EX-99.(C)(6) 7 dex99c6.htm PRESENTATION OF PIPER JAFFRAY & CO., DATED DECEMBER 14, 2005 Presentation of Piper Jaffray & Co., dated December 14, 2005
PRESENTATION TO THE BOARD OF DIRECTORS
Project Socrates
December 14, 2005
Minneapolis
San Francisco
New York
Chicago
Menlo Park
Boston
London
Tel Aviv
*
Shanghai
*
*Strategic Alliance
Exhibit (c)(6)

2
Integrity
Internal Security
Measures
Strict External
Communication
Policies
CONFIDENTIALITY POLICY
•
Franchise based on a reputation of integrity and professional conduct
•
Non-descript code names used
•
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
•
Standard policy to outside inquiries of “no comment”
•
Transaction documents released only with client approval and signed confidentiality
agreement
•
Compliance department closely monitors stock trading of public company M&A clients

3
TABLE OF CONTENTS
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

SECTION I
Introduction

5
Project Socrates Team –
An Experienced and Dedicated Team
INTRODUCTION
Clients
Project Socrates Team
Additional Resources
Garry Vaynberg
Associate
Robert Frost
Principal
Michael Kenworthy
Analyst
John Hogan
Managing Director, Head of
Financial Sponsors
David Wilson
Head of European Investment
Banking
Jerry Will
Managing Director
Matt Sznewajs
Vice President
Project Socrates
Senior Leadership
Glenn Gurtcheff
Managing Director, Co-Head
of Middle Market M&A

6
Private Client Services
Public Finance Services
Corporate & Institutional
Services
•
Government Agency and Preferreds
•
Public Finance and Derivatives
•
900+ financial advisors
•
100+ branches in 18 states
•
$50+ billion in client assets
•
Investment Banking
•
Institutional Equity Sales
•
Equity Trading
•
Equity and Debt Capital Markets
•
Convertible Securities
•
High-Yield/Structured Products
•
Private capital
•
Equity and Fixed Income Research
*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
•
Leading growth-oriented, middle-market investment banking firm
•
Independent publicly traded firm (ticker: PJC)
•
Full-service capabilities and unparalleled execution
•
Growing presence in global growth markets
•
Built on a 100+ year track record of quality service and customer success
•
Significant investment in European operations with genuine trans-atlantic capabilities
INTRODUCTION
Chicago
London
(Banking, Sales & (Banking, Research,
Ltd.*
San Francisco
Shanghai
Advisory Ltd.*
Minneapolis—
Headquarters
(Banking, Research, Sales &
Trading)
Palo Alto
(Banking & Research)
Chicago
(Banking)
New York
(Banking, Research &
Trading)
London
Piper Jaffray Ltd.**
Sales & Trading)
Tel Aviv
Nessuah
Ltd.*
(Banking, Sales & Trading)
(Banking)
China Growth
(Banking)
Boston
(Sales & Trading)

7
Softlines Retail, Mass
Merchandising &
Multichannel Commerce
Leisure & Entertainment
Catalogue / Internet Retailing
Retail: Hardlines
Food Processing & Distribution
Restaurants
Broadlines Specialty Retailing
Consumer
Breadth of Industry Expertise
INTRODUCTION
Real Estate Investment Trusts
(REITs)
Small-
and Mid-Capitalization
Banks
Specialty Finance
Banks & Investment Banks
Financial Technologies & Services
Financial
Medical Technology
Health Care
BioPharmaceuticals
Health Care Services
Information-Driven Health
Care & Lab Services
Business Services
Business Information Services
Professional Services
Offshore Outsourcing
PreK-12 Education
Postsecondary Education
Learning Technology
Corporate Training
Business Process Outsourcing
Technology Services
HR Outsourcing
Marketing Services
Semiconductor Capital Equipment
Software Applications
Software Infrastructure
Wireless Communications Equipment
Analog/Mixed Signal Semiconductors
Data Networking & Wireline
Telecommunications
Defense Electronics & Homeland
Security
Enterprise Computing & Storage,
Semiconductors
Internet Media & Marketing
Security & Design
Technology
Building Materials & Services
Flow & Process Controls
Industrial Distribution/Fabrication
Specialty Chemicals
Specialty Vehicles
Transportation & Logistics
Other Manufacturing & Services
Metal Processing
Packaging
Plastic Processing
Security & Safety
Industrial

