, arising out of or related to (i) changes in or generally affecting the industry in which the Target operates or arising from changes in general business or economic conditions (and not having a materially disproportionate effect (relative to most other industry participants) on the Target and its Subsidiaries, taken as a whole); (ii) (A) reasonable out-of-pocket fees and expenses (including without limitation legal, investigetory, accounting, investigatory, investment banking, and other fees and expenses) incurred in connection with the transactions contemplated by this Agreement, or (B) the payment by the Target and its Subsidiaries of all amounts due to any officers or employees of the Target and its Subsidiaries under employment contracts, employee benefit plans or severance arrangements described or disclosed in the employment contracts, employee benefit plans or severance arrangements described or disclosed in the Disclosure Schedule or the Target SEC Documents or reflected on the Financial Statements (as each such term is defined in the Agreement and Plan of Merger between the Target and your affiliate; (iii) any

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Thoma Cressey Equity Partners July 21, 2006 Page 3 of 6 change in Law or GAAP (not having a materially disproportionate effect (relative to most other industry participants) on the Target and its Subsidiaries taken as a whole); (iv) the public announcement or the pendency of this Agreement or the transactions contemplated by or any actions taken in compliance with this Agreement or otherwise with the consent of Parent, including the impact thereof on the relationships of the Target or any of its subsidiaries with customers, suppliers, distributors, consultants, employees or independent contractors; (v) the failure by the Target to meet published financial projections or forecasts for any period ending (or for which revenues or earnings are released) on or after the date hereof (it being understood that the facts and circumstances giving rise to such failure to meet published financial projections may be considered and shall be taken into account in determining whether there has been a Material Adverse Effect); (vi) any attack on, or by, or acts of terrorism involving, the United States, or any declaration of war by the United States Congress (and not having a materially disproportionate effect (relative to most other industry participants) on the Target and its Subsidiaries taken as a whole); or (vii) the SECs investigation into the Targets restatement of its financial statements for the fiscal year ended December 31, 2004 and for the quarter ended March 31, 2005 (the SEC Investigation), or any action or suit arising therefrom or related thereto, including all filings, appeals, judgments or settlements in connection therewith and announcements or disclosure thereof, except, in the case of this clause (vii) to the extent that such change, event, development, effect of circumstance (A) results from, arises out of or relates to (1) any civil enforcement action brought against the Target or the Targets current Chief Executive Officer by the SEC or (2) any criminal indictment of the Target or any current or former executive officer of the Target by the United States Department of Justice (each, and Excepted Enforcement Action) and (B) such Excepted Enforcement Action, individually or together with all other Excepted Enforcement Actions and all other charges, events, developments, effects or circumstances, would have a Material Adverse Effect.

As noted above, the Arranger intends to form a syndicate of Lenders to join Harris and BMO in entering into the Facilities at or after closing. You understand an agree that the Arranger intends to commence syndication efforts promptly and prior to closing after your execution and delivery of this letter. You agree that the Arranger will, in consultation with you, manage all aspects of the arrangement and syndication of the Facilities, including decisions as to the selection of institutions to be approached, when they will be approached, when their commitments will be accepted, the allocation of the aggregate commitment among the Lenders, the awarding of titles and the distribution of compensation among the Lenders. The Arranger intends to syndicate to other Lenders the entire portion of the Facilities committed to by BMO and you agree that, to the extent that commitments in excess of BMOs commitment are received from other Lenders, we may reduce Harris initial commitment and allocate such amount among the other Lenders.

You agree to actively assist the Arranger in forming the syndicate of Lenders. Such assistance shall include, without limitation: (i) assistance in the preparation of a confidential information memorandum and other marketing materials to be used in the syndication, including the delivery of all financial and other information requested by the Agent or the Arranger for inclusion in such memorandum and materials, (ii) providing the Agent and the Arranger with financial information and projections prepared by you or your advisors relating to the transactions described herein, all as reasonably requested by the Agent or the Arranger and updated as may be reasonably requested by the

Agent or the Arranger through the closing of the Facilities, it being understood by you that the Agent and the Arranger shall be relying on such information and projections in syndicating and arranging the Facilities. (iii) making the senior management and any other appropriate officers and representatives of the Borrower and its subsidiaries available to participate in informational meetings for potential Lenders at such times and places as the Agent or the Arranger may reasonably request, (iv) using your best efforts to ensure that the syndication benefits from the existing lending relationships of the Borrower, and (v) promptly providing the Agent and the Arranger with any other information reasonably requested by them to successfully complete the syndication. With respect to the arrangement and syndication of the Facilities, neither the Arranger nor the Agent will have any responsibility other than to arrange the syndication as set forth herein and neither the Arranger nor the Agent shall, in any event, be subject to any fiduciary or other implied duties.

To ensure an orderly syndication of the Facilities, you agree that, from the date hereof through the date upon which the Arranger has fully syndicated or closed the Facilities (whichever is later), neither the Borrower nor any of its subsidiaries will attempt to obtain, place, arrange or renew any sort of debt financing (whether or not intended to replace the Facilities), or announce or authorize the announcement of the same, or engage in any discussions concerning the same, other than the financing contemplated by this Commitment Letter. You acknowledge and agree to the disclosure by the Agent and the Arranger, after the execution of the Credit Agreement, of information related to the Facilities to Gold Sheets and other similar trade publications, and to our publication of tombstones and similar advertising materials relating to the Facilities. The information disclosed shall consist of deal terms and other information customarily found in such publications, tombstones and advertising materials.

The Agent and the Arranger have reviewed certain historical and projected financial statements of the Borrower and its subsidiaries prepared by you or on your behalf and delivered to us by you or on your behalf, and we have conducted such other due diligence investigations with respect to such entities as we have deemed necessary or advisable. Although our due diligence investigation with respect to the Borrower and its subsidiaries is substantially complete as of the date of this letter, each Lenders obligation to make loans under the Facilities is subject to the fact that neither we nor any other Lender becomes aware, after the date hereof, (i) of any material adverse development with respect to the assets and liabilities (including contingent liabilities), business operations or prospects of the Borrower and its subsidiaries or (ii) that any information previously disclosed to it with respect to such assets and liabilities (including contingent liabilities), business operations or prospects was materially untrue, inaccurate or incomplete.

You agree, whether or not the transactions contemplated hereby are closed, to indemnify and hold harmless the Agent, the Arranger, the Lenders, their affiliates, and each of their respective directors, officers, employees and agents (collectively, the Indemnified Parties) from and against any and all losses claims, damages, cost, expenses (including, without limitation, the reasonable fees and expenses of attorneys for the Indemnified Parties) and liabilities (collectively, such losses, claims, damages, costs, expenses and liabilities indemnified liabilities) to which any of them may become subject, insofar as such indemnified liabilities (or actions, suits or proceedings, including any inquiry or investigation or claim in respect thereof ) arise out of, in any way relate to, or result from a claim in respect of, the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Thoma Cressey Equity Partners July 21, 2006 Page 5 of 6 financing contemplated hereby or the transactions to be financed (whether or not any Indemnified Party is a party to any action or proceeding out of which any such indemnified liabilities arise), provided that you shall not be obligated to indemnify, hold harmless or reimburse any Indemnified Party for any indemnified liabilities to the extent that the same are determined in a final judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party. No Indemnified Party shall be liable for any indirect, special, consequential or punitive damages in connection with its activities relating to the Facilities. You also agree to reimburse the Agent and the Arranger for all costs and expenses (including, without limitation, the reasonable fees and expenses of counsel to the Agent) incurred in connection with the preparation, negotiation, syndication, execution and delivery of the Facilities, and in performing due diligence related to the Facilities, whether or not the Facilities close. Such costs and expenses shall include, without limitation, costs and expenses incurred in connection with the establishment and maintenance of an internet site relating to the Facilities.

Your obligations under the immediately preceding paragraph shall remain in full force and effect unless and until superseded by the indemnity and expense provisions of the Loan Documents, whether or not the Loan Documents are executed or any credit is extended thereunder.

By executing this Commitment Letter, you acknowledge that this Commitment Letter, the Term Sheet and the Fee Letter, taken together, are the only agreement among you, the Agent and the Arranger with respect to the Facilities and set forth our entire understanding with respect thereto. This Commitment Letter, the Term Sheet and the Fee Letter may be changed only by a writing signed by each of the parties thereto. This Commitment Letter, the Term Sheet and the Fee Letter shall be governed by, and construed in accordance with, the laws of the State of Illinois without regard to the conflict of law principles thereof.

This Commitment Letter and the commitments and undertakings hereunder are solely for your benefit, and only you may rely thereon. In no event shall the Agent, the Arranger or any other Lender have any obligation to any third party with respect to any provision of this Commitment Letter, the Term Sheet or the Fee Letter. This Commitment Letter, the Term Sheet and the Fee Letter are for your confidential use only and may not, without our prior written consent, be disclosed by you to any person other than Representatives of you and of the Borrower having a need to know the same in order to evaluate or work on the transaction described herein, except where such disclosure is required by law or legal process (in which case you agree to notify us promptly thereof). As used in this paragraph, Representatives of a person or entity means such person or entitys employees, directors, officers, attorneys, agents and financial advisers (but not commercial lenders).

We are pleased to be able to offer these Facilities to you and are prepared to devote the human and other resources to this transaction which will be necessary to assure an expeditious closing.

If you are in agreement with the terms of this Commitment Letter, please indicate your acceptance by signing the enclosed copy of this Commitment Letter and returning the same to the Agent,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Thoma Cressey Equity Partners July 21, 2006 Page 6 of 6 together with an executed copy of the Fee Letter and any fees required to be paid at the time of such delivery pursuant to the terms hereof or of the Fee Letter.

Very truly yours,

HARRIS N.A.

By /s/ Ronald V. Redd

Its Vice President

BANK OF MONTREAL

By /s/ Donald Buse

Its MANAGING DIRECTOR

Accepted and agreed to this 21 day of July, 2006.

Thoma Cressey Equity Partners

By /s/ Carl D. Thoma

Its Managing Partner

Minneapolis San Francisco New York PROJECT WELLINGTON London Presentation to the Special Committee of the Board of Directors Chicago Palo Alto Shanghai*

July 19, 2006

*Strategic Alliance

Confidential

Section I Wellington Overview

Section II Overview of the Proposed Transaction

Section III Summary of Due Diligence Procedures

Section IV Summary of Analyses

Confidential 2

Confidential

Company Overview

Wellington was formed on November 6, 2000 for the purpose of effecting a combination of Early Childhood LLC and Smarterkids.com, Inc. The two companies were combined on April 30, 2001 and began trading on the NASDAQ Composite on May 1, 2001 at $5.61 per share

Wellington is a developer, manufacturer and retailer of educational products which are sold to child care programs, elementary schools and consumers. The Company serves early childhood professionals, educators and consumers by providing high quality educational products and programs for children from infancy to 12 years of age

The Company operates in two business segments, Early Childhood and Elementary School:

The Early Childhood Segment develops, markets and sells educational products through multiple distribution channels primarily to early childhood professionals and, to a lesser extent, consumers. Through this segment, the Company also provides information to teachers and other education professionals regarding the development of children from infancy through age eight

The Elementary School Segment sells school supplies and other products specifically targeted for use by children in kindergarten through sixth grade to elementary schools, teachers and other education organizations. Those parties then resell the products either as a fundraising device for the benefit of a particular school, student program or other community organization, or as a service project to the school

Confidential 4

Company Overview (contd)

On August 12, 2005, the Company announced a delay in the filing of its Form 10-Q for the three and six months ended June 30, 2005 pending the completion of an internal investigation of allegations by current and former accounting personnel that the Company had failed to record and accrue for certain obligations for the fiscal year ended December 31, 2004

The staff in the Division of Enforcement in the San Francisco District Office of the SEC informed the Company in October 2005 that it was conducting an informal inquiry into the Companys restatement and related circumstances. The staff obtained a non-public formal order of investigation from the Commission in January 2006

After delays in publicly reporting their financial performance and a restatement of the Companys 2004 10-K, the Company was delisted from NASDAQ on February 3, 2006. The Companys stock is currently traded on pink sheets

Confidential 5

Wellington suffers from a lack of research coverage, thin trading volume, and relatively small institutional investor interest

As a result, the Company enjoys few of the benefits of being a public company: The public market is currently valuing Wellingtons shares at a low multiple relative to its peers Low trading volume for the Companys stock has afforded its shareholders limited liquidity The Companys market cap and trading volume make it difficult to effectively access the public equity markets as a financing source

However, Wellington remains subject to the costs associated with being a public company Legal, accounting and reporting costs Management time Meeting short-term expectations of the public market Sarbanes-Oxley related costs

Confidential 6

Historical Stock Price Performance

$14.00 600

$13.00 per share Offer Price

$12.00 500 Premium Represented by Price $13.00 Offer Price Current (as of 7/18/2006) $8.10 60.5% Volume $10.00 1-Week Ago $8.05 61.5% 3-Month Average (000s) 1.969 1-Month Ago $7.95 63.5% 1-Year Average (000s) 5.781 1-Year Average $7.31 77.9% 400 2-Year Average $6.20 109.8% 3-Year Average $6.02 116.0% $8.00 52-Week High $9.45 37.6%

300

$6.00

200 $4.00

100 $2.00

$0.00 0

Source: Capital IQ Data as of 7/18/2006

Confidential 7

Closing Share Price Trading Ranges Since 2001 Merger

16% 14% 14% Trading Statistics Average Closing Price $4.41 Total Volume (000s) 11,349.930 12% Average Daily Volume (000s): 8.346 Shares Traded Below Offer Price ($13.00) 100% 10% 10% 9% 8% 8% 8% 8% 8% 6% 7%

6% 5% 5% 4% 4% 4% 2% 2% 1% 1% 0% 0% $0.51 - $1.01 - $1.51 - $2.01 - $2.51 - $3.01 - $3.51 - $4.01 - $4.51 - $5.01 - $5.51 - $6.01 - $6.51 - $7.01 - $7.51 - $8.01 - $8.51 - $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00

Source: Capital IQ Data as of 7/18/2006

Confidential 8

110

100

Wellington Comparable Company Group NASDAQ Composite S&P 500

Comparable Company NASDAQ Composites Wellingtons Return: S&P 500s Return: Groups Return: Return: 6.6% 0.6% -30.1% -6.0% Source: Capital IQ Note: Comparable Company Group includes Bright Horizons Family Solutions Inc., Educate Inc., Scholastic Corp., and School Specialty Inc.; Groups performance weighted by market capitalization; Performances reflect adjusted closing prices; Data as of 7/18/2006

Confidential 9

Ownership Profile

Institutional Holdings(1) Private Equity Holdings(2) % of Total Diluted % of Total Diluted Institution Shares Shares Outstanding Firm Shares Shares Outstanding Gruber & McBaine Capital Management 546,575 5.590% William E. Simon & Sons Private Equity Partners, L.P. 1,478,700 15.124% Rutabaga Capital Management 495,963 5.073% Total Private Equity Holdings 1,478,700 15.124% Heartland Advisors Inc. 371,700 3.802% Ashford Capital Management 90,800 0.929% Other Holdings First Wilshire Securities Management 75,599 0.773% % of Total Diluted Bard Associates Inc. 56,699 0.580% Description Shares Shares Outstanding Aegon Investment Management 4,660 0.048% Total Other Holdings 4,470,791 45.726% California Public Employees Retirement System 4,600 0.047% Northern Trust Investments 600 0.006% Total Shares Outstanding 9,055,935 92.622% Axa Rosenberg Investment Management 300 0.003% Bear, Stearns & Co. 62 0.001% Total Diluted Shares Outstanding 9,777,324 100.000% Total Institutional Holdings 1,647,558 16.851%

(2) Insider Holdings Ownership Breakdown Total Options % of Total Diluted Institutional Insider Outstanding Shares Shares Outstanding Holdings Ronald Elliott 180,000 1,328,204 15.426% 17% Richard Delaney 40,000 116,000 1.596% Judith McGuinn 97,522 291 1.000% Other Holdings Colin Gallagher 40,000 10,000 0.511% 46% Scott Graves 44,000 2,912 0.480% Dr. Louis Casagrande 44,000 - 0.450% Insider Holdings Dean DeBiase 44,000 - 0.450% 22% Vikas Arora 15,000 - 0.153% Private Equity Robert MacDonald - 1,479 0.015% Holdings All Other Outstanding Options 216,867 - 2.218% 15% Total Insider Holdings 721,389 1,458,886 22.299%

Note: Data as of 7/18/2006 (1) Estimated ownership based on quarterly institutional filings (13F and 13G) and sum of funds filings (2) Source: Management

Confidential 10

Confidential

Summary Units in Millions, except per share data

Capitalization

Current at 7/18/2006 Wellington at Offer Stock Price $8.10 $13.00

Common shares outstanding (1) (2) 9.1 9.1 Plus: Existing stock options(1) (2) (3) 0.7 0.7 Less: Shares Repurchased from Options Proceeds(4) (0.2) (0.1) Total diluted shares 9.6 9.6

Diluted Equity Value $77.4 $125.3 Plus: Debt at May 31, 2006 4.0 4.0 Less: Cash at May 31, 2006 (2.3) (2.3)

Enterprise Value $79.1 $127.0

Multiple Analysis

Metric Multiple Multiple Enterprise Value / LTM Revenue $136.5 0.6x 0.9x Enterprise Value / LTM EBIT $6.1 13.0x 20.8x Enterprise Value / LTM EBITDA $8.1 9.8x 15.7x

Enterprise Value / LTM Revenue $136.5 0.6x 0.9x Enterprise Value / LTM Adjusted EBIT(5) $9.3 8.5x 13.6x Enterprise Value / LTM Adjusted EBITDA(5) $11.4 7.0x 11.2x

Note: LTM as of 5/31/2006 (1) As of 7/18/2006 (2) Per management (3) "In the money" options (4) Using treasury stock method (5) Adjusted per Wellington Management for non-recurring one-time costs as set forth on page 24

Confidential 12

Key Deal Terms

Terms / Structure Cash merger

Price $13.00 cash per share of Wellington common stock

Key Closing Wellington shareholder approval Conditions HSR clearance for the transaction

Voting Voting agreements from certain directors and shareholders Agreements Ronald Elliott William E. Simon & Sons Private Equity Partners, L.P.

Rollover Ronald Elliott Agreements

Confidential 13

Key Deal Terms (cont.)

Options All options will be accelerated and cashed out

Financing Transaction is not subject to financing contingencies

Guaranty Thoma Cressey Fund VIII, L.P. has guaranteed prompt and complete payment and performance of Parentsobligations to the Company up to a liability cap of $15,000,000 (subject to the Guaranty)

Termination Fee Termination fee of $3,600,000 plus up to $1,400,000 in reimbursement of out-of-pocket expenses under certain circumstances

Non-Solicitation No solicitation or negotiation of alternative transactions except as provided for in merger agreement

Confidential 14

Transaction Background

February 22, 2006: Board of Directors engages Piper Jaffray to explore a range of strategic and financial alternatives

March 8, 2006: Organizational and due diligence meeting between the Companys Management and Piper Jaffray

May 1, 2006: Piper Jaffray presents a range of strategic alternatives to the Board of Directors

May 22, 2006: The Board of Directors receives an unsolicited written offer from Thoma Cressey Equity Partners (TCEP) for $11.50 per share

May 23, 2006: The Board of Directors convenes for a scheduled board meeting and presentation of further information regarding specific alternatives from Piper Jaffray. The Board of Directors discusses the TCEP offer and mandates Piper Jaffray to contact other potential buyers (see results of this on following page)

June 6, 2006: TCEP, the Chairman of the Board, and Piper Jaffraymeet to discuss TCEPsoffer

June 12, 2006: At the request of the Board of Directors, Piper Jaffray informs TCEP that the Board would consider a deal at $13.00 per share

June 13, 2006: The Board of Directors receives a revised offer from TCEP for $13.00 per share in cash, contemplating a one-step merger and a rollover of stock by Ronald Elliott

June 14, 2006: The Board of Directors meets to discuss the revised TCEP proposal and receives an update from Piper Jaffray on the status of other potential buyers. The Board of Directors voted in favor of investigating a transaction with TCEP on the terms of the revised offer and forms a Special Committee of disinterested directors to direct all aspects of such potential transaction

June 15, 2006: An exclusivity agreement is signed with TCEP, granting TCEP exclusivity through July 19, 2006 to conduct diligence and complete definitive documentation for a transaction

Confidential 15

Buyers Contacted

At the request of the Board of Directors, Piper Jaffray contacted 15 potential strategic buyers with a description of the Company but not revealing the Companys name until a confidentiality agreement was executed

Of the 15 potential buyers Respondents Were not interested in pursuing the acquisition opportunity as described: 7 Were unresponsive to multiple contacts: 5 Signed a confidentiality agreement and received additional information: 3 Of the three that received additional financial information Declined / unresponsive after reviewing the information: 2 Provided a verbal expression of interest: 1

The party that provided a verbal indication of interest Provided a value range of $110 $120 million enterprise value

Confidential 16

Confidential

Overview

We reviewed the following information regarding Wellington and the transaction: Public filings and press releases of the Company Project Wellington data site (confidential ftp website) documents that were provided to Thoma Cressey, including: Historical consolidated financials for fiscal years 2002 to 2005 and 2006 YTD Historical segment level data and P&Ls for the fiscal years 2002 to 2005 and 2006 YTD Projected consolidated financials for June 2006, Q3 and Q4 2006E and fiscal years 2007E through 2010E Drafts of the Merger, Voting and Guaranty Agreements including final drafts Managements analysis of estimated net operating loss tax benefits LTM financial information as adjusted on a proforma basis by Wellington management for the non-recurring one-time costs estimated to have been incurred in connection with the Companys restatement and SEC investigation and other litigation not in the ordinary course as more fully described on page 24 Miscellaneous: Analysis of various information sent and presentations made to TCEP

We conducted or participated in due diligence review sessions / conversations as follows: Met with Wellington management or participated in conference calls on various dates Met with CEO, Board of Directors and other senior management to discuss historical and projected financials Review included discussions with CEO, COO, Finance Consultant, Senior Finance Manager and other senior managers regarding current and future strategy; historical and projected financial results and performance; corporate organization; marketing initiatives; customer acquisition and channel review; warehouse and fulfillment operations; product introductions and sourcing (numerous meetings and conference calls) Participated in due diligence reviews with TCEP (June 19-21, 2006) Participated in corporate, warehouse and operation facilities tours Discussions with outside legal counsel for Wellington, Latham & Watkins Discussion with KPMG, Wellingtons accountants Discussed transaction history, drafts of the Agreement and Plan of Merger, transaction issues and timing

Confidential 18

Management Adjustments for Non-Recurring Costs

RESTATEMENT AND SEC INVESTIGATION RELATED COSTS We reviewed the following informationfurnished by management or publicly available regarding the SEC investigationand restatements: Annual, quarterly and monthly costs related to the investigationand the related restatements The cause of the investigation described in the SEC filings Restatement amounts shown in the SEC filings Remediation actions described in the SEC filings Restatement amounts described in press releases Restatement invoices Detail of restatement journal entries Remediation log file

We conducted or participated in the following review sessions / conversations regarding the SEC investigation and restatements: Discussed the cause of investigation,restatements, invoices and remediationactions with the management team and finance consultant Received updates from the management team on the status of the investigation and restatement Conference calls with Wellingtons legal counsel, Latham & Watkins, regarding the historical and ongoing investigation, and potential future exposure and costs Discussion with Wellingtons accounting firm, KPMG, regarding the investigation and restatements

OTHER Review and discussion of non-SEC adjustments

Confidential 19

Confidential

Summary of Analyses

$20.00 Public Comparables M&A Comparables Premiums DCF

$17.50

$15.00

Offer

$12.50 Price

$10.00

$7.50

$5.00

$2.50

Relevant LTM 2006P 2006P LTM Price as of Price as of Price as of Assumptions Wellington Adj. EBITDA(1) Adj. EPS (2) Adj. EBITDA(1) Adj. EBITDA(1) 7/17/06 7/10/06 6/17/06 Discount Metric $11.4 $0.72 $13.8 $11.4 $8.10 $8.05 $7.85 Rates

Maximum 12.1x 22.9x 10.6x 14.0x 102.8% 103.5% 120.7% 16.0% - 18.0% Mean 9.4x 19.6x 9.0x 10.3x 25.6% 26.8% 30.8% Median 10.5x 21.2x 8.7x 10.9x 20.5% 22.2% 27.1% Terminal Minimum 4.5x 13.0x 8.0x 7.4x (13.0%) (11.4%) (8.0%) EBITDA Mult.

Multiple at 7.0x - 8.0x $13.00 11.2x 18.0x 9.2x 11.2x 60.5% 61.5% 65.6%

Note: Thin bars represent minimum and maximum values; Wide bars represent mean and median values (1) Adjusted per Wellington Management for non-recurring one-time costs as set forth on page 24 (2) Adjusted per Wellington Management for non-recurring one-time costs as set forth on pages 23 and 24

Confidential 21

Historical and Projected Financials

Fiscal Year Ending December 31 $ in Thousands

HISTORICAL LTM ESTIMATED 2002 2003 2004 2005 5/31/2006 2006 2007 2008 2009 2010 Early Childhood Revenue $ 70,190 $ 78,490 $ 90,908 $ 102,892 $ 106,784 $ 115,484 $ 135,312 $ 157,242 $ 173,048 $ 190,230 Elementary School Revenue 30,570 31,431 30,080 29,852 29,697 30,760 32,440 35,058 37,148 39,005 Revenue 100,760 109,921 120,988 132,744 136,481 146,245 167,752 192,300 210,195 229,235 Cost of Goods Sold 64,478 70,427 80,408 86,727 88,362 93,788 107,361 123,094 134,049 145,573 Gross Profit 36,282 39,494 40,580 46,017 48,119 52,456 60,391 69,206 76,147 83,662 Selling, General, & Administrative Costs 32,891 34,857 38,430 40,032 42,028 42,181 47,347 54,014 58,755 61,893 Add-Back: Adjustments(1) (879) - (874) (2,248) (3,240) (1,323) - - - - Adjusted EBIT 4,270 4,637 3,023 8,233 9,332 11,597 13,044 15,192 17,392 21,768 Depreciation 1,266 1,418 1,538 1,697 1,846 2,057 2,568 2,374 2,482 2,743 Amortization 288 279 173 174 174 113 173 158 61 6 Adjusted EBITDA $ 5,824 $ 6,334 $ 4,735 $ 10,104 $ 11,352 $ 13,767 $ 15,785 $ 17,724 $ 19,935 $ 24,517

Capital Expenditures $ 1,203 $ 1,183 $ 1,864 $ 1,659 - $ 2,025 $ 2,246 $ 2,267 $ 2,423 $ 2,583 Net Working Capital (2) 14,763 18,371 21,734 20,928 33,172 24,428 27,990 32,089 35,005 38,089 (Increase) / Decrease in Working Capital 1,687 (3,608) (3,363) 806 (5,210) (3,500) (3,562) (4,099) (2,916) (3,084)

Key Financial Ratios Early Childhood Revenue Growth 11.4% 11.8% 15.8% 13.2% - 12.2% 17.2% 16.2% 10.1% 9.9% Elementary School Revenue Growth 2.4% 2.8% -4.3% -0.8% - 3.0% 5.5% 8.1% 6.0% 5.0% Total Revenue Growth 8.5% 9.1% 10.1% 9.7% - 10.2% 14.7% 14.6% 9.3% 9.1% Gross Profit Margin 36.0% 35.9% 33.5% 34.7% 35.3% 35.9% 36.0% 36.0% 36.2% 36.5% Adjusted EBIT Margin 4.2% 4.2% 2.5% 6.2% 6.8% 7.9% 7.8% 7.9% 8.3% 9.5% Adjusted EBITDA Margin 5.8% 5.8% 3.9% 7.6% 8.3% 9.4% 9.4% 9.2% 9.5% 10.7% Capital Expenditures / Revenue 1.2% 1.1% 1.5% 1.2% - 1.4% 1.3% 1.2% 1.2% 1.1% Net Working Capital / Revenue 14.7% 16.7% 18.0% 15.8% 24.3% 16.7% 16.7% 16.7% 16.7% 16.6% (Increase) / Decrease in Working Capital / Revenue 1.7% -3.3% -2.8% 0.6% -3.8% -2.4% -2.1% -2.1% -1.4% -1.3%

Source: Management and public filings (1) See summary of adjustments page for further detail (2) Excludes cash and debt

Confidential 22

Detail of 2006 Estimates Fiscal Year Ending December 31 $ in Thousands

Quarter Ending FY Ending 3/31/2006 A 6/30/2006 E 9/30/2006 E 12/31/2006 E 12/31/2006 E Early Childhood Revenue $ 23,400 $ 26,506 $ 40,607 $ 24,972 $ 115,484 Elementary School Revenue 1,560 5,871 20,566 2,763 30,760 Revenue 24,960 32,377 61,173 27,735 146,245 Cost of Goods Sold 15,695 20,341 39,735 18,018 93,788 Gross Profit 9,265 12,036 21,438 9,718 52,456 Selling, General, & Administrative Costs 10,831 9,655 11,882 9,813 42,181 Add-Back: Adjustments (1) (1,234) (88) - - (1,323) Adjusted EBIT (331) 2,469 9,555 (96) 11,597 Interest Expense - 42 65 10 117 Interest (Income) (69) (26) (20) (5) (120) Pre-Tax Income (262) 2,453 9,510 (101) 11,600

Income Taxes (2) (99) 981 3,804 (40) 4,646 Net Income (163) 1,472 5,706 (60) 6,955

Diluted Shares Outstanding (000s) (3) 9,637.101 Earnings per Share $ 0.72

Depreciation 490 516 524 526 2,057 Amortization 43 35 18 18 113 Adjusted EBITDA $ 202 $ 3,020 $ 10,097 $ 448 $ 13,767

Key Financial Ratios

Gross Profit Margin 37.1% 37.2% 35.0% 35.0% 35.9% Pre-Tax Income Margin -1.1% 7.6% 15.5% -0.4% 7.9% Net Income Margin -0.7% 4.5% 9.3% -0.2% 4.8% Adjusted EBIT Margin -1.3% 7.6% 15.6% -0.3% 7.9% Adjusted EBITDA Margin 0.8% 9.3% 16.5% 1.6% 9.4%

Source: Management and public filings Note: 6/30/2006 figures include two months of actual financial results and one month of estimates (1) See summary of adjustments page for further detail (2) Q1 income taxes assume additional tax expense due to adjustment taxed at 40.0% (3) Diluted shares outstanding calculated using treasury stock method based upon offer price of $13.00 per share

Confidential 23

Summary of Management Adjustments of Non-Recurring Costs

Fiscal Year Ending December 31

Adjustments

LTM 2002 2003 2004 2005 5/31/2006 2006 RESTATEMENT AND SEC INVESTIGATION RELATED COSTS Accounting $ - $ - $ - $ 741,907 $ 1,213,201 $ 471,294 Consulting - - - 204,901 308,275 103,374 Legal - - - 896,695 1,572,957 676,262 Other - - - 69,157 136,729 67,572

OTHER Legal (1) - - 874,000 330,034 - - Merger Related(2) 879,000 - - - - - NASDAQ - - - 5,000 9,000 4,000 Total $ 879,000 $ - $ 874,000 $ 2,247,694 $ 3,240,161 $ 1,322,501

Source: Management (1) Related to legal fees for the Company pursuing a complaint against a competitor for, among other things, trade secret misappropriation, unfair competition and copyright infringement (2) Related to certain facility closures of the Company

Confidential 24

Comparable Public Companies Analysis

Overview Piper Jaffray has reviewed and compared certain actual and estimated publicly available financial, operating, and stock market information of Wellington and selected publicly-traded companies

Selection Company Standard Industry Classification search criteria: Criteria 5961 - Catalog & Mail-Order Houses 8200 - Educational Services 8351 - Child Day Care Services 3944 - Games, Toys, and Children's Vehicles 5092 - Toys and Hobby Goods and Supplies 2731 - Book Publishing 2741 - Misc. Publishing Company financial criteria: Market capitalization between $100 million and $1.2 billion Trailing revenue greater than $100 million Profitable on a trailing EBITDA basis

Selected Bright Horizons Family Solutions Inc. Companies Educate Inc. (n=4) Scholastic Corp. School Specialty Inc.

Confidential 25

Comparable Public Companies Analysis

$ in Millions, except per share data

LTM Multiples 2006P Multiples Fiscal LTM Price Market Net Enterprise LTM Financial Performance CY 2006P CY 2006P CY 2006P / 2004 EBITDA Enterprise Value / Price / EV / Ticker Company Year End Period 7/18/06 Capitalization Debt Value Revenue EBIT EBITDA EPS(1) EBITDA (1) Revenue CAGR(1) Margin Revenue EBIT EBITDA EPS EBITDA BFAM Bright Horizons Family Solutions Inc. 12/31 3/31/2006 $ 33.82 $ 978.9 $ (22.1) $ 956.8 $ 643.6 $ 63.8 $ 79.1 $ 1.48 $ 90.7 13.1% 12.3% 1.5x 15.0x 12.1x 22.9x 10.6x EEEE Educate Inc. 12/31 3/31/2006 6.91 296.5 159.3 455.9 340.8 38.9 48.1 0.53 56.7 19.5% 14.1% 1.3x 11.7x 9.5x 13.0x 8.0x SCHL Scholastic Corp. 5/31 2/28/2006 27.58 1,170.4 352.8 1,523.2 2,274.9 201.9 339.9 1.26 185.9 1.5% 14.9% 0.7x 7.5x 4.5x 21.9x 8.2x SCHS School Specialty Inc. 4/29 4/29/2006 30.87 709.0 414.8 1,123.8 1,015.7 69.3 97.3 1.50 122.5 3.1% 9.6% 1.1x 16.2x 11.6x 20.6x 9.2x

High 19.5% 14.9% 1.5x 16.2x 12.1x 22.9x 10.6x Mean 9.3% 12.7% 1.1x 12.6x 9.4x 19.6x 9.0x Median 8.1% 13.2% 1.2x 13.4x 10.5x 21.2x 8.7x Low 1.5% 9.6% 0.7x 7.5x 4.5x 13.0x 8.0x

Wellington at Offer Price(2) 12/31 5/31/2006 $ 13.00 $ 125.3 $ 1.7 $ 127.0 $ 136.5 $ 9.3 $ 11.4 $ 0.72 $ 13.8 9.9% 8.3% 0.9x 13.6x 11.2x 18.0x 9.2x

(1) Per ReutersmeanmajoritybasisEPS,EBITDAandRevenue estimates;Wellington's2006PEPS,EBITDAand Revenueper Managementestimates;Due tooff-cycle reportingperiods,SCHL'scalendaryear-end takenasof 11/31/2006andSCHS'scalendaryear-end takenasof 1/31/2007 (2) Assumes adjusted EBIT and EBITDA

Confidential 26

Comparable M&A Transactions Analysis

Overview Piper Jaffray has reviewed transactions involving target companies believed by Piper Jaffray to be comparable

Selection Company Standard Industry Classification search criteria: Criteria 5961 - Catalog & Mail-Order Houses 8200 - Educational Services 8351 - Child Day Care Services 3944 - Games, Toys, and Children's Vehicles 5092 - Toys and Hobby Goods and Supplies 2731 - Book Publishing 2741 - Misc. Publishing Transactions that have announced and closed over the past five years Transactions in which the acquiring company purchased a controlling interest of the target

Selected National Business Furniture OCM Direct, Inc. Targets Delta Education, LLC Learning Curve International, Inc. (n=11) Rose Art Industries, Inc. ABC School Supply Crosstown Traders, Inc. Dan's Competition Inc. Cornerstone Brands, Inc. Premier Agendas, Inc. The Golf Warehouse

Confidential 27

Comparable M&A Transactions Analysis

$ in Millions, except per share data

Transaction Multiples Announcement Enterprise Target LTM Financial Performance Enterprise Value / Date Target Acquiror Value Revenue EBIT EBITDA Revenue EBIT EBITDA

9/28/2005 National Business Furniture (1) (2) K+K America Corp $ 82.0 $ 127.5 $ 6.4 $ 7.1 0.6x 12.9x 11.5x 8/19/2005 Delta Education, LLC (1) School Specialty Inc. 272.0 95.6 16.1 21.0 2.8x 16.9x 13.0x 6/15/2005 Rose Art Industries, Inc. (1) Mega Bloks Inc. 400.5 285.0 46.5 50.0 1.4x 8.6x 8.0x 5/19/2005 Crosstown Traders, Inc. (1) Charming Shoppes Inc. 255.8 458.2 27.6 29.5 0.6x 9.3x 8.7x 3/1/2005 Cornerstone Brands, Inc. (1) (2) (3) IAC/InterActiveCorp 720.0 720.0 59.0 66.0 1.0x 12.2x 10.9x 6/29/2004 The Golf Warehouse (1) Sportsman's Guide Inc. 30.3 45.5 2.2 2.6 0.7x 14.0x 11.7x 5/5/2003 OCM Direct, Inc. (1) Alloy Inc 20.6 28.5 0.6 1.8 0.7x NM 11.4x 2/3/2003 Learning Curve International, Inc. (1) RC2 Corp. 114.0 136.9 12.0 15.4 0.8x 9.5x 7.4x 8/14/2002 ABC School Supply (1) (2) School Specialty Inc. 41.6 48.0 - 5.3 0.9x NA 7.8x 9/28/2001 Dan's Competition Inc. (1) Alloy Inc. 36.8 22.6 2.5 2.6 1.6x 14.7x 14.0x 11/13/2001 Premier Agendas, Inc. (1) School Specialty Inc. 155.9 91.3 11.5 17.2 1.7x 13.5x 9.0x

High 2.8x 16.9x 14.0x Mean 1.2x 12.4x 10.3x Median 0.9x 12.9x 10.9x Low 0.6x 8.6x 7.4x

Wellington at Offer Price (4) $ 127.0 $ 136.5 $ 9.3 $ 11.4 0.9x 13.6x 11.2x

(1) Information from publicly filed documents (2) Information from Wall Street analyst reports (3) Information from press releases (4) Assumes adjusted EBIT and EBITDA

Confidential 28

Discounted Cash Flows Analysis

Overview The Discounted Cash Flows Analysis is used to calculate a range of theoretical values for Wellington based on the net present value of (i) Wellingtonsimplied annual cash flows; (ii) a terminal value of Wellington at fiscal year ending December 31, 2010 based upon a multiple of EBITDA; and (iii) net operating loss tax benefits

For the purposes of this analysis, the following range of assumptions were used: Key Assumptions 5-year cash flows discounted back to May 31, 2006 Discount rates: 16.0% - 18.0% EBITDA exit multiples of 7.0x to 8.0x Assumed tax rate of 40% provided by Wellington management Analyzed discount rates based upon the WACC of comparable company group in addition to other considerations Analyzed the Companys existing net operating loss (NOL) carry-forwards

The projected financial data was prepared by management

Confidential 29

Discounted Cash Flows Analysis

Fiscal Year Ending December 31 $ in Thousands, except per share data

Projected Cash Flows

Jun. - Dec. 2006P 2007P 2008P 2009P 2010P Adjusted EBIT $ 10,502 $ 13,044 $ 15,192 $ 17,392 $ 21,768 Less:Taxes @ 40.0% (4,201) (5,217) (6,077) (6,957) (8,707) After-tax Operating Income 6,301 7,826 9,115 10,435 13,061 Plus: Depreciation & Amortization 1,264 2,741 2,532 2,543 2,749 Less:Capital Expenditures (1,044) (2,246) (2,267) (2,423) (2,583) Less:(Inc) / Dec in Working Capital 8,744 (3,562) (4,099) (2,916) (3,084) Free Cash Flows 15,265 4,760 5,282 7,639 10,143 Terminal Cash Flows @ 7.5x 2010P EBITDA - - - - 183,879 Total Free Cash Flows $ 15,265 $ 4,760 $ 5,282 $ 7,639 $ 194,022

NPV Calculation @ 5/31/2006 Company Value - Sensitivity Analysis

NPV of Free Cash Flows $ 31,662 Discount Rate NPV of Terminal Cash Flows 89,459 16.0% 17.0% 18.0% NPV of NOL Tax Benefits 5,719 Terminal 7.0x $124,717 $120,876 $117,208 Company Value 126,840 EBITDA 7.5x $130,921 $126,840 $122,944 Plus: Cash / (Net Debt) (1,729) Multiple 8.0x $137,124 $132,804 $128,679 Equity Value $ 125,111

Equity Value Per Share 12.98

Assumptions Equity Value per Share - Sensitivity Analysis

LTM 5/31/2006 Adjusted EBITDA $ 11,352 Discount Rate Terminal EBITDA Multiple 7.5x 16.0% 17.0% 18.0% Discount Rate 17.0% Terminal 7.0x $12.76 $12.36 $11.98 Tax Rate 40.0% EBITDA 7.5x $13.41 $12.98 $12.58 Net Debt / (Cash) 1,729 Multiple 8.0x $14.05 $13.60 $13.17 Diluted Shares Outstanding (000s)(1) 9,636.912

Note: Assumes midpoint of free cash flows occurs on September 30th (1) Diluted shares outstanding calculated using treasury stock method of options accounting

Confidential 30

Net Operating Loss Carry-Forwards

Fiscal Year Ending December 31 $ in Thousands

Net Operating Losses

2006P 2007P 2008P 2009P 2010P 2011P 2012P 2013P 2014P 2015P 2016P 2017P 2018P 2019P 2020P 2021P 2022P 2023P Net Operating Loss Utilized $ 6,358 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 1,102 $ 7 $ 20 Federal Income Tax Benefit @ 35.0% 2,225 386 386 386 386 386 386 386 386 386 386 386 386 386 386 386 2 7

NPV of NOLs (7.0% Discount Rate) $ 5,719

NPV of NOL - Sensitivity Analysis

Discount Rate 6.0% 7.0% 8.0% $5,955 $5,719 $5,506

Note: 2006P NOL not discounted; Reflects only federal tax benefits; State NOL tax benefits not deemed material Source: Management

Confidential 31

Premiums Paid Analysis

Overview The premiums paid analysis involves a review of purchase prices in public buyout transactions relative to pre-announcement prices

Selection All industries, excluding REIT, financial, biopharmaceutical, high technology and Criteria telecommunications Announced and completed transactions 1 Going-private transactions and transactions in which public company receives only cash as consideration Majority of shares purchased (>60%)

Transactions with values between $50 million and $250 million that have announced and Transactions closed over the past three years

1 Going private transaction defined as a privateacquiror ('private' meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 32

Premiums Paid Analysis

Transaction Premiums Announcement 1 Day 1 Week 1 Month Date Target Acquiror Prior Prior Prior 5/22/2006 Main Street Restaurant Group Inc. Briad Main Street, Inc. 20.5% 23.1% 29.6% 2/17/2006 Checkers Drive In Restaurants Inc. Wellspring Capital Management, L.L.C. -1.1% 0.1% 1.5% 1/29/2006 Lowrance Electronics Inc. Simrad Yachting AS 48.0% 45.0% 41.4% 11/15/2005 Learning Care Group Inc. ABC Learning Centres Ltd. 36.4% 26.9% 23.4% 10/27/2005 Transport Corp. of America Inc. Goldner Hawn Johnson & Morrison, Inc. 25.0% 22.2% 33.9% 10/18/2005 Lancer Corp. Hoshizaki America, Inc. 10.6% 15.8% 15.8% 8/31/2005 Haggar Corp. Investor Group 27.8% 28.4% 32.9% 8/29/2005 Action Performance Companies, Inc. Motorsports Authentics Inc. 5.9% 16.1% 27.5% 7/11/2005 D&K Healthcare Resources Inc. McKesson Corp. 70.6% 70.8% 75.8% 7/1/2005 Tipperary Corp. Santos Ltd. 18.6% 15.8% 36.0% 6/2/2005 Cruzan International Inc. The Absolut Spirits Company, Inc. 102.8% 103.5% 101.9% 6/1/2005 Saucony Inc. Stride Rite Corp. 14.8% 16.8% 17.5% 4/28/2005 Worldwide Restaurant Concepts Inc. Pacific Equity Partners 46.5% 44.1% 42.2% 3/28/2005 Digital Impact, Inc. Acxiom Corp. 52.84% 80.41% 87.17% 1/4/2005 Total Logistics Inc. SUPERVALU Inc. 7.7% 11.8% 7.5% 12/27/2004 META Group Inc. Gartner Inc. 54.3% 62.9% 85.9% 12/20/2004 Chalone Wine Group Ltd. Diageo plc 1.2% 2.9% 20.9% 12/17/2004 Superior Consultant Holdings Corp. Affiliated Computer Services Inc. 29.2% 35.4% 29.2% 6/7/2004 The First Years Inc. RC2 Corp. 9.3% 12.7% 9.5% 5/23/2004 Wiser Oil Co. Forest Oil Corp. 32.2% 22.5% 20.5% 4/23/2004 Loehmanns Holdings Inc. Crescent Capital Investments, Inc. 5.7% 9.7% 14.1% 4/22/2004 MedSource Technologies Inc. Accellent Corp. 18.5% 18.9% 30.0% 4/8/2004 Isco, Inc. Teledyne Technologies Inc. 32.2% 33.4% 32.0% 3/24/2004 DigitalThink Inc. Convergys Corp. 30.4% 25.0% 23.1%

Source: Securities Data Corporation; Capital IQ

Confidential 33

Premiums Paid Analysis (contd)