8
INTRODUCTION
Corporate Training
Postsecondary Education
PreK-12 Education
•
Providers of the underlying technology
infrastructure which supports human
capital and knowledge management
organizations
•
Providers of training and development
products and services for the corporate
market
•
Private, for-profit providers of higher
education worldwide
•
Both bricks-and-mortar and online
delivery
•
Providers of products and services for the
preK-12
education market
•
Includes supplies, educational products,
software, content, assessment and testing
•
Over 15 years of experience serving
education companies
•
Completed over 36 financing
transactions raising over $2 billion
•
Acted as an M&A advisor in more
than 55 transactions
Representative Clients:
Representative Clients:
Representative Clients:
Learning Technology
Representative Clients:
Comprehensive Education Platform

9
INTRODUCTION
Selected Transactions
Catalog
Education
Convertible Preferred Stock
has been acquired by
has been acquired by
SB Acquisition, Inc.
Underwritten Shelf
Take Down
a portfolio company of
has been acquired by
a portfolio company of
Bain Capital Partners
Private Investment
in Public Equity
has been acquired by
13% Senior Subordinated
Notes due 2007 and
Warrants to Purchase
Common Stock
has been acquired by a
Private Equity Investor
Initial Public Offering
has been acquired by
has been acquired by
has agreed to divest its 
K-12 businesses to
Apollo Advisors, L.P
Follow-on Offering
Initial Public Offering
has been acquired
by
Follow-on Offering
has acquired
Interactive Marketing Services
has acquired
Initial Public Offering
Initial Public Offering
has been acquired by
Sole Managed PIPE
Private Placement
has been acquired by
has sold its Cyber Patrol
business to
has been acquired by
Initial Public Offering
Follow-on Offering
Convertible Exchange
Preferred Stock
Follow-on Offering
3.75% Convertible
Debt due 2011
Initial Public Offering
Series D Convertible
Preferred Stock
Initial Public Offering
Initial Public Offering
In Process
Initial Public Offering
Follow-on Offering

10
EARLY CHILDHOOD EXPERIENCE
•
Early childhood care represents a $40+ billion industry in
the United States
•
Highly fragmented, with the 50 largest providers
accounting for less than 10% of the market
•
Increasing percentage of working parents and employer
concerns over absenteeism and retention drive need for
early childcare services
•
Demographics of “Current Baby Boom”
are driving market
growth
Transaction Overview
U.S. Population Projections: 0 - 4 years of age
(Adapted from www.census.gov/population/projections)
15,000
16,000
17,000
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,000
1995
2000
2005
2015
2025
Years
Key Investment Considerations
•
Bright Horizons Family Solutions (Ticker: BFAM, $980M
market cap), the world's leading provider of employer-
sponsored child care and early education, announced it has
completed the acquisition of ChildrenFirst Inc., an operator of
employer-sponsored back-up child care centers serving more than
270 clients in the United States and Canada
September 13, 2005
Piper Jaffray acted as sole advisor to ChildrenFirst
has been acquired by
Piper
Jaffray
&
Co.
initiated
the
above
transaction,
assisted
in
the
negotiations and served as exclusive financial advisor to ChildrenFirst.

11
INTRODUCTION
Premier Middle Market Public Company Advisor
Client Ownership
Assignments
Note: Since 2000
Note: Since 2000
Source: Thompson Financial and Piper Jaffray; U.S. buyers and sellers only
* Excludes investment banks with average deal size > $500 million
Piper Jaffray
49
Jefferies & Co.
48
Keefe Bruyette& Woods
39
CIBC World Markets
35
Robert W. Baird & Co.
34
William Blair & Co.
30
SandlerO’Neill & Partners
26
Harris Williams
26
Daniels & Associates
26
Goldsmith Agio
Helms & Co.
21
Duff & Phelps
20
Rothschild
19
RBC Capital Markets
19
Lincoln Partners
19
SocieteGenerale
18
National Bank Financial
17
McDonald Investments
15
Advisor in 2004 *
Number of
Firm
Deals Closed
Piper Jaffray: Top Middle-Market
Citigroup Global Markets
125
Goldman Sachs & Co.
114
Morgan Stanley Dean Witter
105
JP Morgan Chase & Co.
101
Credit Suisse First Boston
88
Lehman Brothers
86
UBS Warburg
69
Banc of America Securities
64
Merrill Lynch & Co.
59
Piper Jaffray
49
Jefferies & Co.
48
Deutsche Bank Alex. Brown
47
Lazard
43
CIBC World Markets
35
Robert W. Baird & Co.
34
Bear Stearns & Co.
33
William Blair & Co.
30
Piper Jaffray: Top Ten Wall Street
Advisor in 2004
Number of
Firm
Deals Closed