Transaction Premiums Announcement 1 Day 1 Week 1 Month Date Target Acquiror Prior Prior Prior 3/17/2004 Golden State Vintners Inc. The Wine Group Inc. -0.7% 5.8% 13.2% 2/27/2004 Landacorp Inc. SHPS Holdings, Inc. 0.7% 1.3% -4.0% 2/20/2004 Trover Solutions Inc. Tailwind Capital Partners 0.0% -0.7% -0.7% 2/15/2004 Butler Manufacturing Co. Bluscope Steel Ltd. 1.8% 0.9% 1.9% 2/4/2004 Rainbow Rentals Inc. Rent-A-Center Inc. 96.1% 96.1% 120.7% 1/30/2004 WorkFlow Management Inc. Investor Group 5.4% 3.6% -8.0% 12/31/2003 Gundle/SLT Environmental Inc. Code Hennessy & Simmons, L.L.C. -13.0% -10.1% -4.2% 12/19/2003 Summit America Television Inc. EW Scripps Co. 19.8% 13.1% 22.7% 11/26/2003 North Coast Energy Inc. EXCO Resources Inc. -10.2% -11.4% -7.8% 11/14/2003 Sylvan Inc. Snyder Associated Companies, Inc. 21.9% 22.0% 23.2% 11/7/2003 barnesandnoble.com Inc. Barnes & Noble Inc. 35.6% 32.6% 27.1% 11/3/2003 Invivo Corp. Intermagnetics General Corp. 34.9% 34.6% 46.5% 10/31/2003 Media Arts Group Inc. Investor Group 68.8% 80.2% 77.8% 9/29/2003 Good Guys Inc. CompUSA Inc. 36.7% 31.4% 45.5% 9/22/2003 United States Exploration Inc. Investor Group 0.7% -1.1% 2.2% 7/31/2003 dELiA*s, Inc. Alloy Inc. 17.7% 24.0% 31.0% 7/29/2003 The Elder-Beerman Stores Corp. Bon-Ton Stores Inc. 32.9% 33.3% 36.3%

High 102.8% 103.5% 120.7% Mean 25.6% 26.8% 30.8% Median 20.5% 22.2% 27.1% Low -13.0% -11.4% -8.0%

Wellington 60.5% 61.5% 65.6%

Source: Securities Data Corporation; Capital IQ

Confidential 34

PRESENTATION TO THE BOARD OF DIRECTORS Project Wellington

June 14, 2006

Confidential

Section I Thoma Cressey Proposal

Section II Other Potential Buyers Contacted

Section III Updated Preliminary Valuation

Confidential 2

Confidential

Offer Summary

$13.00 per share - $121 million enterprise value Represents a 10.1x multiple of LTM 3/31/06 adjusted EBITDA

30-day exclusivity

3% break-up fee

One-step merger transaction

Confidential 4

MAY 2006 JUNE 2006 S M T W T F S S M T W T F S 1 2 3 4 5 6 1 2 3 7 8 9 10 11 12 13 4 5 6 7 8 9 10 14 15 16 17 18 19 20 11 12 13 14 15 16 17 21 22 23 24 25 26 27 18 19 20 21 22 23 24 28 29 30 31 25 26 27 28 29 30

Timing Activity May 22 Received unsolicitedwritten offerfrom Thoma Cressey for $11.50 pershare or $107 millionenterprise value

May 23 Board discussed ThomaCressey offer at scheduled board meeting PiperJaffray mandatedby board to contact other potential buyers May 24 PiperJaffray begancontacting other potential buyers June 6 Thoma Cressey, Bob McDonaldand PiperJaffray met in Los Angeles to discuss offer

June 13 Received a revised written offerfrom ThomaCressey for $13.00 per share or $121million enterprise value

Confidential 5

JULY 2006 AUGUST 2006 SEPTEMBER 2006 OCTOBER 2006 S M T W T F S S M T W T F S S M T W T F S S M T W T F S 1 1 2 3 4 5 1 2 1 2 3 4 5 6 7 2 3 4 5 6 7 8 6 7 8 9 10 11 12 3 4 5 6 7 8 9 8 9 10 11 12 13 14 9 10 11 12 13 14 15 13 14 15 16 17 18 19 10 11 12 13 14 15 16 15 16 17 18 19 20 21 16 17 18 19 20 21 22 20 21 22 23 24 25 26 17 18 19 20 21 22 23 22 23 24 25 26 27 28 23 24 25 26 27 28 29 30 31 27 28 29 30 31 24 25 26 27 28 29 30 29 30 31

Timing Proposed Activity Week of July 10 Sign the definitive agreement File HSR Issue press release Week of July 17 Start preparing proxy statement Week of July 24 Finalize preliminary proxy statement File preliminary proxy materials with SEC Weeks of July 31, August 14 Waiting/responding to SEC comments

Week of August 14 HSR 30 -day period expiration (if no comment) Waiting/responding to SEC comments Weeks of August 24, 28, September 4 Waiting/responding to SEC comments Re-file- preliminary proxy statement(s) with SEC Week of September 11 Clear SEC reviews Mail final proxy statement to shareholders Weeks of September 18, 25, October 2, 9 Prepare for shareholder meeting Communicate with shareholders/shareholder voting services Collect shareholder votes Week of October 16 Hold special meeting of shareholders (assumes minimum solicitation period of 20 days) Close transaction

Confidential 6

Confidential

Potential Buyer Update

Provided Additional Passed on Company Name Contact Contacted Signed CA Information Opportunity Other Comments Buhrmann NV Herman Brauckmann "Most likely not interested" according to Herman Brauckmann

Findel Patrick Jolly Not interested in the U.S. market

Genuine Parts Treg Brown Interested in wholesale

Hobby Lobby David Green

Lakeshore Mike Kaplan

Mega Bloks Alain Tanguay Waiting for response

Office Depot Scott Craig Attorney from Office Depot will respond to Latham & Watkins on the CA on Thursday at the earliest OfficeMax Robert Lee Called back on 6/13

Pearson Paul Sheppared Does not fit strategy

Renaissance Steve Schmidt

Scholastic Heather Myers Looking to get into the early childhood spacethrough technologyand other more highly value-added products School Specialty David Vander Zanden Initial verbal bid at $100-$110 million on June 2nd Revised verbal bid at $110-$120 million on June 12th, requiring a 10 day due diligence period to confirm 2006 projections Staples John Mahoney

United Stationers Kathleen Dvorak Left three voicemails; unresponsive

Confidential 8

Confidential

Preliminary Valuation Analysis

$ per Share Offer at a 65.6% Premium to $20.00 June 13, 2006 Closing Price

$18.00 $16.56

$16.00

$14.28 $13.93 $14.00 $14.25 Thoma Cressey $12.63 $12.59 Offer Price:

$12.00 $12.64 $12.34 $11.24 $13.00 $10.25 $11.46 $10.92 $10.00 $9.45 $9.73 $9.81 Share Price as $8.00 of June 13, 2006: $6.00 $7.85 $5.46

$4.00

Trading Range Public Company Analysis Transaction Analysis DCF Analysis LBO Analysis

EBITDA Trading Multiples of Public EBITDA Trading Multiples of Public CY 2006P P/E Trading Multiples of EBITDA Multiples of Acquisition Median M&A Transaction Premiums EBITDA Multiples Assuming Terminal EBITDA Multiples Assuming Required 52-WeekHi-Low Educational Products / Services Catalog / Internet Retail Companies Public Educational Products / Services Transactions in the Educational Products for Public Company Deals 1 Day -4 Multiples-of-7.0x-8.0x-and-a-Discount IRRs of 22.5% - 27.5% and Total Companies (1,4): (1,4): Companies (3,4): / Services Sector (2,4): Weeks Prior to Announcement (5): Rate of 18.0% (2): Leverage of 4.50x (2):

10.9x-12.7x 8.5x-9.9x 21.2x-24.6x 8.4x-9.8x 25.0%-30.6% 9.8x-10.8x 8.8x-9.7x Multiple Multiple Multiple Multiple Share Price Multiple Multiple

9,625.8 9,590.2 9,643.8 9,608.5 9,625.5 9,611.3 Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s)

Note: Diluted shares outstanding calculated using treasury stock method of options accounting (1) Assumes LTM 3/31/2006 EBITDA of $10.5 million after public company expenses (2) Assumes LTM 3/31/2006 EBITDA of $12.1 million before public company expenses (3) Assumes 2006P net income of $6.5 million after public company expenses (4) A range of +/- 7.5% has been applied to the median multiples (5) Assumes 6/13/2006 closing price of $7.85 per share

Confidential 10

Financial Summary

Fiscal Year Ended December 31 $ in Thousands

HISTORICAL LTM ESTIMATED 2001 2002 2003 2004 2005 3/31/2006 2006 2007 2008 2009 2010 Early Childhood Revenue $ 63,000 $ 70,190 $ 78,490 $ 90,908 $ 102,892 $ 105,191 $ 115,380 $ 135,189 $ 157,099 $ 172,891 $ 190,057 Elementary School Revenue 29,849 30,570 31,431 30,080 29,852 29,935 31,098 32,796 35,443 37,556 39,434 Revenue 92,849 100,760 109,921 120,988 132,744 135,126 146,478 167,985 192,543 210,446 229,491 Cost of Goods Sold 59,747 64,478 70,427 80,408 86,727 87,964 94,376 108,380 123,249 134,209 145,736 Gross Profit 33,102 36,282 39,494 40,580 46,017 47,162 52,101 59,605 69,293 76,238 83,755 Selling, General, & Administrative Costs 42,920 32,891 34,857 38,430 40,032 41,941 42,745 47,413 54,082 58,825 61,963 Adjustments (2,517) (879) - (874) (2,473) (3,361) (1,203) - - - - Adjusted EBIT after Public Company Expenses (7,301) 4,270 4,637 3,023 8,458 8,582 10,559 12,192 15,211 17,413 21,792 Depreciation 1,981 1,266 1,418 1,538 1,697 1,777 2,055 2,512 2,310 2,418 2,679 Amortization 5,485 288 279 173 174 174 96 173 158 61 6 Adjusted EBITDA after Public Expenses 165 5,824 6,334 4,735 10,329 10,533 12,710 14,877 17,680 19,892 24,477 Public Company Expenses (680) (572) (613) (730) (1,235) (1,528) (1,875) (2,140) (2,441) (2,655) (2,796) Adjusted EBIT before Public Company Expenses (6,621) 4,842 5,250 3,754 9,693 10,110 12,434 14,332 17,652 20,068 24,589 Depreciation 1,981 1,266 1,418 1,538 1,697 1,777 2,055 2,512 2,310 2,418 2,679 Amortization 5,485 288 279 173 174 174 96 173 158 61 6 Adjusted EBITDA before Public Company Expenses $ 845 $ 6,396 $ 6,947 $ 5,465 $ 11,564 $ 12,061 $ 14,585 $ 17,017 $ 20,120 $ 22,546 $ 27,274

Capital Expenditures $ 2,303 $ 1,203 $ 1,183 $ 1,864 $ 1,659 $ 1,761 $ 1,800 $ 2,021 $ 2,267 $ 2,423 $ 2,583 Net Working Capital 16,450 14,763 18,371 21,734 20,287 26,217 22,217 25,498 29,102 31,744 34,538 (Increase) / Decrease in Working Capital - 1,687 (3,608) (3,363) 1,447 (3,433) (1,930) (3,281) (3,603) (2,642) (2,794)

Key Financial Ratios

Early Childhood Revenue Growth - 11.4% 11.8% 15.8% 13.2% - 12.1% 17.2% 16.2% 10.1% 9.9% Elementary School Revenue Growth - 2.4% 2.8% -4.3% -0.8% - 4.2% 5.5% 8.1% 6.0% 5.0% Total Revenue Growth - 8.5% 9.1% 10.1% 9.7% - 10.3% 14.7% 14.6% 9.3% 9.0% Gross Profit Margin 35.7% 36.0% 35.9% 33.5% 34.7% 34.9% 35.6% 35.5% 36.0% 36.2% 36.5% Public Company Expenses as a % of Normalized SG&A -1.6% -1.7% -1.8% -1.9% -3.1% -3.6% -4.5% -4.5% -4.5% -4.5% -4.5% Adjusted EBIT after Public Company Expenses Margin -7.9% 4.2% 4.2% 2.5% 6.4% 6.4% 7.2% 7.3% 7.9% 8.3% 9.5% Adjusted EBITDA after Public Expenses Margin 0.2% 5.8% 5.8% 3.9% 7.8% 7.8% 8.7% 8.9% 9.2% 9.5% 10.7% Adjusted EBIT before Public Company Expenses Margin -7.1% 4.8% 4.8% 3.1% 7.3% 7.5% 8.5% 8.5% 9.2% 9.5% 10.7% Adjusted EBITDA before Public Company Expenses Margin 0.9% 6.3% 6.3% 4.5% 8.7% 8.9% 10.0% 10.1% 10.4% 10.7% 11.9% Capital Expenditures / Revenue 2.5% 1.2% 1.1% 1.5% 1.2% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% Net Working Capital / Revenue 17.7% 14.7% 16.7% 18.0% 15.3% 19.4% 15.2% 15.2% 15.1% 15.1% 15.0% (Increase) / Decrease in Working Capital / Revenue - 1.7% -3.3% -2.8% 1.1% - -1.3% -2.0% -1.9% -1.3% -1.2%

Note: FY 2001 excludes $29.6 m impairment charge and $1.8 m merger integration charge

Source: Public Filings; Management

Confidential 11

Discounted Cash Flow Analysis

Fiscal Year Ended December 31 $ in Thousands, except per share data

Projected Cash Flows

Q2-Q4 2006 2007P 2008P 2009P 2010P Adjusted EBIT before Public Company Expenses $ 12,264 $ 14,332 $ 17,652 $ 20,068 $ 24,589 Less: Taxes @ 40.0% (4,906) (5,733) (7,061) (8,027) (9,835) After-tax Operating Income 7,359 8,599 10,591 12,041 14,753 Plus: Depreciation & Amortization 1,618 2,685 2,468 2,479 2,685 Less: Capital Expenditures (1,297) (2,021) (2,267) (2,423) (2,583) Less: (Inc) / Dec in Working Capital 4,000 (3,281) (3,603) (2,642) (2,794) Free Cash Flows 11,679 5,982 7,189 9,454 12,061 Terminal Cash Flows @ 7.5x 2010P EBITDA - - - - 204,552 Total Free Cash Flows $ 11,679 $ 5,982 $ 7,189 $ 9,454 $ 216,613

NPV Calculation @ 3/31/2006 Company Value - Sensitivity Analysis

NPV of Free Cash Flows $ 31,181 Discount Rate NPV of Terminal Cash Flows 93,094 17.0% 18.0% 19.0% Company Value 124,275 Terminal 7.0x $122,250 $118,068 $114,079 Plus: Cash / (Net Debt) 3,614 EBITDA 7.5x $128,712 $124,275 $120,041 Equity Value $ 127,889 Multiple 8.0x $135,175 $130,481 $126,003

Equity Value Per Share 13.29 Company Value / EBITDA - Sensitivity Analysis Premium to Current Share Price 69.3% Discount Rate Company Value / LTM 3/31/2006 EBITDA 10.3x 17.0% 18.0% 19.0% Terminal 7.0x 10.1x 9.8x 9.5x EBITDA 7.5x 10.7x 10.3x 10.0x Assumptions Multiple 8.0x 11.2x 10.8x 10.4x

LTM 3/31/2006 EBITDA $ 12,061 Equity Value per Share - Sensitivity Analysis Current Share Price as of 6/13/2006 7.85 Terminal EBITDA Multiple 7.5x Discount Rate Discount Rate 18.0% 17.0% 18.0% 19.0% Tax Rate 40.0% Terminal 7.0x $13.08 $12.64 $12.23 Diluted Shares Outstanding (000s) (1) 9,625.525 EBITDA 7.5x $13.75 $13.29 $12.85 Net Debt / (Cash) (3,614) Multiple 8.0x $14.42 $13.93 $13.47

(1) Diluted shares outstanding calculated using treasury stock method of options accounting

Confidential 12

Leveraged Buyout Analysis

Fiscal Year Ended December 31 $ in Thousands, except per share data

Capital Structure Cash Flows

Amount Multiple % Q2-Q4 2006 2007P 2008P 2009P 2010P Total Bank Debt (1) $ 39,199 3.25x 33.3% Adjusted EBIT before Public Company Expenses $ 12,264 $ 14,332 $ 17,652 $ 20,068 $ 24,589 Second Lien (11.5%) 6,031 0.50x 5.1% Interest (Expense) / Income (3,573) (4,236) (3,912) (3,422) (2,688) Mezzanine Debt (14.0%) 9,046 0.75x 7.7% Pretax Income 8,691 10,096 13,739 16,645 21,900 Total Leverage 54,276 4.50x 46.2% Less: Taxes @ 40% (3,477) (4,038) (5,496) (6,658) (8,760) Sponsor Equity 63,295 5.25x 53.8% Net Income 5,215 6,058 8,244 9,987 13,140 Total Consideration 117,571 9.75x 100.0% Plus: Depreciation & Amortization 1,618 2,685 2,468 2,479 2,685 Less: Transaction Costs 5.0% (5,879) Less: Capital Expenditures (1,297) (2,021) (2,267) (2,423) (2,583) Transaction Value 111,692 9.3x Less: (Inc) / Dec in Working Capital 4,000 (3,281) (3,603) (2,642) (2,794) Plus: Cash / (Net Debt) 3,614 Scheduled Debt Repayment (735) (1,274) (1,666) (2,058) (196) Equity Value $ 115,306 Free Cash Flow 8,800 2,167 3,176 5,342 10,252 Advances / (Additional Principle Repaid) (8,800) (2,167) (3,176) (5,342) (10,252) Equity Value per Share 12.00 Net Free Cash Flow $ - $ - $ - $ - $ - Premium to Current Share Price 52.8%

LTM 3/31/2006 EBITDA 12,061 Current Share Price as of 6/13/2006 7.85 Diluted Shares Outstanding (000s) (3) 9,611.281

Exit Value Credit Statistics

Exit Value EBITDA Multiple: 7.5x $ 204,552 2006P 2007P 2008P 2009P 2010P Less: Net Debt (18,610) EBITDA $ 14,585 $ 17,017 $ 20,120 $ 22,546 $ 27,274 Equity Value 185,942 Total Debt Outstanding 44,741 41,300 36,458 29,058 18,610 Less: Mezzanine Debt Equity 0.0% - Total Debt / EBITDA 3.1x 2.4x 1.8x 1.3x 0.7x Less: Management Equity 7.0% (13,016) EBITDA / Interest 3.9x 4.0x 5.1x 6.6x 10.1x LBO Fund Equity $ 172,926 EBIT / Interest 3.4x 3.4x 4.5x 5.9x 9.1x Fixed Coverage 3.7x 3.5x 4.0x 4.6x 10.4x Return Analysis

2010 EBITDA Multiple 7.0x 7.5x 8.0x LBO Fund Equity 22.9% 25.0% 27.0%

(1) Total Bank Debt allocated 50.0% to Term Loan A at LIBOR plus 2.75% and 50.0% to Term Loan B at LIBOR plus 3.25% (2) Assumes LIBOR of 5.04% as of 6/13/2006 (3) Diluted shares outstanding calculated using treasury stock method of options accounting

Confidential 13

Public Company Analysis

$ in Millions, except per share data

Educational Products / Services LTM Multiples P/E Price % of 52 Market Net Company LTM Financial Performance CY 2006P EBITDA Company Value / Price / Ticker Company 6/13/06 Week High Capitalization Debt Value Revenue EBIT EBITDA EPS(1) Margin Revenue EBIT EBITDA 2006P EPS BFAM Bright Horizons Family Solutions Inc. $ 36.39 77.9% $ 1,011.4 $ (22.1) $ 989.3 $ 643.6 $ 63.8 $ 79.1 $ 1.48 12.3% 1.5x 15.5x 12.5x 24.6x EEEE Educate Inc. 8.64 50.5% 370.8 159.3 530.1 340.8 38.9 47.6 0.48 14.0% 1.6x 13.6x 11.1x 18.0x SCHL Scholastic Corp. 25.93 65.2% 1,084.0 352.8 1,436.8 2,274.9 147.0 212.7 1.22 9.3% 0.6x 9.8x 6.8x 21.3x SCHS School Specialty Inc. 31.90 65.2% 732.0 414.8 1,146.8 1,015.7 62.0 89.9 0.80 8.9% 1.1x 18.5x 12.7x 39.9x

Max 14.0% 1.6x 18.5x 12.7x 39.9x Mean 11.1% 1.2x 14.4x 10.8x 25.9x Median 10.8% 1.3x 14.6x 11.8x 22.9x Min 8.9% 0.6x 9.8x 6.8x 18.0x

Catalog / Internet Retail LTM Multiples P/E Price % of 52 Market Net Company LTM Financial Performance CY 2006P EBITDA Company Value / Price / Ticker Company 6/13/06 Week High Capitalization Debt Value Revenue EBIT EBITDA EPS(1) Margin Revenue EBIT EBITDA 2006P EPS ARTL Aristotle Corp. $ 8.10 90.0% $ 139.9 $ 89.0 $ 228.8 $ 193.2 $ 29.6 $ 31.4 NA 16.3% 1.2x 7.7x 7.3x NA SGDE Sportsman's Guide Inc. 30.49 99.3% 223.4 (8.1) 215.3 292.2 17.9 19.3 NA 6.6% 0.7x 12.0x 11.1x NA

Max 16.3% 1.2x 12.0x 11.1x NA Mean 11.4% 1.0x 9.9x 9.2x NA Median 11.4% 1.0x 9.9x 9.2x NA Min 6.6% 0.7x 7.7x 7.3x NA

Wellington $ 7.85 83.1% $ 71.0 $ (3.6) $ 67.4 $ 135.1 $ 8.6 $ 10.5 $ 0.68 7.8% 0.5x 7.8x 6.4x 11.5x

Note: Sportsman's Guide's and Aristotle's prices reflect acquisition premiums due to 5/5/2006 and 5/22/2006 announcements that they will be acquired by Redcats USA and Geneve Corp., respectively (1) Per Reuters mean reported EPS estimates; Wellington's projected EPS based upon management and PJC estimates

Source: Public Filings

Confidential 14

Transaction Analysis

$ in Millions, except per share data

Educational Products / Services TransactionMultiples Announcement Company Target LTM Financial Performance Company Value / Date Target Target Business Description Acquiror AcquirorBusiness Description Value Revenue EBIT EBITDA Revenue EBIT EBITDA 1/13/2006 PoshTots, LLC Internet Retail BabyUniverse, Inc. Internet Retail $ 14.9 $ 6.3 $ 0.4 $ 0.4 2.4x NM NM 11/15/2005 Learning Care Group, Inc. Pvd childcare svcs A.B.C. Learning CentresLtd. Pvd childcare svcs 164.2 220.7 5.9 10.3 0.7x 27.9x 16.0x 8/19/2005 Delta Education Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies 273.0 95.6 16.2 21.1 2.9x 16.8x 12.9x 6/27/2005 ChildrenFirst, Inc. Op backup childcare centers Bright Horizons Family Solutions Inc. Pvd workplace svcs 50.0 31.0 - - 1.6x NA NA 6/22/2005 American Guidance Service, Inc. Pvd speech training products Pearson plc Publbooks, educ materials 270.0 - - - NA NA NA 6/15/2005 Rose Art Industries, Inc. Mnfr arts / crafts prod Mega Bloks Inc. Mnfr,mkt toys 335.3 285.0 43.4 50.0 1.2x 7.7x 6.7x 1/24/2005 AlphaSmart Inc. Dvlp educsoftware Renaissance Learning Inc. Dvlp software 54.7 33.7 3.2 3.7 1.6x 16.9x 14.7x 12/14/2004 Voyager Expanded Learning, Inc. Pvd educservices ProQuest Co. Publishing co 376.7 - - - NA NA NA 9/1/2004 The Guidance Channel Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies 18.8 20.0 - - 0.9x NA NA 1/16/2004 McGraw Hill, Children's Publishing Unit Educ publishing co School Specialty Inc. Mnfr,whl school supplies 46.0 66.0 - (5.1) 0.7x NA NM 1/16/2004 Califone International, Inc. Mnfr audiovisual equip for educ School Specialty Inc. Mnfr,whl school supplies 26.0 16.0 - 3.7 1.6x NA 7.0x 9/9/2003 Lightspan Inc. Pvd educational software Plato Learning Inc. Pvd,dvlp edusoftware,svcs 27.0 36.3 (20.4) (12.6) 0.7x NM NM 5/30/2003 Select Agendas Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies 17.0 8.0 - 1.7 2.1x NA 10.0x 3/4/2003 ARAMARK Educational Resources Inc. Pvd educsvcs Knowledge Learning Corp. Pvd educsvcs 265.0 455.0 - - 0.6x NA NA 1/20/2003 Riverdeep Interactive Learning Ltd. Dvlp Internet software Management Buyout Management 371.7 216.3 (14.0) 46.2 1.7x NM 8.0x 12/18/2002 bigchalk.com Inc Pvd educvia internet svcs ProQuest Co. Publishing co 32.3 28.2 (16.7) 4.7 1.1x NM 6.9x 11/7/2002 Houghton Mifflin Co. Publish books and software Bain Capital, Thomas H. Lee Private Equity Firms 1,660.0 1,194.6 81.9 268.6 1.4x 20.3x 6.2x 8/26/2002 Broderbund LLC Dvlp,whl educational software Riverdeep Interactive Learning Ltd. Dvlp Internet software 57.2 - - - NA NA NA 8/14/2002 ABC School Supply Pvd educational mat School Specialty Inc. Mnfr,whl school supplies 42.9 48.0 - 5.3 0.9x NA 8.1x 5/9/2002 NetSchoolsCorp. Pvd educational svcs Plato Learning Inc. Pvd,dvlp edusoftware,svcs 31.4 11.2 (14.8) (14.2) 2.8x NM NM 3/4/2002 Klutz, Inc. Publish educ materials Scholastic Corp. Publish educ materials 42.8 - - - NA NA NA 11/13/2001 Premier Agendas, Inc. Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies 156.5 91.3 11.5 17.2 1.7x 13.6x 9.1x 9/7/2001 Learning Co., Educational Unit Dvlp software Riverdeep Interactive Learning Ltd. Dvlp Internet software 59.5 - - - NA NA NA 7/9/2001 Argosy Education Group Inc Provide education services Education Management Corp. Pvd educsvcs 86.4 58.2 0.2 2.4 1.5x NM NM 6/1/2001 Houghton Mifflin Co Publish books and software Vivendi Universal SA Multi-media co 2,531.4 1,034.0 133.0 239.5 2.4x 19.0x 10.6x 1/31/2001 Wasatch Interactive Learning Corp. Dvlp educational software Plato Learning Inc. Pvd,dvlp edusoftware,svcs 14.5 2.2 (1.2) (0.7) 6.5x NM NM 11/14/2000 JL Hammett Co., K-12 Wholesale Division Whl school supplies School Specialty Inc. Mnfr,whl school supplies 82.5 102.0 - 7.1 0.8x NA 11.6x 6/30/2000 Global Video Inc. Dvlp educvideos School Specialty Inc. Mnfr,whl school supplies 32.0 23.0 - 4.6 1.4x NA 7.0x 6/26/2000 Tribune Education Co. Publish educational books McGraw-Hill CosInc. Publishing co 634.7 - - - NA NA NA 5/24/2000 Edutest Inc. Dvlp Internet software Lightspan Inc. Pvd educational software 13.4 - - - NA NA NA 4/13/2000 Grolier Inc. Publish encyclopedias,books Scholastic Inc. Publ educmaterials 446.7 455.5 7.0 30.6 1.0x NM 14.6x 1/6/2000 Oriental Trading Company, Inc. Catalog Retail Brentwood Associates Private Equity Firm - - - - NA NA NA

Max 6.5x 27.9x 16.0x Mean 1.7x 17.5x 10.0x Median 1.4x 16.9x 9.1x Min 0.6x 7.7x 6.2x

Source: Public Filings

Confidential 15

Going Private Transactions & Premiums

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror Acquiror Business Description Prior Prior Prior 6/12/2006 Tac Acquisition Corp Holding company AVIEL Systems Inc Pvd financial svcs NA NA NA 6/9/2006 Stratos International Inc Mnfr optical transceivers Steel Partners II LP Invest co 23.8% 28.4% 0.8% 6/7/2006 Ace Cash Express Inc Own,op check cashing stores Investor Group Investor group 14.0% 12.7% 10.9% 6/5/2006 Onyx Software Corp Dvlp CRM software M2M Holdings Inc Investment holding co 14.6% 11.6% 4.1% 5/26/2006 WatchGuardTechnologies Inc Dvlp Internet sec software Vector Capital Corp Private equity firm 16.3% 12.6% -1.9% 5/24/2006 NES Rentals Holdings Inc Pvd equip rental svcs Diamond Castle Holdings LLC Private equity firm NA NA NA 5/22/2006 Jameson Inns Inc Own,op hotels JER Partners Private equity firm 29.7% 29.7% 18.8% 5/22/2006 Main Street Restaurant Group Own,op restaurants Main Street Acquisition Corp Own,op hotels,restaurants 20.5% 23.1% 29.6% 5/17/2006 Integrated Alarm Svcs Group Pvd monitoring svcs Alarm Security Group LLC Pvd sec sys svcs 2.6% -0.8% -0.3% 5/16/2006 Sands Regent Own,op casino hotels Herbst Gaming Inc Own,op gaming mach,parlor 7.8% 8.8% 15.4% 5/11/2006 RemedyTemp Inc Pvd employment svcs Select Personnel Services Pvd employment solutions svcs 39.3% 35.7% 47.2% 5/5/2006 Mpower Holding Corp Pvd telecommunications svcs Telepacific Communications Pvd telephone commun svcs 2.7% 15.0% 37.1% 4/27/2006 NetIQ Corp Dvlp sys mgmt software AttachmateWRQ Pvd terminal emulation svc 13.8% 8.2% 10.3% 4/20/2006 Marsh Supermarkets Inc Own,op grocery stores Sun Capital Partners Inc Private equity firm 9.1% 38.0% 39.1% 4/19/2006 Keweenaw Land Associated Ltd Real estate development firm Opportunity Partners LP Hedge fund firm 60.6% 51.5% 54.1% 4/19/2006 Easy Gardener Products Ltd Mnfr landscape fabrics Green Thumb Acquisition Corp Investment firm NA NA NA 4/17/2006 Gyrodyne Co Of America Own,op nonres real estate Opportunity Partners LP Hedge fund firm 7.9% 5.5% 11.6% 4/6/2006 Riviera Holdings Corp Own,op hotels;holding co RIV Acquisition Holdings Inc Investment holding company -6.3% 1.3% 16.8% 4/3/2006 Agree Realty Corporation Real estate investment trust Compson Holding Corp Real estate agency 20.7% 22.4% 26.7% 3/23/2006 Morton Industrial Group Inc Mnfr metal,plastic prod Investor Group Investor group 63.9% 65.3% 63.9% 3/17/2006 Bayou Steel Corp Mnfr light structural prod Black Diamond Capital Invest mgmt svcs NA NA NA 3/7/2006 SourceCorp Inc Pvd bus outsourcing svcs Apollo Management LP Private equity inv firm -2.5% -2.3% -2.2% 3/6/2006 American HomePatientInc Pvd home health care svcs Highland Capital Mgmt LP Pvd invest advisory svcs -9.3% -6.9% 6.3% 2/27/2006 Wilshire Enterprises Inc Real estate investment firm Mercury Real Estate Advisors Real estate investment firm 3.7% 6.0% 3.7% 2/24/2006 Packaging Dynamics Corp Mnfr packaging equip Thilmany LLC Mnfr packaging equip -2.4% 4.2% 7.6% 2/21/2006 Thomas Nelson Inc Publish,whl Christian books Intermedia Partners VII LP Private equity firm 21.1% 23.0% 10.1% 2/10/2006 Bedford Property Investors Inc Real estate investment trust LBA Realty LLC Investment company 10.5% 17.7% 20.1% 2/6/2006 Duratek Inc Pvd waste treatment svcs EnergySolutions Pvd waste disposal svcs 25.1% 24.2% 36.1% 2/3/2006 Clover Leaf Financial Corp Commercial bank First Federal Finl Svcs Inc Pvd equip leasing svcs 44.1% 44.1% 43.3% 1/6/2006 Water Pik Technologies Inc Mnfr pool,heatingequip Coast Acquisition Corp Special purpose finance co 29.9% 29.3% 30.6% 1/4/2006 Datastream Systems Inc Dvlp asset mgmt software Magellan Holdings Inc Investment holding company 15.3% 24.4% 26.7% 12/29/2005 Hemlock Federal Financial Corp Savings and loan holding co Marquette National Corp Bank holding comapny 105.6% 105.6% 107.5% 12/19/2005 Pegasus Solutions Inc Pvd hotel reservation svcs Investor Group Investor group 15.0% 20.4% 35.9% 12/8/2005 Dave & Busters Inc Own,operate restaurants Wellspring Capital Mgmt LLC Private eq firm 18.1% 18.4% 21.9% 12/2/2005 MTR Gaming Group Inc Own,op hotels,racetracks TBR Acquisition Group LLC Investment co 20.4% 24.2% 42.4% 11/21/2005 National RV Holdings Inc Manufacture motor homes Investor Group Investor group 12.6% 2.6% 30.2% 11/11/2005 Enterasys Networks Inc Mnfr ethernet, routers Investor Group Investor group 35.5% 28.4% 29.9% 11/7/2005 Cap Rock Energy Corp Electric utility Lindsay Goldberg & Bessemer Private equity firm 62.3% 58.8% 52.9% 10/27/2005 Transport Corp of America Inc Pvd truckload carriage svcs Patriot Holding Corp Investment holding company 25.0% 22.3% 33.9% 10/18/2005 Lancer Corp Mnfr beverage dispensing mach HoshizakiAmerica Inc Mnfr coml ice mach 10.6% 15.8% 15.8%

Source: SDC; Data from1/1/2000 6/13/2006 Criteria includes all domestic going-private transactions between $50 - $500 mm in deal value; Going private transaction defined as a private acquiror ('privatemeaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 16

Going Private Transactions & Premiums (contd)

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror Acquiror Business Description Prior Prior Prior 10/12/2005 Central Coast Bancorp,CA Coml bkhldg co Rabobank Investment bank 23.6% 23.2% 18.0% 10/12/2005 SunLinkHealth Systems Inc Own,op hospitals North Atlantic Value LLP Invest mgmt firm 21.0% 22.8% 23.9% 10/11/2005 Neoforma Inc Pvd bus-to-bus ecommerce svcs Global HealthCare Exchange LLC Pvd ecommerce svcs 43.7% 31.6% 27.6% 10/10/2005 Goody's Family Clothing Inc Own,op family clothing stores Sun Capital Partners Inc Private equity firm -8.6% 4.6% 6.4% 10/5/2005 Anderson Tully Co Mnfr hardwood Heartwood Forestland Fund V LP Open-end investment fund NA NA NA 10/4/2005 Fox & Hound Restaurant Group Own,op theme restaurants Levine Leichtman Capital Investment company 36.2% 29.5% 22.2% 9/30/2005 Specialty Laboratories Inc Pvd lab tests svcs AmeriPath Inc Pvd lab pathology svcs 1.6% 6.4% 1.7% 9/27/2005 Party City Corp Own,op party supply stores AAH Holdings Corp Investment holding company 42.5% 33.8% 32.6% 9/9/2005 Hector Communications Corp Pvd telecommunications svcs Opportunity Partners LP Hedge fund firm NA 1.4% 2.9% 8/18/2005 BrooktroutInc Mnfr,whl electn commun prod EAS Group Inc Investment holding company 38.1% 39.3% 16.2% 8/9/2005 Register.com Inc Pvd Internet domain svcs Vector Capital Corp Private equity firm 7.6% 9.2% 24.0% 8/3/2005 Chart Industries Inc Mnfr process control instr First Reserve Corp Private equity firm 10.5% 14.3% 19.5% 7/29/2005 PRG Schultz Intl Inc Pvd recovery auditing svcs Cannell Capital Management Pvd invest mgmt svcs 18.7% 21.6% 21.6% 6/9/2005 Register.com Inc Pvd Internet domain svcs RCM Acquisition Co LLC Investment company 10.1% 6.3% 25.0% 5/20/2005 Imperial Sugar Co Produce,whl sugar Schultze Asset Management LLC Investment management services 31.5% 38.8% 23.0% 5/18/2005 Metals USA Inc Mnfr processed steel,aluminum Apollo Management LP Private equity inv firm 58.4% 50.9% 26.7% 5/10/2005 Blair Corp Pvd ecommerce retail svcs Loeb Partners Corp Investment company 3.5% 7.4% 9.6% 4/28/2005 Worldwide Rest Concepts Inc Own,op restaurants Pac Eq Partners Pty Ltd Private equity firm 41.4% 39.2% 37.3% 4/19/2005 Orphan Medical Inc Mnfr,whl pharm prod Jazz Pharmaceuticals Inc Mnfr prescription pharm 25.7% 23.3% 14.9% 4/18/2005 Manchester Technologies Inc Mnfr,whl display tech soln Caxton-Iseman Capital Inc Private equity firm 35.9% 17.4% 17.0% 4/15/2005 Brookstone Inc Own,op novelty stores OSIM Brookstone Holdings LP Investment company 28.2% 21.8% 40.8% 4/12/2005 Noland Co Whl plumbing,heating supplies Primus Inc Whl industrial supplies 52.3% 60.4% 49.0% 4/7/2005 NEFF Corp Pvd equip rental svcs Odyssey Invest Partners LLC Private equity firm NA NA NA 4/4/2005 Maxcor Financial Group Inc Finl holding co BGC Partners LP Securities bkrg firm 46.4% 56.1% 57.0% 3/15/2005 Trico Marine Services Inc Pvd oil field supply services Creditors Investment company NA NA NA 3/1/2005 Blue Martini Software Inc Dvlp e-business software Multi-Channel Holdings Inc Whl,ret software;holdingco 63.3% 80.2% 55.6% 2/22/2005 Insurance Auto Auctions Inc Ret used motor vehicles Kelso & Co Private equity firm 24.5% 24.4% 29.5% 2/17/2005 Prime Group Realty Trust Real estate investment trust Lightstone Group LLC Real estate investment firm 10.2% 11.2% 13.3% 2/15/2005 Tickets.com Inc Pvd ticket distnsvcs MLB Advanced Media LP Multi-media company 32.5% 29.4% 46.7% 2/15/2005 AMX Corp Mnfr,dvlp,whl electn equip Duchossois Industries Inc Mnfr industrial door equip 5.4% 21.6% 35.4% 1/27/2005 MAPICS Inc Develop ERM software Infor Global Solutions Dvlp entrp software 9.7% 14.3% 24.0% 1/19/2005 Selectica Inc Dvlp Internet software Trilogy Inc Dvlp software 19.8% 19.8% 22.7% 1/17/2005 Penn Engr & Mnfr Corp Mnfr fasteners,DCmotors PEM Holding Co Investment holding company 22.7% 21.7% 17.0% 1/7/2005 Polaroid Holding Co Mnfr cameras Petters Group Worldwide Pvd ecommerce retail svcs 13.4% 14.4% 16.7% 10/27/2004 Security Capital Corp Insurance agcy Investor Group Investor group 6.9% 9.0% 10.6% 10/4/2004 MSC Software Corp Dvlp,supplymech software ValueAct Capital Partners LP Investment company 12.6% 16.1% 19.8% 9/10/2004 Security Capital Corp Insurance agcy Investor Group Investor group 15.4% 15.4% 16.3% 7/20/2004 QRS Corp Pvd on-line database svcs Inovis International Inc Pvd bus commerce svcs 11.5% 33.8% 9.4% 7/2/2004 Del Laboratories Inc Mnfr,whl perfumes,drugs Kelso & Co Private equity firm 14.0% 14.8% 19.1% 6/11/2004 VLPS Lighting Services Intl Pvd lighting sys svcs Production Resource Group LLC Pvd lighting,audio svcs 95.8% 95.8% 98.1%

Source: SDC; Data from 1/1/2000 6/13/2006 Criteria includes all domestic going-private transactions between $50 - $500 mm in deal value; Going private transaction defined as a private acquiror ('private' meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 17

Going Private Transactions & Premiums (contd)

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror Acquiror Business Description Prior Prior Prior 6/4/2004 Cornerstone Propane Partners Pvd ret,dist propane svcs Creditors Investment company NA NA NA 5/28/2004 CompuCom SystemsInc(Safeguard) Whl computer equip Platinum Equity LLC Leverage buyout firm -5.0% 0.4% -5.0% 5/14/2004 FSF Finl Corp,Hutchinson,MN Commercial bank;holding co MidCountry Financial Corp Pvd finl svcs;holding co 23.2% 23.5% 13.8% 4/28/2004 MedSource Technologies Inc Mnfr surgical instruments Uti Corp Mnfr med devices NA NA NA 4/23/2004 Loehmanns Holdings Inc Own,op clothing stores Crescent Capital Invest Inc Investment company 5.8% 9.7% 14.1% 4/23/2004 Castle Dental Centers Inc Own,op dental offices Bright Now Dental Inc Pvd bus support svcs -55.1% -59.7% -59.7% 3/17/2004 Golden State Vintners Inc Produce beverages Wine Group LLC Produces beverages 22.0% 22.2% 79.4% 2/27/2004 Guilford Mills Inc Manufacture,whl fabrics Cerberus Capital Management LP Private equity firm -13.6% -16.5% 5.6% 2/27/2004 Landacorp Inc Pvd healthcare mgmt solutions SHPS Holdings Inc Pvd healthcare mgmt svcs NA NA NA 2/20/2004 Trover Solutions Inc Pvd subrogation recovery svcs TSI Holding Co Inc Investment holding company NA -0.7% -0.7% 1/30/2004 WorkFlow Management Inc Pvd commerical printing svcs Investor Group Investor group 9.0% 7.1% -4.8% 1/22/2004 T-Netix Inc Pvd prison cell comm svcs TZ Holdings Inc Special purpose finance co 9.5% 16.2% 12.5% 1/22/2004 Great Lakes REIT Inc Real estate investment trust Aslan Realty Partners II LP Open-end investment fund -2.1% -1.9% -2.0% 12/31/2003 Gundle/SLT Environmental Inc Mnfr waste containment prods GEO Holdings Corp Investment holding company -13.0% -10.1% -4.2% 12/23/2003 Duane ReadeInc Own and operate drug stores Rex Corner Holdings LLC Investment holding company 8.4% 24.7% 22.7% 11/27/2003 AMF Bowling Worldwide Inc Mnfr bowling equipment Code Hennessy & Simmons LLC Venture capital firm NA NA NA 11/26/2003 North Coast Energy Inc Oil and gas exploration,prodn Exco Resources Inc Oil and gas exploration,prodn -10.2% -11.5% -7.8% 11/20/2003 Plains Resources Inc Oil,gas exploration,production Investor Group Investor group 30.7% 30.2% 31.5% 11/14/2003 Sylvan Inc Produce mushrooms,fruits Snyder Associated Cos Inc Oil and gas exploration,prodn 21.9% 22.0% 23.2% 11/10/2003 Cotton States Life Insurance Insurance company COUNTRY Insurance & Financial Stock insurance company 100.5% 98.3% 104.6% 11/4/2003 ITXC Corp Pvd Internet tele svcs TeleglobeIntl Hldg Ltd Pvd Internet tele svcs -27.9% -27.7% -35.0% 10/31/2003 Media Arts Group Inc Mnfr media products Investor Group Investor group 68.8% 80.2% 77.8% 10/24/2003 Information Resources Inc Pvd database research svcs Open Ratings Inc Dvlp supply mgmt software -19.5% -17.4% -18.8% 10/7/2003 Concerto Software Inc Dvlp mgmt sys software Golden Gate Capital Private equity firm 28.9% 37.3% 25.8% 10/6/2003 FTD Inc Pvd online floral,gift svcs Green Equity Investors IV LP Invest co 2.2% 12.1% -2.6% 9/30/2003 Garden Fresh Restaurant Corp Own,op restaurant chain Investor Group Investor group 48.9% 54.8% 64.3% 9/29/2003 Good Guys Inc Own,op electn stores CompUSA Inc Ret tech products & svcs 36.7% 31.4% 45.4% 9/22/2003 United States Exploration Inc Oil and gas exploration; prodn DGL Acquisition Corp Investment holding company 0.7% -1.1% -1.1% 9/11/2003 Skibo Financial Corp,PA Savings and loan holding co Northwest Bancorp MHC,PA Bank holding co 26.3% 28.1% 29.5% 9/3/2003 Omega Protein Corp Produce omega-3 fish oil Investor Group Investor group 54.5% 61.3% 56.0% 8/12/2003 Jacksonville Bancorp,TX Bank holding company Franklin Bank Corp,Houston,TX Savings,loan holding co 25.0% 29.3% 27.1% 8/12/2003 NTELOS Inc Pvd telecommun svcs Bondholders Investor group NA NA NA 7/18/2003 Contour Energy Co Oil and gas exploration,prodn Samson Investment Co Oil and gas exploration,prodn NA NA NA 7/13/2003 Edison Schools Inc Own,op public schools Investor Group Investor group 38.6% 64.5% 74.3% 6/29/2003 Information Resources Inc Pvd database research svcs Investor Group Investor group 10.7% -2.4% -2.7% 6/25/2003 United Park City Mines Co Real estate development firm Capital Growth Partners LLC Investment firm 3.4% 4.7% 5.5% 5/30/2003 Cysive Inc Dvlp software solutions Snowbird Holdings Inc Invest hldg co 0.9% 0.9% 11.4% 5/16/2003 Superior Finl Corp,AR Savings and loan holding co Arvest Bank Group Inc,AR Commercial bank holding co 24.5% 22.7% 29.2% 5/13/2003 Packaged Ice Inc Produce packaged ice Investor Group Investor group 61.6% 62.3% 96.7%

Source: SDC; Data from 1/1/2000 6/13/2006 Criteria includes all domestic going-private transactions between $50 - $500 mmin deal value; Going private transaction defined as a private acquiror ('private' meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 18

Going Private Transactions & Premiums (contd)

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror Acquiror Business Description Prior Prior Prior 5/12/2003 Dwyer Group Inc Pvd special fran svcs Investor Group Investor group 58.8% 57.0% 45.5% 4/29/2003 Thousand Trails Inc Own and operate campgrounds Kohlberg & Co LP Private equity firm 55.1% 55.9% 49.8% 4/22/2003 Varsity Brands Inc Mnfr sporting,athletic goods Investor Group Investor group 39.8% 39.5% 42.2% 4/16/2003 Lillian Vernon Corp Pvd ecommerce retail svcs Investor Group Investor group 72.6% 74.7% 72.2% 4/4/2003 Sports Club Co Inc Own,op sports,fitness clubs Investor Group Investor group 25.0% 24.5% 31.6% 3/13/2003 Colorado MEDtechInc Mnfr surgical,med prod CIVCO Holding Inc Mnfr med instruments 67.3% 75.9% 72.1% 3/5/2003 Zapata Corp Mnfr fish meal,fish oil Hollingsworth Rothwell Roxford Investment company 23.7% 26.9% 22.5% 2/19/2003 Upbancorp Inc,Chicago,Illinois Coml bank,hldg co Bridgeview Bancorp,Oak Lawn,IL Bank hldgco 52.6% 58.8% 50.9% 2/18/2003 Insignia Financial Group Inc Pvd housing mgmt svcs CB Richard Ellis Inc Real estate agency 33.3% 35.4% 42.8% 2/12/2003 Caliper Technologies Corp Mnfr laboratory semiconductors Little Bear Investments LLC Investment bank 50.0% 56.8% 47.5% 1/22/2003 Resonate Inc Pvd software for the Internet GTG Acquisition Corp Investment company 7.2% 6.0% 10.2% 12/24/2002 Aegis Realty Inc Real estate investment trust Phillips Edison & Co Own,op shopping centers 7.7% 6.9% 7.7% 12/13/2002 CoSine Communications Inc Dvlp commun platform software Wyndcrest Holdings LLC Investment holding co 112.5% 109.7% 100.0% 12/5/2002 Kasper ASL Ltd Mnfr,whl women's apparel Investor Group Investor group NA NA NA 11/12/2002 Hunt Corp Mnfr,whl art,framing supplies Berwind Co LLC Invest co 32.3% 31.2% 37.4% 11/11/2002 CoorsTek Inc Mnfr electronic components Investor Group Investor group 62.5% 60.4% 86.4% 11/8/2002 Prophet 21 Inc Dvlp,whl software applications Investor Group Investor group 25.4% 35.8% 78.0% 11/4/2002 Ebenx Inc Prvd ecommerce bus solutions SHPS Inc Pvd outsourced care mgmt svcs 146.2% 193.9% 190.4% 10/1/2002 BWAY Corp Manufacture steel containers Kelso & Co Private equity firm 43.9% 44.9% 38.9% 9/11/2002 West Essex Bancorp Inc Savings bank Kearny Financial Corp,Kearny Bank 51.3% 48.7% 73.4% 8/9/2002 US Laboratories Inc Provide engineering services Bureau Veritas SA Pvd quality assessment svcs 48.0% 45.0% 26.6% 8/7/2002 Exco Resources Inc Oil and gas exploration,prodn Douglas H Miller Individual 20.8% 22.9% 22.0% 8/1/2002 Omega Worldwide Inc Pvd asset mgt,advisory svcs Four Seasons Health Care Ltd Pvd nursing svcs 50.9% 62.0% 66.1% 7/31/2002 VIB Corp,El Centro,California Bank holding company Rabobank Investment bank 9.4% 11.2% 8.8% 7/29/2002 Shelbourne Properties I Inc Real estate investment trust Investor Group Investor group 85.5% 83.8% 129.4% 7/29/2002 Shelbourne Properties II Inc Real estate investment trust Investor Group Investor group 84.4% 84.6% 109.6% 7/29/2002 Shelbourne Properties III Inc Real estate investment trust Investor Group Investor group 81.8% 80.8% 119.8% 7/26/2002 Netro Corp Pvd wireless commun svcs Wyndcrest Holdings LLC Investment holding co 37.8% 33.9% 82.0% 7/26/2002 International Specialty Prods Mnfr specialty chemicals Samuel J Heyman Individual 4.3% 1.7% 33.8% 6/12/2002 Vestcom International Inc Pvd document management svcs Cornerstone Equity Investors Private equity fund 50.6% 64.5% 78.6% 5/21/2002 Morton's Restaurant Group Inc Own,operate restaurants Castle Harlan Inc Private equity firm 11.6% 9.7% 31.0% 5/16/2002 Liberty Bancorp,Avenel,NJ Commercial bank holding co New Southern Bank,Macon,GA Coml bk 45.3% 45.2% 48.3% 4/25/2002 Maynard Oil Co Oil and gas exploration,prodn Plantation Petroleum Holdings Oil and gas holding co -10.3% -7.6% -12.8% 3/17/2002 Associated Materials Inc Mnfr steel,aluminum siding Harvest/AMI Holdings Inc Investment company -1.2% -1.2% 28.5% 3/15/2002 Anchor Glass Container Corp Manufacture glass containers Cerberus Capital Management LP Private equity firm NA NA NA 2/20/2002 Sevenson Environmental Svcs Construction site waste svcs SCC Contracting Inc Pvd general contracting svcs 26.0% 26.0% 26.0% 2/14/2002 dick clark productions inc Produce television programs Investor Group Investor group 32.7% 49.5% 49.5% 2/13/2002 Deltek Systems Inc Pvd computer programming svcs Investor Group Investor group 18.4% 28.6% 41.9% 2/1/2002 Pitt-Des Moines Inc Mnfr,design custom facilities IronbridgeAcquisition Corp Investment holding company 7.3% 8.5% 10.5% 1/29/2002 Suburban Lodges of America Inc Own and operate hotels/motels InTown Suites Management Own,op hotels 13.0% 17.0% 32.0%

Source: SDC; Data from 1/1/2000 6/13/2006 Criteria includes all domestic going-private transactions between $50 - $500 mmin deal value; Going private transaction defined as a private acquiror ('private' meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 19

Going Private Transactions & Premiums (contd)

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror AcquirorBusiness Description Prior Prior Prior 1/28/2002 Jenny Craig Inc Own,op weight mgmt centers Investor Group Investor group 68.3% 86.0% 72.1% 1/25/2002 Shoney's Inc Own,operate restaurants Lone Star Fund Private equity firm -7.7% 16.1% 38.5% 1/24/2002 Midland Enterprises Operate tow boats and barges Landgrove Corp(Ingram) Pvd marine transportation svcs NA NA NA 1/11/2002 Pulaski Bancorp Inc,NJ Bank holding company Kearny Financial Corp,Kearny Bank 33.7% 31.3% 68.7% 12/7/2001 Landmark Systems Corp Dvlp management software ASG Dvlp computer software 82.7% 98.7% 84.1% 12/7/2001 ABC-NACO Inc Mnfr railroad equipment TCF Railco Acquisition Corp Investment holding company NA NA NA 11/9/2001 eMachines Inc Mnfr,whl computers EM Holdings Inc Investment holding company 120.8% 171.8% 351.1% 10/22/2001 Liquid Audio Inc Dvlp Internet software Steel Partners II LP Invest co 27.7% 25.5% 42.9% 10/1/2001 NCH Corp Mnfr,whl maintenance products Investor Group Investor group 34.0% 33.6% 18.8% 9/10/2001 American Coin Merchandising Own,op amusement machines Investor Group Investor group 42.6% 45.6% 39.3% 8/29/2001 Renaissance Worldwide Inc Pvd info tech consulting svcs Aquent Pvd employment,staffing svcs 39.9% 52.7% 49.3% 6/18/2001 Purina Mills Inc Mnfr,whl animal nutrition prod Land O'Lakes Inc Produce butter,milk,cheese 19.2% 18.0% 26.4% 6/4/2001 Bank Plus Corp,Los Angeles,CA Savings and loan FBOP Corp,Oak Park,Illinois Commercial bank;holding co 36.8% 40.8% 43.0% 5/30/2001 Bacou USA Inc Manufacture ophthalmic goods Bacou SA Mnfr security equipment 21.8% 17.3% 11.3% 4/27/2001 WorldPages.comInc Pvd Internet infrastructure sv TransWesternPublishing Co LLC Publish telephone directories 36.4% 27.7% 62.2% 4/25/2001 OroAmerica Mnfr,whl jewelry Aurafin Corp Mnfr,whl gold jewelry 45.8% 49.4% 55.6% 4/16/2001 EW Blanch Holdings Inc Reinsurance intermediary svcs Benfield Greig Group Ltd Insurance agency 68.3% 92.9% 42.1% 3/19/2001 York Group Inc Mnfr metal,hardwoodcaskets Wilbert Inc Holding company 65.3% 69.8% 93.8% 3/13/2001 Roy F Weston Inc Environmental consulting Investor Group Investor group 7.1% 14.7% 13.1% 2/23/2001 Clintrials Research Inc Pvd coml research svcs Inveresk Research Intl Contract scientific research 14.3% 4.4% -6.8% 2/15/2001 VICORP Restaurants Inc Own,op franchised restaurants Investor Group Investor group 35.9% 34.6% 50.9% 1/26/2001 Kenan Transport Co Pvd trucking svcs Advantage Management Group Inc Pvd transportation svcs 32.1% 45.1% 40.0% 1/24/2001 NextHealth Inc Pvd,dvlp alt healthcare svcs Investor Group Investor group 31.6% 33.8% 68.3% 1/22/2001 Pontotoc Production Inc Oil and gas exploration,prodn Ascent Energy Inc Oil and gas exploration,prodn 26.0% 24.3% 24.3% 12/16/2000 Crown Central Petroleum Corp Oil and gas exploration,prodn Rosemore Inc Investment holding company 33.3% 25.4% 23.5% 12/14/2000 NPC International Inc Own,op fast food restaurants O Gene Bicknell Individual 11.3% 6.8% 32.0% 12/11/2000 PBOC Holdings Inc Bank holding co FBOP Corp,Oak Park,Illinois Commercial bank;holding co 8.8% 8.1% 41.6% 11/16/2000 Il Fornaio America Corp Own,operate restaurant Bruckmann Rosser Sherrill & Co Venture capital firm 28.9% 23.9% 44.4% 10/25/2000 Meridian Insurance Group Inc Insurance holding company State Auto Mutual Insurance Co Fire,marine,casualty ins co 64.4% 65.5% 105.1% 10/17/2000 Sunrise Medical Inc Mnfr medical rehab products Investor Group Investor group 55.3% 64.9% 63.3% 10/12/2000 Engle Homes Inc Construct single-family homes Technical Olympic USA Inc Construction company 21.3% 22.2% 21.3% 10/6/2000 Taco Cabana Inc wn,op mexicanrestaurants Carrols Corp Own and operate restaurants 117.5% 109.6% 103.0% 10/4/2000 Home-Stake Oil & Gas Co Oil and gas exploration,prodn Cortez Oil & Gas Inc Oil and gas exploration,prodn 2.3% 2.3% -9.3% 9/29/2000 Simpson Industries Inc Mnfr motor vehicle parts Heartland Industrial Partners Venture capital firm 28.4% 26.8% 33.3% 9/28/2000 First Washington Realty Trust Real estate investment trust US Retail Partners LLC Investment management services 25.9% 25.1% 29.8% 9/21/2000 Ridgewood Financial Inc,NJ Savings & loan bank Boiling Springs Svgs Bk,Ruther Commercial bank 140.0% 144.1% 179.6% 9/21/2000 Sunburst Hospitality Corp Own,op hotels Investor Group Investor group 32.6% 25.5% 24.2% 9/19/2000 US Franchise Systems Inc Pvd franchise services Pritzker Group Investment company 14.3% 14.3% 15.9% 9/11/2000 Mikasa Inc Mnfr houseware;whlfurniture JG Durand Industries SA Mnfr glass,crystal 69.2% 68.1% 72.0% 8/11/2000 Republic Group Inc Mnfr gypsum wallboards,paper Premier Construction Products Investment company 16.9% 53.5% 58.3%

Source: SDC; Data from 1/1/2000 6/13/2006 Criteria includes all domestic going-private transactions between $50 - $500 mmin deal value; Going private transaction defined as a private acquiror ('private meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 20

Going Private Transactions & Premiums (contd)

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror AcquirorBusiness Description Prior Prior Prior 8/7/2000 Courtyard by Marriott II Own,op hotels CBM I Holdings LLC Investment company NA NA NA 8/4/2000 EndoSonics Corp Mnfr image processing equip Jomed NV Whl medical,dental,hosp equip 57.1% 72.6% 72.6% 8/4/2000 PDK Labs Inc Mnfr vitamins;comlresearch PDK Acquisition Corp Leverage buyout firm NA NA NA 7/19/2000 Carey International Inc Pvd transportation svcs Investor Group Investor group 25.9% 21.2% 65.0% 7/17/2000 CareerBuilder Inc Pvd online recruitment svcs Investor Group Investor group 93.9% 106.5% 169.5% 7/10/2000 Barnett Inc Whl plumbing, electrical equip Interline Brands Whl repair,maintenance prods 25.2% 35.3% 29.9% 6/27/2000 Tech-Sym Corp Mnfr electronics equipment Integrated Defense Tech Mnfr defense related equipment 25.0% 23.7% 36.4% 6/20/2000 Hagler Bailly Inc Pvd management consulting svcs PA Consulting Group Ltd Pvd mgt,sys,tech consulting 12.0% 49.3% 174.5% 6/16/2000 Pacific Gateway Properties Own,op apartment buildings Mission Orchard Statutory Statutory trust 19.5% 19.5% 18.8% 6/15/2000 International Aluminum Corp Mnfr metal doors,sash frames Columbia Ventures Inc Venture capital firm 21.7% 22.7% 20.2% 5/26/2000 Acme Electric Corp Mnfr electronic transformers Key Components LLC Mnfr,whl locks,locksystems 21.0% 22.0% 24.1% 5/25/2000 Protocol Systems Inc Mnfr patient monitors Welch AllynInc Mnfr med equip 21.9% 25.5% 29.3% 5/15/2000 CoinmachLaundry Corp Mnfr,whl laundry equipment GTCR Golder Rauner LLC Leveraged buyout firm 78.1% 78.1% 66.4% 5/10/2000 WMF Group Ltd Mortgage bank Prudential Mortgage Capital Pvd mortgage banking svcs 48.3% 42.4% 69.5% 4/27/2000 VIASOFT Inc Dvlp application mgmt software ASG Dvlp computer software 52.7% 46.1% 29.9% 4/24/2000 Cherry Corp Mnfr electronic equipment Investor Group Investor group 103.1% 109.1% 70.3% 4/14/2000 PlayCoreInc(GreenGrass Hldgs) Mnfr playground equip,games Chartwell Investments II LLC Investment company 49.6% 44.3% 29.3% 3/31/2000 Veterinary Centers of America Pvd animal veterinary services Investor Group Investor group 12.2% 9.6% 36.4% 3/31/2000 Pulaski Furniture Corp Mnfr wood household furniture Investor Group Investor group 2.9% 31.4% 54.8% 3/24/2000 Harding Lawson Associates Pvd engineering,consultingsvc MACTEC Inc Pvd environmental mgmt svcs 24.3% 35.3% 44.9% 3/23/2000 US Can Corp Manufacture metal cans Investor Group Investor group 0.9% 31.2% 53.9% 3/6/2000 Data Transmission Network Corp Pvd information,commun svcs Veronis Suhler& Asoc Commun Investment firm 16.0% 16.6% 52.6% 2/28/2000 Carson Inc Mnfr hair,nail care products Cosmair Inc Manufacture cosmetics 38.7% 41.0% 48.6% 2/25/2000 Centennial HealthCare Corp Pvd home health care svcs Investor Group Investor group 87.2% 85.3% 83.3% 2/25/2000 Spanlink Communications Inc Mfr interactive comp telecomm SpanlinkAcquisition Group Investment company -2.3% 6.3% 47.4% 2/11/2000 Cameron Ashley Building Prods Wholesale building products Guardian Industries Corp Mnfr glass and glass products 32.9% 62.2% 81.2% 2/10/2000 TCBY Enterprises Inc Operate frozen yogurt stores Capricorn Investors LP Investment company 68.4% 57.4% 60.0% 1/31/2000 Jason Inc Mnfr noise control equipment Investor Group Investor group 57.9% 48.8% 73.9% 1/28/2000 Advanced Technical Products Mnfr aerospace,defense prods Veritas Capital Fund LP Pvd private equity svcs 71.4% 17.2% -8.5% 1/23/2000 Echelon International Corp Real estate development firm EIN Acquisition Corp Investment firm 23.6% 41.7% 34.3% 1/18/2000 Dayton Superior Corp Mnfr concrete accessories Stone Acquisition Corp Investment co 48.0% 54.3% 68.8%

Max 146.2% 193.9% 351.1% Mean 31.1% 33.6% 39.8% Median 25.0% 25.5% 30.6% Min -55.1% -59.7% -59.7%

Source: SDC; Data from 1/1/2000 6/13/2006 Criteria includes all domestic going-private transactions between $50 - $500 mmin deal value; Going private transaction defined as a private acquiror ('private meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 21

Summary of Adjustments

Fiscal Year Ended December 31

FY Ended FY Ended FY Ended FY Ended FY Ended 1 Qtr. Ended 1 Qtr. Ended LTM 2001 2002 2003 2004 2005 3/31/2005 3/31/2006 3/31/2006 Accounting $ - $ - $ - $ - $ 741,907 $ - $ 651,707 $ 1,393,614 Consulting - - - - 204,901 - 123,374 328,275 Legal - - - 874,000 1,451,694 315,000 428,036 1,564,730 NASDAQ - - - - 5,000 - - 5,000 Other - - - - 69,158 - - 69,158 Total $ 2,517,000 $ 879,000 $ - $ 874,000 $ 2,472,659 $ 315,000 $ 1,203,117 $ 3,360,776

Source: Management

Confidential 22

Summary of Public Company Expenses

Fiscal Year Ended December 31

FY Ended FY Ended FY Ended FY Ended FY Ended 1 Qtr. Ended 1 Qtr. Ended LTM 2001 2002 2003 2004 2005 3/31/2005 3/31/2006 3/31/2006 Accounting (KPMG) $ 148,457 $ 180,000 $ 253,996 $ 309,196 $ 414,192 $ 101,125 $ 228,575 $ 541,642 D&O Insurance 253,447 116,493 96,444 118,571 93,440 16,722 26,675 103,393 Director Costs 41,000 110,996 94,501 91,046 126,352 32,625 32,625 126,352 Filing Fees / Annual Report & Proxy 37,037 35,000 30,970 24,500 68,653 13,626 18,321 73,348 Investor Relations 23,985 95,858 69,877 72,138 188,500 44,000 45,250 189,750 SEC Legal Fees 176,462 33,431 67,000 115,000 47,658 31,649 130,082 146,091 SOX 404 Compliance - - - - 296,365 - 51,318 347,683 Total Public Company Costs $ 680,387 $ 571,779 $ 612,788 $ 730,452 $ 1,235,160 $ 239,747 $ 532,846 $ 1,528,259

Source: Management

Confidential 23

PRESENTATION TO THE BOARD OF DIRECTORS Project Wellington

May 23, 2006

Confidential

Section I M&A Market Overview

Section II Expected Project Timeline

Section III Potential Buyers

Section IV Updated Preliminary Valuation

Appendix A Sale Considerations

Confidential 2

Confidential

M&A Market Activity Historical M&A Activity

$1,600 15,000 M&A market activity continues to be strong after a 12,000 vigorous 2005 $1,200

2005 transaction values were up almost 40% over 9,000 2004 $800 6,000 Approximately 8,400 transactions have been $400 announced in the last 12 months, representing 3,000 nearly $1 trillion in transaction value $0 0 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 Q1 Q1 '05 '06 Favorable economic and market factors have driven Total Reported Deal Values Number of Deals multiples higher, particularly for companies in the middle Source: Securities Data Corporation market Improved business performance and a Historical EBITDA Multiples*

strengthened economy 12.0x

Large pools of uninvested private equity capital 11.0x

Strategic buyers are active, cash rich and seeking 10.0x

growth through acquisitions 9.0x Aggressive lending markets combined with low 8.0x interest rates 7.0x

6.0x

5.0x

4.0x '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 Source: Thomson Financial * Transaction sizes under $250 million

Confidential 4

Private Equity LBO Activity

Uninvested Equity Capital 6.0x Cash Flow Lending Multiples LBO Activity $160 $150 5.0x $135 $130 $140 2.1x $123 1.0x $120 $118 $120 1.7x $120 $110 4.0x 1.2x $105 $101 1.0x $100 $100 1.2x $94 $100 $90 1.7x 3.0x 1.6x 1.4x $80 $75 $64 $57 $60 $53 $60 2.0x 4.0x $47 3.6x 3.5x 3.3x $45 $41 $37 2.9x 3.2x $33 $40 $37 $28 2.4x 2.3x $30 1.0x 2.2x $20 $22 $20 $15

$0 0.0x $0 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '97 '98 '99 '00 '01 '02 '03 '04 '05 Bank Debt/EBITDA Non-Bank Debt/EBITDA

Source: Piper Jaffray & Venture Economics Source: Portfolio Management Data Source: Portfolio Management Data

Faced with the challenge of finding Favorable lending markets have LBO transaction values more than ways to put their large pools of allowed sponsors to be even more doubled from 2002 to 2003 and capital to work, financial sponsors competitive with strategic buyers doubled again in 2004; Activity in continue to be aggressive 2005 rose by 38 percent Senior lending levels are at Despite a high level of LBO historically high levels activity in recent years, there remains a tremendous amount of uninvested equity capital that is under pressure to be put to work

Confidential 5

Performances of S&P 500 Companies

Aggregate Cash & Equivalents Balances Aggregate LTM EBITDA $ in millions $ in millions

$6,400 $1,350

$5,400 $1,150

$4,400 $950

$3,400 $750

$2,400 $550

$1,400 $350

$400 $150

Source: Capital IQ; Data as of 5/18/2006 Note: Includes only companies that were listed on the S&P 500 Composite Index from March 31, 2000 to March 31, 2006; Cash & Equivalentsincludes companiesShort-TermInvestments

Confidential 6

Confidential

Seasonality

Historical Monthly Revenue 2006 Revenue $ in millions $ in millions

$25 $160 $30 $150 $20 $25

$140 $20 $15

$130 $15 $10 $120 $10 $5 $110 $5

$0 $100 $0

Monthly Revenue LTM Revenue

Source: Management

Confidential 8

MAY 2006 JUNE 2006 JULY 2006 AUGUST 2006 S M T W T F S S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 5 6 1 2 3 1 1 2 3 4 5 7 8 9 10 11 12 13 4 5 6 7 8 9 10 2 3 4 5 6 7 8 6 7 8 9 10 11 12 14 15 16 17 18 19 20 11 12 13 14 15 16 17 9 10 11 12 13 14 15 13 14 15 16 17 18 19 16 17 18 19 20 21 22 21 22 23 24 25 26 27 18 19 20 21 22 23 24 20 21 22 23 24 25 26 23 24 25 26 27 28 29 30 25 26 27 28 29 28 29 30 31 30 31 27 28 29 30 31

Timing Objective Weeks of May 22, 29 Board of Directors Meeting (May 23rd ) Develop marketing strategy and buyer list Finalize confidentiality agreements Continue data room collection Week of June 12 Finalize memorandum Continue data room collection Complete first draft of management presentation by PJC Weeks of June 19, 26 Contact potential buyers Execute confidentiality agreements Continue data room collection Print, bind, and distribute memorandums Week of July 3 Contact potential buyers Continue data room collection Complete management presentation Week of July 10 Follow-up with buyer inquiries Finalize data room collection Weeks of July 17, 24, 31 Practice management presentation Follow-up with buyer inquiries Receive non-binding indications of interest (August 1)

Confidential 9

AUGUST 2006 SEPTEMBER 2006 OCTOBER 2006 S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 5 1 2 1 2 3 4 5 6 7 6 7 8 9 10 11 12 3 4 5 6 7 8 9 8 9 10 11 12 13 14 13 14 15 16 17 18 19 10 11 12 13 14 15 16 15 16 17 18 19 20 21 20 21 22 23 24 25 26 17 18 19 20 21 22 23 22 23 24 25 26 27 28 27 28 29 30 31 24 25 26 27 28 29 30 29 30 31

Timing Objective Week of August 7 Begin management presentations and facility tours (August 10) Provide access to data room Distribute firm offer instructions Weeks of August 14, 21, 28 Continue management presentations and facility tours Week of September 4 Respond to follow - up questions Weeks of September 11, 18, 25 Respond to final follow - up questions Week of October 2 Obtain firm offers (October 3) Form Board of Directors, if needed Week of October 9 Clarify final offer, if needed with potential buyers Prepare analysis of final offers for the Board of Directors Review final offers with the Board of Directors Week of October 16 Communicate selection to potential buyers Work towards signing the definitive agreement

Confidential 10

OCTOBER 2006 NOVEMBER 2006 DECEMBER 2006 S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 5 6 7 1 2 3 4 1 2 8 9 10 11 12 13 14 5 6 7 8 9 10 11 3 4 5 6 7 8 9 15 16 17 18 19 20 21 12 13 14 15 16 17 18 10 11 12 13 14 15 16 17 18 19 20 21 22 23 22 23 24 25 26 27 28 19 20 21 22 23 24 25 24 25 26 27 28 29 30 29 30 31 26 27 28 29 30 31

Scenario I Timing Objective Two-Step Tender / Week of October 23 Fairness opinion Short-Form Merger Sign the definitive agreement File HSR Issue press release Week of October 30 Buyer commences tender offer Buyer files disclosure documents with SEC Week of November 6 Board determines whether to recommend acceptance or rejection of offer, or to express no opinion Board files Schedule 14D-9 Monitor tender progress Weeks of November 13, 30 Wait/respond to SEC comments (if any) Monitor tender progress Week of November 27 HSR 30-day period expiration (if no comment) Tender offer closes (if 90% level has been met) Buyer pays for shares tendered Week of December 4 Buyer conducts a short-form merger to freeze out-remaining-stockholders Close transaction

Confidential 11

OCTOBER 2006 NOVEMBER 2006 DECEMBER 2006 JANUARY 2007 S M T W T F S S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 1 2 3 4 5 6 7 1 2 1 2 3 4 5 6 3 4 5 6 7 8 9 8 9 10 11 12 13 14 5 6 7 8 9 10 11 7 8 9 10 11 12 13 12 13 14 15 16 17 18 10 11 12 13 14 15 16 15 16 17 18 19 20 21 14 15 16 17 18 19 20 17 18 19 20 21 22 23 22 23 24 25 26 27 28 19 20 21 22 23 24 25 21 22 23 24 25 26 27 24 25 26 27 28 29 30 29 30 31 26 27 28 29 30 31 28 29 30 31

Timing Objective Scenario II Week of October 23 Long-Form Merger Start preparing fairness opinion Sign the definitive agreement File HSR Issue press release Week of October 30 Present fairness opinion to the Board of Directors Start preparing proxy statement Week of November 6 Finalize preliminary proxy statement File preliminary proxy materials with SEC Weeks of November 13, 20 Waiting/responding to SEC comments Week of November 27 HSR 30-day period expiration (if no comment) Waiting/responding to SEC comments Weeks of December 4, 11, 18 Waiting/responding to SEC comments Re-file preliminary proxy statement(s) with SEC Week of December 25 Clear SEC reviews Mail final proxy statement to shareholders Weeks of January 1, 8, 15, 22 Prepare for shareholder meeting Communicate with shareholders/shareholder voting services Collect shareholder votes Week of January 29 Hold special meeting of shareholders (assumes minimum solicitation period of 20 days) Close transaction

Confidential 12

Confidential

Preliminary List of Tier I Strategic Buyers

Total Revenues EBITDA Market Value Enterprise Value Net Debt Company Name Ticker Business Description (mm) (mm) (mm) (mm) (mm)

Engages in the manufacture and distribution of educational, health, medical technology, and agricultural products. Its educational products include supplemental educational supplies and equipment for school districts, individual Aristotle Corp. ARTL $ 193.2 $ 31.5 $ 124.6 $ 213.5 $ 89.0 schools, teachers, and curriculum specialists and offers its products through approx. 45 catalogs, the Internet, and distributors.

Provides home shopping and educational supplies sales through mail order catalogs. The companys Educational Findel plc FDL Supplies division offers a range of products for the preschool to secondary education markets, including science 499.5 66.0 461.4 712.7 251.3 products, sports equipment, musical instruments, and furniture.

Distributes office products, automotive and industrial replacement parts, and electrical/electronic materials in the United States, Canada, and Mexico. The Office Products Group provides school supplies, office furniture, Genuine Parts Co. GPC 9,994.4 787.4 7,487.3 7,894.7 407.4 computer supplies, office machines, janitorial supplies, and break-room supplies to schools, businesses, offices, and institutions.

Operates as a mail-order school-supply company. Its product categories include active play, arts and crafts, block play, children's books, dramatic play, furniture, school games, health and nutrition, infants and toddlers, language, Lakeshore Learning Materials N/A 350.0 - - - - manipulatives, mathematics, music, puzzles, sand and water, science, social studies, take-home packs, and teacher resource products.

Engages in the design, manufacture, and marketing of construction toys in North America and internationally. The Mega BloksInc. MB Company sells its products to chain stores, discount stores, distributors, wholesalers, department stores, other 407.0 72.9 617.9 899.3 281.4 traditional retailers, food and drug stores, and Internet-based e-tailers.

Engages in the ownership and operation of a chain of specialty retail stores in the United States and Canada. The Michaels Stores Inc. MIK 3,676.4 464.4 5,088.7 4,636.2 (452.5) stores feature arts, crafts, framing, floral, decorative wall decor, and seasonal merchandise.

Supplies various office products and services worldwide. It sells a line of merchandise, including brand name and Office Depot Inc. ODP private brand office supplies, business machines and computers, computer software, office furniture, and other 14,391.8 951.5 12,555.7 12,590.8 35.1 business-related products and services.

Engages in publishing and distributing childrens books worldwide and creates educational and entertaining materials and products for use in school and at home. The company distributes its products and services through Scholastic Corp. SCHL 2,274.9 212.7 1,108.3 1,461.1 352.8 various channels, including school-based book clubs, school-based book fairs, school-based and direct-to-home continuity programs, retail stores, schools, libraries, Internet, and television networks.

Provides educational products, programs, and services that improve student achievement and development in the School Specialty Inc. SCHS 1,010.1 96.6 822.7 1,202.3 379.6 United States and Canada. The company sells its products through its sales force, catalog, and Internet.

Distributes office products in North America and internationally. The company offers business machines, computers Staples Inc. SPLS 16,078.9 1,617.2 19,421.9 18,385.9 (1,036.1) and related products, and office furniture.

Confidential 14

Preliminary List of Tier II Strategic Buyers

Total Revenues EBITDA Market Value Enterprise Value Net Debt Company Name Ticker Business Description (mm) (mm) (mm) (mm) (mm)

A.B.C. Learning Centres Limited, a childcare company, provides childcare services and education in Australia. As of ABC Learning Centres Ltd. ABS November 16, 2005, it owned 697 centers in Australia and New Zealand. The company was co-founded by Edmund $ 439.4 $ 183.3 $ 2,342.5 $ 2,376.6 $ 34.2 S Groves and Le Neve A Groves an

Operates as a specialty retailer of arts, crafts, and floral merchandise in the eastern region of the United States. The AC Moore Arts & Crafts Inc. ACMR companys merchandise comprises art supplies, scrapbooking and frames, yarn, cake, and candy making supplies, as 549.5 25.7 345.7 324.5 (21.2) well as glass crafts, wood crafts, kids crafts, felt, glitter, dollmaking, dollhouses, furniture, and instructional books.

Engages in the design, manufacture, and sale of greeting cards and other social expression products worldwide. It offers everyday and seasonal greeting cards, gift wrap, party goods, calendars, candles, and stationery, as well as American Greetings Corp. AM 1,885.7 206.7 1,437.1 1,490.0 53.0 educational products and custom display fixtures. The Company sells these products through various channels of distribution with mass retailers as the primary channel.

Engages in the sale, distribution, and service of office and computer products to businesses and institutions primarily Buhrmann NV BUHR in North America, Europe, Australia, and New Zealand. The company offers various office products, including 6,105.6 338.3 2,430.3 3,645.7 1,215.4 traditional office supplies and office furniture, break room supplies, janitorial, and sanitary products.

Engages in the manufacture, marketing, and distribution of sporting goods and equipment and soft goods, as well as physical education, recreational, and leisure products to the institutional market in the United States. The company Collegiate Pacific Inc. BOO offers its products and services to colleges, universities, high schools, and other levels of public and private schools 166.5 10.5 110.6 177.7 67.1 and their athletic and recreational departments.

Markets greeting cards, stationery packs, holiday gift wraps, and accessories. Its product lines include greeting cards, Current USA Inc. N/A catalog sales, gift items, gift wrap, online shopping, and rebates. Current USA offers its products through its catalog 208.6 - - - - store, factory outlets, and online.

Confidential 15

Preliminary List of Tier II Strategic Buyers (contd)

Total Revenues EBITDA Market Value Enterprise Value Net Debt Company Name Ticker Business Description (mm) (mm) (mm) (mm) (mm)

Doing business as Hobby Lobby Creative Centers, operates a chain of art and craft stores in the Hobby Lobby Stores, Inc. N/A United States. It offers crafts, hobbies, picture framing, jewelry making, fashion fabrics, floral, cards $ 1,085.7 - - - - and party, baskets, wearable art, home accents, and holiday supplies.

OfficeMax Inc. OMX Engages in the distribution of business-to-business and retail office products primarily in the United States. The 9,258.4 191.6 2,988.2 4,925.3 1,937.1 Company markets and sells through field salespeople, outbound telesales, catalogs, and via the Internet.

Operates as a publishing company with its primary operations in the education, business information, and consumer publishing markets in the United States, the United Kingdom, and continental Europe. Pearson plc PSON 4,096.0 605.0 6,150.8 7,376.8 1,226.0 The Company provides testing and software services for primary and secondary schools; and publishes textbooks and related course materials for colleges and universities, as well as texts, reference, and interactive products for industry professionals.

Provides computerized assessment and progress monitoring tools for pre-K through senior high schools in North America. Its educational software products covers a range of subject areas, including reading, early literacy, Renaissance Learning Inc. RLRN mathematics, writing, vocabulary, test preparation, standards assessment, and language acquisition. The Company 119.8 33.5 425.8 399.2 (26.6) markets its educational products and services to teachers, school librarians, principals, schools, and school district personnel.

Operates as an education and consumer software company. It develops and delivers various pedagogical solutions Riverdeep Interactive N/A 216.3 41.7 - - - Learning Limited for schools.

Distributes technology products, traditional office products, janitorial/sanitation products, and office furniture United Stationers Inc. USTR primarily in the United States. The Company sells its products through distribution networks, catalogs, and the 4,537.3 185.4 1,568.5 1,561.8 (6.8) Internet in the United States, Canada, and Mexico.

Confidential 16

Preliminary List of Financial Buyers

Fund Size Company Name (mm) Relevant Portfolio Companies ABS Capital Partners $ 400.0 American Capital Strategies, Ltd. N/A American Securities Capital Partners, L.P. 1,000.0 Apax Partners L.P. 1,100.0 Freedom Scientific, Inc., Member Direct Television Arcadia Partners 50.0 Arcapita Limited N/A Arena Capital Partners 212.5 Bain Capital, Inc. 3,500.0 School Specialty (failed acquisition attempt) Banc of America Equity Partners N/A Element K Bear Stearns Merchant Banking 1,500.0 Virtual Ink Corporation Berkshire Partners, LLC 1,700.0 Brentwood Associates 540.0 Brockway Moran & Partners, Inc. 410.0 Bruckmann, Rosser, Sherrill & Co. L.L.C. 770.0 Carlyle Group, The 7,850.0 Blackboard Inc., Educomp Datamatics Ltd., LearningMate Solutions Private Ltd., Varsity Group Inc. Centre Partners Management LLC 750.0 Charlesbank Capital Partners LLC 900.0 Charterhouse Group, Inc. 320.0 Chicago Growth Partners 100.0 CIVC Partners, L.P. 650.0 Cortec Group, Inc. 332.0 Cravey, Green & Wahlen Incorporated 404.5 Dyson-Kissner-Moran Corp., The N/A Falconhead Capital, LLC N/A FdG Associates 310.0 Fenway Partners Inc. 910.0 The National School Supply Company First Atlantic Capital, Ltd. 353.0 Freeman Spogli & Co. 1,000.0 Hall-Mark Electronics Corporation,Micro Warehouse Canada Ltd, MVP.com,PartsAmerica.com,Inc., Redcats USA, Inc., Ross-Simons, Inc. Friedman Fleischer & Lowe, L.L.C. 750.0 Advanced Career Technologies, Inc. Frontenac Company 560.0 Golden Gate Capital 1,800.0 Lexicon Marketing Corporation Goldner Hawn Johnson & Morrison, Inc. 175.0 Great Hill Partners, LLC 550.0 Gryphon Capital Management, LLC N/A

Confidential 17

Preliminary List of Financial Buyers (contd)

Fund Size Company Name (mm) Relevant Portfolio Companies GTCR Golder Rauner, L.L.C. $ 1,850.0 Haas Wheat & Partners 253.0 Harbour Group Ltd. 375.0 Harvest Partners, Inc. 558.0 ICV Capital Partners, L.L.C. 255.3 KRG Capital Partners, L.L.C. 715.0 Leeds Weld & Co. 200.0 Leonard Green & Partners, L.P. 1,850.0 Liberty Partners N/A Edison Schools Inc. Linsalata Capital Partners 425.0 MidOcean Partners 435.0 Strayer Education Inc. Morgenthaler 450.0 KnowledgeNet, Inc. Nautic Partners, LLC 1,080.0 La Petite Academy Inc. New Mountain Capital, LLC 1,550.0 Strayer Education Inc. Norwest Equity Partners 800.0 Oak Hill Capital Management, Inc. 2,500.0 Blackboard Inc., ProQuest Co. Oaktree Capital Management, LLC 1,200.0 Kindercare Learning Centers Inc. Olympus Partners 757.5 Princeton Review Inc., Stratys Learning Solutions Parthenon Capital 750.0 Barrett Kendall Publishing Ltd. Quad-C Management, Inc. 850.0 Lexicon Marketing Corporation Summit Partners 3,000.0 Alphasmart Inc. TA Associates, Inc. 800.0 The Jordan Company, LP 1,500.0 Thoma Cressey Equity Partners 765.0 Trimaran Capital Partners 1,043.0 Educational Services of America, Inc. Warburg Pincus LLC 8,000.0 Apex Learning, Inc., Aspen Education Group, Inc., KidsNet Co., Ltd., Scientific Learning Corp., SkillSoft plc, Zdsoft Net Co. Ltd. Wellspring Capital Management, L.L.C. 1,000.0 Weston Presidio 1,000.0 Achievement Technologies, Inc., Hanna Andersson Corporation, Learning Curve International, RedEnvelope Inc., Tavolo, Inc. Whitney & Co. 1,000.0 MaMaMedia Inc., NextEd, Ltd William Blair & Company, L.L.C. 400.0 Willis Stein & Partners, L.L.C. 1,800.0 Wind Point Partners 700.0 Windjammer Capital Investors, L.L.C. 370.0

Confidential 18

Confidential

Preliminary Valuation Analysis

$ per Share

$20.00

$18.00

$16.00

$13.71 $13.59 $14.00 $13.21

$12.10 $12.33 $12.00 $12.31 $11.85 $10.96 $11.42 $10.36 $11.30 $10.00 $9.45 $10.41 $9.81 $9.48 Share Price as of $8.00 May 18, 2006: $7.85 $6.00

$5.46 $4.00

Trading Range Public Company Analysis Transaction Analysis DCF Analysis LBO Analysis EBITDA Trading Multiples of Public EBITDA Trading Multiples of Public 2006P P/E Trading Multiples of EBITDA Multiples of Acquisition Median M&A Transaction Premiums EBITDA Multiples Assuming Terminal EBITDA Multiples Assuming Required 52-Week Hi - Low Educational Products / Services Catalog / Internet Retail Companies Public Educational Products/ Transactions in the Educational for Public Company Deals 1 Day - 4 Growth Rates of 7.0x - 8.0x and a IRRs of 22.5% - 27.5% and Total Companies (1,4): (1,4): Services Companies (3,4): Products / Services Sector (2,4): Weeks Prior to Announcement (5): Discount Rate of 17.0% (2): Leverage of 4.50x (2):

10.5x - 12.3x 8.3x - 9.7x 18.4x - 21.4x 8.8x - 10.3x 25.0% - 32.0% 9.5x - 10.6x 8.7x - 9.5x Multiple Multiple Multiple Multiple Share Price Multiple Multiple 9,641.5 9,605.0 9,621.6 9,635.9 9,643.4 9,629.1 Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Note: Diluted shares outstanding calculated using treasurystock method of options accounting (1) Assumes LTM 3/31/2006 EBITDA of $10.5 million after public company expenses (2) Assumes LTM 3/31/2006 EBITDA of $12.1 million before public company expenses (3) Assumes 2006P net income of $5.4 million after public company expenses (4) A range of +/- 7.5% has been applied to the median multiples (5) Assumes 5/18/2006 closing price of $7.85 per share

Confidential 20

Financial Summary

Fiscal Year Ended December 31 $ in Thousands, except per share data

HISTORICAL LTM PROJECTED 2001 2002 2003 2004 2005 3/31/2006 2006 2007 2008 2009 2010 Early Childhood Revenue $ 63,000 $ 70,190 $ 78,490 $ 90,908 $ 102,892 $ 105,190 $ 115,099 $ 134,861 $ 156,718 $ 172,471 $ 189,596 Elementary School Revenue 29,849 30,570 31,431 30,080 29,852 29,935 30,791 32,473 35,093 37,185 39,044 Revenue 92,849 100,760 109,921 120,988 132,744 135,126 145,890 167,333 191,811 209,656 228,640 Cost of Goods Sold 59,747 64,478 70,427 80,408 86,727 87,964 94,874 107,959 122,781 133,704 145,195 Gross Profit 33,102 36,282 39,494 40,580 46,017 47,162 51,017 59,374 69,030 75,951 83,444 Selling, General, & Administrative Costs 42,920 32,891 34,857 38,430 40,032 41,941 43,340 48,060 54,723 59,413 61,733 Adjustments (2,517) (879) - (1,000) (2,158) (3,317) (1,160) - - - - Adjusted EBIT after Public Company Expenses (7,301) 4,270 4,637 3,150 8,143 8,538 8,836 11,314 14,307 16,538 21,712 Depreciation 1,981 1,266 1,418 1,538 1,699 1,779 1,895 1,777 1,698 1,653 1,634 Amortization 5,485 288 279 173 173 173 173 173 173 51 1 Adjusted EBITDA after Public Expenses 165 5,824 6,334 4,861 10,015 10,490 10,904 13,264 16,178 18,242 23,346 Add-Back: Public Company Expenses 680 572 613 730 1,342 1,567 1,876 2,138 2,434 2,642 2,746 Adjusted EBIT before Public Company Expenses (6,621) 4,842 5,250 3,880 9,485 10,105 10,712 13,452 16,741 19,180 24,457 Depreciation 1,981 1,266 1,418 1,538 1,699 1,779 1,895 1,777 1,698 1,653 1,634 Amortization 5,485 288 279 173 173 173 173 173 173 51 1 Adjusted EBITDA before Public Company Expenses $ 845 $ 6,396 $ 6,947 $ 5,591 $ 11,357 $ 12,057 $ 12,780 $ 15,402 $ 18,612 $ 20,884 $ 26,092

Capital Expenditures $ 2,303 $ 1,203 $ 1,183 $ 1,864 $ 1,659 $ 1,761 $ 1,800 $ 2,021 $ 2,267 $ 2,423 $ 2,583 Net Working Capital 16,450 14,763 18,371 21,734 20,287 26,217 22,240 25,399 28,991 31,625 34,410 (Increase) / Decrease in Working Capital - 1,687 (3,608) (3,363) 1,447 (5,930) (1,953) (3,159) (3,592) (2,634) (2,785)

Key Financial Ratios Early Childhood Revenue Growth - 11.4% 11.8% 15.8% 13.2% - 11.9% 17.2% 16.2% 10.1% 9.9% Elementary School Revenue Growth - 2.4% 2.8% -4.3% -0.8% - 3.1% 5.5% 8.1% 6.0% 5.0% Total Revenue Growth - 8.5% 9.1% 10.1% 9.7% - 9.9% 14.7% 14.6% 9.3% 9.1% Gross Profit Margin 35.7% 36.0% 35.9% 33.5% 34.7% 34.9% 35.0% 35.5% 36.0% 36.2% 36.5% Public Company Expenses as a % of Normalized SG&A 1.6% 1.7% 1.8% 1.9% 3.4% 3.7% 4.4% 4.4% 4.4% 4.4% 4.4% Adjusted EBIT after Public Company Expenses Margin -7.9% 4.2% 4.2% 2.6% 6.1% 6.3% 6.1% 6.8% 7.5% 7.9% 9.5% Adjusted EBITDA after Public Expenses Margin 0.2% 5.8% 5.8% 4.0% 7.5% 7.8% 7.5% 7.9% 8.4% 8.7% 10.2% Adjusted EBIT before Public Company Expenses Margin -7.1% 4.8% 4.8% 3.2% 7.1% 7.5% 7.3% 8.0% 8.7% 9.1% 10.7% Adjusted EBITDA before Public Company Expenses Margin 0.9% 6.3% 6.3% 4.6% 8.6% 8.9% 8.8% 9.2% 9.7% 10.0% 11.4% Capital Expenditures / Revenue 2.5% 1.2% 1.1% 1.5% 1.2% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% Net Working Capital / Revenue 17.7% 14.7% 16.7% 18.0% 15.3% 19.4% 15.2% 15.2% 15.1% 15.1% 15.0% (Increase) / Decrease in Working Capital / Revenue - 1.7% -3.3% -2.8% 1.1% - -1.3% -1.9% -1.9% -1.3% -1.2%

Note: FY 2001 excludes $29.6 m impairment charge and $1.8 m merger integration charge

Source: Public Filings; Management

Confidential 21

Discounted Cash Flow Analysis Fiscal Year Ended December 31 $ in Thousands, except per share data

Projected Cash Flows

2006P 2007P 2008P 2009P 2010P Adjusted EBIT before Public Company Expenses $ 10,586 $ 13,452 $ 16,741 $ 19,180 $ 24,457 Less: Taxes @ 40.0% (4,234) (5,381) (6,696) (7,672) (9,783) After-tax Operating Income 6,351 8,071 10,044 11,508 14,674 Plus: Depreciation & Amortization 1,535 1,950 1,871 1,704 1,635 Less: Capital Expenditures (1,297) (2,021) (2,267) (2,423) (2,583) Less: (Inc) / Dec in Working Capital 3,977 (3,159) (3,592) (2,634) (2,785) Free Cash Flows 10,566 4,841 6,057 8,155 10,941 Terminal Cash Flows @ 7.5x 2010P EBITDA - - - - 195,689 Total Free Cash Flows $ 10,566 $ 4,841 $ 6,057 $ 8,155 $ 206,630