12
Data based on lead or sole advisories from 2000-2004
Source:  Securities Data Corporation
INTRODUCTION
Public Company Seller Advisories –
Premiums
27.3%
28.7%
29.7%
30.6%
31.0%
31.8%
32.4%
34.5%
34.7%
35.5%
36.6%
37.9%
39.8%
43.1%
0%
10%
20%
30%
40%
50%

13
FINANCING EXPERTISE FOR SMALL CAP GROWTH COMPANIES
•
Piper Jaffray team has completed over 70 privately negotiated
transactions for public company clients since 2001
•
Cumulative proceeds raised of over $1 billion
•
Experience includes:
–
PIPEs
Privately negotiated sales of unregistered securities
through a discreet and targeted marketing process
–
Registered Directs (RDs)
Privately negotiated sales of registered securities off an
issuer’s effective shelf registration statement
–
Block Trades
Existing shareholder seeks to sell large block of
securities
Public Equity Offerings
Privately Negotiated Transactions
2005 Equity Offerings
Growth Sectors, <$2B Market Cap
•
#1 underwriter of small-cap growth stocks
•
Exceptional institutional and retail distribution combined with
strong aftermarket trading
Growth Sectors include Consumer, Financial, Health Care, Business Services,
Education and Technology
Data as of 12/6/2005
Common Stock
$19,600,000
November 2005
Convertible
Preferred Stock
$18,000,000
August 2005
Common Stock
$18,700,000
September 2005
Common Stock
with Warrants
$36,000,000
April 2005
Representative Transactions:
29
William Blair & Co.
14
31
Credit Suisse First Boston
13
31
Thomas Weisel Partners LLC
12
32
Wachovia Capital Markets LLC
11
33
Citigroup Global Market Inc.
10
33
Goldman Sachs & Co.
9
35
Banc of America Securities
8
37
SG Cowen Securities Corp
7
38
Merrill Lynch & Co.
6
10
UBS Securities Inc.
5
41
Lehman Brothers
4
46
J.P. Morgan Securities Inc.
3
47
CIBC World Markets
2
51
Piper Jaffray & Co.
1
# of Deals
Manager
Rank,

14
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:
Effectively Assisting the Board in Discharging its Fiduciary Obligations
Education Services Expertise
Capabilities of a Full Service
Investment Bank
Reputation in the Marketplace
M&A Expertise
Public Company Expertise

SECTION II
Situation Overview

16
SITUATION OVERVIEW
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 Company’s 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 Company’s stock has afforded its shareholders limited liquidity
–
The
Company’s
market
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 Company’s 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

17
SITUATION OVERVIEW
Historical Market Performance
P/E Ratio: 10.7x
0
50
100
150
200
250
300
350
400
450
500
550
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
Stock Price as of 12/9/05
$6.93
12-Month High
$7.94
12-Month Low
$4.30
12-Month Average Daily Volume (000s)
11.011
Price
Volume (000s)
1-Week Average
$6.80
12.244
30-Day Average
$6.73
6.192
90-Day Average
$6.71
9.246
180-Day Average
$7.02
9.190
YTD Average
$6.21
11.326
12-Month Average
$6.10
11.011

18
SITUATION OVERVIEW
Relative Equity Performance
Socrates' Return:
64.6%
S&P 500’s Return:
5.9%
School Specialty’s Return:
-4.7%
NASDAQ’s Return:
6.0%
Since Merger
Data as of 12/9/05; Merger on 5/1/01
Socrates' Return:
18.7%
S&P 500’s Return:
-0.2%
School Specialty’s Return:
60.7%
NASDAQ’s Return:
4.3%
Last Twelve Months
0
25
50
75
100
125
150
175
200
225
250
Socrates
School Specialty
NASDAQ
S&P 500
50
75
100
125
150
175
200
225
250
Socrates
School Specialty
NASDAQ
S&P 500

19
SITUATION OVERVIEW
Recent Trading Ranges
Last Two Years
Last Six Months
Data as of 12/9/05; Merger on 5/1/01;          Reflects 12/9/05 price of $6.93.
Last Twelve Months
Since Merger
95%
80%
20%
5%
89%
11%
62%
38%
Average Price:
$3.99
Average Price:
$5.65
Average Price:
$5.98
Average Price:
$6.97
1%
16%
10%
2%
9%
4%
7%
6%
7%
9%
11%
5%
7%
1%
1%
4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
$0.51 -
$1.00
$1.01 -
$1.50
$1.51 -$2.01 -
$2.00
$2.50
$2.51 -$3.01 -
$3.00
$3.50
$3.51 -$4.01 -
$4.00
$4.50
$4.51 -$5.01 -
$5.00
$5.50
$5.51 -$6.01 -$6.51 -$6.93 -
$6.00
$6.50
$6.92
$7.00
$7.01 -
$7.50
$7.51 -
$8.00
9%
11%
9%
14%
21%
10%
15%
1%
1%
8%
0%
5%
10%
15%
20%
25%
$3.51 -
$4.00
$4.01 -
$4.50
$4.51 -
$5.00
$5.01 -
$5.50
$5.51 -
$6.00
$6.01 -
$6.50
$6.51 -
$6.92
$6.93 -
$7.00
$7.01 -
$7.50
$7.51 -
$8.00
3%
10%
15%
16%
3%
5%
28%
3%
3%
15%
0%
5%
10%
15%
20%
25%
30%
$3.51 -
$4.00
$4.01 -
$4.50
$4.51 -
$5.00
$5.01 -
$5.50
$5.51 -
$6.00
$6.01 -
$6.50
$6.51 -
$6.92
$6.93 -
$7.00
$7.01 -
$7.50
$7.51 -
$8.00
1%
10%
51%
5%
5%
28%
0%
10%
20%
30%
40%
50%
60%
$5.51 -
$6.00
$6.01 -
$6.50
$6.51 -
$6.92
$6.93 -
$7.00
$7.01 -
$7.50
$7.51 -
$8.00

20
SITUATION OVERVIEW
Ownership Profile
(1) Source: Institutions’
13F filings
(2) Source: Company’s 14A filings; Filing as of 3/15/05
Institutional Holdings
(1)
Private Equity Holdings
Institution Name
Shares
% of Total Shares
Outstanding
Firm Name
Shares
% of Total Shares
Outstanding
Gruber & McBaine
Capital 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 Microcap
Index
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%
Insider Holdings
(2)
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%

21
Top Institutional Buyers & Sellers (LTM)
SITUATION OVERVIEW
(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
Institutional Investor
(1)
Aggregate Shares
Cost Basis per Share
Return to
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%

22
SITUATION OVERVIEW
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
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,
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
•
It
is
essential
to
have
institutional
investors
among
a
company’s
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
straw”
for
sub-$100
million
market
capitalization
companies

23
SITUATION OVERVIEW
Number of
Companies
Average Number of
Analyst Estimates
Source:  Factset
Data as of 12/1/2005
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Market Capitalization
($ in millions)
0
2
4
6
8
10
12
14
16
Number of Companies
Average Number of Analyst Estimates

24
SITUATION OVERVIEW
Research Economics
•
Resulting minimum reported daily volume required
80,000 shares / day
•
If the investment bank is the most active market maker in the company’s stock, it could represent up to
half of the trading volume
50%
•
The resulting minimum reported daily trading volume for one investment bank is 40,000 shares/day
per
stock
40,000 shares
•
Estimated trading days in a year of 250.
250 days
•
The reported trading volume generated by the investment bank must be 10,000,000 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)
10,000,000 shares
•
The average institutional commission is, at most, $0.05/share on
each side of a trade.
$0.05
•
As a result, the trading commissions per stock should be about $500,000 per year
$500,000
•
One analyst’s capacity to adequately understand and communicate the prospects for a company is
about 20 specific names
20 companies
•
A typical investment bank’s 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
$10,000,000