NPV Calculation @ 3/31/2006 Company Value - Sensitivity Analysis

NPV of Free Cash Flows $ 28,505 Discount Rate NPV of Terminal Cash Flows 92,739 16.0% 17.0% 18.0% Company Value 121,244 Terminal 7.0x $119,183 $115,061 $111,130 Plus: Cash / (Net Debt) 3,614 EBITDA 7.5x $125,624 $121,244 $117,067 Equity Value $ 124,858 Multiple 8.0x $132,064 $127,426 $123,005

Equity Value Per Share 12.95 Premium to Current Share Price 64.9% Company Value / EBITDA - Sensitivity Analysis

Company Value / LTM 3/31/2006 EBITDA 10.1x Discount Rate 16.0% 17.0% 18.0% Terminal 7.0x 9.9x 9.5x 9.2x Assumptions EBITDA 7.5x 10.4x 10.1x 9.7x Multiple 8.0x 11.0x 10.6x 10.2x LTM 3/31/2006 EBITDA $ 12,057 Current Share Price as of 5/18/2006 7.85 Terminal EBITDA Multiple 7.5x Equity Value per Share - Sensitivity Analysis Implied Terminal Growth Rate 10.8% Discount Rate 17.0% Discount Rate Tax Rate 40.0% 16.0% 17.0% 18.0% Diluted Shares Outstanding (000s) (1) 9,643.380 Terminal 7.0x $12.73 $12.31 $11.90 Net Debt / (Cash) (3,614) EBITDA 7.5x $13.40 $12.95 $12.51 Multiple 8.0x $14.07 $13.59 $13.13

(1) Diluted shares outstanding calculated using treasury stock method of options accounting

Confidential 22

Leveraged Buyout Analysis

Fiscal Year Ended December 31 $ in Thousands, except per share data

Capital Structure Cash Flows

Amount Multiple % 2006P 2007P 2008P 2009P 2010P Total Bank Debt (1) $ 39,184 3.25x 33.9% Adjusted EBIT before Public Company Expenses $ 10,586 $ 13,452 $ 16,741 $ 19,180 $ 24,457 Second Lien (11.5%) 6,028 0.50x 5.2% Interest (Expense) / Income (3,605) (4,370) (4,143) (3,774) (3,170) Mezzanine Debt (14.0%) 9,042 0.75x 7.8% Pretax Income 6,981 9,082 12,598 15,407 21,288 Total Leverage 54,254 4.50x 46.9% Less: Taxes @ 40% (2,792) (3,633) (5,039) (6,163) (8,515) Sponsor Equity 61,417 5.09x 53.1% Net Income 4,189 5,449 7,559 9,244 12,773 Total Consideration 115,672 9.59x 100.0% Plus: Depreciation & Amortization 1,535 1,950 1,871 1,704 1,635 Less: Transaction Costs 5.0% (5,784) Less: Capital Expenditures (1,297) (2,021) (2,267) (2,423) (2,583) Transaction Value 109,888 9.1x Less: (Inc) / Dec in Working Capital 3,977 (3,159) (3,592) (2,634) (2,785) Plus: Cash / (Net Debt) 3,614 Scheduled Debt Repayment (735) (1,273) (1,665) (2,057) (438) Equity Value $ 113,502 Free Cash Flow 7,669 946 1,906 3,834 8,601 Advances / (Additional Principle Repaid) (7,669) (946) (1,906) (3,834) (8,601) Equity Value per Share 11.79 Net Free Cash Flow $ - $ - $ - $ - $ - Premium to Current Share Price 50.2%

LTM 3/31/2006 EBITDA 12,057 Current Share Price as of 5/18/2006 7.85 Diluted Shares Outstanding (000s) (3) 9,629.117

Exit Value Credit Statistics

Exit Value EBITDA Multiple: 7.5x $ 195,689 2006P 2007P 2008P 2009P 2010P Less: Net Debt (25,131) EBITDA $ 12,780 $ 15,402 $ 18,612 $ 20,884 $ 26,092 Equity Value 170,559 Total Debt Outstanding 45,851 43,632 40,061 34,170 25,131 Less: Mezzanine Debt Equity 0.0% - Total Debt / EBITDA 3.6x 2.8x 2.2x 1.6x 1.0x Less: Management Equity 7.0% (11,939) EBITDA / Interest 3.5x 3.5x 4.5x 5.5x 8.2x LBO Fund Equity $ 158,620 EBIT / Interest 2.9x 3.1x 4.0x 5.1x 7.7x Fixed Coverage 3.2x 3.1x 3.6x 4.0x 7.9x Return Analysis

2010 EBITDA Multiple 7.0x 7.5x 8.0x LBO Fund Equity 22.7% 25.0% 27.2%

(1) Total Bank Debt allocated 50.0% to Term Loan A at LIBOR plus 2.75% and 50.0% to Term Loan B at LIBOR plus 3.25% (2) Assumes LIBOR of 5.04% as of 5/18/2006 (3) Diluted shares outstanding calculated using treasury stock method of options accounting

Confidential 23

Public Company Analysis

$ in Millions, except per share data

Educational Products / Services LTM Multiples P/E Price % of 52 Market Net Company LTM Financial Performance CY 2006P EBITDA Company Value / Price / Ticker Company 5/18/06 Week High Capitalization Debt Value Revenue EBIT EBITDA EPS(1) Margin Revenue EBIT EBITDA 2006P EPS BFAM Bright Horizons Family Solutions Inc. $ 36.90 79.0% $ 1,025.6 $ (22.1) $ 1,003.5 $ 643.6 $ 63.8 $ 79.1 $ 1.48 12.3% 1.6x 15.7x 12.7x 24.9x EEEE Educate Inc. 8.38 49.0% 359.6 159.3 519.0 340.8 38.9 47.6 0.48 14.0% 1.5x 13.3x 10.9x 17.5x SCHL Scholastic Corp. 26.28 66.1% 1,098.7 352.8 1,451.5 2,274.9 147.0 212.7 1.22 9.3% 0.6x 9.9x 6.8x 21.5x SCHS School Specialty Inc. 35.79 73.1% 821.3 379.6 1,200.9 1,010.0 74.4 101.0 1.96 10.0% 1.2x 16.1x 11.9x 18.3x

Max 14.0% 1.6x 16.1x 12.7x 24.9x Mean 11.4% 1.2x 13.8x 10.6x 20.5x Median 11.1% 1.4x 14.5x 11.4x 19.9x Min 9.3% 0.6x 9.9x 6.8x 17.5x

Catalog / Internet Retail LTM Multiples P/E Price % of 52 Market Net Company LTM Financial Performance CY 2006P EBITDA Company Value / Price / Ticker Company 5/18/06 Week High Capitalization Debt Value Revenue EBIT EBITDA EPS(1) Margin Revenue EBIT EBITDA 2006P EPS ARTL Aristotle Corp. $ 7.48 85.5% $ 129.1 $ 89.0 $ 218.1 $ 193.2 $ 29.6 $ 31.4 NA 16.3% 1.1x 7.4x 6.9x NA SGDE Sportsman's Guide Inc. 30.40 99.0% 222.8 (8.1) 214.6 292.2 17.9 19.3 NA 6.6% 0.7x 12.0x 11.1x NA

Max 16.3% 1.1x 12.0x 11.1x NA Mean 11.4% 0.9x 9.7x 9.0x NA Median 11.4% 0.9x 9.7x 9.0x NA Min 6.6% 0.7x 7.4x 6.9x NA

Wellington $ 7.85 83.1% $ 71.0 $ (3.6) $ 67.4 $ 135.1 $ 8.5 $ 10.5 $ 0.57 7.8% 0.5x 7.9x 6.4x 13.7x

Note: Sportsman's Guide's price reflects acquisition premium due to 5/5/2006 announcement that it will be acquired by Redcats USA (1) Per Reuters mean reported EPS estimates; Wellington's projected EPS based upon management and PJC estimates

Source: Public Filings

Confidential 24

Transaction Analysis

$ in Millions, except per share data

Educational Products / Services Transaction Multiples Announcement Company Target LTM Financial Performance Company Value / Date Target Target Business Description Acquiror Acquiror Business Description Value Revenue EBIT EBITDA Revenue EBIT EBITDA 5/5/2006 Sportsman's Guide Inc. Catalog Retail Redcats USA, Inc. Internet Retail $ 256.7 $ 292.2 $ 17.9 $ 19.3 0.9x 14.3x 13.3x 1/13/2006 PoshTots, LLC Internet Retail BabyUniverse, Inc. Internet Retail 14.9 6.3 0.4 0.4 2.4x NM NM 11/15/2005 Learning Care Group, Inc. Pvd childcare svcs A.B.C. LearningCentresLtd. Pvd childcare svcs 164.2 220.7 5.9 10.3 0.7x 27.9x 16.0x 8/19/2005 Delta Education Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies 273.0 95.6 16.2 21.1 2.9x 16.8x 12.9x 6/27/2005 ChildrenFirst, Inc. Op backup childcare centers Bright Horizons Family Solutions Inc. Pvd workplace svcs 50.0 31.0 31.0 31.0 1.6x NM NM 6/22/2005 American Guidance Service, Inc. Pvd speech training products Pearson plc Publbooks, educ materials 270.0 - - - NA NA NA 6/15/2005 Rose Art Industries, Inc. Mnfr arts / crafts prod Mega Bloks Inc. Mnfr,mkt toys 335.3 285.0 43.4 50.0 1.2x 7.7x 6.7x 1/24/2005 AlphaSmart Inc. Dvlp educsoftware Renaissance Learning Inc. Dvlp software 54.7 33.7 3.2 3.7 1.6x 16.9x 14.7x 12/14/2004 Voyager Expanded Learning, Inc. Pvd educservices ProQuest Co. Publishing co 376.7 - - - NA NA NA 9/1/2004 The Guidance Channel Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies 18.8 20.0 20.0 20.0 0.9x NM NM 1/16/2004 McGraw Hill, Children's Publishing Unit Educ publishing co School Specialty Inc. Mnfr,whl school supplies 46.0 66.0 - (5.1) 0.7x NA NM 1/16/2004 Califone International, Inc. Mnfr audiovisual equip for educ School Specialty Inc. Mnfr,whl school supplies 26.0 16.0 - 3.7 1.6x NA 7.0x 9/9/2003 Lightspan Inc. Pvd educational software Plato Learning Inc. Pvd,dvlp edusoftware,svcs 27.0 36.3 (20.4) (12.6) 0.7x NM NM 5/30/2003 Select Agendas Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies 17.0 8.0 - 1.7 2.1x NA 10.0x 3/4/2003 ARAMARK Educational Resources Inc. Pvd educsvcs Knowledge Learning Corp. Pvd educsvcs 265.0 455.0 455.0 455.0 0.6x NM NM 1/20/2003 Riverdeep Interactive Learning Ltd. Dvlp Internet software Management Buyout Management 371.7 216.3 (14.0) 46.2 1.7x NM 8.0x 12/18/2002 bigchalk.com Inc Pvd educvia internet svcs ProQuest Co. Publishing co 32.3 28.2 (16.7) 4.7 1.1x NM 6.9x 11/7/2002 Houghton Mifflin Co. Publish books and software Bain Capital, Thomas H. Lee Private Equity Firms 1,660.0 1,194.6 81.9 268.6 1.4x 20.3x 6.2x 8/26/2002 Broderbund LLC Dvlp,whl educational software Riverdeep Interactive Learning Ltd. Dvlp Internet software 57.2 - - - NA NA NA 8/14/2002 ABC School Supply Pvd educational mat School Specialty Inc. Mnfr,whl school supplies 42.9 48.0 - 5.3 0.9x NA 8.1x 5/9/2002 NetSchoolsCorp. Pvd educational svcs Plato Learning Inc. Pvd,dvlp edusoftware,svcs 31.4 11.2 (14.8) (14.2) 2.8x NM NM 3/4/2002 Klutz, Inc. Publish educ materials Scholastic Corp. Publish educ materials 42.8 - - - NA NA NA 11/13/2001 Premier Agendas, Inc. Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies 156.5 91.3 11.5 17.2 1.7x 13.6x 9.1x 9/7/2001 Learning Co., Educational Unit Dvlp software Riverdeep Interactive Learning Ltd. Dvlp Internet software 59.5 - - - NA NA NA 7/9/2001 Argosy Education Group Inc Provide education services Education Management Corp. Pvd educsvcs 86.4 58.2 0.2 2.4 1.5x NM NM 6/1/2001 Houghton Mifflin Co Publish books and software Vivendi Universal SA Multi-media co 2,531.4 1,034.0 133.0 239.5 2.4x 19.0x 10.6x 1/31/2001 Wasatch Interactive Learning Corp. Dvlp educational software Plato Learning Inc. Pvd,dvlp edusoftware,svcs 14.5 2.2 (1.2) (0.7) 6.5x NM NM 11/14/2000 JL Hammett Co., K-12 Wholesale Division Whl school supplies School Specialty Inc. Mnfr,whl school supplies 82.5 102.0 - 7.1 0.8x NA 11.6x 6/30/2000 Global Video Inc. Dvlp educvideos School Specialty Inc. Mnfr,whl school supplies 32.0 23.0 - 4.6 1.4x NA 7.0x 6/26/2000 Tribune Education Co. Publish educational books McGraw-Hill CosInc. Publishing co 634.7 - - - NA NA NA 5/24/2000 Edutest Inc. Dvlp Internet software Lightspan Inc. Pvd educational software 13.4 - - - NA NA NA 4/13/2000 Grolier Inc. Publish encyclopedias,books Scholastic Inc. Publ educmaterials 446.7 455.5 7.0 30.6 1.0x NM 14.6x

Max 6.5x 27.9x 16.0x Mean 1.7x 17.1x 10.2x Median 1.4x 16.9x 9.5x Min 0.6x 7.7x 6.2x

SCHOOL SPECIALTY-ACQUISITIONS:

Max 2.1x 13.6x 11.6x Mean 1.3x 13.6x 9.2x Median 1.3x 13.6x 9.1x Min 0.7x 13.6x 7.0x Source: Public Filings

Confidential 25

Acquisition Transactions & Premiums

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror Acquiror Business Description Prior Prior Prior

4/24/2006 Marsh Supermarkets Inc Own supermarkets, drug stores Sun Capital Partners Inc Private equity firm 11.2% 8.8% 8.0% 2/21/2006 Thomas Nelson Inc Printing, Publishing, and Allied Services Intermedia Partners VII LP Private equity firm 21.1% 23.0% 10.1% 1/6/2006 Water Pik Technologies Inc Soaps, Cosmetics, and Personal-Care Products Coast Acquisition Corp Special purpose finance co 29.9% 29.3% 30.6% 11/11/2005 Enterasys Networks Inc Electronic and Electrical Equipment Investor Group Investor group 35.5% 28.4% 29.9% 10/12/2005 Central Coast Bancorp,CA Commercial Banks, Bank Holding Companies Rabobank Investment bank 23.6% 23.2% 18.0% 10/11/2005 Neoforma Inc Business Services Global HealthCare Exchange LLC Pvd ecommerce svcs 43.7% 31.6% 27.6% 8/18/2005 Brooktrout Inc Communications Equipment EAS Group Inc Investment holding company 38.1% 39.3% 16.2% 8/9/2005 Register.com Inc Business Services Vector Capital Corp Private equity firm 7.6% 9.2% 24.0% 8/3/2005 Chart Industries Inc Measuring, Medical, Photo Equipment; Clocks First Reserve Corp Private equity firm 10.5% 14.3% 19.5% 6/9/2005 Register.com Inc Business Services RCM Acquisition Co LLC Investment company 10.1% 6.3% 25.0% 5/10/2005 Blair Corp Miscellaneous Retail Trade Loeb Partners Corp Investment company 3.5% 7.4% 9.6% 4/28/2005 Worldwide Rest Concepts Inc Retail Trade-Eating and Drinking Places Pac Eq Partners Pty Ltd Private equity firm 41.4% 39.2% 37.3% 4/18/2005 Manchester Technologies Inc Computer and Office Equipment Caxton-Iseman Capital Inc Private equity firm 35.9% 17.4% 17.0% 4/12/2005 Noland Co Wholesale Trade-Durable Goods Primus Inc Whl industrial supplies 52.3% 60.4% 49.0% 3/1/2005 Blue Martini Software Inc Prepackaged Software Multi-Channel Holdings Inc Whl,ret software;holding co 63.3% 80.2% 55.6% 2/15/2005 Tickets.com Inc Business Services MLB Advanced Media LP Multi-media company 32.5% 29.4% 46.7% 1/27/2005 MAPICS Inc Prepackaged Software Infor Global Solutions Dvlp entrp software 9.7% 14.3% 24.0% 1/7/2005 Polaroid Holding Co Measuring, Medical, Photo Equipment; Clocks Petters Group Worldwide Pvd ecommerce retail svcs 13.4% 14.4% 16.7% 10/4/2004 MSC Software Corp Prepackaged Software ValueAct Capital Partners LP Investment company 12.6% 16.1% 19.8% 5/28/2004 CompuCom SystemsInc(Safeguard) Wholesale Trade-Durable Goods Platinum Equity LLC Leverage buyout firm -5.0% 0.4% -5.0% 4/23/2004 Loehmanns Holdings Inc Retail Trade-General Merchandise and Apparel Crescent Capital Invest Inc Investment company 5.8% 9.7% 14.1% 3/17/2004 Golden State Vintners Inc Food and Kindred Products Wine Group LLC Produces beverages 22.0% 22.2% 79.4% 1/30/2004 WorkFlow Management Inc Printing, Publishing, and Allied Services Investor Group Investor group 9.0% 7.1% -4.8% 12/31/2003 Gundle/SLT Environmental Inc Rubber and Miscellaneous Plastic Products GEO Holdings Corp Investment holding company -13.0% -10.1% -4.2% 12/23/2003 Duane Reade Inc Miscellaneous Retail Trade Rex Corner Holdings LLC Investment holding company 8.4% 24.7% 22.7% 11/20/2003 Plains Resources Inc Oil and Gas; Petroleum Refining Investor Group Investor group 30.7% 30.2% 31.5% 11/14/2003 Sylvan Inc Agriculture, Forestry, and Fishing Snyder Associated Cos Inc Oil and gas exploration,prodn 21.9% 22.0% 23.2% 11/10/2003 Cotton States Life Insurance Insurance COUNTRY Insurance & Financial Stock insurance company 100.5% 98.3% 104.6% 10/31/2003 Media Arts Group Inc Printing, Publishing, and Allied Services Investor Group Investor group 68.8% 80.2% 77.8% 10/24/2003 Information Resources Inc Computer and Office Equipment Open Ratings Inc Dvlp supply mgmt software -19.5% -17.4% -18.8% 10/7/2003 Concerto Software Inc Prepackaged Software Golden Gate Capital Pvd eq svcs 28.9% 37.3% 25.8% 9/30/2003 Garden Fresh Restaurant Corp Retail Trade-Eating and Drinking Places Investor Group Investor group 48.9% 54.8% 64.3% 9/22/2003 United States Exploration Inc Oil and Gas; Petroleum Refining DGL Acquisition Corp Investment holding company 0.7% -1.1% -1.1% 7/13/2003 Edison Schools Inc Educational Services Investor Group Investor group 38.6% 64.5% 74.3% 6/29/2003 Information Resources Inc Computer and Office Equipment Investor Group Investor group 10.7% -2.4% -2.7% 6/25/2003 United Park City Mines Co Real Estate; Mortgage Bankers and Brokers Capital Growth Partners LLC Investment firm 3.4% 4.7% 5.5% 5/30/2003 Cysive Inc Business Services Snowbird Holdings Inc Invest hldg co 0.9% 0.9% 11.4% 5/16/2003 Superior Finl Corp,AR Savings and Loans, Mutual Savings Banks Arvest Bank Group Inc,AR Commercial bank holding co 24.5% 22.7% 29.2% 5/13/2003 Packaged Ice Inc Food and Kindred Products Investor Group Investor group 61.6% 62.3% 96.7% 5/12/2003 Dwyer Group Inc Investment & Commodity Firms,Dealers,Exchanges Investor Group Investor group 58.8% 57.0% 45.5% 4/29/2003 Thousand Trails Inc Hotels and Casinos Kohlberg & Co LP Private equity firm 55.1% 55.9% 49.8% 4/22/2003 Varsity Brands Inc Miscellaneous Manufacturing Investor Group Investor group 39.8% 39.5% 42.2% 4/16/2003 Lillian Vernon Corp Miscellaneous Retail Trade Investor Group Investor group 72.6% 74.7% 72.2% 4/4/2003 Sports Club Co Inc Amusement and Recreation Services Investor Group Investor group 25.0% 24.5% 31.6% 3/13/2003 Colorado MEDtech Inc Measuring, Medical, Photo Equipment; Clocks CIVCO Holding Inc Mnfr med instruments 67.3% 75.9% 72.1% 2/18/2003 Insignia Financial Group Inc Real Estate; Mortgage Bankers and Brokers CB Richard Ellis Inc Real estate agency 33.3% 35.4% 42.8% 1/22/2003 Resonate Inc Prepackaged Software GTG Acquisition Corp Investment company 7.2% 6.0% 10.2% 12/24/2002 Aegis Realty Inc Investment & Commodity Firms,Dealers,Exchanges Phillips Edison & Co Own,op shopping centers 7.7% 6.9% 7.7% 11/12/2002 Hunt Corp Computer and Office Equipment Berwind Co LLC Invest co 32.3% 31.2% 37.4% 11/11/2002 CoorsTek Inc Electronic and Electrical Equipment Investor Group Investor group 62.5% 60.4% 86.4% 11/4/2002 Ebenx Inc Business Services SHPS Inc Pvd outsourced care mgmt svcs 146.2% 193.9% 190.4% 10/1/2002 BWAY Corp Metal and Metal Products Kelso & Co Private equity firm 43.9% 44.9% 38.9%

Source: SDC; Data from 1/1/2000 5/18/2006 Criteria includes domestic all going-private transactions between $50 - $500 mmin deal value; Going private transaction defined as a private acquiror ('private' meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 26

Acquisition Transactions & Premiums (contd)

TransactionPremiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror AcquirorBusiness Description Prior Prior Prior 8/7/2002 Exco Resources Inc Oil and Gas; Petroleum Refining Douglas H Miller Individual 20.8% 22.9% 22.0% 8/1/2002 Omega Worldwide Inc Investment & Commodity Firms,Dealers,Exchanges Four Seasons Health Care Ltd Pvdnursing svcs 50.9% 62.0% 66.1% 7/26/2002 International Specialty Prods Chemicals and Allied Products Samuel J Heyman Individual 4.3% 1.7% 33.8% 6/12/2002 Vestcom International Inc Business Services Cornerstone Equity Investors Private equity fund 50.6% 64.5% 78.6% 5/21/2002 Morton's Restaurant Group Inc Retail Trade-Eating and Drinking Places Castle Harlan Inc Investment company 11.6% 9.7% 31.0% 5/16/2002 Liberty Bancorp,Avenel,NJ Commercial Banks, Bank Holding Companies New Southern Bank,Macon,GA Coml bk 45.3% 45.2% 48.3% 4/25/2002 Maynard Oil Co Oil and Gas; Petroleum Refining Plantation Petroleum Holdings Oil and gas holding co -10.3% -7.6% -12.8% 3/17/2002 Associated Materials Inc Rubber and Miscellaneous Plastic Products Harvest/AMI Holdings Inc Investment company -1.2% -1.2% 28.5% 2/20/2002 Sevenson Environmental Svcs Sanitary Services SCC Contracting Inc Pvdgeneral contracting svcs 26.0% 26.0% 26.0% 2/14/2002 dick clarkproductions inc Motion Picture Production and Distribution Investor Group Investor group 32.7% 49.5% 49.5% 2/13/2002 Deltek Systems Inc Business Services Investor Group Investor group 18.4% 28.6% 41.9% 2/1/2002 Pitt-Des Moines Inc Metal and Metal Products IronbridgeAcquisition Corp Investment holding company 7.3% 8.5% 10.5% 1/29/2002 Suburban Lodges of America Inc Hotels and Casinos InTownSuites Management Own,ophotels 13.0% 17.0% 32.0% 1/28/2002 Jenny Craig Inc Personal Services Investor Group Investor group 68.3% 86.0% 72.1% 1/25/2002 Shoney's Inc Retail Trade-Eating and Drinking Places Lone Star Fund Private equity firm -7.7% 16.1% 28.6% 1/11/2002 Pulaski Bancorp Inc,NJ Commercial Banks, Bank Holding Companies Kearny Financial Corp,Kearny Bank 33.7% 31.3% 68.7% 12/7/2001 Landmark Systems Corp Prepackaged Software ASG Dvlp computer software 82.7% 98.7% 84.1% 10/1/2001 NCH Corp Soaps, Cosmetics, and Personal-Care Products Investor Group Investor group 34.0% 33.6% 18.8% 9/10/2001 American Coin Merchandising Amusement and Recreation Services Investor Group Investor group 42.6% 45.6% 39.3% 6/18/2001 Purina Mills Inc Food and Kindred Products Land O'LakesInc Produce butter,milk,cheese 19.2% 18.0% 26.4% 5/30/2001 Bacou USA Inc Measuring, Medical, Photo Equipment; Clocks BacouSA Mnfr security equipment 21.8% 17.3% 11.3% 3/13/2001 Roy F Weston Inc Business Services Investor Group Investor group 7.1% 14.7% 13.1% 2/15/2001 VICORP Restaurants Inc Retail Trade-Eating and Drinking Places Investor Group Investor group 35.9% 34.6% 50.9% 1/24/2001 NextHealthInc Health Services Investor Group Investor group 31.6% 33.8% 68.3% 12/16/2000 Crown Central Petroleum Corp Oil and Gas; Petroleum Refining Rosemore Inc Investment holding company 33.3% 25.4% 23.5% 12/14/2000 NPC International Inc Retail Trade-Eating and Drinking Places O Gene Bicknell Individual 11.3% 6.8% 32.0% 12/11/2000 PBOC Holdings Inc Savings and Loans, Mutual Savings Banks FBOP Corp,OakPark,Illinois Commercial bank;holdingco 8.8% 8.1% 41.6% 11/16/2000 Il Fornaio America Corp Retail Trade-Eating and Drinking Places BruckmannRosser Sherrill & Co Venture capital firm 28.9% 23.9% 44.4% 10/25/2000 Meridian Insurance Group Inc Insurance State Auto Mutual Insurance Co Fire,marine,casualtyins co 64.4% 65.5% 105.1% 10/17/2000 Sunrise Medical Inc Measuring, Medical, Photo Equipment; Clocks Investor Group Investor group 55.3% 64.9% 63.3% 10/4/2000 Home-Stake Oil & Gas Co Oil and Gas; Petroleum Refining Cortez Oil & Gas Inc Oil and gas exploration,prodn 2.3% 2.3% -9.3% 9/21/2000 Sunburst Hospitality Corp Hotels and Casinos Investor Group Investor group 32.6% 25.5% 24.2% 9/19/2000 US Franchise Systems Inc Hotels and Casinos PritzkerGroup Investment company 14.3% 14.3% 15.9% 9/11/2000 Mikasa Inc Stone, Clay, Glass, and Concrete Products JG Durand Industries SA Mnfr glass,crystal 69.2% 68.1% 72.0% 8/11/2000 Republic Group Inc Stone, Clay, Glass, and Concrete Products Premier Construction Products Investment company 16.9% 53.5% 58.3% 8/4/2000 EndoSonicsCorp Measuring, Medical, Photo Equipment; Clocks Jomed NV Whl medical,dental,hospequip 57.1% 72.6% 72.6% 6/16/2000 Pacific Gateway Properties Real Estate; Mortgage Bankers and Brokers Mission Orchard Statutory Statutory trust 19.5% 19.5% 18.8% 5/26/2000 Acme Electric Corp Electronic and Electrical Equipment Key Components LLC Mnfr,whl locks,locksystems 21.0% 22.0% 24.1% 5/25/2000 Protocol Systems Inc Measuring, Medical, Photo Equipment; Clocks Welch Allyn Inc Mnfr med equip 21.9% 25.5% 29.3% 5/10/2000 WMF Group Ltd Real Estate; Mortgage Bankers and Brokers Prudential Mortgage Capital Pvd mortgage banking svcs 48.3% 42.4% 69.5% 4/24/2000 Cherry Corp Electronic and Electrical Equipment Investor Group Investor group 103.1% 109.1% 70.3% 3/31/2000 Veterinary Centers of America Agriculture, Forestry, and Fishing Investor Group Investor group 12.2% 9.6% 36.4% 3/31/2000 Pulaski Furniture Corp Wood Products, Furniture, and Fixtures Investor Group Investor group 2.9% 31.4% 54.8% 3/23/2000 US Can Corp Metal and Metal Products Investor Group Investor group 0.9% 31.2% 53.9% 3/6/2000 Data Transmission Network Corp Business Services VeronisSuhler & AsocCommun Investment firm 16.0% 16.6% 52.6% 2/25/2000 Centennial HealthCare Corp Health Services Investor Group Investor group 87.2% 85.3% 83.3% 2/25/2000 Spanlink Communications Inc Communications Equipment Spanlink Acquisition Group Investment company -2.3% 6.3% 47.4% 2/10/2000 TCBY Enterprises Inc Food and Kindred Products Capricorn Investors LP Investment company 68.4% 57.4% 60.0% 1/31/2000 Jason Inc Electronic and Electrical Equipment Investor Group Investor group 57.9% 48.8% 73.9% 1/23/2000 Echelon International Corp Real Estate; Mortgage Bankers and Brokers EIN Acquisition Corp Investment firm 23.6% 41.7% 34.3% 1/18/2000 Dayton Superior Corp Metal and Metal Products Stone Acquisition Corp Investment co 48.0% 54.3% 68.8%

Max 146.2% 193.9% 190.4% Mean 30.6% 34.0% 39.7% Median 25.0% 26.0% 32.0% Min -19.5% -17.4% -18.8% Source: SDC; Data from 1/1/2000 5/18/2006 Criteria includes domestic all going-private transactions between $50 - $500 mmin deal value; Going private transaction defined as a private acquiror ('private' meaning that none of the acquiror's ultimate parentage is public either) acquiring a public target and upon completion remaining a private company

Confidential 27

Summary of Adjustments

Fiscal Year Ended December 31 2001 2002 2003 2004 2005 Q1'06 Accounting $ - $ - $ - $ - $ 1,271,596 $ 959,294 Consulting - - - - 203,896 120,000 Legal - - - 1,000,000 608,010 48,834 Merger Related 2,517,000 879,000 - - - - NASDAQ - - - - 5,000 4,000 Other - - - - 69,157 27,500 Total $ 2,517,000 $ 879,000 $ - $ 1,000,000 $ 2,157,658 $ 1,159,628

Source: Management

Confidential 28

Summary of Public Company Expenses

Fiscal Year Ended December 31 2001 2002 2003 2004 2005 Q1'05 Q1'06 Accounting (KPMG) $ 148,457 $ 180,000 $ 253,996 $ 309,196 $ 414,192 $ 101,125 $ 228,575 D&O Insurance 253,447 116,493 96,444 118,571 93,440 16,722 26,675 Director Costs 41,000 110,996 94,501 91,046 155,852 32,625 32,625 Filing Fees / Annual Report & Proxy 37,037 35,000 30,970 24,500 68,653 13,626 14,196 Investor Relations 23,985 95,858 69,877 72,138 193,500 44,000 49,375 SEC Legal Fees 176,462 33,431 67,000 115,000 120,034 100,270 130,082 SOX 404 Compliance - - - - 296,365 - 51,318 Total Public Company Costs $ 680,387 $ 571,779 $ 612,788 $ 730,452 $ 1,342,035 $ 308,368 $ 532,846

Source: Management

Confidential 29

Confidential

Overview

Advantages Disadvantages

Most likely maximizes shareholder value in the May eliminate opportunity for shareholders to near-term benefit from growth in the early childhood sector

Immediate liquidity for shareholders Loss of autonomy

Eliminates issues associated with being an orphaned Upside for shareholders may be eliminated public company (depending on price and acquisition currency)

May be structured to preserve upside and tax Fate of management and employees unknown deferral Integration issues Wellingtons Board of Directors determines process, criteria and potential partners

Wellington represents an extremely attractive platform / add-on acquisition for numerous potential strategic and financial buyers

Confidential 31

Description: Sale of Controlling Equity Interest to Strategic Buyer

Advantages Disadvantages

Likely maximize near-term shareholder value Upside for existing shareholders may be Fiduciary outshelp ensure highest price diluted/eliminated

Board determines process and criteria Fate of senior management and employees unknown

May be structured to preserve upside for existing May face integration issues shareholders May have to accept buyers currency Possible synergies, exchange of skills Industry conditions/financial health of most likely Eliminates public market scrutiny and costs acquirers will dictate success Usually outside of Companys control

Confidentiality / competitive dynamics

Confidential 32

Description: Sale of Controlling Equity Interest to a Financial Buyer

Advantages Disadvantages May maximize near-term shareholder value Upside for existing shareholders may be eliminated Fiduciary outshelp ensure highest price Expectation that management will roll over stake

Board determines process and criteria Leverage may inhibit some future initiatives May put constraints on growth Financial buyers are typically sophisticated investors committed to growing the business Capital markets driven Additional capital availability Specifically, availability of senior and subordinated debt Attractive buyout candidate given strong revenue Company performance and size critical growth and free cash flow factors

Eliminates public market scrutiny and public Attractiveness also driven by perceived timing and company costs success of sponsors exit

May present opportunity for management to Fate of certain management and employees unknown implement business plan Greater scrutiny on process Limited organizational change Possibly extensive 13E3 disclosures

Full liquidity event May pay lower multiples than strategic buyers given leverage constraint

Confidential 33

Recent Trading Ranges Since Merger Last Two Years

25% 16% 15% Average Price: Average Price: 14% 20% 19% $4.31 $6.05 12% 10% 10% 9% 15% 9% 8% 8% 12% 12% 8% 11% 7% 7% 10% 10% 10% 8% 9% 6% 5% 5% 5% 7% 4% 4% 4% 3% 5% 3% 1% 2% 1% 0% 1% 0% 0% $0.51 $1.01 $1.51 $2.01 $2.51 $3.01 $3.51 $4.01 $4.51 $5.01 $5.51 $6.01 $6.51 $7.01 $7.51 $7.86 $8.51 $3.51 - $4.01 - $4.51 - $5.01 - $5.51 - $6.01 - $6.51 - $7.01 - $7.51 - $7.86 - $8.51 ------$4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $7.85 $8.50 $9.00 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $7.85 $8.50 $9.00

Last Twelve Months Last Six Months

40% 38% 35%

35% Average Price: 29% 30% Average Price: $7.21 27% $7.46 30% 25% 22% 23% 25% 19% 20% 20% 17% 15% 15% 13%

10% 10% 5% 5% 5% 2% 2% 1% 0% 0% $5.51 - $6.00 $6.01 - $6.50 $6.51 - $7.00 $7.01 - $7.50 $7.51 - $7.85 $7.86 - $8.50 $8.51 - $9.00 $6.51 - $7.00 $7.01 - $7.50 $7.51 - $7.85 $7.86 - $8.50 $8.51 - $9.00

Source: Capital IQ; Data as of 5/18/06;Merger on 5/1/01; Reflects 5/18/06 price of $7.85.

Confidential 34

Summary

A sale of Wellington is likely to maximize near term shareholder value and provide the desired level of shareholder liquidity Potential to extract the value not currently recognized by the public market Eliminates public company expenses Healthy M&A market Potential synergies for strategic buyers

Interested parties would include both strategic and financial buyers A number of financially capable and highly interested strategic parties Financial sponsor interest should be strong given readily available equity and debt financing and significant interest in the catalog and education sector

Key to maximizing shareholder value in a sale process will be to orchestrate a highly competitive and disciplined sale process Very high probability of success given limited number of sizable platforms in the early childhood space Several strategic buyers could pay a significant premium without diluting EPS An LBO could support a significant premium given strong cash flows and current valuation

Confidential 35

PRESENTATION TO THE BOARD OF DIRECTORS Project Wellington

April 28, 2006

Confidential

Section I The Piper Jaffray Team

Section II Situation Overview

Section III Strategic Alternatives Overview

Section IV Status Quo

Section V Acquisition Strategy

Section VI Follow-on Offering

Section VII Private Placement

Section VIII Share Repurchase

Section IX Sale of the Company

Section X Summary

Appendices

Appendix A Preliminary Valuation Detail

Appendix B Small Capitalization Issues

Confidential 2

Confidential

Project Wellington

Piper Jaffray & Co.

Team Additional Resources

Robert Frost Jerry Will John Hogan Managing Director Managing Director Managing Director, Head of Financial Sponsors

Matthew Sznewajs Garry Vaynberg David Wilson Vice President Associate Head of European Investment Banking

Michael Kenworthy Analyst

Confidential 4

Confidential

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SITUATION OVERVIEW Decision to Review Strategic Alternatives Despite favorable industry fundamentals, an attractive business model and positive financial performance, the Company suffers from a lack of research coverage, thin trading volume, and relatively small institutional investor interest

As a result, the Company enjoys few of the benefits of being a public company: The public market is currently valuing Wellingtons shares at a low multiple relative to its peers Low trading volume for the Companys stock has afforded its shareholders limited liquidity The Companys market cap and trading volume make it difficult to effectivelyaccess the public equity markets as a financing source

However, Wellington remains subject to the costs associated with being a public company Legal, accounting, and reporting costs Management time Meeting short-term expectations of the public market Sarbanes-Oxley related costs continue to grow

Additionally, Wellington needs to consider the impact, if any, of the Companys private equity shareholders reaching the end of their planned holding period

As a result of the above, the Board has elected to consider a range of strategic and financial alternatives

Confidential 6

Historical Stock Price Performance

$9.00 L 550 J 500 $8.00 E K

450 $7.00 A G 400

$6.00 F M 350

$5.00 B C H I 300

$4.00 250

200 $3.00

150 $2.00 D 100

$1.00 50

$0.00 0

Stock Price $8.51 A 5/1/2001 Merger closes; Wellington begins listing on NASDAQ LTM EBITDA Multiple 6.6x B 11/6/2002 Reports record third quarter earnings and revenues 12-Month High $9.45 C 2/19/2003 Consummates acquisition of ECMD 12-Month Low $5.41 D 5/16/2003 ECMD launches first catalog and new website E 11/5/2003 Reports third quarter results 3-Month Average Daily Volume (000s) 3.494 F 8/12/2004 Revises FY 2004 projections 12-Month Average Daily Volume (000s) 8.992 G 5/31/2005 Bain announces intention to acquire School Specialty H 8/12/2005 Announces delayed 10-Q filing I 8/19/2005 Receives NASDAQ delisting notice J 9/13/2005 Announces plan to restate financial results; Departure of CFO K 2/1/2006 Restates FY 2004 financial results L 2/3/2006 Wellington delistedfrom NASDAQ M 4/14/2006 Wellington files 2005 10-K Data as of 4/21/06

Confidential 7

Relative Equity Performances

Since Merger Last Twelve Months

250 180

160

200 140

120 150 100

80 100 60

40 50

0 0

Wellington School Specialty NASDAQ Composite S&P 500 Index Wellington School Specialty NASDAQ Composite S&P 500 Index

Wellingtons Return: School Specialtys Return: Wellingtons Return: School Specialtys Return: 51.7% 56.5% 56.7% -4.0%

NASDAQs Return: S&P 500s Return: NASDAQs Return: S&P 500s Return: 8.1% 3.5% 21.3% 13.8%

Data as of 4/21/06; Merger on 5/1/01

Confidential 8

Ownership Profile

2 Institutional Holdings ¹ Private Equity Holdings Est. Return % of Total Shares % of Total Shares Institution to Current Price3 Shares Outstanding Firm Shares Outstanding Gruber & McBaine Capital Management 4 47.8% 546,575 5.584% The Simon Group 2,418,998 24.713% Rutabaga Capital Management 5 28.5% 494,363 5.051% Total Private Equity Holdings 2,418,998 24.713% Heartland Advisors Inc.4 40.4% 371,700 3.797% 4 Ashford Capital Management 122.7% 90,800 0.928% Other Holdings First Wilshire Securities Management 4 74.7% 78,599 0.803% % of Total Shares Bard Associates Inc.4 25.1% 54,674 0.559% Description Shares Outstanding California Public Employees Retirement System 4 43.1% 4,600 0.047% Total Other Holdings 3,504,699 35.805% Geode Capital Management N/A 4,441 0.045% Barclays Global Investors 4 22.5% 4,080 0.042% Axa Rosenberg Investment Management 4 22.7% 3,450 0.035% Total Diluted Shares Outstanding 9,788,248 100.000% UBS Securities LLC 5 20.0% 3,005 0.031% Northern Trust Investments N/A 600 0.006% Kentucky Teacher's Retirement System N/A 600 0.006% Bear, Stearns & Co. N/A 62 0.001% Total Institutional Holdings 1,657,549 16.934%

Insider Holdings ² Ownership Breakdown Total Options % of Total Shares Insider Outstanding Shares Outstanding

Ron Elliott 180,000 1,328,204 15.408% Richard Delaney 40,000 116,000 1.594% Judith McGuinn 97,522 291 0.999% Colin Gallagher 40,000 10,000 0.511% Scott Graves 44,000 2,912 0.479% Dr. Louis Casagrande 44,000 - 0.450% Dean DeBiase 42,000 - 0.429% Vikas Arora 15,000 - 0.153% Bob MacDonald - 1,479 0.015% All Other Outstanding Options 245,594 - 2.509% Total Insider Holdings 748,116 1,458,886 22.547%

1 Estimated ownership based on quarterly institutional filings (13F and 13G) and Sum of Funds Filings 2 Source: Wellingtons 4/14/2006 Schedule 14A filing; Wellington Management 3 Cost basis determined by multiplying average share price of security during quarter of 13F filing's release and aggregate change in holdings of security; Assumes 4/21/2006 price of $8.51 per share 4 Data as of 12/31/2005 13F filing 5 Data as of 9/30/2005 13F filing

Confidential 9

Valuation Comparison

CY 2006P Median P/E Median LTM Enterprise Value / EBITDA

25.0x 12.0x 10.7x 10.7x 21.2x 20.1x 10.0x 9.5x 20.0x 18.8x 8.1x 8.0x 14.8x 6.6x 15.0x 6.0x

10.0x 4.0x

5.0x 2.0x

0.0x 0.0x Russell 2000 Top Russell 2000 Educational Catalog / Internet Wellington Russell 2000 Top 80% Russell 2000 Bottom Educational Products / Wellington 80% Bottom 20% Products / Services Retail Group (b) 20% Services Group (a) Group (a)

Note: No 2006 EPS projections forcompanies in catalog / internet retail group; Data as of 4/21/06 (a) Educational Products / Services Group includes BrightHorizons Family Solutions, Educate, ScholasticCorp., and School Specialty (b) Catalog / Internet Retail Group includes AristotleCorp. and SportsmansGuide

Confidential 10

Small- and Mid-Cap Issues

As a result of the substantial amount of capital flowing into mutual funds and pension funds in recent years, many institutional investors have increased their minimum size threshold for investing in public companies

The demand for small- and mid-cap stocks is generally restricted to opportunities in relatively high growth companies in rapidly expanding markets with the prospect for the size of the Company to grow substantially within the next 12 to 18 months

For companies in relatively slower growth market segments, institutional investors often require minimum market capitalizations in excess of $1 billion and significant trading volume when considering investing in public companies

Research analysts play an extremely significant role with institutional investors and analysts are not attracted to stocks with little trading volume and investor interest

It is essential to have institutional investors among a companys shareholder base as they help to create an active trading market for the stock, which translates into adequate liquidity for shareholders

The importance of institutional investors to create and maintain liquidity in the stocks of public companies is substantial, as evidenced by the fact that institutional investors account for approximately 80% of all trading volume for stocks listed on the three major stock exchanges

Additional costs associated with Sarbanes-Oxley compliance has become the last strawfor sub-$100 million market capitalization companies

Wellingtons Public Company Issues are not Unique and Represent a Long-Term Trend for Small-Capitalization Stocks

Confidential 11

Confidential

Shareholder Value Strategies

Overview Capital Wellingtons Board has a broad range of Structure alternatives available to enhance shareholder value

We have preliminarily provided a qualitative overview of those alternatives that address the Boards primary objectives: Maximize Operating Shareholder Shareholder liquidity Strategy Value maximization Value

Value Recognition

Confidential 13

Capital Structure Options Private Placement

New Issue Public Issue

Bank Financing Debt Refinance

Retire Maximize Shareholder Capital Private Placement Value Structure New Issue Follow-On

Tender Offer

Equity Share Repurchase Share-Repurchase Program

Special Dividend Dividend Policy Ordinary Dividend

Confidential 14

Value Recognition Options Analyst Coverage

Institutional Support Communication

Reporting/ Disclosure

Break Up Maximize Value Shareholder Spin-off Recognition Value Capture UnrealizedValue Consolidation

Company Sale

Staggered Board

Blank Check Preferred Defensive Mechanisms Break Up

Poison Pill

Confidential 15

Overview of Primary Alternatives Liquidity and Shareholder Value

Status Quo

Acquisition Strategy

Publicly Marketed Follow-On Offering

Privately Negotiated Equity Placement

Share Repurchase

Sale of Company to Strategic / Financial Buyer

Confidential 16

Confidential

Description: Execute Business Plan

Advantages Disadvantages

Preserves opportunity to create value for shareholders No significant liquidity in near-term through execution of business plan May not attract new research coverage or greater Least disruptive for operations, management and trading liquidity employees May not expand Wellingtons multiple or garner Retain strong balance sheet favor with street

Can continue to pursue acquisitions on an Value maximization/liquidity alternative may opportunistic basis not always be available

Confidential 18

Small-Cap Valuations

Breakdown of the Russell 2000 ($ in millions) Mean Market Mean 1 Year Median EBITDA Median LTM Mean 3-Mo. Avg. Capitalization Return Multiple P/E Ratio Daily Vol. (000s) Decile: 1 $2,227.9 73.9% 11.8x 22.5x 1,144.6 Decile: 2 1,504.5 47.5% 11.2x 21.4x 839.1 Decile: 3 1,189.9 42.9% 10.7x 21.8x 520.4 Decile: 4 940.9 39.8% 11.2x 20.9x 528.1 Decile: 5 745.6 35.8% 10.2x 19.8x 452.5 Decile: 6 609.9 32.1% 10.1x 21.5x 394.2 Decile: 7 468.5 39.9% 10.0x 18.3x 327.8 Decile: 8 374.1 24.3% 10.5x 18.3x 186.9 Decile: 9 295.8 17.0% 11.3x 20.4x 195.3 Decile: 10 203.2 -10.8% 8.4x 18.7x 275.3 Total Russell: $860.3 34.5% 10.7x 20.6x 488.2

Wellington $76.9 56.7% 6.6x 13.7x 3.5

Data as of 4/21/06

Confidential 19

Summary

Executing stand-alone plan is unlikely to maximize shareholder value in near-term Public company costs are still significant in relation to total cash flows estimated to be 13%(1) of EBITDA in 2005 Unlikely that the market will improve Wellingtons relative valuation in the near term Undervaluation relative to comparable companies and broader market unlikely to change substantially

Executing stand-alone plan is unlikely to improve shareholder liquidity Unlikely to attract increased coverage by Wall Street given Companys current market capitalization

(1) Source: Management; $1,492,725 / $11,627,383 = 13% (see page 48)

Confidential 20

Confidential

Description: Company Acts as Industry Consolidator and Purchases One or Several Targets

Advantages Disadvantages Preserves opportunity to create value through No liquidity for existing shareholders execution of business plan Management has a history of successful Significant management time and resources required acquisitions Acquisitions would need to be large to have impact Consolidation play in the highly fragmented space Unlikely to significantly impact market valuation Multiple targets Uncertainty regarding availability of attractive Acquisition of new products provides new growth acquisition targets at attractive valuations vehicle Potentially meaningful integration risk Gain new management talent

Ability to realize revenue and cost synergies

Confidential 22

Summary

Acquisitions would have to substantially increase size of Company to have a material impact on liquidity and valuation of Wellington

Given the fragmented nature of the industry, dominated by small, family-managedcompanies, it could take years to reach adequate size Execution risk is correlated with the number of acquisitions required to achieve desired size Lack of available, obvious targets to achieve critical mass in the Elementary School segment

Wellington is at a competitive disadvantage in auction situations for larger, more attractive properties Scarcity value of available, quality strategic assets has driven up acquisitionprices School Specialty is a bigger, more credible, and active acquiror The Company is limited to using debt since selling equity or using stock as acquisition currency is likely not a viable alternative

Confidential 23

Confidential

Description: Selling Equity to the Market

Advantages Disadvantages Provides capital for the Company (if primary shares sold) Need to be able to raise significant amount of proceeds, likely greater than could be sold currently, to support fully-marketed May provide some liquidity for existing shareholders (if underwritten public offering secondary shares sold) Limited liquidity for existing shareholders Increases float Potential dilution Research coverage likely, if able to complete sizeable offering through underwriters Public shareholder expectations Short-term results Some increase in trading volume likely Share price volatility

Time and expense of offering Management time Auditors, counsel, printer, roadshow

Difficult to attract new public investors

Use of proceeds?