25
SITUATION OVERVIEW
Small-Cap Valuations
Source:  Capital IQ
Data as of 12/1/2005
21.0x
10.0x
8.0%
$812
Total Russell:
16.6x
8.7x
-20.5%
74
Decile:  10
19.0x
9.7x
-8.3%
181
Decile:  9
20.3x
10.1x
-3.2%
271
Decile:  8
18.6x
10.2x
2.9%
380
Decile:  7
23.5x
9.8x
7.0%
513
Decile:  6
20.6x
9.7x
10.4%
672
Decile:  5
20.1x
9.5x
7.1%
866
Decile:  4
21.2x
10.0x
20.1%
1,106
Decile:  3
21.5x
9.9x
21.3%
1,480
Decile:  2
23.0x
12.1x
42.0%
$2,554
Decile:  1
Median LTM
P/E Ratio
Median EBITDA
Multiple
Mean 1 Year
Return
Mean Market
Capitalization ($ mm)
Breakdown of the Russell 2000

26
SITUATION OVERVIEW
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

27
SITUATION OVERVIEW
Conclusion:  For Most Small and Mid-Cap Companies Mergers & Acquisitions Represent the
Only
Real Means to Realize a Premium Valuation and Significant Liquidity
Market Capitalization of Companies
on the Major Exchanges
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
Source:  Factset
Data as of 12/1/2005

SECTION III
Strategic Alternatives

29
STRATEGIC ALTERNATIVES
Shareholder Value Strategies
Overview
•
Socrates’
Board has a range of alternatives available
to it in enhancing shareholder value
•
We have preliminarily provided a qualitative
overview of those alternatives that address the
Board’s primary objectives
–
Shareholder liquidity
–
Value maximization
•
Piper Jaffray is uniquely qualified to assist the
Board
in evaluating and potentially executing other
alternatives, if appropriate
Maximize
Shareholder
Value
Operating
Strategy
Value
Recognition
Capital
Structure

30
Maximize
Shareholder
Value
Capital
Structure
Debt
Equity
New Issue
Refinance
Retire
New Issue
Share Repurchase
Dividend Policy
Private Placement
Public Issue
Bank Financing
IPO
Follow-On
Tender Offer
Share-Repurchase
Program
Special Dividend
Ordinary
Dividend
Capital Structure
STRATEGIC ALTERNATIVES

31
Maximize
Shareholder
Value
Value
Recognition
Communication
Defensive
Mechanisms
Analyst Coverage
Institutional
Support
Reporting/
Disclosure
Poison Pill
Staggered Board
Blank Check
Preferred
Capture
“Unrealized”
Value
Break Up
Break Up
Spin-off
Carve-out
Company Sale
Value Recognition
STRATEGIC ALTERNATIVES

32
STRATEGIC ALTERNATIVES
Overview
of
Primary
Alternatives
-
Liquidity
Status Quo
Sale of Company to Strategic / Financial Buyer
Privately Negotiated Equity Placement
Share Repurchase
Publicly Marketed Follow-On Offering

33
•
Preserves opportunity to create value for shareholders
through execution of business plan
•
Least disruptive for operations, management and
employees
•
Strong balance sheet
•
No significant liquidity in near-term
•
Value maximization/liquidity alternative may
not always be available
•
May not attract new research coverage or greater
trading liquidity
•
Does not address capital market issues
Advantages
Disadvantages
STRATEGIC ALTERNATIVES
Description: Execute Stand-Alone Business Plan (Status Quo)
Probability of Success Versus Objectives: Low

34
•
Provides capital for the Company (if primary shares
sold)
•
May provide some liquidity for existing
shareholders (if secondary shares sold)
•
Increases float
•
Research coverage likely through underwriters
•
Some increase in trading volume likely
•
Limited liquidity
•
Potential dilution
•
Public shareholder expectations
Short-term results
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
Advantages
Disadvantages
STRATEGIC ALTERNATIVES
Description: Selling Equity to the Market
Probability of Success Versus Objectives: Fair

35
•
“Story”
projections can often be better explained to
sophisticated investors
•
Minority investments by strategic corporate
partners or non-traditional investors may enhance
valuation if their are possible synergies
•
Transaction costs and time demands may be less
than public equity offerings
•
Institutional and/or strategic investors may add
value through “value-added”
board participation,
market or key contact introductions, or informal
consulting
•
Limited liquidity to current investors
Unlikely change in volume or research coverage
•
Valuation at a discount to public market price
Dilution and marketability
•
Less visibility than public offering
•
Investor usually requires board seat (although company
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 issues
Advantages
Disadvantages
STRATEGIC ALTERNATIVES
Description: Selling Equity to Institutions
Private Institutional Placement of Equity (“PIPE”) or Registered Direct (“RD”)
Probability of Success Versus Objectives: Low

36
Advantages
Disadvantages
STRATEGIC ALTERNATIVES
Description: Institute Share Buyback Program Via Open Market Purchases or Dutch
Auction
•
Can be viewed as positive signal by “Street”
•
Can increase EPS and (hopefully) market value
–
“Financial engineering”
•
Dutch Auction provides greater certainty of fixed
price range and fixed time period for larger
repurchase
•
Limited liquidity for current investors
•
Positive effects may be minimal / temporal
•
Shareholders may question use of capital/use of
balance
sheet
versus
other
strategies
-
perceived
lack
of
opportunities
•
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

37
•
Likely maximize near-term shareholder value
Fiduciary “outs”
help ensure highest price
•
Board determines process and criteria
•
May be structured to preserve upside for existing
shareholders
•
Possible synergies, exchange of skills
•
Eliminates public market scrutiny and costs
•
Upside for existing shareholders may be
diluted/eliminated
•
Fate of senior management and employees unknown
•
May face integration issues
•
May have to accept buyer’s currency
•
Industry conditions/financial health of most likely
acquirers will dictate success
Usually outside of Company’s control
•
Confidentiality / competitive dynamics
Advantages
Disadvantages
STRATEGIC ALTERNATIVES
Description: Sale of Controlling Equity Interest to Strategic Buyer
Probability of Success Versus Objectives: Good to High

38
•
May maximize near-term shareholder value
Fiduciary “outs”
help ensure highest price
•
Board determines process and criteria
•
Financial buyers are typically sophisticated
investors committed to growing the business
Additional capital availability
•
Eliminates public market scrutiny and public
company costs
•
Opportunity for management to implement business
plan and participate in upside
•
Limited organizational change
•
Full liquidity event
•
Upside for existing shareholders may be eliminated
–
Expectation that management will roll over stake
•
Leverage may inhibit some future initiatives
•
Capital markets driven
–
Specifically, availability of senior and 
subordinated  debt
Company performance and size critical
factors
•
Attractiveness also driven by perceived timing and
success of sponsor’s exit
•
Greater scrutiny on process
–
Extensive 13E3 disclosures
Advantages
Disadvantages
STRATEGIC ALTERNATIVES
Description: Sale of Controlling Equity Interest to a Financial Buyer
Probability of Success Versus Objectives: High

39
•
Management partners with a private equity firm and
makes an offer to purchase the Company
•
Board may form a Special Committee of unaffiliated
Directors
•
Market check or public announcement may be
necessary to fulfill fiduciary obligations
•
Numerous financial buyers are contacted through
auction process
•
Buyers may offer management a meaningful equity
position to align motivations of all parties
•
Full Board participation for significant portion of
process; may necessitate Special Committee at some
point in the process
MBO
LBO
MBO versus LBO
STRATEGIC ALTERNATIVES

40
STRATEGIC ALTERNATIVES
Summary of Alternatives
No
No
Yes
Yes
Yes
Yes
Retained Operational Risk
Yes
(by definition)
No Change
Maybe
?
None
Immediately
Down
Private
Placement
Likely
Likely
Reduced
(Use of
Capital)
Yes
(by definition)
No Change
Access to Expansion
Capital
High
Low
No Change
No Change
No Change
Opportunity for Employee
Ownership
Maybe
Yes
No
No
No
Synergistic Combination
Immediate
Immediate
Immediate
?
?
Time to Significant
Liquidity
Complete
Complete
Partial
Yes/Maybe
No Change
Market Liquidity
Higher
Highest
No Change to
Up
No Change to
Down
No Change
Relative Valuation
Financial
Buyer Sale
Strategic Sale
Share
Repurchase
Equity
Offering
Status Quo