Does not address public company issues / costs

Confidential 25

Follow-On Transactions with 100% Secondary Shares Offered

Amt. Offered / Discount Trade Amount Pre-Deal Mkt. Post-Deal Mkt. Filing Last Trade Offer Pre-Deal Filing / Last Trade / Date Company Ticker Offered ($mm) Cap. ($mm) Cap. ($mm) Price Before Offer Price Mkt. Cap. Offer Price Offer Price 3/10/06 Alaska Communications Systems Group Inc ALSK $ 105.0 $ 458.9 $ 458.9 $ 11.15 $ 11.15 $ 11.00 22.9% -1.4% -1.4% 2/2/06 Huron Consulting Group Inc HURN 170.1 465.7 465.7 25.14 28.06 27.00 36.5% 6.9% -3.9% 1/19/06 Placer Sierra Bancshares PLSB 130.0 389.8 389.8 28.55 26.00 26.00 33.3% -9.8% 0.0% 12/13/05 Lionbridge Technologies Inc LIOX 58.8 360.6 360.6 6.65 6.44 6.25 16.3% -6.4% -3.0% 12/8/05 United PanAm Financial Corp UPFC 74.0 422.0 422.0 28.26 25.27 24.65 17.5% -14.6% -2.5% 12/1/05 Alaska Communications Systems Group Inc ALSK 100.0 395.2 395.2 10.42 10.13 10.00 25.3% -4.2% -1.3% 11/8/05 Zumiez Inc ZUMZ 84.6 479.1 479.1 31.81 36.06 35.60 17.6% 10.6% -1.3% 10/25/05 Inter Parfums Inc IPAR 53.3 366.0 366.0 19.89 16.74 15.50 14.6% -28.3% -8.0% 9/30/05 Accuride Corp ACW 92.8 445.9 445.9 15.35 13.75 13.25 20.8% -15.8% -3.8% 9/15/05 Ladish Co Inc LDSH 46.4 221.7 221.7 17.56 16.55 16.00 20.9% -9.7% -3.4% 8/9/05 Oyo Geospace Corp OYOG 23.1 104.0 104.0 19.25 19.01 18.50 22.2% -4.1% -2.8% 7/14/05 Middleby Corp MIDD 67.9 434.5 434.5 53.76 56.07 56.00 15.6% 4.0% -0.1% 5/23/05 AMN Healthcare Services Inc AHS 127.2 389.7 389.7 15.00 14.02 13.75 32.6% -9.1% -2.0% 3/17/05 Aftermarket Technology Corp ATAC 92.8 310.6 310.6 14.35 15.27 14.85 29.9% 3.4% -2.8% 1/20/05 Encore Capital Group Inc ECPG 61.7 442.4 442.4 20.45 20.45 20.00 13.9% -2.3% -2.3% 12/9/04 Superior Essex Inc SPSX 36.1 285.1 285.1 17.01 16.94 16.75 12.7% -1.6% -1.1% 11/30/04 TTM Technologies Inc TTMI 43.5 406.7 406.7 10.72 10.72 9.95 10.7% -7.7% -7.7% 9/21/04 PH Glatfelter Co GLT 88.0 482.7 482.7 13.04 11.94 11.00 18.2% -18.5% -8.5% 8/3/04 Carmike Cinemas Inc CKEC 143.0 401.0 401.0 37.85 33.17 33.00 35.7% -14.7% -0.5% 6/9/04 StarTek Inc SRT 125.4 477.0 477.0 42.05 33.00 33.00 26.3% -27.4% 0.0% 5/5/04 Discovery Partners International Inc DPII 36.1 123.2 123.2 6.11 5.00 5.00 29.3% -22.2% 0.0% 4/20/04 Charlotte Russe Holding Inc CHIC 52.8 378.8 378.8 18.30 18.30 17.60 13.9% -4.0% -4.0% 4/19/04 Hersha Hospitality Trust HT 25.6 168.0 168.0 10.55 10.55 10.25 15.3% -2.9% -2.9% 4/12/04 Perini Corp PCR 88.7 345.7 345.7 8.27 15.39 15.00 25.7% 44.9% -2.6% 3/29/04 NETGEAR Inc NTGR 78.0 385.5 385.5 14.80 13.28 13.00 20.2% -13.8% -2.2% 3/25/04 Acadia Realty Trust AKR 68.8 399.3 399.3 14.43 14.07 13.75 17.2% -4.9% -2.3% 3/2/04 Omega Healthcare Investors Inc OHI 178.5 429.5 429.5 10.38 9.90 9.85 41.5% -5.4% -0.5% 2/20/04 Keystone Property Trust KTR 89.8 489.4 489.4 22.98 22.98 22.45 18.3% -2.4% -2.4% 1/22/04 Pantry Inc PTRY 100.0 394.9 394.9 22.04 21.05 20.00 25.3% -10.2% -5.2% 12/17/03 Modem Media Inc MMPT 55.8 150.4 150.4 6.60 5.95 5.75 37.1% -14.8% -3.5% 12/11/03 NYMAGIC Inc NYM 49.3 239.3 239.3 24.94 24.62 24.65 20.6% -1.2% 0.1% 11/24/03 Arris Group Inc ARRS 50.9 423.1 423.1 6.24 6.24 5.65 12.0% -10.4% -10.4% 11/17/03 Big 5 Sporting Goods Corp BGFVE 94.2 410.7 410.7 19.66 18.12 18.12 22.9% -8.5% 0.0% 11/10/03 Energy Partners Ltd EPL 53.4 376.7 376.7 11.75 11.81 11.75 14.2% 0.0% -0.5% 11/7/03 Covenant Transport Inc CVTI 39.0 284.6 284.6 18.83 20.70 19.50 13.7% 3.4% -6.2% 10/30/03 MarineMax Inc HZO 47.2 231.0 231.0 17.80 17.80 15.00 20.4% -18.7% -18.7% 10/7/03 INET Technologies Inc INET 100.0 483.0 483.0 14.51 13.40 12.50 20.7% -16.1% -7.2% 8/6/03 Harris Interactive Inc HPOL 61.7 340.9 340.9 6.56 6.36 6.36 18.1% -3.1% 0.0% 8/4/03 Digitas Inc DTAS 105.0 304.5 304.5 6.75 5.38 5.25 34.5% -28.6% -2.5% 5/22/03 Portfolio Recovery Associates Inc PRAA 89.3 385.1 385.1 26.10 27.05 25.50 23.2% -2.4% -6.1% 5/13/03 VistaCare Inc VSTA 110.0 312.1 312.1 19.25 21.25 20.00 35.2% 3.8% -6.3% 5/12/03 NN Inc NNBR 36.9 166.8 166.8 10.77 10.74 10.37 22.1% -3.9% -3.6% 5/9/03 Select Comfort Corp SCSS 80.3 416.0 416.0 8.78 13.19 13.00 19.3% 32.5% -1.5% 5/1/03 Hibbett Sporting Goods Inc HIBB 48.4 262.6 262.6 28.15 26.79 26.00 18.4% -8.3% -3.0% 11/12/02 Advisory Board Co ABCO 108.8 423.2 423.2 34.70 29.34 29.00 25.7% -19.7% -1.2% 7/29/02 Aftermarket Technology Corp ATAC 85.5 465.9 465.9 22.00 22.00 19.00 18.4% -15.8% -15.8% 7/2/02 Monarch Casino & Resort Inc MCRI 25.0 118.0 118.0 14.99 12.94 12.50 21.2% -19.9% -3.5% 6/19/02 Arris Group Inc ARRS 70.7 385.2 385.2 6.40 4.71 4.71 18.3% -35.9% 0.0% 5/30/02 American Medical Security Group Inc AMZ 47.0 226.6 226.6 18.10 18.31 18.00 20.7% -0.6% -1.7% 4/9/02 Odyssey HealthCare Inc ODSY 131.1 414.6 414.6 27.48 28.25 27.00 31.6% -1.8% -4.6% 1/17/02 Hibbett Sporting Goods Inc HIBB 37.9 212.4 212.4 32.20 32.20 32.10 17.8% -0.3% -0.3% 11/6/01 Silgan Holdings Inc SLGN 77.9 339.1 339.1 22.01 19.10 19.00 23.0% -15.8% -0.5% 5/22/01 Horizon Offshore Inc HOFF 55.5 494.5 494.5 21.85 21.81 21.50 11.2% -1.6% -1.4% 9/21/00 Prize Energy Corp PRZ.X 64.1 284.6 284.6 20.56 21.74 21.38 22.5% 3.8% -1.7% 5/15/00 CARBO Ceramics Inc CRR 46.6 395.1 395.1 33.75 27.00 27.00 11.8% -25.0% 0.0%

Mean $76.6 $352.7 $352.7 $19.03 $18.51 $17.99 21.9% -6.9% -3.2% Median $70.7 $385.5 $385.5 $18.10 $17.80 $16.75 20.7% -5.4% -2.4%

Source: Equidesk; Data from 1/1/2000 3/31/2006 All follow-onofferings with 100% secondaryshares offered, pre-deal marketcapitalization less than $500 mm, and amount offered to pre-deal marketcapitalization ratio greater than 10%

Confidential 26

Summary

Discount of approximately 5-7% on secondary shares sold sets potentially low valuation expectations

Costs associated with the offering are paid by the company

Rarely do we see 100% secondary share offerings, but more common in cases where private equity investors are selling

The bigger question is who would be interested in purchasing the shares Liquidity and size problems would prevent most institutional shareholders from participating Retail investors would attract unwelcome volatility to the thinly traded stock not known as patient long- term holders

Other than possibly helping private equity investors, Wellington would be back where it started no liquidity for remaining shareholders, lack of attention by Wall Street, and relative inferior valuation

Confidential 27

Confidential

Description: Selling Equity to Institutions Private Institutional Placement of Equity (PIPE) or Registered Direct (RD)

Advantages Disadvantages

Storyprojections can often be better explained to Limited liquidity to current investors sophisticated investors Unlikely change in volume or research coverage

Minority investments by strategic corporate Would need to begin by raising smaller amounts of partners or non-traditional investors may enhance capital (< $10 million) valuation if there are possible synergies Valuation at a discount to public market price Transaction costs and time demands may be less Dilution and marketability than public equity offerings Less visibility than public offering Institutional and/or strategic investors may add value through board participation, market or key Investors usually require board seat (although company contact introductions, or informal consulting may desire a new value-added board member)

Investors typically require registration within specified period of time

Use of proceeds?

Does not address public company cost issues

Confidential 29

Summary

Typically viewed as capital of last resort Investors require substantial discount to public market Additional warrants imply further dilution

Attracts fast moneycrowd of investors Dump shares on favorable news Contributes to the problem when price drops

Strategic corporate partners do not solve capital market problem Wellington would be forced to open-up to a potential competitor Can create problems by interfering with strategy and/or capital structure decisions in the future

Does not solve liquidity problems for the remaining shareholders and most likely will not result in improved valuations

Confidential 30

Confidential

Description: Share Buyback Program Via Privately Negotiated Purchases, Open Market Purchases or Dutch Auction/Fixed Price Tender

Advantages Disadvantages

Can be viewed as positive signal by Street Depending on the size of the buy-back, may provide limited liquidity for current investors Good investment if stock price is depressed Plus additional debt is tax deductible Positive effects may be minimal / temporal

Can increase EPS and (hopefully) market value Shareholders may question use of capital/use of Financial engineering balance sheet versus other strategies - perceived lack of opportunities Increases insider ownership percentage Buy shares at a premium to market in a Dutch Dutch Auction provides greater certainty of fixed Auction / Fixed Price Tender price range and fixed time period for larger repurchase Can not control exact share buyback price in an open market purchase May remove public reporting requirements Reduces float, less future trading opportunity for institutional investors

Increases leverage

Confidential 32

Example Share Repurchase

Total Shares Buy Back 1,000,000 Current Price per Share $8.51 Total Acquisition Debt Issued to Repurchase Shares $8,510,000 2005 Outstanding Shares and In-the-Money Options 9,423,651 Less: Shares Repurchased (1,000,000) Pro-Forma 2007P Total Shares Outstanding 8,423,651 Interest Rate on Acquisition Debt 7.0%

Additional Annual After-Tax Cost to Finance Buyout (a) $357,420

2007 Net Income $6,997,102 Pro-Forma 2007 Net Income $6,639,682 2007P EPS $0.74 2007P New EPS $0.79 2007P Accretion 6.9% Pro-Forma Debt / Equity Ratio (b) 10.6%

(a) Does not include transaction costs; Assumes 40% tax rate; Does not assume any debt amortization

Confidential 33

Summary

Given Wellingtons current share price, a share repurchase may be an attractive investment that would likely be accretive to earnings per share

However, additional required debt significantlytiesWellingtonshandsfor: Investments in additional projects Growth through acquisitions

Moreover, being a small, leveraged company makes it even more difficult for the Company to grow out of its current predicament

Confidential 34

Confidential

Overview

Advantages Disadvantages Most likely maximizes shareholder value in the near- May eliminate opportunity for shareholders to term benefit from growth in the early childhood sector

Immediate liquidity for shareholders Loss of autonomy

Eliminates issues associated with being an orphaned Upside for shareholders may be eliminated public company (depending on price and acquisition currency)

May be structured to preserve upside and tax Fate of management and employees unknown deferral Integration issues WellingtonsBoard of Directors determines process, criteria and potential partners

Wellington represents an extremely attractive platform / add-on acquisition for numerous potential strategic and financial buyers

Confidential 36

Preliminary Valuation Analysis

$ per Share

$20.00

$18.00

$16.00

$14.00 $13.13 $13.20 $12.81 $12.26 $12.00 $11.31 $11.97 $11.44 $10.27 $11.16 $11.26 $10.68 $10.00 $9.45 Share Price as $8.98 of April 21, $8.00 2006: $8.51 $6.00

$5.41

$4.00

Trading Range Public Company Analysis Transaction Analysis DCF Analysis LBO Analysis

EBITDA Trading Multiples of Public EBITDA Trading Multiples of Public EBITDA Multiples of Acquisition Median M&A Transaction Premiums EBITDA Multiples Assuming Terminal EBITDA Multiples Assuming a Required 52-Week Hi -Low Educational Products / Services Catalog / Internet Retail Companies Transactions in the Educational Products for Public Company Deals 1 Day -4 Growth Rates of 7.0x -8.0x and IRR of 22.5% -27.5% and Total Companies (1,3): (1,3): / Services Sector (2): Weeks Prior to Announcement (4): Discount Rates of 17.0% (2): Leverage of 4.50x (2,3):

9.9x -11.5x 7.5x -8.7x 8.4x -9.8x 25.5% -32.9% 9.1x -10.1x 8.5x -9.3x Multiple Multiple Multiple Share Price Multiple Multiple

9,635.6 9,593.9 9,631.7 9,639.2 9,628.4 Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s) Diluted Shares (000s)

Note: Diluted shares outstanding-calculated-using-treasury-stock-method-of-options-accounting (1) Assumes LTM 12/31/2005 EBITDA of $10.1 million after public company expenses (see page 48) (2) Assumes LTM 12/31/2005 EBITDA of $11.6 million before public company expenses (see page 48) (3) A range-of+/- 7.5% hasbeen applied to the median EBITDA multiples (4) Assumes 4/21/2006-closing-price-of-$8.51-per-share

Confidential 37

Description: Sale of Controlling Equity Interest to Strategic Buyer

Advantages Disadvantages

Likely maximize near-term shareholder value Upside for existing shareholders may be Fiduciary outshelp ensure highest price diluted/eliminated

Board determines process and criteria Fate of senior management and employees unknown

Confidentiality / competitive dynamics

Confidential 38

Description: Sale of Controlling Equity Interest to a Financial Buyer

Eliminates public market scrutiny and public Attractiveness also driven by perceived timing and company costs success of sponsors exit

Full liquidity event May pay lower multiples than strategic buyers given leverage constraint

Confidential 39

Recent Trading Ranges Since Merger Last Two Years

25% 16% 15% 20% 14% 20% Average Price: Average Price: $5.90 12% $4.23 11% 10% 15% 14% 10% 9% 9% 8% 12% 12% 11% 8% 7% 7% 10% 9% 10% 9% 6% 5% 5% 5% 4% 4% 4% 5% 3% 2% 2% 1% 0% 0% 0% 0% 0% 0% $0.51 $1.01 $1.51 $2.01 $2.51 $3.01 $3.51 $4.01 $4.51 $5.01 $5.51 $6.01 $6.51 $7.01 $7.51 $8.01 $8.51 $3.51 - $4.01 - $4.51 - $5.01 - $5.51 - $6.01 - $6.51 - $7.01 - $7.51 - $8.01 - $8.51 ------$4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00

Last Twelve Months Last Six Months

50% 45% 45% 45% 39% 40% Average Price: 40% $7.20 35% 35% Average Price: 31% 30% 27% $6.99 30% 25% 25% 22%

20% 18% 20%

15% 15%

10% 10% 6% 6% 5% 3% 5% 0% 0% 1% 1% 0% 0% $5.01 - $5.51 - $6.01 - $6.51 - $7.01 - $7.51 - $8.01 - $8.51 - $6.51 - $7.00 $7.01 - $7.50 $7.51 - $8.00 $8.01 - $8.50 $8.51 - $9.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 $8.50 $9.00 Source: Capital IQ; Data as of 4/21/06;Merger on 5/1/01; Reflects 4/21/06 price of $8.51.

Confidential 40

Summary

Confidential 41

Confidential

Summary of Alternatives

Acquisition Follow-On Private Share Status Quo Company Sale Strategy Offering Placement Repurchase

Near-Term No Change Uncertain No Change to Down Down No change to up Highest Relative Valuation

No change to down Market Liquidity No Change No Change Maybe None Immediately for continuing Complete shareholders

Retained Yes Yes Yes Yes Yes No Operational Risk

Time to Significant Potential, if Secondary Potential, if Secondary Uncertain Uncertain Partial Immediate Liquidity Shares Issued Shares

Synergistic No Maybe No Maybe No Maybe Combination

Opportunity for Employee No Change No Change No Change No Change No Change Depends Ownership

Access to Reduced Reduced No Change Depends Depends Likely Expansion Capital (Use of Capital) (Use of Capital)

Confidential 43

Confidential

Financial Overview

Revenue & EBITDA Growth Gross Profit & EBITDA Margins

2005 2010 CAGR: 37% 12% $250 Revenue: 11.5% $25 EBITDA: 17.5% 37% 10% 2001 2005 CAGR: 36% $200 $20 8% Revenue: 9.3% 36% EBITDA: NA $150 $15 35% 6% 35% 4% $100 $10 34% 2% 34% $50 $5 0% 33% 33% -2% $0 $0 32% -4% 2001 2002 2003 2004 2005 2006P2007P 2008P2009P2010P

Revenue EBITDA Gross Profit Margin EBITDA Margin Working Capital Depreciation & Capital Expenditures

$40 15.3% $3.0 $35 15.3% $2.5 $30 15.2% $2.0 $25 15.2% $1.5 $20 15.1% $15 $1.0 15.1% $10 $0.5 15.0% $5 $0.0 $0 15.0% 2006P 2007P 2008P 2009P 2010P 2006P 2007P 2008P 2009P 2010P

Working Capital Working Capital as a % of Sales Capital Expenditures Depreciation Note: $ in millions; Source: Wellington management, Public filings

Confidential 45

Financial Summary

Fiscal Year Ended December 31 $ in Thousands, except per share data

HISTORICAL PROJECTED 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Early Childhood Revenue $ 63,000 $ 70,190 $ 78,490 $ 90,908 $ 102,892 $ 115,099 $ 134,861 $ 156,718 $ 172,471 $ 189,596 Elementary School Revenue 29,849 30,570 31,431 30,080 29,852 30,791 32,473 35,093 37,185 39,044 Revenue 92,849 100,760 109,921 120,988 132,744 145,890 167,333 191,811 209,656 228,640 Cost of Goods Sold 59,747 64,478 70,427 80,408 86,727 94,874 107,959 122,781 133,704 145,195 Gross Profit 33,102 36,282 39,494 40,580 46,017 51,017 59,374 69,030 75,951 83,444 Selling, General, & Administrative Costs 42,920 32,891 34,857 38,430 40,032 42,180 48,060 54,723 59,413 61,733 Adjustments (1) - (879) - - (2,278) - - - - - EBIT after Public Company Expenses (9,818) 4,270 4,637 2,150 8,263 8,836 11,314 14,307 16,538 21,712 Depreciation 1,981 1,266 1,418 1,538 1,699 1,895 1,777 1,698 1,652 1,627 Amortization 5,485 288 279 173 173 173 173 173 51 1 Adjusted EBITDA after Public Expenses $ (2,352) $ 5,824 $ 6,334 $ 3,861 $ 10,135 $ 10,904 $ 13,264 $ 16,178 $ 18,241 $ 23,339 Add-Back: Public Company Expenses (2) 741 632 673 791 1,493 1,876 2,138 2,434 2,642 2,746 EBIT before Public Company Expenses (9,077) 4,902 5,310 2,941 9,755 10,712 13,452 16,741 19,180 24,457 Depreciation 1,981 1,266 1,418 1,538 1,699 1,895 1,777 1,698 1,652 1,627 Amortization 5,485 288 279 173 173 173 173 173 51 1 Adjusted EBITDA before Public Company Expenses $ (1,611) $ 6,456 $ 7,007 $ 4,652 $ 11,627 $ 12,780 $ 15,402 $ 18,611 $ 20,883 $ 26,085

Capital Expenditures $ 2,303 $ 1,203 $ 1,183 $ 1,864 $ 1,500 $ 1,800 $ 2,020 $ 2,264 $ 2,418 $ 2,515 Net Working Capital 16,450 14,763 18,371 21,734 20,287 22,240 25,399 28,991 31,625 34,410 (Increase) / Decrease in Working Capital - 1,687 (3,608) (3,363) 1,447 (1,953) (3,159) (3,592) (2,634) (2,785)

Key Financial Ratios Early Childhood Revenue Growth - 11.4% 11.8% 15.8% 13.2% 11.9% 17.2% 16.2% 10.1% 9.9% Elementary School Revenue Growth - 2.4% 2.8% -4.3% -0.8% 3.1% 5.5% 8.1% 6.0% 5.0% Total Revenue Growth - 8.5% 9.1% 10.1% 9.7% 9.9% 14.7% 14.6% 9.3% 9.1% Gross Profit Margin 35.7% 36.0% 35.9% 33.5% 34.7% 35.0% 35.5% 36.0% 36.2% 36.5% Public Company Expenses as a % of SG&A 1.7% 1.9% 1.9% 2.1% 3.7% 4.4% 4.4% 4.4% 4.4% 4.4% EBIT after Public Company Expenses Margin -10.6% 4.2% 4.2% 1.8% 6.2% 6.1% 6.8% 7.5% 7.9% 9.5% Adjusted EBITDA after Public Expenses Margin -2.5% 5.8% 5.8% 3.2% 7.6% 7.5% 7.9% 8.4% 8.7% 10.2% EBIT before Public Company Expenses Margin -9.8% 4.9% 4.8% 2.4% 7.3% 7.3% 8.0% 8.7% 9.1% 10.7% Adjusted EBITDA before Public Company Expenses Margin -1.7% 6.4% 6.4% 3.8% 8.8% 8.8% 9.2% 9.7% 10.0% 11.4% Capital Expenditures / Revenue 2.5% 1.2% 1.1% 1.5% 1.1% 1.2% 1.2% 1.2% 1.2% 1.1% Net Working Capital / Revenue 17.7% 14.7% 16.7% 18.0% 15.3% 15.2% 15.2% 15.1% 15.1% 15.0% (Increase) / Decrease in Working Capital / Revenue - 1.7% -3.3% -2.8% 1.1% -1.3% -1.9% -1.9% -1.3% -1.2%

Note: FY 2001 excludes $29.6 m impairment charge and $1.8 m merger integration charge (1) See page 47 for breakout of adjustments (2) See page 48 for breakout of public company expenses Source: Public company filings; Management

Confidential 46

Adjustments Overview

2002 2005 ACG - Tax Provision $ - $ 10,890 AlixPartners, LLC - 304,771 Bill Gochnauer - 16,149 Board Fees - Special Session - 29,500 Bonus Payments - 25,000 Dean DeBiase - 9,528 Howard Rice Nemerovski Canady Falk & Rabkin - - KPMG - 426,246 Kroll Ontrack - 204,190 Latham & Watkins LLP - 324,494 NASDAQ - 5,000 Paul Weiss, Rifkind, Whaton & Garrison LLP - 275,707 RR Donnelley - - Severance Payment - 120,000 Tatum CFO Partners, LLP - 187,747 True Data Partners, LLC - 92,303 Westaff - 1,005 William E. Simon & Sons - 5,129 Litigation - 240,000 Merger Related 879,000 - Total $ 879,000 $ 2,277,658

Confidential 47

Public Company Expenses Overview

2001 2002 2003 2004 2005 Filing Fees / Annual Report & Proxy $ 37,037 $ 35,000 $ 30,970 $ 24,500 $ 68,653 Investor Relations 23,985 95,858 69,877 72,138 193,500 Director Costs 41,000 110,996 94,501 91,046 155,852 Accounting (KPMG) 148,457 180,000 253,996 309,196 414,192 D&O Insurance 314,137 177,183 157,134 179,261 154,130 SOX 404 Compliance - - - - 386,365 SEC Legal Fees 176,462 33,431 67,000 115,000 120,034 Total Public Company Costs $ 741,077 $ 632,469 $ 673,478 $ 791,142 $ 1,492,725

Confidential 48

Public Company Analysis

$ in Millions, except per share data

Educational Products / Services LTM Multiples P/E Price % of 52 Market Net Company LTM Financial Performance CY 2006P EBITDA Company Value / Price / Ticker Company 4/21/06 Week High Capitalization Debt Value Revenue EBIT EBITDA EPS(1) Margin Revenue EBIT EBITDA 2006P EPS BFAM Bright Horizons Family Solutions Inc. $ 37.09 79.4% $ 1,010.4 $ (20.3) $ 990.1 $ 625.3 $ 60.7 $ 75.2 $ 1.48 12.0% 1.6x 16.3x 13.2x 25.1x EEEE Educate Inc. 8.23 48.1% 351.7 160.4 512.1 330.4 45.6 54.0 0.55 16.4% 1.6x 11.2x 9.5x 15.0x SCHL Scholastic Corp. 26.55 66.8% 1,109.9 352.8 1,462.7 2,274.9 147.0 212.7 1.22 9.3% 0.6x 10.0x 6.9x 21.8x SCHS School Specialty Inc. 36.00 73.6% 826.1 379.6 1,205.7 1,010.0 74.4 101.0 1.96 10.0% 1.2x 16.2x 11.9x 18.4x

Max 16.4% 1.6x 16.3x 13.2x 25.1x Mean 11.9% 1.2x 13.4x 10.4x 20.0x Median 11.0% 1.4x 13.7x 10.7x 20.1x Min 9.3% 0.6x 10.0x 6.9x 15.0x

Catalog / Internet Retail LTM Multiples P/E Price % of 52 Market Net Company LTM Financial Performance CY 2006P EBITDA Company Value / Price / Ticker Company 4/21/06 Week High Capitalization Debt Value Revenue EBIT EBITDA EPS(1) Margin Revenue EBIT EBITDA 2006P EPS ARTL Aristotle Corp. $ 7.00 80.0% $ 120.8 $ 82.7 $ 203.5 $ 188.8 $ 28.5 $ 30.3 NA 16.1% 1.1x 7.1x 6.7x NA SGDE Sportsman's Guide Inc. 27.45 96.0% 201.1 (14.1) 187.0 285.1 18.1 19.5 NA 6.9% 0.7x 10.4x 9.6x NA

Max 16.1% 1.1x 10.4x 9.6x NA Mean 11.5% 0.9x 8.7x 8.1x NA Median 11.5% 0.9x 8.7x 8.1x NA Min 6.9% 0.7x 7.1x 6.7x NA

Wellington $8.51 90.1% $ 76.9 $ (9.9) $ 67.1 $ 132.7 $ 8.3 $ 10.1 $ 0.57 7.6% 0.5x 8.1x 6.6x 14.8x

(1) Per Reuters mean reported EPS estimates; Wellington's projected EPS based upon Management and Piper Jaffray estimates

Source: Public Company filings

Confidential 49

Acquisitions Analysis

$ in Millions, except per share data

1/13/2006 PoshTots, LLC Internet Retail BabyUniverse, Inc. Internet Retail $ 14.9 $ 6.3 $ 0.4 $ 0.4 2.4x NM NM 11/15/2005 Learning Care Group, Inc. Pvd childcare svcs A.B.C. Learning Centres Ltd. Pvd childcare svcs 164.2 220.7 5.9 10.3 0.7x 27.9x 16.0x 8/19/2005 Delta Education Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies 273.0 95.6 16.2 21.1 2.9x 16.8x 12.9x 6/27/2005 ChildrenFirst, Inc. Op backup childcare centers Bright Horizons Family Solutions Inc. Pvd workplace svcs 50.0 31.0 31.0 31.0 1.6x NM NM 6/22/2005 American Guidance Service, Inc. Pvd speech training products Pearson plc Publ books, educ materials 270.0 - - - NA NA NA 6/15/2005 Rose Art Industries, Inc. Mnfr arts / crafts prod Mega Bloks Inc. Mnfr,mkt toys 335.3 285.0 43.4 50.0 1.2x 7.7x 6.7x 1/24/2005 AlphaSmart Inc. Dvlp educ software Renaissance Learning Inc. Dvlp software 54.7 33.7 3.2 3.7 1.6x 16.9x 14.7x 12/14/2004 Voyager Expanded Learning, Inc. Pvd educ services ProQuest Co. Publishing co 376.7 - - - NA NA NA 9/1/2004 The Guidance Channel Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies 18.8 20.0 20.0 20.0 0.9x NM NM 1/16/2004 McGraw Hill, Children's Publishing Unit Educ publishing co School Specialty Inc. Mnfr,whl school supplies 46.0 66.0 - (5.1) 0.7x NA NM 1/16/2004 Califone International, Inc. Mnfr audiovisual equip for educ School Specialty Inc. Mnfr,whl school supplies 26.0 16.0 - 3.7 1.6x NA 7.0x 9/9/2003 Lightspan Inc. Pvd educational software Plato Learning Inc. Pvd,dvlp edu software,svcs 27.0 36.3 (20.4) (12.6) 0.7x NM NM 5/30/2003 Select Agendas Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies 17.0 8.0 - 1.7 2.1x NA 10.0x 3/4/2003 ARAMARK Educational Resources Inc. Pvd educ svcs Knowledge Learning Corp. Pvd educ svcs 265.0 455.0 455.0 455.0 0.6x NM NM 1/20/2003 Riverdeep Interactive Learning Ltd. Dvlp Internet software Management Buyout Management 371.7 216.3 (14.0) 46.2 1.7x NM 8.0x 12/18/2002 bigchalk.com Inc Pvd educ via internet svcs ProQuest Co. Publishing co 32.3 28.2 (16.7) 4.7 1.1x NM 6.9x 11/7/2002 Houghton Mifflin Co. Publish books and software Bain Capital, Thomas H. Lee Private Equity Firms 1,660.0 1,194.6 81.9 268.6 1.4x 20.3x 6.2x 8/26/2002 Broderbund LLC Dvlp,whl educational software Riverdeep Interactive Learning Ltd. Dvlp Internet software 57.2 - - - NA NA NA 8/14/2002 ABC School Supply Pvd educational mat School Specialty Inc. Mnfr,whl school supplies 42.9 48.0 - 5.3 0.9x NA 8.1x 5/9/2002 NetSchools Corp. Pvd educational svcs Plato Learning Inc. Pvd,dvlp edu software,svcs 31.4 11.2 (14.8) (14.2) 2.8x NM NM 3/4/2002 Klutz, Inc. Publish educ materials Scholastic Corp. Publish educ materials 42.8 - - - NA NA NA 11/13/2001 Premier Agendas, Inc. Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies 156.5 91.3 11.5 17.2 1.7x 13.6x 9.1x 9/7/2001 Learning Co., Educational Unit Dvlp software Riverdeep Interactive Learning Ltd. Dvlp Internet software 59.5 - - - NA NA NA 7/9/2001 Argosy Education Group Inc Provide education services Education Management Corp. Pvd educ svcs 86.4 58.2 0.2 2.4 1.5x NM NM 6/1/2001 Houghton Mifflin Co Publish books and software Vivendi Universal SA Multi-media co 2,531.4 1,034.0 133.0 239.5 2.4x 19.0x 10.6x 1/31/2001 Wasatch Interactive Learning Corp. Dvlp educational software Plato Learning Inc. Pvd,dvlp edu software,svcs 14.5 2.2 (1.2) (0.7) 6.5x NM NM 11/14/2000 JL Hammett Co., K-12 Wholesale Division Whl school supplies School Specialty Inc. Mnfr,whl school supplies 82.5 102.0 - 7.1 0.8x NA 11.6x 6/30/2000 Global Video Inc. Dvlp educ videos School Specialty Inc. Mnfr,whl school supplies 32.0 23.0 - 4.6 1.4x NA 7.0x 6/26/2000 Tribune Education Co. Publish educational books McGraw-Hill Cos Inc. Publishing co 634.7 - - - NA NA NA 5/24/2000 Edutest Inc. Dvlp Internet software Lightspan Inc. Pvd educational software 13.4 - - - NA NA NA 4/13/2000 Grolier Inc. Publish encyclopedias,books Scholastic Inc. Publ educ materials 446.7 455.5 7.0 30.6 1.0x NM 14.6x

Max 6.5x 27.9x 16.0x Mean 1.7x 17.5x 10.0x Median 1.4x 16.9x 9.1x Min 0.6x 7.7x 6.2x

SCHOOL SPECIALTY ACQUISITIONS:

Max 2.1x 13.6x 11.6x Mean 1.3x 13.6x 9.2x Median 1.3x 13.6x 9.1x Min 0.7x 13.6x 7.0x

Source: SDC, Capital IQ, Public Company Filings

Confidential 50

Discounted Cash Flow Analysis

Fiscal Year Ended December 31 $ in Thousands, except per share data

Projected Cash Flows

2006P 2007P 2008P 2009P 2010P EBIT before Public Company Expenses $ 10,712 $ 13,452 $ 16,741 $ 19,180 $ 24,457 Less: Taxes @ 40.0% (4,285) (5,381) (6,696) (7,672) (9,783) After-tax Operating Income 6,427 8,071 10,044 11,508 14,674 Plus: Depreciation & Amortization 2,068 1,950 1,871 1,703 1,628 Less: Capital Expenditures (1,800) (2,020) (2,264) (2,418) (2,515) Less: (Inc) / Dec in Working Capital (1,953) (3,159) (3,592) (2,634) (2,785) Free Cash Flows 4,742 4,842 6,059 8,159 11,002 Terminal Cash Flows @ 7.5x 2010P EBITDA - - - - 195,636 Total Free Cash Flows $ 4,742 $ 4,842 $ 6,059 $ 8,159 $ 206,638

NPV Calculation @ 12/31/2005 Company Value - Sensitivity Analysis

NPV of Free Cash Flows $ 22,278 Discount Rate NPV of Terminal Cash Flows 89,193 13.0% 17.0% 17.0% Company Value 111,471 Terminal 7.0x $123,566 $105,525 $105,525 Plus: Cash / (Net Debt) 9,862 EBITDA 7.5x $130,642 $111,471 $111,471 Equity Value $ 121,333 Multiple 8.0x $137,719 $117,418 $117,418

Equity Value Per Share 12.59 Premium to Current Share Price 47.9% Company Value / EBITDA - Sensitivity Analysis

Company Value / LTM 12/31/2005 EBITDA 9.6x Discount Rate 13.0% 17.0% 17.0% Terminal 7.0x 10.6x 9.1x 9.1x Assumptions EBITDA 7.5x 11.2x 9.6x 9.6x Multiple 8.0x 11.8x 10.1x 10.1x LTM 12/31/2005 EBITDA $ 11,627 Current Share Price as of 4/21/2006 8.51 Terminal EBITDA Multiple 7.5x Equity Value per Share - Sensitivity Analysis Implied Terminal Growth Rate 10.8% Discount Rate 17.0% Discount Rate Tax Rate 40.0% 13.0% 17.0% 17.0% Diluted Shares Outstanding (000s) (1) 9,639.234 Terminal 7.0x $13.84 $11.97 $11.97 Net Debt / (Cash) (9,862) EBITDA 7.5x $14.58 $12.59 $12.59 Multiple 8.0x $15.31 $13.20 $13.20

(1) Diluted shares outstanding calculated using treasury stock method of options accounting

Confidential 51

Discounted Cash Flow Analysis Sensitivity

Equity Value per Share Sensitivity Analysis

% of Modeled Sales Growth Achieved 80% 90% 100% 110% 120% 120% $5.85 $5.97 $6.10 $6.23 $6.37 % of Modeled 110% $8.81 $9.07 $9.34 $9.63 $9.92 SG&A 100% $11.77 $12.17 $12.59 $13.02 $13.47 Achieved 90% $14.74 $15.27 $15.83 $16.41 $17.02 80% $17.70 $18.37 $19.07 $19.80 $20.56

EBITDA Multiple Sensitivity Analysis

% of Modeled Sales Growth Achieved 80% 90% 100% 110% 120% 120% 3.9x 4.0x 4.1x 4.2x 4.4x % of Modeled 110% 6.4x 6.6x 6.9x 7.1x 7.3x SG&A 100% 8.9x 9.2x 9.6x 10.0x 10.3x Achieved 90% 11.4x 11.8x 12.3x 12.8x 13.3x 80% 13.9x 14.5x 15.0x 15.7x 16.3x

Confidential 52

Leveraged Buyout Analysis

Fiscal Year Ended December 31 $ in Thousands, except per share data

Capital Structure Cash Flows

Amount Multiple % 2006P 2007P 2008P 2009P 2010P Total Bank Debt (1) $ 37,789 3.25x 34.8% EBIT before Public Company Expenses $ 10,712 $ 13,452 $ 16,741 $ 19,180 $ 24,457 Second Lien (11.5%) 5,814 0.50x 5.4% Interest (Expense) / Income (4,858) (4,708) (4,497) (4,144) (3,573) Mezzanine Debt (14.0%) 8,721 0.75x 8.0% Pretax Income 5,854 8,744 12,243 15,036 20,884 Total Leverage 52,323 4.50x 48.2% Less: Taxes @ 40% (2,342) (3,498) (4,897) (6,014) (8,354) Sponsor Equity 56,251 4.84x 51.8% Net Income 3,512 5,246 7,346 9,022 12,531 Total Consideration 108,575 9.34x 100.0% Plus: Depreciation & Amortization 2,068 1,950 1,871 1,703 1,628 Less: Transaction Costs 5.0% (5,429) Less: Capital Expenditures (1,800) (2,020) (2,264) (2,418) (2,515) Transaction Value 103,146 8.9x Less: (Inc) / Dec in Working Capital (1,953) (3,159) (3,592) (2,634) (2,785) Plus: Cash / (Net Debt) 9,862 Scheduled Debt Repayment (945) (1,323) (1,701) (2,078) (2,456) Equity Value $ 113,008 Free Cash Flow 883 694 1,661 3,594 6,402 Advances / (Additional Principle Repaid) (883) (694) (1,661) (3,594) (6,402) Equity Value per Share 11.74 Net Free Cash Flow $ - $ - $ - $ - $ - Premium to Current Share Price 37.9%

LTM 12/31/2005 EBITDA 11,627 Current Share Price as of 4/21/2006 8.51 Diluted Shares Outstanding (000s) (3) 9,628.433

Exit Value Credit Statistics

Exit Value EBITDA Multiple: 7.5x $ 195,636 2006P 2007P 2008P 2009P 2010P Less: Net Debt (30,587) EBITDA $ 12,780 $ 15,402 $ 18,611 $ 20,883 $ 26,085 Equity Value 165,049 Total Debt Outstanding 50,496 48,479 45,118 39,445 30,587 Less: Mezzanine Debt Equity 0.0% - Total Debt / EBITDA 4.0x 3.1x 2.4x 1.9x 1.2x Less: Management Equity 7.0% (11,553) EBITDA / Interest 2.6x 3.3x 4.1x 5.0x 7.3x LBO Fund Equity $ 153,495 EBIT / Interest 2.2x 2.9x 3.7x 4.6x 6.8x Fixed Coverage 2.5x 2.9x 3.4x 3.7x 4.7x Return Analysis

2010 EBITDA Multiple 7.0x 7.5x 8.0x LBO Fund Equity 22.7% 25.0% 27.1%

(1) Total Bank Debt allocated 50.0% to Term Loan A at LIBOR plus 2.75% and 50.0% to Term Loan B at LIBOR plus 3.25% (2) Assumes LIBOR of 5.04% as of 4/21/2006 (3) Diluted shares outstanding calculated using treasury stock method of options accounting

Confidential 53

Leveraged Buyout Analysis -Sensitivity

Equity Value per Share Sensitivity Analysis

% of Modeled Sales Growth Achieved 80% 90% 100% 110% 120% 120% $7.29 $7.39 $7.50 $7.62 $7.74 % of Modeled 110% $9.21 $9.41 $9.62 $9.83 $10.06 SG&A 100% $11.14 $11.43 $11.74 $12.05 $12.38 Achieved 90% $13.12 $13.51 $13.92 $14.35 $14.79 80% $15.64 $16.14 $16.67 $17.22 $17.79

EBITDA Multiple Sensitivity Analysis

% of Modeled Sales Growth Achieved 80% 90% 100% 110% 120% 120% 5.1x 5.2x 5.3x 5.4x 5.5x % of Modeled 110% 6.7x 6.9x 7.1x 7.3x 7.5x SG&A 100% 8.4x 8.6x 8.9x 9.1x 9.4x Achieved 90% 10.0x 10.4x 10.7x 11.1x 11.4x 80% 12.2x 12.6x 13.0x 13.5x 14.0x