SECTION IV
Preliminary Valuation Observations

42
PRELIMINARY VALUATION OBSERVATIONS
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

43
PRELIMINARY VALUATION OBSERVATIONS
Valuation Summary
Price: $6.93
$12.56
$12.67
$12.91
$13.90
$12.08
$11.79
$11.13
$14.98
$8.49
$9.05
$13.85
$14.05
$13.39
$15.36
$12.91
$14.25
$12.30
$16.55
$9.51
$9.73
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
$13.00
$14.00
$15.00
$16.00
$17.00
$18.00
(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
most
recent
publicly
disclosed
financial
performance
Public Company Analysis
Education
Transactions Analysis
DCF Analysis
LBO Analysis
Accretion / Dilution
Analysis
(5)
M&A Transaction Premiums
Mean & Median EBITDA
trading multiples of public
Educational Products /
Services Companies:
Mean & Median EBITDA
trading multiples of public
Catalog / Online Retail:
Mean & Median 2006P P/E
Ratios of public
Educational Products /
Services Companies:
Mean & Median 2006P P/E
Ratios of public Catalog /
Online Retail Companies:
Mean & Median EBITDA
Multiples of M&A
transactions in the
Educational Products /
Services sector:
Assumes EBITDA exit
multiples of 7.0x -
9.0x and
a discount rate of 17.0%:
Assumes a required IRR of
25%, total leverage of
4.75x, and an 8.0x exit
multiple:
School Specialty -
Assumes 0% equity
financing:
Mean M&A Premiums for
Educational Products /
Services Transactions since
1/1/2000
1 Day  -
4 Weeks Prior to
Transaction:
Mean M&A Premiums for
Going Private Transactions
since 1/1/2000
1 Day  -
4 Weeks Prior to
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)

44
PRELIMINARY VALUATION OBSERVATIONS
Case Study of Proposed School Specialty Acquisition by Bain
Investor Reaction
Deal Metrics
Date of Announcement
May 31, 2005
Proposed Closing Date
September 30, 2005
Enterprise Value
$1.50 billion
Transaction Multiples
LTM
Sales
$1,041.3 million
EV/Sales
1.4x
EBITDA
$122.6 million
EV/EBITDA
12.2x
5/31/05:
SCHS
receives $49
cash offer
10/3/05:
Merger is
cancelled
•
New Board of Directors
•
Management team to stay in
place
•
No layoffs expected
•
Continue to do acquisitions
•
Support from Bain Capital on
key initiatives
•
More debt
•
One single owner versus
several thousand investors
•
Strong, experienced team at
Bain
•
Focused financial performance
as we have today, but no longer
focused as much on
quarterly performance
•
Easier to do acquisitions and
integrations with a single
partner
Expectations for Change          Benefits to the
Company
Comparison of Debt Structure (in Millions)
Old Structure
New Structure
New Debt
$
0
$
675
Bank Debt-Term Loans
0
240
Bank Debt-Revolver
49
102
Bank Debt-A/R Securitization
85
85
Convertible Debt
133
0
Capital Leases
17
17
Total Debt
$284
$1,119
0.000
1.000
2.000
3.000
4.000
5.000
6.000
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00

Section V
Recommendation

46
RECOMMENDATION
•
Based
on
what
we
understand
the
Board's
objectives
to
be, we would recommend a sale process via a limited
auction
–
Shareholder liquidity
–
Value maximization
•
Proposed process design
–
Limited group of relevant strategic purchasers
–
Financial sponsors
Appropriate fund size
Relevant sector interest
Public to private transactions
•
Timing of a sales process-seasonality
•
Elementary school segment
•
Market
has
not
received
quarterly
financial
information
since
March
2005
–
We
would
recommend
releasing
information
and
letting
market
digest
news/performance
Additional Factors To Consider
Actions

SECTION VI
Investment Thesis

48
Leading Platform Company in Early Childhood Educational Products
Historical & Projected Financial Performance
(1) 2005 and 2006 projections provided by management
(2) In February 2003 Socrates Acquired ECMD
2005E Revenue Mix
•
Premier
developer,
manufacturer
and
retailer
of
educational
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
•
Multichannel
marketing
capabilities
with
highly
sophisticated,
very
cost-effective
targeting
processes
•
High-value,
high-touch
customer
experience
builds
a
unique
bond
with
the
Company’s
customer
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
($ in millions)
INVESTMENT THESIS