Confidential 54

Acquisition Transactions & Premiums

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror Acquiror Business Description Prior Prior Prior 2/21/2006 Thomas Nelson Inc Printing, Publishing, and Allied Services Intermedia Partners VII LP Private equity firm 21.1% 23.0% 10.1% 1/6/2006 Water Pik Technologies Inc Soaps, Cosmetics, and Personal-Care Products Coast Acquisition Corp Special purpose finance co 29.9% 29.3% 30.6% 11/11/2005 Enterasys Networks Inc Electronic and Electrical Equipment Investor Group Investor group 35.5% 28.4% 29.9% 10/12/2005 Central Coast Bancorp,CA Commercial Banks, Bank Holding Companies Rabobank Investment bank 23.6% 23.2% 18.0% 10/11/2005 Neoforma Inc Business Services Global HealthCare Exchange LLC Pvd ecommerce svcs 43.7% 31.6% 27.6% 8/18/2005 Brooktrout Inc Communications Equipment EAS Group Inc Investment holding company 38.1% 39.3% 16.2% 8/9/2005 Register.com Inc Business Services Vector Capital Corp Private equity firm 7.6% 9.2% 24.0% 8/3/2005 Chart Industries Inc Measuring, Medical, Photo Equipment; Clocks First Reserve Corp Private equity firm 10.5% 14.3% 19.5% 6/9/2005 Register.com Inc Business Services RCM Acquisition Co LLC Investment company 10.1% 6.3% 25.0% 5/10/2005 Blair Corp Miscellaneous Retail Trade Loeb Partners Corp Investment company 3.5% 7.4% 9.6% 4/28/2005 Worldwide Rest Concepts Inc Retail Trade-Eating and Drinking Places Pac Eq Partners Pty Ltd Private equity firm 41.4% 39.2% 37.3% 4/18/2005 Manchester Technologies Inc Computer and Office Equipment Caxton-Iseman Capital Inc Private equity firm 35.9% 17.4% 17.0% 4/12/2005 Noland Co Wholesale Trade-Durable Goods Primus Inc Whl industrial supplies 52.3% 60.4% 49.0% 3/1/2005 Blue Martini Software Inc Prepackaged Software Multi-Channel Holdings Inc Whl,ret software;holding co 63.3% 80.2% 55.6% 2/15/2005 Tickets.com Inc Business Services MLB Advanced Media LP Multi-media company 32.5% 29.4% 46.7% 1/27/2005 MAPICS Inc Prepackaged Software Infor Global Solutions Dvlp entrp software 9.7% 14.3% 24.0% 1/7/2005 Polaroid Holding Co Measuring, Medical, Photo Equipment; Clocks Petters Group Worldwide Pvd ecommerce retail svcs 13.4% 14.4% 16.7% 10/4/2004 MSC Software Corp Prepackaged Software ValueAct Capital Partners LP Investment company 12.6% 16.1% 19.8% 5/28/2004 CompuCom SystemsInc(Safeguard) Wholesale Trade-Durable Goods Platinum Equity LLC Leverage buyout firm -5.0% 0.4% -5.0% 4/23/2004 Loehmanns Holdings Inc Retail Trade-General Merchandise and Apparel Crescent Capital Invest Inc Investment company 5.8% 9.7% 14.1% 3/17/2004 Golden State Vintners Inc Food and Kindred Products Wine Group LLC Produces beverages 22.0% 22.2% 79.4% 1/30/2004 WorkFlow Management Inc Printing, Publishing, and Allied Services Investor Group Investor group 9.0% 7.1% -4.8% 12/31/2003 Gundle/SLT Environmental Inc Rubber and Miscellaneous Plastic Products GEO Holdings Corp Investment holding company -13.0% -10.1% -4.2% 12/23/2003 Duane Reade Inc Miscellaneous Retail Trade Rex Corner Holdings LLC Investment holding company 8.4% 24.7% 22.7% 11/20/2003 Plains Resources Inc Oil and Gas; Petroleum Refining Investor Group Investor group 30.7% 30.2% 31.5% 11/14/2003 Sylvan Inc Agriculture, Forestry, and Fishing Snyder Associated Cos Inc Oil and gas exploration,prodn 21.9% 22.0% 23.2% 11/10/2003 Cotton States Life Insurance Insurance COUNTRY Insurance & Financial Stock insurance company 100.5% 98.3% 104.6% 10/31/2003 Media Arts Group Inc Printing, Publishing, and Allied Services Investor Group Investor group 68.8% 80.2% 77.8% 10/24/2003 Information Resources Inc Computer and Office Equipment Open Ratings Inc Dvlp supply mgmt software -19.5% -17.4% -18.8% 10/7/2003 Concerto Software Inc Prepackaged Software Golden Gate Capital Pvd eq svcs 28.9% 37.3% 25.8% 9/30/2003 Garden Fresh Restaurant Corp Retail Trade-Eating and Drinking Places Investor Group Investor group 48.9% 54.8% 64.3% 9/22/2003 United States Exploration Inc Oil and Gas; Petroleum Refining DGL Acquisition Corp Investment holding company 0.7% -1.1% -1.1% 7/13/2003 Edison Schools Inc Educational Services Investor Group Investor group 38.6% 64.5% 74.3% 6/29/2003 Information Resources Inc Computer and Office Equipment Investor Group Investor group 10.7% -2.4% -2.7% 6/25/2003 United Park City Mines Co Real Estate; Mortgage Bankers and Brokers Capital Growth Partners LLC Investment firm 3.4% 4.7% 5.5% 5/30/2003 Cysive Inc Business Services Snowbird Holdings Inc Invest hldg co 0.9% 0.9% 11.4% 5/16/2003 Superior Finl Corp,AR Savings and Loans, Mutual Savings Banks Arvest Bank Group Inc,AR Commercial bank holding co 24.5% 22.7% 29.2% 5/13/2003 Packaged Ice Inc Food and Kindred Products Investor Group Investor group 61.6% 62.3% 96.7% 5/12/2003 Dwyer Group Inc Investment & Commodity Firms,Dealers,Exchanges Investor Group Investor group 58.8% 57.0% 45.5% 4/29/2003 Thousand Trails Inc Hotels and Casinos Kohlberg & Co LP Private equity firm 55.1% 55.9% 49.8% 4/22/2003 Varsity Brands Inc Miscellaneous Manufacturing Investor Group Investor group 39.8% 39.5% 42.2% 4/16/2003 Lillian Vernon Corp Miscellaneous Retail Trade Investor Group Investor group 72.6% 74.7% 72.2% 4/4/2003 Sports Club Co Inc Amusement and Recreation Services Investor Group Investor group 25.0% 24.5% 31.6% 3/13/2003 Colorado MEDtech Inc Measuring, Medical, Photo Equipment; Clocks CIVCO Holding Inc Mnfr med instruments 67.3% 75.9% 72.1% 2/18/2003 Insignia Financial Group Inc Real Estate; Mortgage Bankers and Brokers CB Richard Ellis Inc Real estate agency 33.3% 35.4% 42.8% 1/22/2003 Resonate Inc Prepackaged Software GTG Acquisition Corp Investment company 7.2% 6.0% 10.2% 12/24/2002 Aegis Realty Inc Investment & Commodity Firms,Dealers,Exchanges Phillips Edison & Co Own,op shopping centers 7.7% 6.9% 7.7% 11/12/2002 Hunt Corp Computer and Office Equipment Berwind Co LLC Invest co 32.3% 31.2% 37.4% 11/11/2002 CoorsTek Inc Electronic and Electrical Equipment Investor Group Investor group 62.5% 60.4% 86.4% 11/4/2002 Ebenx Inc Business Services SHPS Inc Pvd outsourced care mgmt svcs 146.2% 193.9% 190.4% 10/1/2002 BWAY Corp Metal and Metal Products Kelso & Co Private equity firm 43.9% 44.9% 38.9%

Source: SDC; Data from 1/1/2000 4/19/2006 Criteria includes domesticall going-private transactionsbetween $50 - $500 mm in deal value; Going private transactiondefined as a private acquiror('private' meaning that none of the acquiror's ultimate parentage is public either) acquiringa public target and upon completion remaining a privatecompany

Confidential 55

Acquisition Transactions & Premiums (contd)

Transaction Premiums Announcement 1 Day 1 Week 4 Weeks Date Target Target Business Description Acquiror Acquiror Business Description Prior Prior Prior 8/7/2002 Exco Resources Inc Oil and Gas; Petroleum Refining Douglas H Miller Individual 20.8% 22.9% 22.0% 8/1/2002 Omega Worldwide Inc Investment & Commodity Firms,Dealers,Exchanges Four Seasons Health Care Ltd Pvd nursing svcs 50.9% 62.0% 66.1% 7/26/2002 International Specialty Prods Chemicals and Allied Products Samuel J Heyman Individual 4.3% 1.7% 33.8% 6/12/2002 Vestcom International Inc Business Services Cornerstone Equity Investors Private equity fund 50.6% 64.5% 78.6% 5/21/2002 Morton's Restaurant Group Inc Retail Trade-Eating and Drinking Places Castle Harlan Inc Investment company 11.6% 9.7% 31.0% 5/16/2002 Liberty Bancorp,Avenel,NJ Commercial Banks, Bank Holding Companies New Southern Bank,Macon,GA Coml bk 45.3% 45.2% 48.3% 4/25/2002 Maynard Oil Co Oil and Gas; Petroleum Refining Plantation Petroleum Holdings Oil and gas holding co -10.3% -7.6% -12.8% 3/17/2002 Associated Materials Inc Rubber and Miscellaneous Plastic Products Harvest/AMI Holdings Inc Investment company -1.2% -1.2% 28.5% 2/20/2002 Sevenson Environmental Svcs Sanitary Services SCC Contracting Inc Pvd general contracting svcs 26.0% 26.0% 26.0% 2/14/2002 dick clark productions inc Motion Picture Production and Distribution Investor Group Investor group 32.7% 49.5% 49.5% 2/13/2002 Deltek Systems Inc Business Services Investor Group Investor group 18.4% 28.6% 41.9% 2/1/2002 Pitt-Des Moines Inc Metal and Metal Products Ironbridge Acquisition Corp Investment holding company 7.3% 8.5% 10.5% 1/29/2002 Suburban Lodges of America Inc Hotels and Casinos InTown Suites Management Own,op hotels 13.0% 17.0% 32.0% 1/28/2002 Jenny Craig Inc Personal Services Investor Group Investor group 68.3% 86.0% 72.1% 1/25/2002 Shoney's Inc Retail Trade-Eating and Drinking Places Lone Star Fund Private equity firm -7.7% 16.1% 28.6% 1/11/2002 Pulaski Bancorp Inc,NJ Commercial Banks, Bank Holding Companies Kearny Financial Corp,Kearny Bank 33.7% 31.3% 68.7% 12/7/2001 Landmark Systems Corp Prepackaged Software ASG Dvlp computer software 82.7% 98.7% 84.1% 10/1/2001 NCH Corp Soaps, Cosmetics, and Personal-Care Products Investor Group Investor group 34.0% 33.6% 18.8% 9/10/2001 American Coin Merchandising Amusement and Recreation Services Investor Group Investor group 42.6% 45.6% 39.3% 6/18/2001 Purina Mills Inc Food and Kindred Products Land O'Lakes Inc Produce butter,milk,cheese 19.2% 18.0% 26.4% 5/30/2001 Bacou USA Inc Measuring, Medical, Photo Equipment; Clocks Bacou SA Mnfr security equipment 21.8% 17.3% 11.3% 3/13/2001 Roy F Weston Inc Business Services Investor Group Investor group 7.1% 14.7% 13.1% 2/15/2001 VICORP Restaurants Inc Retail Trade-Eating and Drinking Places Investor Group Investor group 35.9% 34.6% 50.9% 1/24/2001 NextHealth Inc Health Services Investor Group Investor group 31.6% 33.8% 68.3% 12/16/2000 Crown Central Petroleum Corp Oil and Gas; Petroleum Refining Rosemore Inc Investment holding company 33.3% 25.4% 23.5% 12/14/2000 NPC International Inc Retail Trade-Eating and Drinking Places O Gene Bicknell Individual 11.3% 6.8% 32.0% 12/11/2000 PBOC Holdings Inc Savings and Loans, Mutual Savings Banks FBOP Corp,Oak Park,Illinois Commercial bank;holding co 8.8% 8.1% 41.6% 11/16/2000 Il Fornaio America Corp Retail Trade-Eating and Drinking Places Bruckmann Rosser Sherrill & Co Venture capital firm 28.9% 23.9% 44.4% 10/25/2000 Meridian Insurance Group Inc Insurance State Auto Mutual Insurance Co Fire,marine,casualty ins co 64.4% 65.5% 105.1% 10/17/2000 Sunrise Medical Inc Measuring, Medical, Photo Equipment; Clocks Investor Group Investor group 55.3% 64.9% 63.3% 10/4/2000 Home-Stake Oil & Gas Co Oil and Gas; Petroleum Refining Cortez Oil & Gas Inc Oil and gas exploration,prodn 2.3% 2.3% -9.3% 9/21/2000 Sunburst Hospitality Corp Hotels and Casinos Investor Group Investor group 32.6% 25.5% 24.2% 9/19/2000 US Franchise Systems Inc Hotels and Casinos Pritzker Group Investment company 14.3% 14.3% 15.9% 9/11/2000 Mikasa Inc Stone, Clay, Glass, and Concrete Products JG Durand Industries SA Mnfr glass,crystal 69.2% 68.1% 72.0% 8/11/2000 Republic Group Inc Stone, Clay, Glass, and Concrete Products Premier Construction Products Investment company 16.9% 53.5% 58.3% 8/4/2000 EndoSonics Corp Measuring, Medical, Photo Equipment; Clocks Jomed NV Whl medical,dental,hosp equip 57.1% 72.6% 72.6% 6/16/2000 Pacific Gateway Properties Real Estate; Mortgage Bankers and Brokers Mission Orchard Statutory Statutory trust 19.5% 19.5% 18.8% 5/26/2000 Acme Electric Corp Electronic and Electrical Equipment Key Components LLC Mnfr,whl locks,lock systems 21.0% 22.0% 24.1% 5/25/2000 Protocol Systems Inc Measuring, Medical, Photo Equipment; Clocks Welch Allyn Inc Mnfr med equip 21.9% 25.5% 29.3% 5/10/2000 WMF Group Ltd Real Estate; Mortgage Bankers and Brokers Prudential Mortgage Capital Pvd mortgage banking svcs 48.3% 42.4% 69.5% 4/24/2000 Cherry Corp Electronic and Electrical Equipment Investor Group Investor group 103.1% 109.1% 70.3% 3/31/2000 Veterinary Centers of America Agriculture, Forestry, and Fishing Investor Group Investor group 12.2% 9.6% 36.4% 3/31/2000 Pulaski Furniture Corp Wood Products, Furniture, and Fixtures Investor Group Investor group 2.9% 31.4% 54.8% 3/23/2000 US Can Corp Metal and Metal Products Investor Group Investor group 0.9% 31.2% 53.9% 3/6/2000 Data Transmission Network Corp Business Services Veronis Suhler & Asoc Commun Investment firm 16.0% 16.6% 52.6% 2/25/2000 Centennial HealthCare Corp Health Services Investor Group Investor group 87.2% 85.3% 83.3% 2/25/2000 Spanlink Communications Inc Communications Equipment Spanlink Acquisition Group Investment company -2.3% 6.3% 47.4% 2/10/2000 TCBY Enterprises Inc Food and Kindred Products Capricorn Investors LP Investment company 68.4% 57.4% 60.0% 1/31/2000 Jason Inc Electronic and Electrical Equipment Investor Group Investor group 57.9% 48.8% 73.9% 1/23/2000 Echelon International Corp Real Estate; Mortgage Bankers and Brokers EIN Acquisition Corp Investment firm 23.6% 41.7% 34.3% 1/18/2000 Dayton Superior Corp Metal and Metal Products Stone Acquisition Corp Investment co 48.0% 54.3% 68.8%

Max 146.2% 193.9% 190.4% Mean 30.8% 34.2% 40.1% Median 25.5% 27.2% 32.9% Min -19.5% -17.4% -18.8% Source: SDC; Data from 1/1/2000 4/19/2006 Criteria includes domesticall going-private transactionsbetween $50 - $500 mm in deal value; Going private transactiondefined as a private acquiror('private' meaning that none of the acquiror's ultimate parentage is public either) acquiringa public target and upon completion remaining a privatecompany

Confidential 56

Confidential

Research Coverage

Market Capitalization Number of ($ in millions) Average Number of Companies Analyst Estimates

4,000 16 3,500 14 3,000 12 2,500 10 2,000 8 1,500 6 1,000 4 500 2 0 0

Number of Companies Average Number of Analyst Estimates

Source: Factset Data as of 12/1/2005

Confidential 58

Research Economics $10,000,000 A typical investment banks sell-side equity analyst needs to generate $10 million in trading commissions per year to support the sales/trading operation and the costs of research 20 companies One analysts capacity to adequately understand and communicate the prospects for a company is about 20 specific names $500,000 As a result, the trading commissions per stock should be about $500,000 per year

$0.05 The average institutionalcommission is, at most, $0.05/share on each side of a trade. The reported trading volume generated by the investment bank must be 10,000,000 10,000,000 shares shares per stock per year (Note: the actual number of transactions may be as low as half of the reported figure due to double counting of NASDAQ trades) 250 days Estimated trading days in a year of 250.

40,000 shares The resulting minimum reported daily trading volume for one investment bank is 40,000 shares/day per stock 50% If the investment bank is the most active market maker in the companys stock, it could represent up to half of the trading volume 80,000 shares / day Resulting minimum reported daily volume required

Confidential 59

SEC Costs

Average annualcost of being a public company in fiscal 2004 for companies with revenue less than $1 billion has more than tripled to $3.4 million since Sarbanes-Oxley was passed (Source: Foley & Lardner LLP survey in June 2005)

Audit fees for companies in the S&P Small-Cap 600 index surged an average of 84 percent in 2004 and 288 percent since 2001 (Source: Foley & Lardner)

Mounting costs have prompted some public companies to consider taking their business private (Source: Foley & Lardner survey of 147 public companies) 20 percent of respondents said they were considering going private, up from 13 percent in 2002 10 percent considered selling the company, up from 6 percent in 2003 14 percent considered merging with another company, up from 7 percent in 2003

Most of the respondents exploring the option of selling or merging were companies with under $1 billion in annual revenue

Confidential 60

Market Capitalization

As illustrated in the chart below, over 95% of the total market capitalizationof companies on the NASDAQ, American and New York stock exchanges is accounted for by companies with market capitalizations greater than $1 billion

Market Capitalization of Companies on the Major Exchanges

Source: Factset Data as of 12/1/2005

Confidential 61

Minneapolis San Francisco PRESENTATION TO THE BOARD OF DIRECTORS New York Chicago Project Socrates Menlo Park Boston London Tel Aviv* Shanghai*

December 14, 2005

*Strategic Alliance

Integrity Franchise based on a reputation of integrity and professional conduct

Internal Security Non-descript code names used Measures Discussions outside of immediate team on a need-to-know basis only

M&A group is isolated from other departments; exclusive photocopiers, facsimiles and paper shredders are used

Strict External Standard policy to outside inquiries of no comment Communication Policies Transaction documents released only with client approval and signed confidentiality agreement

Compliance department closely monitors stock trading of public company M&A clients

Section I Introduction

Section II Situation Overview

Section III Strategic Alternatives

Section IV Preliminary Valuation Observations

Section V Recommendation

Section VI Investment Thesis

Section VII Potential Buyers

Section VIII Transaction Process and Timing

Section IX Why Partner With Us?

Appendices

Appendix A M&A Market Update

Appendix B Fee Proposal

Appendix C Project Socrates Team

Appendix D Valuation Detail

Project Socrates Team An Experienced and Dedicated Team

Clients

Project Socrates

Senior Leadership Project Socrates Team Additional Resources

Glenn Gurtcheff Robert Frost Jerry Will John Hogan Managing Director, Co-Head Principal Managing Director Managing Director, Head of of Middle Market M&A Financial Sponsors

Matt Sznewajs Garry Vaynberg David Wilson Vice President Associate Head of European Investment Banking

Michael Kenworthy Analyst

Leading growth-oriented, middle-market investment banking firm Independent publicly traded firm (ticker: PJC) Corporate & Institutional Full-service capabilities and unparalleled execution Services Investment Banking Growing presence in global growth markets Institutional Equity Sales Equity Trading Built on a 100+ year track record of quality service and customer success Equity and Debt Capital Markets Significant investment in European operations with genuine trans-atlantic capabilities Convertible Securities High-Yield/Structured Products Private capital Equity and Fixed Income Research Minneapolis Headquarters (Banking, Research, Sales & London Trading) Piper Jaffray Ltd.** Boston (Banking, Sales & (Banking, Research, Public Finance Services (Sales & Trading) Sales & Trading) San Francisco New York (Banking, Sales & Trading) (Banking, Research & Government Agency and Preferreds Chicago Tel Aviv Shanghai (Banking) Trading) Nessuah China Growth Public Finance and Derivatives Palo Alto Ltd.* Advisory Ltd.* (Banking & Research) (Banking) (Banking)

Private Client Services 900+ financial advisors 100+ branches in 18 states $50+ billion in client assets

*Strategic Alliance **Securities and products are offered in the United Kingdom through Piper Jaffray Ltd., which is authorized and regulated by the Financial Services Authority 6

Business Services PreK-12 Education Business Process Outsourcing Business Information Services Postsecondary Education Technology Services Professional Services Learning Technology HR Outsourcing Offshore Outsourcing Corporate Training Marketing Services

Consumer Leisure & Entertainment Softlines Retail, Mass Food Processing & Distribution Catalogue / Internet Retailing Merchandising & Restaurants Retail: Hardlines Multichannel Commerce Broadlines Specialty Retailing

Technology Analog/Mixed Signal Semiconductors Enterprise Computing & Storage, Semiconductor Capital Equipment Data Networking & Wireline Semiconductors Software Applications Telecommunications Internet Media & Marketing Software Infrastructure Defense Electronics & Homeland Security & Design Wireless Communications Equipment Security

Industrial Building Materials & Services Metal Processing Specialty Chemicals Flow & Process Controls Packaging Specialty Vehicles Industrial Distribution/Fabrication Plastic Processing Transportation & Logistics Security & Safety Other Manufacturing & Services

Financial Banks & Investment Banks Small- and Mid-Capitalization Real Estate Investment Trusts Financial Technologies & Services Banks (REITs) Specialty Finance

Health Care BioPharmaceuticals Health Care Services Medical Technology Information-Driven Health Care & Lab Services

Comprehensive Education Platform

PreK-12 Education Corporate Training

Providers of products and services for the Providers of training and development preK-12 education market products and services for the corporate Includes supplies, educational products, market software, content, assessment and testing

Representative Clients: Representative Clients:

Over 15 years of experience serving education companies Completed over 36 financing Postsecondary Education transactions raising over $2 billion Learning Technology Acted as an M&A advisor in more Private, for-profit providers of higher Providers of the underlying technology than 55 transactions education worldwide infrastructure which supports human Both bricks-and-mortar and online capital and knowledge management delivery organizations Representative Clients: Representative Clients:

Selected Transactions

Education

has agreed to divest its has been acquired has been acquired by has been acquired by by Follow-on Offering Initial Public Offering K-12 businesses to Apollo Advisors, L.P Initial Public Offering Follow-on Offering Initial Public Offering In Process

has acquired has sold its Cyber Patrol business to has been acquired by has been acquired by

Follow-on Offering Sole Managed PIPE Private Placement Initial Public Offering Initial Public Offering

Interactive Marketing Services

has been acquired by has acquired Follow-on Offering Follow-on Offering Convertible Exchange 3.75% Convertible Initial Public Offering Series D Convertible Initial Public Offering Initial Public Offering Initial Public Offering Preferred Stock Debt due 2011 Preferred Stock

Catalog

a portfolio company of

has been acquired by has been acquired by 13% Senior Subordinated has been acquired by has been acquired by a has been acquired by Underwritten Shelf Private Investment Notes due 2007 and Convertible Preferred Stock a portfolio company of Private Equity Investor SB Acquisition, Inc. Take Down in Public Equity Warrants to Purchase Bain Capital Partners Common Stock

Transaction Overview Key Investment Considerations

Early childhood care represents a $40+ billion industry in September 13, 2005 the United States Highly fragmented, with the 50 largest providers accounting for less than 10% of the market has been acquired by Increasing percentage of working parents and employer concerns over absenteeism and retention drive need for early childcare services Demographics of Current Baby Boomare driving market Piper Jaffray acted as sole advisor to ChildrenFirst growth U.S. Population Projections: 0 - 4 years of age (Adapted from www.census.gov/population/projections)

Piper Jaffray & Co. initiated the above transaction, assisted in the 25,000 negotiations and served as exclusive financial advisor to ChildrenFirst. 24,000

23,000

22,000

Bright Horizons Family Solutions (Ticker: BFAM, $980M 21,000 market cap), the world's leading provider of employer- 20,000 sponsored child care and early education, announced it has 19,000 completed the acquisition of ChildrenFirst Inc., an operator of 18,000 employer-sponsored back-up child care centers serving more than 17,000 270 clients in the United States and Canada 16,000

15,000 1995 2000 2005 2015 2025 Years

Premier Middle Market Public Company Advisor

Piper Jaffray: Top Middle-Market Piper Jaffray: Top Ten Wall Street Client Ownership Advisor in 2004 * Advisor in 2004 Number of Number of Firm Deals Closed Firm Deals Closed Piper Jaffray 49 Citigroup Global Markets 125 Jefferies & Co. 48 Goldman Sachs & Co. 114 Keefe Bruyette& Woods 39 Morgan Stanley Dean Witter 105 CIBC World Markets 35 JP Morgan Chase & Co. 101 Robert W. Baird & Co. 34 Credit Suisse First Boston 88 William Blair & Co. 30 Lehman Brothers 86 SandlerONeill & Partners 26 UBS Warburg 69 Harris Williams 26 Banc of America Securities 64 Note: Since 2000 Daniels & Associates 26 Merrill Lynch & Co. 59 Goldsmith AgioHelms & Co. 21 Piper Jaffray 49 Assignments Duff & Phelps 20 Jefferies & Co. 48 Rothschild 19 Deutsche Bank Alex. Brown 47 RBC Capital Markets 19 Lazard 43 Lincoln Partners 19 CIBC World Markets 35 SocieteGenerale 18 Robert W. Baird & Co. 34 National Bank Financial 17 Bear Stearns & Co. 33 McDonald Investments 15 William Blair & Co. 30

Source: Thompson Financial and Piper Jaffray; U.S. buyers and sellers only Note: Since 2000 * Excludes investment banks with average deal size > $500 million

Public Company Seller Advisories Premiums

50%

43.1% 39.8% 40% 37.9% 36.6% 35.5% 34.7% 34.5% 32.4% 31.8% 31.0% 30.6% 29.7% 28.7% 30% 27.3%

20%

10%

Data based on lead or sole advisories from 2000-2004 Source: Securities Data Corporation

Public Equity Offerings Privately Negotiated Transactions

#1 underwriter of small-cap growth stocks Piper Jaffray team has completed over 70 privately negotiated Exceptional institutional and retail distribution combined with transactions for public company clients since 2001 strong aftermarket trading Cumulative proceeds raised of over $1 billion 2005 Equity Offerings Experience includes: Growth Sectors, <$2B Market Cap PIPEs Privately negotiated sales of unregistered securities Rank, Manager # of Deals through a discreet and targeted marketing process 1 Piper Jaffray & Co. 51 Registered Directs (RDs) 2 CIBC World Markets 47 Privately negotiated sales of registered securities off an 3 J.P. Morgan Securities Inc. 46 issuers effective shelf registration statement 4 Lehman Brothers 41 Block Trades 5 UBS Securities Inc. 10 Existing shareholder seeks to sell large block of 6 Merrill Lynch & Co. 38 securities 7 SG Cowen Securities Corp 37 8 Banc of America Securities 35 Representative Transactions: 9 Goldman Sachs & Co. 33 10 Citigroup Global Market Inc. 33 $19,600,000 $18,700,000 $18,000,000 $36,000,000 11 Wachovia Capital Markets LLC 32

12 Thomas Weisel Partners LLC 31 Common Stock Convertible Common Stock Common Stock Preferred Stock with Warrants 13 Credit Suisse First Boston 31 November 2005 September 2005 August 2005 April 2005 14 William Blair & Co. 29

Growth Sectors include Consumer, Financial, Health Care, Business Services, Education and Technology Data as of 12/6/2005 13

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document INTRODUCTION Retaining the Right Financial Advisor for Evaluating Strategic Alternatives

The Board will be called upon to evaluate a range of strategic alternatives and communicate the results of its analyses to the shareholders

The procedures employed by the Board, including the details of any transaction process, may be disclosed in detail in a public document filed with the SEC and subject to intense scrutiny by the SEC and shareholders

Given the complexity and scrutiny inherent in evaluating Socrates' strategic alternatives, an experienced, reputable investment bank with proven experience is essential to ensure maximum protection for the Board in exercising its fiduciary duties

In choosing a financial advisor who can effectively perform this role, the Board should consider the following:

Education Services Expertise

Public Company Expertise

M&A Expertise

Reputation in the Marketplace

Capabilities of a Full Service Investment Bank

Effectively Assisting the Board in Discharging its Fiduciary Obligations

Decision to Review Strategic Alternatives Socrates was formed on April 30, 2001 through the combination of Early Childhood LLC (private) and Smarterkids.com (public)

The Companys common stock began trading on May 1, 2001 at $5.61 per share and is currently traded on the NASDAQ Small Cap Market

Despite favorable industry fundamentals, an attractive business model and positive financial performance, the Company suffers from a lack of research coverage, thin trading volume and relatively small institutional investor interest

As a result, the Company enjoys few of the benefits of being a public company: The public market has historically valued Socrates' shares at low multiples Low trading volume for the Companys stock has afforded its shareholders limited liquidity The Companysmarket cap and trading volume make it difficult to effectively access the public equity markets as a financing source

However, Socrates remains subject to the costs associated with being a public company Legal, accounting and reporting costs Management time Meeting short-term expectations of the public market Sarbanes-Oxley related costs continue to grow

The Companys private equity shareholders have reached the end of their planned holding period and need to consider a means by which liquidity can be achieved

As a Result of the Above, the Board has Elected to Consider a Range of Strategic and Financial Alternatives

Historical Market Performance

$9.00 550

500 $8.00

450 $7.00 P/E Ratio: 10.7x 400

$6.00 350

$5.00 300

$4.00 250

200 $3.00

150

$2.00 100

$1.00 50

$0.00 0

Price Volume (000s) Stock Price as of 12/9/05 $6.93 1-Week Average $6.80 12.244 30-Day Average $6.73 6.192 12-Month High $7.94 90-Day Average $6.71 9.246 12-Month Low $4.30 180-Day Average $7.02 9.190 12-Month Average Daily Volume (000s) 11.011 YTD Average $6.21 11.326 12-Month Average $6.10 11.011

Relative Equity Performance

Since Merger Last Twelve Months

250 250 225 225 200 200 175 150 175

125 150 100 125 75 100 50

25 75 0 50

Socrates School Specialty NASDAQ S&P 500 Socrates School Specialty NASDAQ S&P 500

Socrates' Return: School Specialtys Return: Socrates' Return: School Specialtys Return: 18.7% 60.7% 64.6% -4.7%

NASDAQs Return: S&P 500s Return: NASDAQs Return: S&P 500s Return: 4.3% -0.2% 6.0% 5.9%

Data as of 12/9/05; Merger on 5/1/01

Recent Trading Ranges Since Merger Last Two Years

18% 25% 16% 95% 5% 89% 11% 16% 21% Average Price: 14% Average Price: 20% $3.99 $5.65 12% 11% 15% 10% 14% 9% 15% 10% 9% 7% 11% 8% 7% 7% 9% 10% 10% 9% 8% 6% 6% 5% 4% 4% 4% 5% 2% 2% 1% 1% 1% 1% 1% 0% 0% $0.51 - $1.01 - $1.51 -$2.01 - $2.51 -$3.01 - $3.51 -$4.01 - $4.51 -$5.01 - $5.51 -$6.01 -$6.51 -$6.93 - $7.01 - $7.51 - $3.51 - $4.01 - $4.51 - $5.01 - $5.51 - $6.01 - $6.51 - $6.93 - $7.01 - $7.51 - $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $6.92 $7.00 $7.50 $8.00 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $6.92 $7.00 $7.50 $8.00

Last Twelve Months Last Six Months

20% 60% 30% 80% 62% 38% 28% 51% Average Price: 50% 25% Average Price: $5.98 $6.97 40% 20%

15% 16% 15% 30% 28% 15%

10% 10% 20%

5% 10% 5% 10% 3% 3% 3% 3% 5% 5% 1% 0% 0% $3.51 - $4.01 - $4.51 - $5.01 - $5.51 - $6.01 - $6.51 - $6.93 - $7.01 - $7.51 - $5.51 - $6.00 $6.01 - $6.50 $6.51 - $6.92 $6.93 - $7.00 $7.01 - $7.50 $7.51 - $8.00 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $6.92 $7.00 $7.50 $8.00

Data as of 12/9/05; Merger on 5/1/01; Reflects 12/9/05 price of $6.93.

Ownership Profile

(1) Institutional Holdings Private Equity Holdings

% of Total Shares % of Total Shares Institution Name Shares Outstanding Firm Name Shares Outstanding Gruber & McBaineCapital Management 480,445 5.4% William E. Simon & Sons Private Equity 1,478,700 16.5% Heartland Advisors 364,100 4.1% IPP99 Private Equity 988,647 11.1% Rutabaga Capital Management 243,938 2.7% Total Private Equity Holdings 2,467,347 27.6% Ashford Capital Management 90,800 1.0% First Wilshire Securities Management 78,599 0.9% Other Holdings Goldman Sachs & Co. 18,021 0.2% % of Total Shares California Public Employees Retirement System 4,600 0.1% Description Shares Outstanding Geode Capital Management 4,441 0.0% Total Other Holdings 3,614,243 40.4% Axa Rosenberg Investment Management 3,450 0.0% UBS Securities LLC 3,005 0.0% Barclays Global Investors 2,040 0.0% Total Shares Outstanding 8,936,124 100.0% iShares Russell MicrocapIndex 2,040 0.0% Northern Trust Global Investments 1,555 0.0% Northern Trust Investments 600 0.0% Kentucky Teacher's Retirement System 600 0.0% Merrill Lynch & Co. 250 0.0% Bear, Stearns & Co. 62 0.0% Total Institutional Holdings 1,298,546 14.5%

(2) Insider Holdings Ownership Breakdown Insider Name Shares Outstanding Ron Elliott 1,323,104 14.8% Richard Delaney 116,000 1.3% Jeffrey Grace 66,977 0.7% Al Noyes 35,225 0.4% Colin Gallagher 10,000 0.1% Scott Graves 2,912 0.0% Robert MacDonald 1,479 0.0% Judith McGuinn 291 0.0% Total Insider Holdings 1,555,988 17.4%

(1) Source: Institutions13F filings (2) Source: Companys 14A filings; Filing as of 3/15/05

Top Institutional Buyers & Sellers (LTM)

Return to Institutional Investor (1) Aggregate Shares Cost Basis per Share Current Price

Ashford Capital Management (1) 90,800 $3.82 81.3% Axa Rosenberg Investment Management(1) 3,450 $6.94 -0.1% Barclays Global Investors (1) 2,040 $7.09 -2.3% Bear, Stearns & Co.(2) 62 $3.51 97.7% California Public Employees Retirement System(1) 4,600 $5.95 16.5% First Wilshire Securities Management (1) 78,599 $7.09 -2.3% Goldman Sachs & Co.(1) 18,021 $3.51 97.7% Gruber & McBaine Capital Management (1) 480,445 $5.61 23.5% Heartland Advisors (1) 364,100 $6.04 14.7% Merrill Lynch & Co. (1) 250 $4.09 69.3% Rutabaga Capital Management(1) 243,938 $6.44 7.7% UBS Securities LLC (1) 3,005 $7.09 -2.3%

High 480,445 $7.09 97.7% Mean 107,443 $5.60 33.5% Median 11,311 $6.00 15.6% Low 62 $3.51 -2.3%

(1) Data as of 9/30/2005 13F filing (2) Data as of 6/30/2005 13F filing * Cost basis determined by multiplying average share price of security during quarter of 13F filing's release and aggregate change in holdings of security ** Assumes 12/9/2005 price of $6.93 per share

As a result of the substantialamount of capital flowing into mutual funds and pension funds in recent years, many institutionalinvestors have increased their minimum size threshold for investing in public companies

The demand for small - and mid-cap stocks is generally restricted to opportunities in high growth companies in rapidly expanding markets with the prospect for the size of the Company to grow substantially within the next 12 to 18 months

For companies in slower growth market segments, institutionalinvestors often require minimum market capitalizations in excess of $1 billion and significant trading volume when considering investing in public companies

Research analysts play an extremely significant role with institutional investors

It is essential to have institutional investors among a companysshareholder base as they help to create an active trading market for the stock, which translates into adequate liquidity for shareholders

The importance of institutionalinvestors to create and maintainliquidity in the stocks of public companies is substantial, as evidenced by the fact that institutional investors account for approximately 80% of all trading volume for stocks listed on the three major stock exchanges

Additional costs associated with Sarbanes-Oxley compliance has become the laststrawfor sub-$100 million market capitalizationcompanies

Market Capitalization Number of ($ in millions) Average Number of Companies Analyst Estimates

4,000 16 3,500 14 3,000 12 2,500 10 2,000 8 1,500 6 1,000 4 500 2 0 0

Number of Companies Average Number of Analyst Estimates

Source: Factset Data as of 12/1/2005

Research Economics

$10,000,000 A typical investment banks sell-side equity analyst needs to generate $10 million in trading commissions per year to support the sales/trading operation and the costs of research

20 companies One analysts capacity to adequately understand and communicate the prospects for a company is about 20 specific names

$500,000 As a result, the trading commissions per stock should be about $500,000 per year

$0.05 The average institutional commission is, at most, $0.05/share oneach side of a trade.

The reported trading volume generated by the investment bank must be 10,000,000 shares per stock 10,000,000 shares per year (Note: the actual number of transactions may be as low as half of the reported figure due to double counting of NASDAQ trades)

250 days Estimated trading days in a year of 250.

40,000 shares The resulting minimum reported daily trading volume for one investment bank is 40,000 shares/day per stock

50% If the investment bank is the most active market maker in the companys stock, it could represent up to half of the trading volume

80,000 shares / day Resulting minimum reported daily volume required

Small-Cap Valuations

Breakdown of the Russell 2000

Mean Market Mean 1 Year Median EBITDA Median LTM Capitalization ($ mm) Return Multiple P/E Ratio Decile: 1 $2,554 42.0% 12.1x 23.0x Decile: 2 1,480 21.3% 9.9x 21.5x Decile: 3 1,106 20.1% 10.0x 21.2x Decile: 4 866 7.1% 9.5x 20.1x Decile: 5 672 10.4% 9.7x 20.6x Decile: 6 513 7.0% 9.8x 23.5x Decile: 7 380 2.9% 10.2x 18.6x Decile: 8 271 -3.2% 10.1x 20.3x Decile: 9 181 -8.3% 9.7x 19.0x Decile: 10 74 -20.5% 8.7x 16.6x

Total Russell: $812 8.0% 10.0x 21.0x

Source: Capital IQ Data as of 12/1/2005

SEC Costs

Average annual cost of being a public company in fiscal 2004 for companies with revenue less than $1 billion has tripled to $3.4 million since Sarbanes-Oxley was passed (Source: Foley & Lardner LLP survey in January 2005)

Companies with less than $100 million in market capitalization expect to pay $820,000 to comply with the internal-control rules (Source: Financial Executives International survey in March 2004)

Audit fees for companies in the S&P Small-Cap 600 index surged an average of 84 percent in 2004 (Source: Foley & Lardner)

Mounting costs have prompted some public companies to consider taking their business private (Source: Foley & Lardner survey of 147 public companies) 20 percent of respondents said they were considering going private, up from 13 percent in 2003 10 percent considered selling the company, up from 6 percent in 2003 14 percent considered merging with another company, up from 7 percent in 2003

Sarbanes-Oxley is Accelerating the Pace of Privatization for Smaller Companies

Market Capitalization

As illustrated in the chart below, over 95% of the total market capitalization of companies on the NASDAQ, American and New York stock exchanges is accounted for by companies with market capitalizations greater than $1 billion

Market Capitalization of Companies on the Major Exchanges

Source: Factset Data as of 12/1/2005 Conclusion: For Most Small and Mid-Cap Companies Mergers & Acquisitions Represent the Only Real Means to Realize a Premium Valuation and Significant Liquidity

Shareholder Value Strategies

Overview Capital SocratesBoard has a range of alternatives available Structure to it in enhancing shareholder value

We have preliminarily provided a qualitative overview of those alternatives that address the Boards primary objectives Maximize Operating Shareholder liquidity Shareholder Strategy Value maximization Value

Piper Jaffray is uniquely qualified to assist the Board in evaluating and potentially executing other alternatives, if appropriate Value Recognition

Capital Structure Private Placement

New Issue Public Issue

Bank Financing Debt Refinance

Retire Maximize Shareholder Capital IPO Value Structure New Issue Follow-On

Tender Offer

Equity Share Repurchase Share-Repurchase Program

Special Dividend Dividend Policy Ordinary Dividend

Value Recognition Analyst Coverage

Institutional Support Communication Reporting/ Disclosure

Poison Pill Maximize Value Shareholder Break Up Recognition Value Spin-off Capture UnrealizedValue Carve-out

Company Sale

Staggered Board

Defensive Blank Check Mechanisms Preferred

Break Up

Overview of Primary Alternatives - Liquidity

Status Quo

Publicly Marketed Follow-On Offering

Privately Negotiated Equity Placement

Share Repurchase

Sale of Company to Strategic / Financial Buyer

Description: Execute Stand-Alone Business Plan (Status Quo)

Advantages Disadvantages

Preserves opportunity to create value for shareholders No significant liquidity in near-term through execution of business plan Value maximization/liquidity alternative may Least disruptive for operations, management and not always be available employees May not attract new research coverage or greater Strong balance sheet trading liquidity

Does not address capital market issues

Probability of Success Versus Objectives: Low

Description: Selling Equity to the Market

Advantages Disadvantages

Provides capital for the Company (if primary shares Limited liquidity sold) Potential dilution May provide some liquidity for existing shareholders (if secondary shares sold) Public shareholder expectations Short-term results Increases float Share price volatility

Research coverage likely through underwriters Time and expense of offering Management time Some increase in trading volume likely Auditors, counsel, printer, roadshow

Difficult to attract new public investors

Use of proceeds?

Does not address public company issues

Probability of Success Versus Objectives: Fair

Description: Selling Equity to Institutions Private Institutional Placement of Equity (PIPE) or Registered Direct (RD)

Advantages Disadvantages

Storyprojections can often be better explained to Limited liquidity to current investors sophisticated investors Unlikely change in volume or research coverage

Minority investments by strategic corporate Valuation at a discount to public market price partners or non-traditional investors may enhance Dilution and marketability valuation if their are possible synergies Less visibility than public offering Transaction costs and time demands may be less than public equity offerings Investor usually requires board seat (although company may desire a new value-added board member) Institutional and/or strategic investors may add value through value-addedboard participation, Investors typically require registration within specified market or key contact introductions, or informal period of time consulting Use of proceeds?

Does not address public company issues

Probability of Success Versus Objectives: Low

Description: Institute Share Buyback Program Via Open Market Purchases or Dutch Auction Advantages Disadvantages

Can be viewed as positive signal by Street Limited liquidity for current investors

Can increase EPS and (hopefully) market value Positive effects may be minimal / temporal Financial engineering Shareholders may question use of capital/use of Dutch Auction provides greater certainty of fixed balance sheet versus other strategies - perceived lack price range and fixed time period for larger of opportunities repurchase Buy shares at a premium to market in a Dutch Auction

Can not control exact share buyback price in an open market purchase

Reduces float, less future trading opportunity for investment banking firms

Increases leverage

Probability of Success Versus Objectives: Low

Description: Sale of Controlling Equity Interest to Strategic Buyer

Advantages Disadvantages

Likely maximize near-term shareholder value Upside for existing shareholders may be Fiduciary outshelp ensure highest price diluted/eliminated

Board determines process and criteria Fate of senior management and employees unknown

Confidentiality / competitive dynamics

Probability of Success Versus Objectives: Good to High

Description: Sale of Controlling Equity Interest to a Financial Buyer

Advantages Disadvantages

May maximize near-term shareholder value Upside for existing shareholders may be eliminated Fiduciary outshelp ensure highest price Expectation that management will roll over stake

Board determines process and criteria Leverage may inhibit some future initiatives

Financial buyers are typically sophisticated Capital markets driven investors committed to growing the business Specifically, availability of senior and Additional capital availability subordinated debt Company performance and size critical Eliminates public market scrutiny and public factors company costs Attractiveness also driven by perceived timing and Opportunity for management to implement business success of sponsors exit plan and participate in upside Greater scrutiny on process Limited organizational change Extensive 13E3 disclosures

Full liquidity event

Probability of Success Versus Objectives: High

MBO versus LBO

MBO LBO Management partners with a private equity firm and Numerous financial buyers are contacted through makes an offer to purchase the Company auction process

Board may form a Special Committee of unaffiliated Buyers may offer management a meaningful equity Directors position to align motivations of all parties

Market check or public announcement may be Full Board participation for significant portion of necessary to fulfill fiduciary obligations process; may necessitate Special Committee at some point in the process

Summary of Alternatives

Equity Private Share Financial Status Quo Strategic Sale Offering Placement Repurchase Buyer Sale

No Change to No Change to Relative Valuation No Change Down Highest Higher Down Up

None Market Liquidity No Change Yes/Maybe Partial Complete Complete Immediately

Retained Operational Risk Yes Yes Yes Yes No No

Time to Significant ? ? ? Immediate Immediate Immediate Liquidity

Synergistic Combination No No Maybe No Yes Maybe

Opportunity for Employee No Change No Change No Change No Change Low High Ownership

Reduced Access to Expansion Yes Yes No Change (Use of Likely Likely Capital (by definition) (by definition) Capital)

Financial Summary

Fiscal year ended December 31 $ in Thousands

ACTUAL ESTIMATED PROJECTED 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Revenue Early Childhood $ 63,000 $ 70,190 $ 78,490 $ 91,109 $ 103,575 $ 114,160 $ 131,284 $ 147,038 $ 158,919 $ 171,759 Elementary School 29,849 30,570 31,431 30,177 29,900 30,400 30,908 31,425 31,951 32,485 Total Revenue 92,849 100,760 109,921 121,286 133,475 144,560 162,192 178,463 190,869 204,244 Cost of Goods Sold 59,747 64,478 70,427 80,133 87,070 94,640 104,967 114,159 120,663 127,587 Gross Profit 33,102 36,282 39,494 41,153 46,405 49,920 57,225 64,305 70,206 76,658 Selling, General & Administrative 44,693 32,891 34,857 38,028 39,130 40,230 44,813 48,951 51,972 55,206 EBIT (11,591) 3,391 4,637 3,125 7,275 9,690 12,413 15,353 18,234 21,452 Adjustments 1,773 879 - (541) 2,455 674 - - - - Adjusted EBIT (9,818) 4,270 4,637 2,584 9,730 10,364 12,413 15,353 18,234 21,452 Depreciation & Amortization 7,466 1,554 1,697 1,710 1,842 2,192 2,109 2,124 2,061 1,981 Adjusted EBITDA $ (2,352) $ 5,824 $ 6,334 $ 4,294 $ 11,572 $ 12,556 $ 14,521 $ 17,477 $ 20,295 $ 23,433

EBIT (11,591) 3,391 4,637 3,125 7,275 9,690 12,413 15,353 18,234 21,452 Adjustments 1,773 879 - (541) 2,455 674 - - - - Public Company Expenses - - - - 1,260 1,876 2,105 2,316 2,477 2,651 Adjusted EBIT before Public Company Expenses (9,818) 4,270 4,637 2,584 10,990 12,240 14,518 17,669 20,711 24,103 Depreciation & Amortization 7,466 1,554 1,697 1,710 1,842 2,192 2,109 2,124 2,061 1,981 Adjusted EBITDA before Public Company Expenses $ (2,352) $ 5,824 $ 6,334 $ 4,294 $ 12,832 $ 14,432 $ 16,626 $ 19,793 $ 22,772 $ 26,084

Capital Expenditures $ 2,303 $ 1,203 $ 1,183 $ 1,864 $ 1,500 $ 2,112 $ 2,289 $ 2,451 $ 1,909 $ 2,042 Net Working Capital 16,450 13,307 17,157 21,912 23,937 25,978 28,953 31,645 33,617 35,729 (Inc) Dec in Working Capital - 3,143 (3,850) (4,755) (2,025) (2,042) (2,975) (2,692) (1,972) (2,112)

Key Financial Ratios Early Childhood Growth - 11.4% 11.8% 16.1% 13.7% 10.2% 15.0% 12.0% 8.1% 8.1% Elementary School Growth - 2.4% 2.8% (4.0%) (0.9%) 1.7% 1.7% 1.7% 1.7% 1.7% Total Revenue Growth - 8.5% 9.1% 10.3% 10.0% 8.3% 12.2% 10.0% 7.0% 7.0% Gross Margin 35.7% 36.0% 35.9% 33.9% 34.8% 34.5% 35.3% 36.0% 36.8% 37.5% Adjusted EBIT Margin (10.6%) 3.4% 4.2% 2.6% 5.5% 6.7% 7.7% 8.6% 9.6% 10.5% Adjusted EBITDA Margin (2.5%) 5.8% 5.8% 3.5% 8.7% 8.7% 9.0% 9.8% 10.6% 11.5% Adjusted EBIT before Public Company Expenses Margin (10.6%) 4.2% 4.2% 2.1% 8.2% 8.5% 9.0% 9.9% 10.9% 11.8% Adjusted EBITDA before Public Company Expenses Margin (2.5%) 5.8% 5.8% 3.5% 9.6% 10.0% 10.3% 11.1% 11.9% 12.8%

Capital Expenditures / Revenue 2.5% 1.2% 1.1% 1.5% 1.1% 1.5% 1.4% 1.4% 1.0% 1.0% Net Working Capital / Revenue 17.7% 13.2% 15.6% 18.1% 17.9% 18.0% 17.9% 17.7% 17.6% 17.5% (Inc) Dec in Working Capital / Revenue - 3.1% (3.5%) (3.9%) (1.5%) (1.4%) (1.8%) (1.5%) (1.0%) (1.0%)

* FY 2006P adjustments include KPMG audit expenses of $554,000 and Tatum Partners expenses of $120,000 ** FY 2005E adjustments include OTC litigation expenses of $359,000, investigation costs of $1,545,000, KPMG audit expenses of $244,000, Tatum Partners expenses of $187,000, and Kayser Settlement of $120,000 *** FY 2001 adjustments include $879,000 in merger related expenses **** FY 2000 adjustments include $1,773,000 in merger related expenses

Valuation Summary

$18.00

$17.00 $16.55

$16.00 $15.36 $15.00 $14.05 $14.25 $14.98 $14.00 $13.85 $13.39 $13.90 $12.91 $13.00 $12.91 $12.30 $12.67 $12.00 $12.56 $12.08 $11.79 $11.00 $11.13

$10.00 $9.51 $9.73

$9.00 $9.05 $8.00 $8.49

$7.00 Price: $6.93

$6.00

Education Accretion / Dilution Public Company Analysis DCF Analysis LBO Analysis M&A Transaction Premiums Transactions Analysis Analysis (5)

Mean M&A Premiums for Mean & Median EBITDA Mean M&A Premiums for Mean & Median EBITDA Mean & Median 2006P P/E Assumes a required IRR of Educational Products / Mean & Median EBITDA Mean & Median 2006P P/E Multiples of M&A Assumes EBITDA exit School Specialty - Going Private Transactions trading multiples of public Ratios of public 25%, total leverage of Services Transactions since trading multiples of public Ratios of public Catalog / transactions in the multiples of 7.0x -9.0x and Assumes 0% equity since 1/1/2000 Educational Products / Educational Products / 4.75x, and an 8.0x exit 1/1/2000 Catalog / Online Retail: Online Retail Companies: Educational Products / a discount rate of 17.0%: financing: 1 Day - 4 Weeks Prior to Services Companies: Services Companies: multiple: 1 Day - 4 Weeks Prior to Services sector: Transaction: Transaction: 10.5x - 11.6x 10.6x - 11.8x 20.1x - 20.8x 21.6x - 23.9x 9.1x - 9.7x 8.8x - 10.6x 8.4x - 9.3x 11.3x - 12.5x 22.4% -37.3% 30.6% -40.4% 2005E EBITDA (1) 2005E EBITDA (1) 2006P EPS(3) 2006P EPS(3) 2005E EBITDA (2) 2005E EBITDA (2) 2005E EBITDA (2) 2005E EBITDA (2) 12/9/05 Stock Price(4) 12/9/05 Stock Price (4)

(1) Assumes 2005E EBITDA of $11.6 million, which includes public company costs (2) Assumes 2005E EBITDA of $12.8 million, which excludes public company costs of $1.3 million (3) Assumes 2006P diluted EPS of $0.64 per share, which includes public company costs (4) Assumes 12/9/2005 Stock Price of $6.93 per share (5) No synergies assumed, only adjustments of $1,876 to reflect credit of public company costs * Does not include valuation of net operating losses; Share prices calculated using diluted shares outstanding at offer price via Treasury Stock Method ** Public company, LBO, and Accretion / Dilution analyses' share prices and multiples include artificial range of 5.0% around acquisition share price *** Piper Jaffray estimates based upon financials provided by management; Current market price reflects only mostrecent publicly disclosed financial performance

Case Study of Proposed School Specialty Acquisition by Bain Deal Metrics Comparison of Debt Structure (in Millions)

Date of Announcement May 31, 2005 Old Structure New Structure Proposed Closing Date September 30, 2005 New Debt $ 0 $ 675 Enterprise Value $1.50 billion Bank Debt-Term Loans 0 240 Bank Debt-Revolver 49 102 Transaction Multiples LTM Bank Debt-A/R Securitization 85 85 Sales $1,041.3 million Convertible Debt 133 0 EV/Sales 1.4x Capital Leases 17 17 EBITDA $122.6 million Total Debt $284 $1,119 EV/EBITDA 12.2x Investor Reaction Expectations for Change Benefits to the Company New Board of Directors One single owner versus 5/31/05: SCHS 10/3/05: Management team to stay in several thousand investors receives $49 $60.00 Merger is 6.000 cash offer cancelled place Strong, experienced team at No layoffs expected Bain $50.00 5.000 Continue to do acquisitions Focused financial performance $40.00 4.000 Support from Bain Capital on as we have today, but no longer key initiatives focused as much on $30.00 3.000 More debt quarterly performance $20.00 2.000 Easier to do acquisitions and integrations with a single $10.00 1.000 partner

$0.00 0.000

Actions Additional Factors To Consider

Based on what we understand the Board's objectives to Timing of a sales process-seasonality be, we would recommend a sale process via a limited auction Elementary school segment Shareholder liquidity Value maximization Market has not received quarterly financial information since March 2005 Proposed process design We would recommend releasing information and Limited group of relevant strategic purchasers letting market digest news/performance Financial sponsors Appropriate fund size Relevant sector interest Public to private transactions

Premier developer, manufacturer and retailer of educational 2005E Revenue Mix products sold to childcare programs, preschools, elementary schools and consumers

Primarily focused on early childhood, which is the most attractive segment of the large educational products market, with multiple demographic growth drivers

Extensive product portfolio with high percentage of high- margin proprietary products offers one-stop shopping for the best in early childhood educational products Historical & Projected Financial Performance Multichannel marketing capabilities with highly sophisticated, ($ in millions) very cost-effective targeting processes

High-value, high-touch customer experience builds a unique bond with the Companyscustomer base

Outstanding track record of organic and acquisition-related growth with many additional investment opportunities to further accelerate future growth

Strong profitability with the opportunity for significant near- term cost synergies in a transaction (1) 2005 and 2006 projections provided by management (2) In February 2003 Socrates Acquired ECMD

Leading Platform Company in Early Childhood Educational Products

Projected K-12 Enrollments and Per Pupil Spending in the U.S. Overall preK-12 Educational Products Industry

Approximately $7 billion industry number in thousands Overall K-12 spending approximately $440B, expected 58,000 $10,000 to grow at 2.5% CAGR 2005-2013* 56,000 $9,500 54,000 $9,000 Spending not highly correlated to economic conditions 52,000 $8,500 50,000 $8,000 48,000 Early Childhood Educational Products Industry $7,500 46,000 $7,000 Overall childcare spending approximately $40B, 44,000 expected to grow at approximately 7%** 42,000 $6,500 40,000 $6,000

Pop growth plus increased percentage of students 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

attending (1-2%) Enrollment Per Pupil Spending Price increases driven by high demand (5%) Source: National Center for Education Statistics (NCES) Multiple growth drivers Documented educational benefits Projected 0-4 yrs old Population Growth in the U.S.

Increasing percentage of working parents U.S. Population Projections: 0 -4 years of age (Adapted from www.census.gov/population/projections)

Increasing involvement of state governments 25,000 Population growthBaby Boom 24,000 23,000 Not highly correlated to economic conditions 22,000

And not as dependent on government spending-- 21,000 approximately 75% private pay 20,000

19,000

18,000

17,000

16,000

* NCES 15,000 1995 2000 2005 2015 2025 ** Wall Street estimates Years

Early Childhood is the Most Attractive Segment of the Educational Products Market

One-Stop Shopping

One of the most comprehensive product portfolios in the industry, covering the full range of early childhood products

Arts and Crafts are a core focus Colorations brand tied with Crayola for name recognition Active Play Arts & Crafts Dramatic Play Furniture in relevant market Infant/Toddler Learning Centers Manipulatives Clearance Consumable nature translates into high reorder rates

High percentage of high margin, proprietary products Approximately 37% of products are company-developed Paint formulations all developed and manufactured in- house

Largest single selection of furniture and equipment in the early Chairs Tables Classroom Storage Rest Mats/Cots childhood market Infant/Toddler Carpets Lofts/Room Dividers Social Seating Highly successful ECMD model benefits vendors and customers by facilitating broad product comparisons Proprietary Products

Highly effective product development effort Consult with qualified educators to ensure educational or developmental value Company-developed products are difficult to duplicate BioColor SchoolWrapPacs Advanced overseas sourcing expertise Many years experience in sourcing from China Well established manufacturing relationships High Quality, Third Party Products

Broad Reach, Cost-Effective Print--Catalogs, Newsletters Sophisticated catalog marketing effort forms the core of the companys marketing strategy Circulation: 55,000 2.4M DSS and 900K ECMD catalogs mailed in 2004 Advanced database marketing analytics drive high levels of efficiency Cost-effective targeting allows more frequent mailings, which enable quicker price and product changes and more frequent contact with customers High-value content results in catalog becoming a learning resource, which creates longer shelf life 2.4M/yr 900k/yr 6x/yr

Full e-commerce capabilities for each of the companies OnlineWebsites, E-mail principal brands Sites for each of DSS, ECMD, SmarterKids.com and EPI Earlychildhood.com designed to be one of the principal vehicles for reaching online customers Offers content from Earlychildhood NEWS E-mail marketing opportunity with Newslink

National sales force of education consultants Sales RepresentativesWorkshops, Trade Shows Understand the preschool and elementary school environment and the unique demands placed on early childhood instructors Promote company-developed products and programs to teachers and administrators through in-school demonstrations and workshops

Let Us Take Care of You Quick Delivery from Multiple Distribution High-Touch Service from Centers Contextual Merchandising of Education Consultants Unique Products Compelling Content

Unique Professional Development Opportunities Highly Satisfied, Captive Customer

Socrates Creates a High Value Experience that Allows it to Develop a Unique Bond with its Customers

This large market is highly fragmentedmore than Competitive Landscape 3,300 companies provide supplemental educational products*

School Specialty is the leading player in the overall market with 14% share but not in Early Childhood

School Specialty consolidation activity reduced number of competitors with significant size

Most competitors are smaller, regional players, and less equipped to compete, as price sensitivity intensifies

With continued strong organic growth and multiple acquisition targets, there is an excellent opportunity for the company to further build on its market leadership position to become the clear #1 company in Early Childhood educational products

*Source: National School Supply and Equipment Association (NSSEA))

Socrates has the Opportunity to Become the Dominant Market Leader in Early Childhood Educational Products

Potential Issues Recommended Response

Doesnt the termination of the Bain offer after School Specialtys miss School Specialty had a number of company-specific missteps with in Q3 indicate that Bains view on the sector turned negative? regard to the quarter, which resulted in a meaningful miss to their near- term expectations. The company refused to consider any price adjustment, and the transaction was terminated for this and due to conditions in the debt markets. The company continues to communicate that Bain fully endorsed the companys market position and strategy and School Specialty maintained its guidance for FY07.

The earnings growth outlook for School Specialty is much lower than Wasnt the multiple in the Bain deal possible only because of the for Socrates. Our better growth opportunities will allow for extremely extraordinary leverage proposed in that transaction? strong equity returns with only modest leverage.

Our growth has not and will not be constrained by state funding. The School Specialty says that Arts and Crafts and Early Childhood were childcare market is 75% private pay, and the expansion of state the hardest hit areas during the state budget cutbacksdoesnt that sponsorship for the early childhood market will more than compensate mean that you are in a strategically vulnerable position in recessionary for spending constraints in individual states. times?

We are already a very formidable competitor for School Specialty. For How can you compete successfully against School Specialty once they example, we believe we are further along in two areas that School focus on this market? Specialty is attempting to improvedirect marketing analytics and overseas sourcing.

The Elementary School business is an excellent product that is simply Why should we pay value for the Elementary School business? not in our core focus area. We have initiated operational changes to jumpstart the growth for this business and it would undoubtedly grow even faster were it part of an organization with a core focus on the K- 12 market or fundraising.

Educational Products Educational Content Providers + Would allow expansion into growing, less government-dependent U.S. early + Early childhood is undertargeted slice of overall market opportunity childhood market + Could leverage Socrates distribution to sell content + Potential revenue synergies from Socratesdistribution channel Product business model differs from Content/Publishing business model Many lack size necessary to complete acquisition Potentially dilutive to margins Some focus exclusively on proprietary products

Toy Manufacturers Childcare Providers

+ Socratesmarket positioning allows for early customer acquisition + Best understanding of market growth dynamics, product needs + For some, good fit with existing arts and crafts businesses Socratescustomer base may not want to purchase from competitor Larger toy companies focus on branded products, distribution through channel Mixed success with acquisitions in educational products sector Office Products Suppliers K-12 Educational Services

+ This category includes most of the largest B2B catalog companies + Early childhood is undertargeted slice of overall market opportunity + Often focus on the education market + Could leverage Socrates distribution to sell content Less experience with higher-end educational products Product business model differs from Content/Publishing business model Not high-touchservices model Potentially dilutive to margins

Arts / Crafts Suppliers Private Equity Firms

+ Good fit with current arts & crafts focus of Socrates + Multiple firms with relevant sector expertise in education, marketing + Would address current seasonality issues (focused in Q4) + Tremendous amount of capital available drives strong appetite Primarily retail distribution + Attracted to platforms with strong management Less experience with higher-end educational products Would have to compete with natural strategic acquirer

Catalog / Direct Marketers

+ Great appreciation for Socrates marketing strategy, distribution capabilities + Early childhood market focus would be complementary to certain catalogers Most of largest catalog companies have strong B2C focus Little experience selling educational products

School Specialty Issues Socrates Positioning Points

We are the natural acquirer and your best liquidity option. The Bain transaction has raised awareness of the opportunities for the sector. We are receiving multiple inbound calls.

Stock is suffering from post-Bain hangover. Growth outlook Socrates acquisition would help restore market confidence in for near-term is modest. SCHS growth story.

Recent performance in Early Childhood and Arts and Crafts has Socrates would provide SCHS with a better performing, better been disappointing. positioned platform in the Early Childhood sector.

Desire to be #1 in each of its market segments. Socrates would enable SCHS to assume #1 position in the Early Childhood segment, which is 18% of preK-12 population.

Strategic shift in positioning underway from Distribution Socrates model is very much a high-value Early Education Companyto Education Company. products company.

Strategic shift in focus from provider of general products that Socrates is very much a specialty products provider with very are delivered from topdownto specialty products that are well-established bottoms upmarketing channels to Early delivered from bottoms up. Childhood Education professionals.

Acquisition focus on specialty products providers with high Socrates percentage of 37% proprietary products is very good and percentage of proprietary products. would not dilute School Specialtys focus.

Maintains double digit operating margins. Significant potential for immediate cost synergies that will comfortably allow School Specialty to maintain their current levels of profitability.

Summary of Potential Buyers

Educational Products Catalog / Direct Marketers Aristotle (Geneve) LeapFrog Colorbök (FdG) Oriental Trading (Brentwood) Courier Corp. Lakeshore Learning Findel School Specialty Educational Content Providers Knowledge Universe Haights Cross Reed Elsevier Toy Manufacturers Houghton Mifflin Renaissance Learning Hasbro Mattel John Wiley & Sons Riverdeep JAKKS Pacific RC2 McGraw-Hill Scholastic Pearson Office Products Suppliers Thomson Buhrmann (Corporate Express) OfficeMax Plato Learning WRC Media (Ripplewood) Genuine Parts (S.P. Richards) Staples ProQuest

Office Depot United Stationers Childcare Providers A.B.C. Learning Centres Knowledge Learning Arts / Crafts Suppliers Bright Horizons A.C. Moore Arts & Crafts Jo-Ann Stores American Greetings Mega Bloks(Rose Art) Educational Services CSS Industries Michaels Stores Educate Washington Post (Kaplan) Hallmark (Binney& Smith) Plaid Enterprises Follett Hobby Lobby Stores

Strategic Buyers Educational Products

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description Aristotle Corp. (Geneve) $187 $120 $20 Stamford, CT The Aristotle Corporation and its subsidiaries engage in the manufacture and distribution of educational, health, medical technology, and agricultural products. It operates in two segments, Educational and Commercial. The Educational segment primarily sells supplemental educational supplies and equipment to school districts, individual schools, teachers, and curriculum specialists, who purchase products for school and classroom use.

Courier Corp. $227 $457 ($34) North Chelmsford, MA Courier Corporation and its subsidiaries engage in printing, publishing, and selling various types of books primarily in the United States. It operates in two segments, Book Manufacturing and Specialty Book Publishing. Book Manufacturing segment produces hard and soft cover books, as well as provides related services. Specialty Book Publishing segment publishes books in approximately 30 specialty categories, including fine and commercial arts, childrens books, crafts, music scores, graphic design, mathematics, physics and other areas of science, puzzles, games, social science, stationery items, and classics of literature.

Findel plc $884 $707 $445 United Kingdom Findel plc provides home shopping and educational supplies, as well as mail order catalogues and logistics services to third parties. The companys home shopping division offers a range of consumer products through five catalogues and a monthly mailing program to the female customer base. The range of products it offers includes household, textile and bedding, electrical and furniture, nursery products, and gifts and greeting cards. Its educational division offers a range of products from pre-school to secondary education. This division supplies science, sports, musical instruments, and furniture to educational establishments. Its International division exports to approximately 150 countries worldwide.

Knowledge Universe N/A N/A N/A Menlo Park, CA Knowledge Universe invests in and operates companies engaged in the knowledge and information services industry, particularly companies with an intellectual-property and education-content focus. The firm was founded in 1996 by Michael Milken.

Strategic Buyers Educational Products (contd)

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description LeapFrog Enterprises Inc. $658 $804 ($74) Emeryville, CA LeapFrog Enterprises, Inc. engages in the design, development, and marketing of technology-based learning products and related proprietary content for students of all ages. The company designs its products to enable infants and toddlers through high school students learn age-and skill-appropriate subject matter, including phonics, reading, writing, math, spelling, science, geography, history, and music. Its product line includes learning platforms, which are portable hardware devices; educational software- based content, such as interactive books and cartridges, which are designed for use with the companys learning platforms; and stand-alone educational products.

Lakeshore Learning Materials $150 N/A N/A Carson, CA Lakeshore Learning Materials operates as a mail-order school-supply company. Its product categories include active play, arts and crafts, block play, children's books, dramatic play, furniture, school games, health and nutrition, infants and toddlers, language, manipulatives, mathematics, music, puzzles, sand and water, science, social studies, take-home packs, and teacher resource products. The company also provides language tools, literature, mathematics, reading, research and reference, teaching resources, and writing materials. In addition, it offers heavy duty storage, tables and chairs, classroom carpets, classroom display, computer stations, bins and organizations, and fully assembled furniture.

School Specialty Inc. $1,006 $838 $235 Greenville, WI School Specialty, Inc. provides products, programs, and services that improve student achievement and development in the United States and Canada. It operates through two segments, Specialty and Essentials. The Specialty segment offers educational disciplines, such as art, industrial arts, physical education, sciences, and early childhood. This segment also supplies student academic planners, videos, DVDs, published educational materials, and sound presentation equipment. The Essentials segment provides consumables that consist of classroom supplies, instructional materials, educational games, art supplies, and school forms, as well as school furniture, and indoor and outdoor equipment.

Strategic Buyers Toy Manufacturers

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description Hasbro Inc. $3,075 $3,624 $45 Pawtucket, RI Hasbro, Inc. provides children's and family leisure time entertainment products and services worldwide. The company engages in designing, manufacturing, and marketing games and toys. It offers various games, including traditional board and card games, hand-held electronic games, trading card games, and roleplaying games, as well as electronic learning aids and puzzles. Its toy products include boys' action figures, vehicles and playsets, girls' toys, electronic toys and plush products, preschool toys and infant products, children's consumer electronics, electronic interactive products, and creative play and toy related specialty products.

JAKKS Pacific Inc. $680 $609 ($130) Malibu, CA JAKKS Pacific, Inc. engages in the design, development, production, and marketing of toys and related products. It offers a range of products, such as action figures and accessories, toy vehicles, and role-play toys and accessories; craft, activity, and stationery products; activity sets, compounds, playsets, lunch boxes, and writing instruments; infant and preschool electronic toys; TV activities, toy foam puzzle mats and blocks, activity sets, outdoor products, plush toys, and soft body dolls; and seasonal toys and leisure products, including kites, pool toys, and water guns.

Mattel Inc. $5,186 $6,663 $354 El Segundo, CA Mattel, Inc. engages in the design, manufacture, and marketing of various toy products worldwide. The company sells its products to retailers, including discount and free-standing toy stores, chain stores, department stores, other retail outlets, and wholesalers in the United States. It sells its products directly to retailers and wholesalers in Europe, Latin America, Canada, and Asia Pacific.

RC2 Corp. $488 $749 $97 Oak Brook, IL RC2 Corporation engages in the design, production, and marketing of collectibles and toys. The companys products include automotive and racing vehicle replicas; agricultural, construction, and outdoor sports vehicle replicas; traditional children's toys; sports trading cards, apparel, and souvenirs that comprise shirts, hats, jackets, sunglasses, key chains, can coolers, bumper stickers, and license plates; and collectible figures. It markets its infant and preschool products under the Learning Curve family of brands, which includes The First Years, Eden, and Lamaze brands, as well as other licensed properties.

Strategic Buyers Office Products Suppliers

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description BuhrmannNV $6,868 $2,411 $29 Netherlands BuhrmannNV and its subsidiaries supply office products and graphic systems, as well as related services to businesses and institutions primarily in North America, Europe, Australia, and New Zealand. It offers a range of office products, computer products, office furniture, desktop software products, and digital printing equipment and services. Buhrmann is also the parent company of BT Office Products and Corporate Express, Inc.

Genuine Parts Co. (S.P. Richards Co.) $9,627 $7,592 $161 Atlanta, GA Genuine Parts Company distributes automotive replacement parts in the United States, Canada, and Mexico. It operates in four divisions: Automotive Parts, Industrial Parts, Office Products, and Electrical/Electronic Materials (EEM). The Office Products division sells computer supplies, office furniture, officemachines, deskaccessories, business forms, accounting supplies, binders, writing instruments, envelopes, note pads, copy paper, mailroom supplies, and audiovisual supplies. This division also provides school supplies, including bulletin boards, teaching aids, and art supplies; and janitorial supplies, including cleaning supplies, paper towels, and trash can liners, as well as break room supplies, such as napkins, utensils, snacks, and beverages primarily to resellers.

Office Depot Inc. $14,029 $9,046 ($268) Delray Beach, FL Office Depot, Inc. supplies office products and services in North America and internationally. The company provides its products in three categories: supplies; technology; and furniture and other. The supplies category includes paper, filing, binders, writing instruments, adhesives, school supplies, and ink and toner. It sells its products under Office Depot, Viking Office Products, Viking Direct, 4Sure.com, Guilbert, and NiceDay brand names. The company offers its products and services through wholly owned retail stores, contract business-to-business sales relationships, commercial catalogs, and multiple Web sites.

OfficeMax Inc. $9,391 $2,011 $1,872 Itasca, IL OfficeMax Incorporated provides office supplies, technology products and solutions, and furniture to businesses and consumers in the United States. The company distributes a line of office products, which include office supplies, technology products and solutions, and office furniture to corporate, government, and small and medium sized offices. It markets and sells products through field salespeople, outbound telesales, catalogs, the internet, and office products stores.

Staples Inc. $15,693 $16,420 ($801) Framingham, MA Staples, Inc. and its subsidiaries distribute office products in North America and internationally. The company offers business machines, computers and related products, and office furniture. It also offers an array of services, including high-speed, color and self-service copying, other printing services, faxing, and pack and ship services.

United Stationers Inc. $4,314 $1,622 ($7) Des Plaines, IL United Stationers, Inc., a wholesale distributor of business products, together with its subsidiaries, provides marketing and logistics services to resellers. The companys products portfolio includes technology products, traditional office products, office furniture, and janitorial/sanitation Products. It markets its products to independent office products dealers and contract stationers, mega dealers, office products superstores, computer products resellers, office furniture dealers, mass merchandisers, mail order companies, sanitary supply distributors, drug and grocery store chains, and e-commerce merchants.

Strategic Buyers Arts / Crafts Suppliers

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description AC Moore Arts & Crafts Inc. $529 $270 ($1) Berlin, NJ A.C. Moore Arts & Crafts, Inc. operates as a specialty retailer in the eastern region of the United States. It offers a selection of arts, crafts, and floral merchandise to consumers. The company provides paints, brushes, canvas, drawing tools, rubber stamps and stationery, scrap booking supplies, stencils, and frames; stitchery, yarn, cake and candy making supplies, glass crafts, wood crafts, kids crafts, felt, glitter, doll making, dollhouses and furniture, and instructional books; and silk and dried flowers, flower vases and other products, floral arrangements, ribbon and lace, wedding related items, potpourri, candles, candle making supplies, and wicker baskets.

American Greetings Corp. (Learning Horizons) $1,908 $1,535 $104 Cleveland, OH American Greetings Corporation engages in the design, manufacture, and sale of everyday and seasonal greeting cards, as well as other social expression products worldwide. It provides greetingcards, gift wrap, party goods, calendars, candles, balloons, and stationery, as well as educational products and custom display fixtures. American Greetingschannels of distribution include mass merchandisers, chain drug stores, and supermarkets, as well as card and gift shops, department stores, military post exchanges, variety stores, and combo stores. The company's Learning Horizons subsidiary retails educational toys and games. Products include workbooks, write-on mats and cards, musical learning tapes, puzzles, flash cards, facts packs, photo board books, and stickers.

CSS Industries Inc. $527 $343 $120 Philadelphia, PA CSS Industries, Inc. engages in the design, manufacture, and distribution of various seasonal and social expression products. Its seasonal products include gift wrap, gift bags, boxed greeting cards, gift tags, tissue paper, and paper and vinyl decorations. The companys social expression products include classroom exchange Valentines, decorative ribbons and bows, Halloween masks, costumes, make-up and novelties, Easter egg dyes and novelties, and craft and educational products. CSS Industries sells its products in the United States and Canada by national and regional account sales managers, inside sales representatives, product specialists, and a network of independent manufacturersrepresentatives.

Hallmark Cards, Inc. (Binney& Smith) $4,200 N/A N/A Kansas City, MO Hallmark Cards, Inc. offers flowers, gifts and collections, cards and stationery, e-cards, and keepsake ornaments. It also owns and operates businesses in the family entertainment and personal development industries. The company markets its products through a network of specialty retail stores and online. Binney & Smith, a subsidiary, produces wax crayons, markers, colored pencils, paints, modeling compounds, and craft and activity products for use in schools and homes. It also offers writing instruments for adults.

Strategic Buyers Arts / Crafts Suppliers (contd)

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description Hobby Lobby Stores, Inc. $1,297 N/A N/A Oklahoma City, OK Hobby Lobby Stores, Inc., doing business as Hobby Lobby Creative Centers, operates a chain of art and craft stores in the United States. It offers crafts, hobbies, picture framing, jewelry making, fashion fabrics, floral, cards and party, baskets, wearable art, home accents, and holiday supplies.

Jo-Ann Stores Inc. $1,867 $282 $266 Hudson, OH Jo-Ann Stores, Inc. engages in the retailing of fabrics and crafts in the United States. The company operates retail stores under the Jo-Ann Fabrics and Crafts, and Jo-Ann names, which feature merchandise used in sewing, crafting, and home decorating projects. It offers soft line, hard-line, and seasonal products.

Mega BloksInc. (Rose Art) $323 $700 $291 Montreal, QC Mega Bloks, Inc. engages in the design, manufacture, and marketing of construction toys in North America and internationally. The companys preschool products consist of larger blocks and less complex elements suitable for younger children. Its toys within preschool category include electronics, such as lights, sounds, music, and recognition technology that challenge and stimulate children to develop language basics, cognitive ability, motor skills, and basic mathematical concepts.

Michaels Stores Inc. $3,591 $4,988 ($113) Irving, TX Michaels Stores, Inc. and its subsidiaries engage in the ownership and operation of a chain of specialty retail stores in the United States and Canada. These stores feature arts, crafts, framing, floral, decorative wall decor, and seasonal merchandise for the hobbyist and do-it-yourself home decorator. Its wholly owned subsidiary, Aaron Brothers, Inc., operates a chain of framing and art supply stores. Recollections, the companys scrap booking/ paper crafting retail concept, operates locations in Arizona, Maryland, and Texas. Michaels also operates Star DecoratorsWholesale Warehouse, with operations located in California, Georgia, and Texas, offering merchandise primarily to interior decorators/ designers, wedding/ event planners, florists, hotels, restaurants, and commercial display companies.

Plaid Enterprises, Inc. N/A N/A N/A Norcross, GA Plaid Enterprises, Inc. engages in creating, manufacturing, and distributing craft and home décor products. It offers craft painting, home decorative items, stamps, paper crafts, glass crafts, fabric decorations, needle crafts, kidscrafts, glues, plastic crafts, and mosaics. Plaid Enterprises, Inc. is a portfolio company of Dyson-Kissner-Moran Corp.

Strategic Buyers Catalog / Direct Marketers

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description Colorbök (FdG) $38 N/A N/A Dexter, MI Colorbokengages in the creation, distribution, and marketing of stationery, gift, scrap booking, memory craft, toys, and craft products worldwide. It provides its products to a range of specialty stores and chain stores.

Oriental Trading Company, Inc. (Brentwood) $166 N/A N/A Omaha, NE Oriental Trading Company, Inc. operates as a direct marketer of novelties, toys, party supplies, crafts, gift items, home décor products, and garden accents. The company markets its products to individuals, businesses, and nonprofit organizations.

Strategic Buyers Educational Content Providers

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description Haights Cross Communications Inc. $211 N/A $335 White Plains, NY Haights Cross Communications, Inc., through its subsidiaries, engages in the creation, publication, and marketing of products for the education and library publishing markets. The companys K-12 Supplemental Education segment publishes supplemental reading materials for the kindergarten through ninth grade market, as well as literary, biographical, and topical books published in series for school libraries. This segment also markets nonproprietary, supplemental reading products and literature for the K- 12 market. Its Test-Prep And Intervention segment provides state-specific test preparation materials for K-12 state-specific competency tests and proprietary instructional materials for students in kindergarten through eighth grade, who need assistance after using textbooks.

Houghton Mifflin Co. $1,357 N/A $1,102 Boston, MA Houghton MifflinCompanyoperates as apublisher in theprekindergarten throughgradetwelve (K-12) andcollegeeducation, trade and reference, and educational, clinical, and professionaltesting markets primarily in the United States. It operates through four segments: K-12 Publishing, College Publishing, Trade .and Reference Publishing, and Other. The K-12 Publishing segment sells textbooks, instructional materials and services, tests for measuring achievement and aptitude, clinical and special needs testing products, multimedia instructional programs, and career guidance products and services for elementary and secondary schools.

John Wiley & Sons Inc. $1,000 $2,383 $179 Hoboken, NJ John Wiley & Sons, Inc. publishes various print and electronic products for customers worldwide. It provides professional and consumer books, and subscription services; scientific, technical, and medical (STM) journals, encyclopedias, books, and online products and services; and educational materials for undergraduate and graduate students, teachers, and lifelong learners. John Wiley & Sons publishes educational materials primarily in the sciences, geography, mathematics, engineering, accounting, business, economics, computer science, psychology, education, and languages for undergraduate, graduate, and advanced placement students; educators, and lifelong learners.

McGraw-Hill Companies Inc. $5,824 $19,900 ($462) New York, NY The McGraw-Hill Companies, Inc. provides information services and products to the education, financial services, and business information markets worldwide. It operates through three segments: McGraw-Hill Education, Financial Services, and Information and Media Services. McGraw-Hill Education segment provides online learning and multimedia tools. Its School EducationGroup provideseducationalandprofessionaldevelopment materialsin various formatsto the prekindergarten to 12th grade market, as well as assessment and reporting services in the United States. This segments Higher Education, Professional, and International Group provides e-books, online tutoring, customized course Web sites, subscription services, and materials to the higher education market.

Pearson plc $7,159 $9,590 $2,313 United Kingdom Pearson plc, through its subsidiaries, operates as a publishing company with its primary operations in the education, business information, and consumer publishing markets in the United States, the United Kingdom, and continental Europe. The company operates in three divisions: Pearson Education, The FT Group, and The Penguin Group. Pearson Education division is involved in the educational publishing services. It publishes textbooks, supplementary materials, and electronic education programs for elementary and secondary school, higher education, and business and professional markets.

Plato Learning, Inc. $131 $175 ($39) Bloomington, MN PLATO Learning, Inc. provides computer-based and e-learning instruction software and related services worldwide. Itoffers curricula in reading, writing, math, science, social studies, and life and job skills. It markets its products and services to K-12 schools, colleges, job training programs, correctional institutions, military education programs, corporations, and individuals.

ProQuestCo. $548 $862 $542 Ann Arbor, MI ProQuest Company publishes solutions for the education, automotive, and power equipment markets. It operates in two segments: ProQuest Informationand Learning(PQIL), andProQuestBusiness Solutions(PQBS).The ProQuest Informationand Learning segment provides content to schools, academic institutions, and public libraries worldwide. PQIL offers published products, such as topic-specific products, digital vault initiative, SIRS products, digital dissertations, and serials solutions; general reference products, including higher education, k-12, and reseller products; traditional products, such as microfilm and paper products; and classroom products that include custom online and print course materials, and textbook supplements, as well as study aids.

Strategic Buyers Educational Content Providers (contd)

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description Reed Elsevier NV $4,808 $10,482 ($24) Netherlands Reed Elsevier NV operates as a publisher and information provider principally in North America and Europe. It operates in four segments: Elsevier, LexisNexis, Harcourt Education, and Reed Business. Harcourt Education segment provides print and multimedia teaching, and assessment materials principally for kindergarten to 12th grade students in the U.S.; and educational content to students and teachers principally in the U.K., Australia, New Zealand, and southern Africa.

Renaissance Learning Inc. $115 $593 ($39) Wisconsin Rapids, WI Renaissance Learning, Inc. provides learning information systems software and school improvement programs to prekindergarten through senior high schools in the United States. Renaissance Learning markets its educational products and services to teachers, school librarians, principals, entire schools, and school district personnel, as well as internationally through its subsidiaries in Canada, Australia, and the United Kingdom. In addition, the company provides software installation, application hosting, and database conversion and integration services.

Riverdeep Interactive Learning Limited N/A N/A N/A Ireland RiverdeepInteractive Learning Limited operates as an education and consumer software company. It develops and delivers various pedagogical solutions for schools. RiverdeepsWeb-based and CD-ROM solutions can be found in more than 45,000 schools in over 20 countries worldwide.

Scholastic Corp. $2,255 $1,380 $639 New York, NY Scholastic Corporation and its subsidiaries engage in publishing and distributing childrens books worldwide. The company creates educational and entertaining materials and products for use in school and at home. It publishes and distributes textbooks, educational technology products, curriculum materials, and classroom magazines, as well as print and online reference, and nonfiction products for pre-kindergarten to 12th grade. Scholastic Corporation also produces and/or distributes software; childrens television programming, videos, DVDs, toys, and feature films;and consumer products, including promotional activities and nonbook merchandise, and sponsorship programs.

Thomson Corp. $8,626 $23,028 $3,977 Stamford, CT The Thomson Corporation provides integrated information solutions to business and professional customers in the United States. The company operates through four groups: Thomson Legal and Regulatory, Thomson Learning, Thomson Financial, and Thomson Scientific and Healthcare. Thomson Learning group delivers solutions for individuals, businesses, and institutions through specialized content, applications, and services.

WRC Media Inc. (Ripplewood) $214 N/A $286 New York, NY WRC Media, Inc. engages in developing, publishing, and marketingsupplemental educational materials in the United States. It publishes classroom periodicals, grade-specific workbooks, and instructional materials for PreK-12 students. The company also offers print reference and informational materials for the tradechannel; publishes nonfiction and fiction books for K-12 students; provides print and electronic reference materials for the library channel; and distributes third-party books targeted for K-12 students through its catalogs. Compass Learning, a subsidiary of WRC, operates as a research-based technology learning solutions company. It produces educational assessment, curriculum, and management tools for grades pre-K through 12.

Strategic Buyers Childcare Providers

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description A.B.C. Learning Centres Ltd. $223 $1,363 $117 Australia A.B.C. Learning Centres Limited is engaged in the provision of childcare services and education in Australia and New Zealand. The training college managed by the Company educates students inthe field of early childhood education and children's services. The Early Childhood Training College is based in Brisbane and delivers training nationally. The college services include staff training and the opportunity for personnel to study Certificate lll, Diploma and Advanced Diploma courses leading to higher level tertiary qualifications.

Bright Horizons Family Solutions Inc. $607 $976 ($29) Watertown, MA Bright Horizons Family Solutions, Inc. provides workplace services for employers and families, including early care and education and strategic work/life consulting in the United States, Canada, Ireland, and the United Kingdom. It provides center based child care, education and enrichment programs, elementary school education, backup care, before and after school care for school age children, summer camps, vacation care, and other family support services.

Knowledge Learning Corp. N/A N/A N/A San Rafael, CA Knowledge Learning Corp. provides early childhood education and development programs that focus on health, safety, and development of the child. The company operates community child care centers, before and after school programs, and employer sponsored child care centers in the United States.

Strategic Buyers Educational Services

Revenues Market Cap Net Debt Company ($ MM) ($ MM) ($ MM) Headquarters Description Educate Inc. $349 $436 $131 Baltimore, MD Educate, Inc. provides tutoring and other supplemental services in schools, at learning centers, and over the Internet to prekindergarten through twelfth grade students. The company operates through three business segments: Learning Center, Institutional Services, and Online Learning Services.

Follett Corporation $1,632 N/A N/A River Grove, IL Follett Corporation provides products and services for academicians and students in the United States. It provides library automation and management services, and online and on campus college bookstores in the U.S. and Canada. Folletalso provides used textbooks and distributes educational materials to school libraries worldwide. The company, through its various operating units, serves students, parents, bookstores, teachers, and professors, as well as publishers, school administrators, school and public librarians, and consumers.

Washington Post Co. (Kaplan Inc.) $3,508 $7,275 $191 Washington, DC The Washington Post Company operates in the media publishing and television broadcasting markets in the United States and internationally. It primarily operates in five segments: Newspaper Publishing, Television Broadcasting, Magazine Publishing, Cable Television, and Education. The Education segment provides education products and services, which include supplemental education services made up of Kaplan Test Prep and Admissions; test preparation services for college and graduate school entrance exams; Kaplan Professional, providing education and career services to business people and other professionals; and Score!, offering multimedia learning and private tutoring to children, and educational resources to parents.

ABS Capital Partners FdG MidOcean Partners American Capital Strategies First Atlantic Capital Morgenthaler Partners American Securities Capital Partners Freeman Spogli & Co. Nautic Partners, LLC Apax Partners Friedman Fleischer & Lowe, L.L.C. New Mountain Capital Arcapita Frontenac Norwest Equity Partners Bain Golden Gate Capital Oak Hill Capital Management, Inc. Banc of America Equity Partners Goldner Hawn Johnson Morrison Oaktree Capital Management, LLC Bear Stearns Merchant Banking Great Hill Olympus Partners Berkshire Partners Gryphon Parthenon Capital, Inc. Brentwood GTCR Quad-C Management, Inc. Brockway Moran Haas Wheat & Partners Summit Partners Bruckmann, Rosser, Sherrill & Co. Harbour Group Ltd. TA Associates Carlyle Group Harvest Partners, Inc. Texas Growth Fund Centre Partners Hicks, Muse, Tate & Furst, Inc. Trimaran Capital Partners Charlesbank Capital Partners ICV Capital Warburg Pincus & Co., LLC Charterhouse Jordan Company, L.P. Wellspring Capital Management, L.L.C. Chicago Growth Partners JP Morgan Weston Presidio CIVC Partners Knowledge Universe Whitney & Co Cortec Group KRG Capital William Blair Cravey, Green and Wahlen Leeds Leonard Green & Partners, L.P. Willis Stein Dyson-Kissner-Moran Corp. Liberty Partners Wind Point Partners Fenway Partners Inc. Linsalata Capital Windjammer Capital Investors Falconhead

The foundation of the Piper Jaffray M&A practice is centered on rigorous process management designed to create strong momentum and a highly competitive buyer environment Thorough preparation Organization Efficient execution Active senior-level execution and leadership throughout the entire transaction

Our goal is to orchestrate a competitive, controlled sale process which maximizes value and results in a high certainty of closing We have extensive experience in designing creative and flexible sale strategies, and every process is uniquely tailored to meet the specific needs and objectives of the shareholders We have no strategic constituents to appease We do the heavy lifting to allow management to focus their attention on the business and achieving projected results

Sale Process

Given the nature of this transaction, the structure of the marketing approach will most likely be a limited or controlled auction

An important strategic consideration is whether or not an announcement should be made to the public, and when

The Balancing Act Value Maximization Confidentiality Multiple Alternatives Business Interruption Competition Timing Deal Momentum

Low Number of Buyers High

No Make Public Announcement Yes

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document TRANSACTION PROCESS AND TIMING Process Alternatives Piper Jaffray has significant experience crafting and successfully executing a broad spectrum of marketing processes to achieve shareholder goals by: Creating competition and a sense of urgency Minimizing surprises and maximizing negotiating leverage Building and sustaining buyer credibility Finding the right partner for the Company Maintaining maximum confidentiality Exclusive Negotiation Targeted Process Comprehensive Process Fast speed to close (approx. Contact a limited number of Contact a diverse universe 2-3 months) buyers (approx. 5-20 buyers) viable buyers (over 50) Proven ability to negotiate Creates a streamlined Maximizes alternatives price and terms with a single process Eliminates any doubts that buyer Focuses on most logical the best offer was received Create urgency by preparing buyers Process duration of to go to a broader group of Process duration of approximately 5-6 months buyers approximately 3-5 months

We Have Run all of These Processes with Tremendous Success

Stapled Financing Select Recent Pre-Arranged Financing Packages

Stapled financing can help to accelerate the process, Financing provided by Antares at 5.0x maximize value and ensure closing if a private equity a portfolio company of + total leverage group emerges as the most likely winner Stapled financing package was used to Enables management to present the story first-hand has been acquired by close the transaction Allows lenders to become more familiar with the business earlier in the process Financing provided by Comerica Bank Provides a floor for potential buyers to improve has redeemed the equity interest of of 5.2x total leverage upon Stapled financing package was used to Enhances confidence in first round initial and the Silverstein Family has close the transaction recapitalized the company with indications

Using third-party sources eliminates any potential Antares provided financing of 5.0x total conflicts of interest by ensuring that: leverage a portfolio company of Seller advisory role is independent from providing Stapled financing package was ultimately buyer financing has been acquired by used to close the transaction All advisor incentives and objectives are aligned with the client's Focus is on value maximization, regardless of the GE Capital committed to provide senior a portfolio company of financing portion of the capital structuring financing package utilized Norwest Mezzanine Partners prepared to

has been acquired by underwrite mezzanine portion of the capital structure Wind Point Partners

Mitigating Confidentiality Risk During the Selling Process

Preliminary Contacting Management Buyer Due Closing Due Buyers Meetings Diligence Events Diligence Risk of Confidentiality Low Medium Medium High High Leak Methods to Limit site visits Piper Jaffray and Conduct off-site Limit due Announce only Mitigate Risk management meetings, but diligence period if required or Collect research qualified include tours beneficial information buyers Require expeditiously Limit number of confidentiality Execute strict meetings clause Involve only key confidentiality employee(s) agreements Piper Jaffray acts Conduct off-site, if as conduit possible Alternative Confidential initial (facilitator and methods of description coordinator) communication (home vs. office) Limit and sequentially Portray as potential number memoranda investors/creditors/ other relationships All communication through Piper Jaffray

Timing for a Typical Two-Stage Auction Due Diligence 4-5 weeks Conduct due diligence Develop marketing strategy and buyer list Prepare selling memorandum Prepare confidentiality agreements (C.A.) Finalize marketing materials Phase I Marketing 4 weeks Qualify and contact approved Buyers Distribute selling memorandum subject to signed C.A. and standstill agreement Prepare management presentations / on site documentation for Phase II Select Phase II buyer(s) Phase II Marketing 4-5 weeks Establish ground rules for Phase II Conduct company visits / management presentations Support buyer due diligence Distribute draft of purchase agreement Solicit final offers Select Buyer 2 Weeks Evaluate final offers Further negotiate terms Select preferred buyer Agreement Negotiation/Presentation 3-4 Weeks Draft and execute definitive agreement Conduct final due diligence Submit regulatory filing Sign Merger Agreement 1-3 Weeks Prepare and file proxy materials Press release SEC Review/Comment 6 Weeks

Stock Holder Meeting 4 Weeks Close transaction

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

Significant Senior Level Commitment

Board of Directors and/or Team Leaders Execution Leaders Execution Support Specialists Management (Frost/Will) (Frost/Sznewajs) (Vaynberg/Kenworthy) (Gurtcheff/Hogan)

Due Diligence and Provide Information / Lead Diligence Sessions Develop List of Topics/ Record Discussions/ Interviews Respond to Data requests Generate Data Request Review Data

Prepare Financial Provide Key Assumptions Review Model Analyze Model and Assumptions Create Model Forecast and Data Develop Marketing Guide Company and Outline Key Positioning Points/ Develop Marketing Highlights/ Assist in Developing Strategy Industry Perspectives Anticipate Potential Issues Draft Company Description Marketing Highlights

Prepare Confidential Provide Input and Highlight Key Areas/ Create Drafts/ Assist in Drafting and Production Assist Memorandum Direction/ Review Drafts/ Formulate Selling Strengths Incorporate Company Information Final Approval

Prepare Buyer List Approve Candidates Final review/Analyze Viability Assess Prospective Buyers/ Research Potential Buyers Final Review Develop Marketing Pitch

Confidentiality None As Necessary Negotiate Agreements (with Legal Counsel if necessary) (with Legal Counsel if Necessary) Initial Buyer Contact None Key Strategic and Financial Strategic and Financial Buyers Specific Financial Buyers Buyers

Indications of Approve Clarify Terms and Valuation/ Analyze Initial Offers Provide Interest Recommendations Develop Recommendations Recommendations Management Provide Input and Prepare Management Team/ Prepare Draft/Organize Meetings Assist in Production Assist Presentations Direction/ Lead Attend Presentations Presentations Buyer Due Diligence Provide Information/ Establish Ground Rules/ Facilitate Process Coordinate Information Respond to Data Requests Maintain Dialogue

Buyer Selection Final Buyer Approval Lead Negotiations with Buyers/ Support Negotiations Provide Provide Recommendations Recommendations

Negotiations to Plan Post-Closing Lead Negotiations/ Support Purchase Agreement Support Purchase Agreement Close Assimilation Coordinate with Attorneys Negotiations Negotiations

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document TRANSACTION PROCESS AND TIMING Tenacious Hands OnExecution Key Objectives Piper Jaffray

The Right Message, Tailored processes to meet objectives Planning The Right Process The highest quality selling memorandums

Premier middle market reputations we have access Generate Enthusiasm to key decision makers Phase I Marketing and Interest in the Marketplace Customized marketing script and strategy for each buyer Senior bankers lead marketing Create a Highly Competitive Phase II Marketing Environment Critical decision point all handsinvolvement Experience in optimizing competitive environment Disciplined process management Significant diligence completed up front Select Buyer Maximize Value Negotiate purchase agreement Compress time to close

Finalize Transaction Expedite Closing Track record of delivering exceptional results Economic and non-economic terms

Our Reputation is Built on the Quality of Our Execution

Reputation for representing high quality companies Premier Public Company Long history of successfully serving smaller capitalizationpublic companies Middle Market Advisors Tailored processes to meet objectives

Significant experience in the Learning Services industry Industry Knowledge and Relationships with and access to key decision makers at strategic buyers Experience

Close relationshipswith relevant private equity buyers

Commit experienced investment bankers throughout all phases of the Senior Level Attention transaction Client satisfaction is our number one objective

Rigorous Process Management and Strong Track Record In Sell-Side Assignments

M&A activity remains strong in 2005, with YTD Historical M&A Activity transaction values up almost 30% over 2004 $1,600 15,000 $1,200 12,000 9,000 Approximately 8,000 transactions have been $800 6,000 announced in the last 12 months, representing $400 3,000 nearly $900 billion in transaction value $0 0

Economic and market factors remain largely favorable - Strong business performance and a growing Total Reported Deal Values Number of Deals economy Recent M&A Activity - Strategic buyers are active and seeking growth $300 2,500 through acquisitions $250 2,000 $200 - Large overhang of uninvested private equity 1,500 $150 1,000 capital $100 - Aggressive lending markets combined with low $50 500 interest rates $0 0 - Higher energy prices beginning to impact the economy Reported Deal Values Number of Deals Source: Thompson Financial

Strategic Buyer Activity is Increasing Recent Piper Jaffray Strategic Buyer Transactions Beginning in the third quarter of 2003, we saw a significant increase in strategic buyer activity Strategic buyer activity accelerated in 2004 More than 50% of our closed transactions over the past Willingness to outbid sponsors in competitive 18 months involved strategic acquirors auctions Once again approaching targets on an unsolicited Colder Products Company has acquired basis a portfolio company of has been acquired by

has been acquired by Dover Electronics Amongst our recent closed and pending transactions, a subsidiary of a manufacturer of premium residential strategic acquirers have been very aggressive and commercial windows and doors Extremely high TTM EBITDA multiples in certain circumstances a portfolio company of Pushing to pre-emptthe process and moving has acquired the assets of a portfolio company of very quickly Wellspring Capital Management has been acquired by has been acquired by

With investors once again focused on growth, we and its related subsidiaries expect that strategic acquirers will continue to be American Coin Merchandising, aggressive Inc. a portfolio company of and management have sold a portfolio company of Wellspring Capital Management has been acquired by has been acquired by to

Piper Jaffray has Access to and Transaction Experience with Key Strategic Buyers Worldwide

Private Equity Remains Active

Univested Equity Capital LBO Activity Breakdown of Cash Flow Lending Multiples $119.8 $140 $120 6.0 $123 $118 $120 $93.9 $120 $110 $100 5.0 2.1x 1.7x 1.0x $101 $100 $100 4.0 1.2x 1.0x 1.0x $100 $80 1.2x 1.0X 3.0 1.6x 1.4x 1.7x $80 $64 $56.7 $52.5 $60 $47.1 2.0 3.6x 3.6x 3.7x $40.5 3.5x 3.3x 3.2x 3.4x $60 2.9x 2.4x $33.0 2.2x 2.3x $37 $37 $40 $28.3 $21.9 1.0 $40 $25 $19 $19.5 0.0 $20 $13 $20 $0 $0

Bank Debt/EBITDA Non-Bank Debt/EBITDA

Source: Piper Jaffray & Venture Economics Source: Portfolio Management Data Source: Portfolio Management Data

Faced with the challenge of finding LBO transaction value more than Favorable lending markets have ways to put their large pools of doubled from 2002 to 2003 and allowed sponsors to be even capital to work, sponsors continue doubled again in 2004. Activity more aggressive to be aggressive in 2005 continues to be brisk Cash flow and asset based Despite a high level of LBO activity Sponsors are using a variety of lenders have been more in recent years, there remains a strategies to gain a competitive aggressive since 2004 tremendous amount of uninvested edge, but certain funds struggle Continuation of trend started equity capital that is under to differentiate themselves (other in the fourth quarter of 2003 pressure to be put to work than by price) in competitive Driven by improved economic situations performance

Fee Proposal

Our investment banking fees are directly linked Non-refundable, credited retainer of $100,000 due to achieving a successful outcome at initiation of engagement

An initial retainer serves two purposes Contingent success fee payable at closing of 1.5% - Establishes commitment to the process aggregate transaction value up to $105 million plus - Helps defray the cost of initial preparation 3% of the incremental aggregated transaction value and the implementation process to $125 million plus 5.0% of total transaction value over $125 million Reimbursement of out-of-pocket expenses and industry-standard indemnification Non-refundable, credited fairness opinion fee of $250,000 due upon delivery of the fairness opinion

Minimum success fee

Robert D. Frost Bob Frost is a principal and member of the Middle Market Mergers & Acquisitions Group at Piper Principal Jaffray. Middle Market Mergers & Acquisitions Group Prior to joining Piper Jaffray, Frost spent seven years in public accounting with Deloitte & Touche LLP 612-303-8248 providing accounting, auditing, financial reporting and mergers and acquisitions support services. [email protected] Frost graduated from the University of Nebraska with a bachelors degree in accounting and received a Master of Business Administration degree from the Wharton School of Business at the University of Pennsylvania. He is also a licensed Certified Public Accountant.

Jerry T. Will Jerry Will is a managing director on the Business Services Team and leads the Learning Services and Managing Director Technology & Business Services practice. He has extensive transaction experience, including public Technology & offerings, private placements, mergers and acquisitions and strategic advisory engagements. Communications Group 612-303-6309 Will joined Piper Jaffray from the law firm of Faegre & Benson located in Minneapolis, where he was [email protected] an attorney practicing in the areas of public and private securities offerings, mergers and acquisitions, venture capital and technology licensing.

Will is a graduate of St. Johns University in Collegeville, Minn. and received a masters degree in physics from the University of Wisconsin-Madison and a juris doctorate degree from Stanford Law School.

Matthew Sznewajs Matt Sznewajs is a vice president and member of the Middle Market Mergers & Acquisitions Group, Vice President providing a full range of investment banking services to high growth companies. Middle Market Mergers & Acquisitions Group Prior to joining Piper Jaffray, Sznewajs spent five years with Ernst & Young LLP providing accounting, 612-303-2030 auditing and fixed income transaction advisory services. He also structured commercial mortgage [email protected] backed securities at Nomura Securities.

Sznewajs graduated from Indiana University with a bachelors degree in accounting and finance and received a Master of Business Administration degree from the Kellogg School of Management at Northwestern.

Garry Vaynberg Garry Vaynberg is an associate and member of the Middle Market Mergers & Acquisitions Group. Associate Middle Market Mergers & Prior to joining Piper Jaffray, Vaynberg spent five years with A.G. Edwards & Sons and Delphi Financial Acquisitions Group Corp. where his experience included exclusive sell-side assignments, buyer advisory services, fairness 612.303.6348 opinions and public and private offerings of equity and debt. He also co-founded a venture capital [email protected] financed media company. Vaynberg graduated from University of Minnesota with a bachelors degree in actuarial science and finance and received a master of business administration degree from the Columbia Business School. He is also a Charted Financial Analyst.

Michael S. Kenworthy Michael Kenworthy is an analyst in Piper Jaffrays Middle Market Mergers & Acquisition Group. Analyst Middle Market Mergers & Kenworthy is responsible for performing quantitative analysis and financial modeling of mergers and Acquisitions Group acquisitions, leveraged buyouts, equity offerings, private placements and other investment banking 612.303.6477 transactions. [email protected] Kenworthy has a bachelors degree in economics from the University of Wisconsin-Madison.

Glenn A. Gurtcheff Glenn Gurtcheff is a managing director and co-head of the Middle Market Mergers & Acquisitions Group Head of Financial Sponsors and based in the firms Minneapolis office. His transaction experience includes numerous exclusive sale Managing Director mandates, buy-side advisory services, leveraged buyouts, divestitures, fairness opinions, defensive 612-303-5548 advisory assignments and financings for a wide range of clients, including private equity groups, public [email protected] companies and privately owned businesses. Prior to his appointment to group head, he was responsible for all investment banking activities in the Piper Jaffray Food Processing and Distribution industry sector.

Prior to joining Piper Jaffray, Gurtcheff worked in mergers and acquisitions at Dain Rauscher Corporation, in corporate strategy at Northwest Airlines, Inc. and was a business valuation specialist at Coopers & Lybrand. He also worked as a product design engineer at General Motors before attending business school.

Gurtcheff graduated from the University of Notre Dame with a bachelors degree in mechanical engineering and from the University of Minnesota with an masters degree in mechanical engineering. Gurtcheff received a Master of Business Administration degree from the Wharton School of Business at the University of Pennsylvania. John A. Hogan, Jr. John Hogan is a managing director and head of Financial Sponsors. He is focused on developing Head of Financial Sponsors relationships with private equity groups. Previously Hogan worked as a senior banker on the Middle Managing Director Market M&A team and started his career at Piper Jaffray in 1997 with responsibility for investment 612-303-6380 banking activities in the Transportation Equipment & Services industry sector. His transaction [email protected] experience includes exclusive sale assignments, buyer advisory services, fairness opinions and public and private offerings of equity and debt.

Prior to joining Piper Jaffray, Hogan worked at Norwest Bank in several capacities, including arranging private placements for companies in a variety of industries and restructuring troubled assets in the banks portfolio.

Hogan graduated cum laude from Carleton College with a bachelors degree in economics and received a Master of Business Administration degree from the University of Minnesota Carlson School of Management.

David I. Wilson David Wilson is a managing director in the Investment Banking Group at Piper Jaffray and heads up Managing Director, Head the firms London office. He has significant experience in the UK waste, health care, support services, of European Investment transport, engineering/ construction, leisure, utilities and TMT sectors. Banking 44-20-7743-8701 Prior to joining Piper Jaffray, Wilson served as joint head of UK Investment Banking Group at ING Barings. He has spent more than 12 years in the corporate finance area, founding the Small Company [email protected] Investment Banking Team at BTAB/Deutsche Bank and working as head of Smaller Company Corporate Broking at UBS Warburg, which was ranked top in Reuters and Extel surveys in the City of London. He also spent four years as an equity analyst at Lehman Brothers and Lombard Odier.

Wilson graduated from Cambridge University.

Public Company Analysis

$ in Millions except per share

Educational Products / Services LTM Multiples Price % of 52 Market Company LTM Financial Performance EBITDA 2006P Company Value / Ticker Company 12/9/05 Week High Value Value Revenues EBIT EBITDA Margin % P/E Ratio Revenues EBIT EBITDA

BFAM Bright Horizons Family Solutions Inc. $35.58 76.2% $976 $947 $607 $57 $71 11.7% 23.3 1.6x 16.5x 13.4x EEEE Educate Inc. $10.20 59.6% $436 $566 $349 $44 $52 14.9% 14.4 1.6x 12.9x 10.9x LF LeapFrog Enterprises Inc. $12.89 84.0% $804 $730 $658 $4 $24 3.7% 27.4 1.1x NM NM TUTR Plato Learning, Inc. $7.42 84.8% $175 $136 $131 ($7) $12 9.3% NM 1.0x NM 11.2x RLRN Renaissance Learning Inc. $19.20 79.5% $599 $560 $115 $31 $35 30.7% 20.2 4.9x 17.8x 15.9x SCHL Scholastic Corp. $33.29 83.1% $1,380 $2,020 $2,255 $238 $373 16.5% 13.7 0.9x 8.5x 5.4x SCHS School Specialty Inc. $36.82 75.2% $842 $1,076 $1,006 $87 $112 11.1% 21.4 1.1x 12.4x 9.6x

High 30.7% 27.4 4.9x 17.8x 15.9x Mean 14.0% 20.1 1.7x 13.6x 11.1x Median 11.7% 20.8 1.1x 12.9x 11.0x Low 3.7% 13.7 0.9x 8.5x 5.4x

Catalog / Online Retail LTM Multiples Price % of 52 Market Company LTM Financial Performance EBITDA 2006P Company Value / Ticker Company 12/9/05 Week High Cap. Value Revenues EBIT EBITDA Margin % P/E Ratio Revenues EBIT EBITDA

BDAY Celebrate Express Inc. $13.58 59.7% $104 $74 $73 $4 $5 6.9% 24.7 1.0x 17.7x 14.8x BOO Collegiate Pacific Inc. $8.94 61.4% $91 $151 $144 $10 $13 9.4% 20.8 1.1x 14.7x 11.2x FDL Findel plc $8.36 88.1% $696 $977 $926 $116 $130 14.0% NA 1.1x 8.4x 7.5x

High 14.0% 24.7 1.1x 17.7x 14.8x Mean 10.1% 22.7 1.0x 13.6x 11.2x Median 9.4% 22.7 1.1x 14.7x 11.2x Low 6.9% 20.8 1.0x 8.4x 7.5x

Socrates (1) $6.93 83.5% $62 $61 $124 $4 $6 4.6% NA 0.5x 15.5x 10.7x

(1) Socrates(1) data based upon publicly disclosed financial information Note: Data as of 12/9/05

Education Transactions Analysis

$ in Millions Target LTM Financials Transaction Multiples Transaction Premiums Transaction Company Company Value / 1 Day 1 Week 4 Weeks Date Target Target Business Acquiror AcquirorBusiness Value Revenues EBIT EBITDA Revenues EBIT EBITDA Prior Prior Prior

Pending Learning Care Group, Inc. Pvd childcare svcs A.B.C. Learning CentresLtd. Pvd childcare svcs $164 $221 $6 $10 0.7x 27.9x 16.0x 27.8% 15.0% 21.9% 9/13/05 ChildrenFirst, Inc. Op backup childcare centers Bright Horizons Family Solutions Inc. Pvd workplace svcs $50 $31 - - 1.6x - - - - - 8/31/05 Delta Education Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies $273 $96 $16 $21 2.9x 16.8x 12.9x - - - 7/26/05 Rose Art Industries, Inc. Mnfr arts / crafts prod Mega Bloks Inc. Mnfr,mkt toys $335 $285 $43 $50 1.2x 7.7x 6.7x - - - 7/22/05 American Guidance Service, Inc. Pvd speech training products Pearson plc Publbooks, educ materials $270 ------6/27/05 AlphaSmart Inc. Dvlp educsoftware Renaissance Learning Inc. Dvlp software $55 $34 $3 $4 1.6x 16.9x 14.7x 21.7% 20.9% 19.7% 1/31/05 Voyager Expanded Learning, Inc. Pvd educservices ProQuest Co. Publishing co $377 $90 - $36 4.2x - 10.5x - - - 9/2/04 The Guidance Channel Inc. Educ publishing co School Specialty Inc. Mnfr,whl school supplies $19 $20 - - 0.9x - - - - - 1/31/04 McGraw Hill, Children's Publishing Unit Educ publishing co School Specialty Inc. Mnfr,whl school supplies $46 $66 - ($5) 0.7x - NM - - - 1/16/04 Califone International, Inc. Mnfr audiovisual equip for educ School Specialty Inc. Mnfr,whl school supplies $26 $16 - $4 1.6x - 7.0x - - - 11/17/03 Lightspan Inc. Pvd educational software Plato Learning Inc. Pvd,dvlp edusoftware,svcs $27 $36 ($20) ($13) 0.7x NM NM 27.6% 24.0% 50.7% 5/30/03 Select Agendas Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies $17 $8 - $2 2.1x - 10.0x - - - 5/9/03 ARAMARK Educational Resources Inc. Pvd educsvcs Knowledge Learning Corp. Pvd educsvcs $265 $455 - $53 0.6x - 5.0x - - - 4/4/03 Riverdeep Interactive Learning Ltd. Dvlp Internet software Management Buyout Management $372 $216 ($14) $46 1.7x NM 8.0x - - - 12/31/02 Houghton Mifflin Co. Publish books and software Bain Capital, Thomas H. Lee Private Equity Firms $1,660 $1,195 $82 $269 1.4x 20.3x 6.2x - - - 12/30/02 bigchalk.com Inc Pvd educvia internet svcs ProQuest Co. Publishing co $32 $28 ($17) $5 1.1x NM 6.9x - - - 8/26/02 Broderbund LLC Dvlp,whl educational software Riverdeep Interactive Learning Ltd. Dvlp Internet software $57 ------8/14/02 ABC School Supply Pvd educational mat School Specialty Inc. Mnfr,whl school supplies $43 $48 - $5 0.9x - 8.1x - - - 5/9/02 NetSchoolsCorp. Pvd educational svcs Plato Learning Inc. Pvd,dvlp edusoftware,svcs $31 $11 ($15) ($14) 2.8x NM NM - - - 4/8/02 Klutz, Inc. Publish educ materials Scholastic Corp. Publish educ materials $43 ------12/21/01 Premier Agendas, Inc. Pvd educational planners, programs School Specialty Inc. Mnfr,whl school supplies $157 $91 $12 $17 1.7x 13.6x 9.1x - - - 12/21/01 Argosy Education Group Inc Provide education services Education Management Corp. Pvd educsvcs $86 $58 $0 $2 1.5x NM NM 26.0% 45.7% 66.6% 9/20/01 Learning Co., Educational Unit Dvlp software Riverdeep Interactive Learning Ltd. Dvlp Internet software $60 ------7/9/01 Houghton Mifflin Co Publish books and software Vivendi Universal SA Multi-media co $2,531 $1,034 $133 $240 2.4x 19.0x 10.6x 9.1% 5.4% 27.5% 4/5/01 Wasatch Interactive Learning Corp. Dvlp educational software Plato Learning Inc. Pvd,dvlp edusoftware,svcs $15 $2 ($1) ($1) 6.6x NM NM - - - 11/22/00 JL Hammett Co., K-12 Wholesale Division Whl school supplies School Specialty Inc. Mnfr,whl school supplies $83 $102 - $7 0.8x - 11.6x - - - 9/5/00 Tribune Education Co. Publish educational books McGraw-Hill CosInc. Publishing co $635 ------6/30/00 Global Video Inc. Dvlp educvideos School Specialty Inc. Mnfr,whl school supplies $32 $23 - $5 1.4x - 7.0x - - - 6/23/00 Edutest Inc. Dvlp Internet software Lightspan Inc. Pvd educational software $13 ------6/22/00 Grolier Inc. Publish encyclopedias, books Scholastic Inc. Publ educmaterials $447 $456 $7 $31 1.0x NM 14.6x - - -

High 6.6x 27.9x 16.0x 27.8% 45.7% 66.6% Mean 1.8x 17.5x 9.7x 22.4% 22.2% 37.3% Median 1.4x 16.9x 9.1x 26.0% 20.9% 27.5% Low 0.6x 7.7x 5.0x 9.1% 5.4% 19.7%

* Excludes transactions with deal sizes less than $10 m ** Rose Art acquisition price includes contingent payment of $50M payable upon successful EBITDA growth objectives and $100 M in cash flow savings due to goodwill amortization over the next fifteen years discounted at risk-free rate

Discounted Cash Flow Analysis Fiscal year ended December 31 $ in Thousands

Projected Cash Flows # 12/31/06 12/31/07 12/31/08 12/31/09 12/31/10 2006P 2007P 2008P 2009P 2010P Operating Income $ 9,690 $ 12,413 $ 15,353 $ 18,234 $ 21,452 Less: Taxes @ 36% (3,488) (4,469) (5,527) (6,564) (7,723) After-tax Operating Income 6,202 7,944 9,826 11,670 13,729 Plus: Depreciation & Amortization 2,192 2,109 2,124 2,061 1,981 Plus: Adjustments 674 - - - - Plus: Public Company Expenses 1,876 2,105 2,316 2,477 2,651 Less: Capital Expenditures (2,112) (2,289) (2,451) (1,909) (2,042) Less: (Inc) Dec in Working Capital (2,042) (2,975) (2,692) (1,972) (2,112) Free Cash Flows 0 6,790 6,894 9,123 12,327 14,207 Terminal Cash Flows @ 8.0x 2010P EBITDA - - - - 208,670 Total Free Cash Flows $ 6,790 $ 6,894 $ 9,123 $ 12,327 $ 222,876

NPV Calculation @ 12/31/2005 Company Value - Sensitivity Analysis

NPV of Free Cash Flows $ 29,585 Discount Rate NPV of Terminal Cash Flows 95,136 12472082.2% 16.0% 17.0% 18.0% Company Value $ 124,721 Terminal 7.0x $117,281 $112,829 $108,591 Less: Net (Debt) / Cash 1,282 EBITDA 8.0x $129,695 $124,721 $119,987 Equity Value $ 126,003 Multiple 9.0x $142,109 $136,613 $131,383 Diluted Shares Outstanding 9,679 Equity Value per Diluted Share $ 13.02 Equity Value per Share - Sensitivity Analysis

Company Value / 2005E EBITDA 9.7x Discount Rate Equity Value / 2005E EBITDA 9.8x 0.0% 16.0% 17.0% 18.0% Premium to 12/9/2005 Closing Price 87.9% Terminal 7.0x $12.25 $11.79 $11.35 EBITDA 8.0x $13.53 $13.02 $12.53 Assumptions Multiple 9.0x $14.81 $14.25 $13.71

2005E EBITDA $ 12,832 Company Value / EBITDA - Sensitivity Analysis 12/9/2005 Closing Price $ 6.93 EBITDA Multiple 8.0x Discount Rate Discount Rate 17.0% 16.0% 17.0% 18.0% Tax Rate 36.0% Terminal 7.0x 9.1x 8.8x 8.5x EBITDA 8.0x 10.1x 9.7x 9.4x Multiple 9.0x 11.1x 10.6x 10.2x

* 2005E EBITDA excludes public company expenses

Leveraged Buyout Analysis

Fiscal year ended December 31 $ in Thousands

Capital Structure Cash Flows

Amount Multiple % 2006P 2007P 2008P 2009P 2010P Total Bank Debt (1) $ 41,703 3.25x 35.4% Operating Income $ 9,690 $ 12,413 $ 15,353 $ 18,234 $ 21,452 Second Lien (11%) 9,624 0.75x 8.2% Interest (Expense) / Income (5,408) (5,156) (4,807) (4,236) (3,420) Mezzanine Debt (14%) 9,624 0.75x 8.2% Pretax Income 4,282 7,256 10,547 13,998 18,032 Total Leverage 60,951 4.75x 51.8% Less: Taxes @ 36% (1,542) (2,612) (3,797) (5,039) (6,492) Equity 56,721 4.42x 48.2% Net Income 2,741 4,644 6,750 8,959 11,541 Consideration 117,672 9.17x 100.0% Plus: Depreciation & Amortization 2,192 2,109 2,124 2,061 1,981 Less: Transaction Costs 5.0% (5,884) 0.46x Plus: Adjustments 674 - - - - Transaction Value $ 111,789 8.7x Plus: Public Company Expenses 1,876 2,105 2,316 2,477 2,651 Less: Net (Debt) / Cash 1,282 Less: Capital Expenditures (2,112) (2,289) (2,451) (1,909) (2,042) Equity Value $ 113,071 8.8x Less: (Inc) / Dec in Working Capital (2,042) (2,975) (2,692) (1,972) (2,112) Diluted Shares Outstanding 9,651 Scheduled Debt Repayment (973) (2,641) (3,475) (4,309) (139) Equity Value per Diluted Share $ 11.72 Free Cash Flow 2,355 952 2,571 5,307 11,879 Advances / (Additional Debt Repayment) (2,355) (952) (2,571) (5,307) (11,879) 2005E EBITDA $ 12,832 Net Free Cash Flow $ - $ - $ - $ - $ - Premium to 12/9/2005 Closing Price 69.1%

Exit Value Credit Statistics

Exit Value EBITDA Multiple: 8.0x $ 208,670 2006P 2007P 2008P 2009P 2010P Less: Net Debt (26,348) EBITDA $ 14,432 $ 16,626 $ 19,793 $ 22,772 $ 26,084 Equity Value 182,322 Total Debt Outstanding 57,622 54,029 47,982 38,366 26,348 Less: Sub-Debt Equity 0.0% - Total Debt / EBITDA 4.0x 3.2x 2.4x 1.7x 1.0x Less: Management Equity 5.0% (9,116) EBITDA / Interest 2.7x 3.2x 4.1x 5.4x 7.6x LBO Fund Equity $ 173,206 EBIT / Interest 1.8x 2.4x 3.2x 4.3x 6.3x Fixed Coverage 2.8x 2.8x 3.1x 3.5x 9.7x Return Analysis

2010 EBITDA Exit Multiple 7.0x 8.0x 9.0x LBO Fund Equity 21.2% 25.0% 28.4%

(1) Bank debt allocated 50% to term loan A @ LIBOR+ 2.75%; 50% to term loan B @ LIBOR+ 3.25% * 2005E EBITDA excludes public company expenses

Accretion/Dilution Analysis School Specialty Fiscal year ended December 31 $ in Thousands

Assumptions Combination Analysis - 2006P

Transaction Value $ 152,003 Pro Forma Less: Net (Debt) / Cash 1,282 School Specialty(1) Socrates Adjustments Combined Equity Value 153,285 Diluted Shares Outstanding 9,723 Revenue $ 1,105,100 $ 144,560 - $ 1,249,660 Offer Price per Share $ 15.77 Cost of Goods Sold 623,900 94,640 - 718,540 Gross Profit 481,200 49,920 - 531,120 Plus: Transaction Costs: 5.0% 7,664 Selling, General & Administrative (2) 364,200 39,556 (1,876) 401,880 Total Cost to Acquiror $ 160,949 Amortization of Purchase Price (3) - - 1,520 1,520 Operating Income 117,000 10,364 356 127,720 Company Value / 2005E EBITDA 11.8x Interest Expense (Income) 29,000 - 10,720 39,720 Equity Value / 2005E EBITDA 11.9x Pretax Income 88,000 10,364 (10,364) 88,000 Provision (Benefit) for Taxes 31,680 3,731 (3,731) 31,680 Financing Sources Net Income $ 56,320 $ 6,633 $ (6,633) $ 56,320

Equity Consideration: 0.0% - Diluted Shares Outstanding 23,968 9,723 23,968 Total Cash Consideration: 100.0% 160,949 Earnings Per Share $ 2.35 $ 0.68 $ 2.35 Total Sources 160,949 160,949 EPS Accretion / (Dilution) - $ $ - Cash consideration provided by: EPS Accretion / (Dilution) - % 0.00% Debt 159,667 Pretax Cushion to Breakeven. $ - Cash 1,282

Payment Summary Accretion / Dilution Sensitivity Analysis

School Specialty Share Price @ 12/12/2005 $ 36.65 Transaction Value School Specialty Diluted Shares Outstanding 23,968 $140,000 $150,000 $160,000 Shares Issued to Purchase Socrates 0 $0 1.10% 0.18% (0.73%) Post-deal Diluted Shares Outstanding 23,968 Adjustments ($2,000) 3.38% 2.46% 1.54% ($4,000) 5.65% 4.73% 3.81% % Ownership Dilution 0.0% Transaction Value School Specialty Interest Expense @ 6.75% 10,778 $140,000 $150,000 $160,000 School Specialty Cost of Cash @ 4.49% 58 Equity 0.0% 1.10% 0.18% (0.73%) Total Interest Expense 10,720 Consideration 50.0% (1.52%) (2.54%) (3.54%) 100.0% (3.77%) (4.84%) (5.89%) (1) School Specialty projected financials per Piper Jaffray Estimates (2) Socrates SG&A includes adjustments to EBIT; Pro-Forma adjustments extract $1,876,000 in public company expenses (3) 15.0% of purchase price amortized over 15 year period

Going Private Transactions & Premiums 1/1/00 - 12/1/05

Transaction Premiums 1 Day 1 Week 4 Weeks Date Target Target Business Acquiror AcquirorBusiness Prior Prior Prior Nov-05 EnterasysNetworks Inc Mnfr ethernet, routers Investor Group Investor group 35.5% 28.4% 29.9% Oct-05 Central Coast Bancorp,CA Coml bkhldg co Rabobank Investment bank 23.6% 23.2% 18.0% Oct-05 Neoforma Inc Pvdbus-to-bus ecommerce svcs Global HealthCare Exchange LLC Pvd ecommerce svcs 43.7% 31.6% 27.6% Aug-05 Brooktrout Inc Mnfr,whl electn communprod EAS Group Inc Investment holding company 38.1% 39.3% 16.2% Aug-05 Register.com Inc Pvd Internet domain svcs Vector Capital Venture capital firm 7.6% 9.2% 24.0% Aug-05 Chart Industries Inc Mnfr process control instr First Reserve Corp Private equity firm 10.5% 14.3% 19.5% Jun-05 Register.com Inc Pvd Internet domain svcs RCM Acquisition Co LLC Investment company 10.1% 6.3% 25.0% May-05 Blair Corp Pvd ecommerce retail svcs Loeb Partners Corp Investment company 3.5% 7.4% 9.6% Apr-05 Worldwide Rest Concepts Inc Own,op restaurants Pac Eq Partners Pty Ltd Private equity firm 41.4% 39.2% 37.3% Apr-05 Manchester Technologies Inc Mnfr,whldisplay tech soln Caxton-IsemanCapital Inc Private equity firm 35.9% 17.4% 17.0% Apr-05 Noland Co Whlplumbing,heatingsupplies Primus Inc Whl industrial supplies 52.3% 60.4% 49.0% Mar-05 Blue Martini Software Inc Dvlp e-business software Multi-Channel Holdings Inc Whl,retsoftware;holding co 63.3% 80.2% 55.6% Feb-05 Tickets.comInc Pvd ticket distnsvcs MLB Advanced Media LP Multi-media company 32.5% 29.4% 46.7% Jan-05 MAPICS Inc Develop ERM software Infor Global Solutions Dvlp entrpsoftware 9.7% 14.3% 24.0% Jan-05 Polaroid Holding Co Mnfr cameras Petters Group Worldwide Pvd ecommerce retail svcs 13.4% 14.4% 16.7% Oct-04 MSC Software Corp Dvlp,supplymechsoftware ValueAct Capital Partners LP Investment company 12.6% 16.1% 19.8% May-04 CompuComSystemsInc(Safeguard) Whl computer equip Platinum Equity LLC Leverage buyout firm -5.0% 0.4% -5.0% Apr-04 Loehmanns Holdings Inc Own,op clothing stores Crescent Capital Invest Inc Investment company 5.8% 9.7% 14.1% Mar-04 Golden State Vintners Inc Produce beverages Wine Group LLC Produces beverages 22.0% 22.2% 79.4% Jan-04 WorkFlowManagement Inc Pvd commericalprinting svcs Investor Group Investor group 9.0% 7.1% -4.8% Dec-03 Gundle/SLT Environmental Inc Mnfr waste containment prods GEO Holdings Corp Investment holding company -13.0% -10.1% -4.2% Dec-03 Duane Reade Inc Own and operate drug stores Rex Corner Holdings LLC Investment holding company 8.4% 24.7% 22.7% Nov-03 Plains Resources Inc Oil,gas exploration,production Investor Group Investor group 30.7% 30.2% 31.5% Nov-03 Sylvan Inc Produce mushrooms,fruits Snyder Associated CosInc Oil and gas exploration,prodn 21.9% 22.0% 23.2% Nov-03 Cotton States Life Insurance Insurance company COUNTRY Insurance & Financial Stock insurance company 100.5% 98.3% 104.6% Oct-03 Media Arts Group Inc Mnfr media products Investor Group Investor group 68.8% 80.2% 77.8% Oct-03 Information Resources Inc Pvddatabase research svcs Open Ratings Inc Dvlp supply mgmt software -19.5% -17.4% -18.8% Sep-03 Garden Fresh Restaurant Corp Own,op restaurant chain Investor Group Investor group 48.9% 54.8% 64.3% Sep-03 United States Exploration Inc Oil and gas exploration; prodn DGL Acquisition Corp Investment holding company 0.7% -1.1% -1.1% Jul-03 Edison Schools Inc Own,oppublic schools Investor Group Investor group 38.6% 64.5% 74.3% Jun-03 Information Resources Inc Pvddatabase research svcs Investor Group Investor group 10.7% -2.4% -2.7% Jun-03 United Park City Mines Co Real estate development firm Capital Growth Partners LLC Investment firm 3.4% 4.7% 5.5% May-03 Cysive Inc Dvlp software solutions Snowbird Holdings Inc Invest hldgco 0.9% 0.9% 11.4% May-03 Superior FinlCorp,AR Savings and loan holding co Arvest Bank Group Inc,AR Commercial bank holding co 24.5% 22.7% 29.2% May-03 Packaged Ice Inc Produce packaged ice Investor Group Investor group 61.6% 62.3% 96.7% May-03 Dwyer Group Inc Pvd special fransvcs Investor Group Investor group 58.8% 57.0% 45.5% Apr-03 Thousand Trails Inc Own and operate campgrounds Kohlberg & Co LP Private equity firm 55.1% 55.9% 49.8% Apr-03 Varsity Brands Inc Mnfr sporting,athleticgoods Investor Group Investor group 39.8% 39.5% 42.2% Apr-03 Lillian Vernon Corp Pvd ecommerce retail svcs Investor Group Investor group 72.6% 74.7% 72.2% Apr-03 Sports Club Co Inc Own,op sports,fitnessclubs Investor Group Investor group 25.0% 24.5% 31.6% Mar-03 Colorado MEDtechInc Mnfr surgical,medprod CIVCO Holding Inc Mnfr med instruments 67.3% 75.9% 72.1% Feb-03 Insignia Financial Group Inc Pvdhousing mgmt svcs CB Richard Ellis Inc Real estate agency 33.3% 35.4% 42.8% Jan-03 Resonate Inc Pvd software for the Internet GTG Acquisition Corp Investment company 7.2% 6.0% 10.2% Dec-02 Aegis Realty Inc Real estate investment trust Phillips Edison & Co Own,op shopping centers 7.7% 6.9% 7.7% Nov-02 Hunt Corp Mnfr,whl art,framingsupplies BerwindCo LLC Invest co 32.3% 31.2% 37.4% Nov-02 CoorsTek Inc Mnfr electronic components Investor Group Investor group 62.5% 60.4% 86.4% Nov-02 Ebenx Inc Prvd ecommerce bus solutions SHPS Inc Pvdoutsourced care mgmt svcs 146.2% 193.9% 190.4% Oct-02 BWAY Corp Manufacture steel containers Kelso & Co Private equity firm 43.9% 44.9% 38.9% Aug-02 Exco Resources Inc Oil and gas exploration,prodn Douglas H Miller Individual 20.8% 22.9% 22.0% Aug-02 Omega Worldwide Inc Pvd asset mgt,advisorysvcs Four Seasons Health Care Ltd Pvdnursing svcs 50.9% 62.0% 66.0% Jul-02 International Specialty Prods Mnfr specialty chemicals Samuel J Heyman Individual 4.3% 1.7% 33.8% Jun-02 Vestcom International Inc Pvddocument management svcs Cornerstone Equity Investors Investment company 50.6% 64.5% 78.6% May-02 Morton's Restaurant Group Inc Own,operate restaurants Castle Harlan Inc Investment company 11.6% 9.7% 31.0% May-02 Liberty Bancorp,Avenel,NJ Commercial bank holding co NSB Holding Corp Bank holding co 45.3% 45.2% 48.3% Apr-02 Maynard Oil Co Oil and gas exploration,prodn Plantation Petroleum Holdings Oil and gas holding co -10.3% -7.6% -12.8%

Source: SDC; Transactionssizes between $50 - $500 mm.

Going Private Transactions & Premiums 1/1/00 - 12/1/05 (contd)

Transaction Premiums 1 Day 1 Week 4 Weeks Date Target Target Business Acquiror AcquirorBusiness Prior Prior Prior Mar-02 Associated Materials Inc Mnfr steel,aluminumsiding Harvest/AMI Holdings Inc Investment company -1.2% -1.2% 28.5% Feb-02 Sevenson Environmental Svcs Construction site waste svcs SCC Contracting Inc Pvdgeneral contracting svcs 26.0% 26.0% 26.0% Feb-02 dick clarkproductions inc Produce television programs Investor Group Investor group 32.7% 49.5% 49.5% Feb-02 Deltek Systems Inc Pvd computer programming svcs Investor Group Investor group 18.4% 28.6% 41.9% Feb-02 Pitt-Des Moines Inc Mnfr,designcustom facilities IronbridgeAcquisition Corp Investment holding company 7.3% 8.5% 10.5% Jan-02 Suburban Lodges of America Inc Own and operate hotels/motels InTownSuites Management Own,ophotels 13.0% 17.0% 32.0% Jan-02 Jenny Craig Inc Own,op weight mgmt centers Investor Group Investor group 68.3% 86.0% 72.1% Jan-02 Shoney's Inc Own,operate restaurants Lone Star Fund Private equity firm -7.7% 16.1% 28.6% Jan-02 Pulaski Bancorp Inc,NJ Bank holding company Kearny Financial Corp,Kearny Bank 33.7% 31.3% 68.7% Dec-01 Landmark Systems Corp Dvlp management software ASG Dvlp computer software 82.7% 98.7% 84.1% Oct-01 NCH Corp Mnfr,whl maintenance products Investor Group Investor group 34.0% 33.6% 18.8% Sep-01 American Coin Merchandising Own,op amusement machines Investor Group Investor group 42.6% 45.6% 39.3% Jun-01 Purina Mills Inc Mnfr,whl animal nutrition prod Land O'LakesInc Produce butter,milk,cheese 19.2% 18.0% 26.4% May-01 Bacou USA Inc Manufacture ophthalmic goods BacouSA Mnfr security equipment 21.8% 17.3% 11.3% Mar-01 Roy F Weston Inc Environmental consulting Investor Group Investor group 7.1% 11.6% 13.1% Feb-01 VICORP Restaurants Inc Own,op franchised restaurants Investor Group Investor group 35.9% 34.6% 50.9% Jan-01 NextHealthInc Pvd,dvlp alt healthcare svcs Investor Group Investor group 31.6% 33.8% 68.3% Dec-00 Crown Central Petroleum Corp Oil and gas exploration,prodn Rosemore Inc Investment holding company 33.3% 25.4% 23.5% Dec-00 NPC International Inc Own,op fast food restaurants O Gene Bicknell Individual 11.3% 6.8% 32.0% Dec-00 PBOC Holdings Inc Bank holding co FBOP Corp,OakPark,Illinois Commercial bank;holdingco 8.8% 8.1% 41.6% Nov-00 Il Fornaio America Corp Own,operate restaurant BruckmannRosser Sherrill & Co Venture capital firm 28.9% 23.9% 44.4% Oct-00 Meridian Insurance Group Inc Insurance holding company State Auto Mutual Insurance Co Fire,marine,casualtyins co 64.4% 65.5% 105.1% Oct-00 Sunrise Medical Inc Mnfr medical rehab products Investor Group Investor group 55.3% 64.9% 63.3% Oct-00 Home-Stake Oil & Gas Co Oil and gas exploration,prodn Cortez Oil & Gas Inc Oil and gas exploration,prodn 2.3% 2.3% -9.3% Sep-00 Sunburst Hospitality Corp Own,ophotels Investor Group Investor group 32.6% 25.5% 24.2% Sep-00 US Franchise Systems Inc Pvd franchise services PritzkerGroup Investment company 14.3% 14.3% 15.9% Sep-00 Mikasa Inc Mnfr houseware;whlfurniture JG Durand Industries SA Mnfr glass,crystal 68.2% 68.2% 69.2% Aug-00 Republic Group Inc Mnfr gypsum wallboards,paper Premier Construction Products Investment company 16.9% 53.5% 58.3% Aug-00 EndoSonicsCorp Mnfr image processing equip Jomed NV Whl medical,dental,hospequip 57.1% 72.6% 72.6% Jun-00 Pacific Gateway Properties Own,op apartment buildings Mission Orchard Statutory Statutory trust 19.5% 19.5% 18.8% May-00 Acme Electric Corp Mnfr electronic transformers Key Components LLC Mnfr,whl locks,locksystems 21.0% 22.0% 24.1% May-00 Protocol Systems Inc Mnfr patient monitors Welch Allyn Inc Mnfr medical equip 21.9% 25.5% 29.3% May-00 WMF Group Ltd Mortgage bank Prudential Mortgage Capital Pvd mortgage banking svcs 48.3% 42.4% 69.5% Apr-00 Cherry Corp Mnfr electronic equipment Investor Group Investor group 103.1% 109.1% 70.3% Mar-00 Pulaski Furniture Corp Mnfr wood household furniture Investor Group Investor group 2.9% 31.4% 54.5% Mar-00 Veterinary Centers of America Pvd animal veterinary services Investor Group Investor group 12.2% 9.6% 36.4% Mar-00 US Can Corp Manufacture metal cans Investor Group Investor group 1.0% 31.2% 53.9% Mar-00 Data Transmission Network Corp Pvd information,communsvcs VeronisSuhler & AsocCommun Investment firm 16.0% 16.6% 52.6% Feb-00 Centennial HealthCare Corp Pvdhome health care svcs Investor Group Investor group 87.2% 85.3% 83.3% Feb-00 Spanlink Communications Inc Mfr interactive comp telecomm Spanlink Acquisition Group Investment company -2.3% 6.3% 47.4% Jan-00 Jason Inc Mnfr noise control equipment Investor Group Investor group 57.9% 48.8% 73.9% Jan-00 Echelon International Corp Real estate development firm EIN Acquisition Corp Investment firm 23.6% 41.7% 34.3% Jan-00 Dayton Superior Corp Mnfr concrete accessories Stone Acquisition Corp Investment co 48.0% 54.3% 68.8%

High 146.2% 193.9% 190.4% Mean 30.6% 34.1% 40.4% Median 24.8% 25.8% 34.0% Low -19.5% -17.4% -18.8%

Source: SDC; Transactionssizes between $50 - $500 mm.

100