49
HIGH GROWTH SEGMENT OF LARGE MARKET OPPORTUNITY
•
Overall preK-12 Educational Products Industry
–
Approximately $7 billion industry
–
Overall K-12 spending approximately $440B, expected 
to grow at 2.5% CAGR 2005-2013*
–
Spending not highly correlated to economic conditions
•
Early Childhood Educational Products Industry
–
Overall childcare spending approximately $40B,
expected to grow at approximately 7%**
Pop growth plus increased percentage of students
attending (1-2%)
Price increases driven by high demand (5%)
–
Multiple growth drivers
Documented educational benefits
Increasing percentage of working parents
Increasing involvement of state governments
Population growth—“Baby Boom”
–
Not highly correlated to economic conditions
–
And not as dependent on government spending--
approximately 75% private pay
number in thousands
Projected K-12 Enrollments and Per Pupil Spending in the U.S.
Projected 0-4 yrs old Population Growth in the U.S.
Early Childhood is the Most Attractive Segment of the Educational Products Market
*  NCES
** Wall Street estimates
Source: National Center for Education Statistics (NCES)
U.S. Population Projections: 0 -4 years of age
(Adapted from www.census.gov/population/projections)
15,000
16,000
17,000
18,000
19,000
20,000
21,000
22,000
23,000
24,000
25,000
1995
2000
2005
2015
2025
Years
40,000
42,000
44,000
46,000
48,000
50,000
52,000
54,000
56,000
58,000
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
$6,000
$6,500
$7,000
$7,500
$8,000
$8,500
$9,000
$9,500
$10,000
Enrollment
Per Pupil Spending

50
•
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
in relevant market
–
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
childhood market
–
Highly successful ECMD model benefits vendors and
customers by facilitating broad product comparisons
•
Highly effective product development effort
–
Consult with qualified educators to ensure educational or
developmental value
–
Company-developed products are difficult to duplicate
•
Advanced overseas sourcing expertise
–
Many years experience in sourcing from China
–
Well established manufacturing relationships
Learning  Centers
Infant/Toddler
Manipulatives
Clearance
Chairs
Carpets
Infant/Toddler
Rest Mats/Cots
Classroom Storage
Tables
Lofts/Room Dividers
Social Seating
Proprietary Products
BioColor
SchoolWrapPacs
Active Play
Furniture
Dramatic Play
Arts & Crafts
High Quality, Third Party Products
One-Stop Shopping
BROAD RANGE OF HIGH-QUALITY EDUCATIONAL PRODUCTS

51
HIGHLY-DEVELOPED MULTICHANNEL MARKETING STRATEGY
Sales Representatives—Workshops, Trade Shows
Online—Websites, E-mail
Print--Catalogs, Newsletters
•
Sophisticated catalog marketing effort forms the core of the
company’s marketing strategy
–
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
•
Full e-commerce capabilities for each of the companies
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
–
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
Broad Reach, Cost-Effective
Circulation: 55,000
2.4M/yr
900k/yr
6x/yr

52
HIGH VALUE CUSTOMER EXPERIENCE
Highly Satisfied, Captive Customer
Contextual Merchandising of
Unique Products
Socrates Creates a High Value Experience that Allows it to Develop a Unique Bond with its Customers
Compelling Content
High-Touch Service from
Education Consultants
Unique
Professional Development
Opportunities
“Let Us Take Care of You”
Quick Delivery from
Multiple Distribution
Centers

53
•
This large market is highly fragmented—more than
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))
FRAGMENTED COMPETITIVE LANDSCAPE
Competitive Landscape
Socrates has the Opportunity to Become the Dominant Market Leader in Early Childhood Educational
Products

54
Develop Positive, Forceful Responses
Potential Issues
Recommended Response
INVESTMENT THESIS
•
Doesn’t the termination of the Bain offer after School Specialty’s miss
in Q3 indicate that Bain’s view on the sector turned negative?
•
Wasn’t the multiple in the Bain deal possible only because of the
extraordinary leverage proposed in that transaction?
•
School Specialty says that Arts and Crafts and Early Childhood were
the hardest hit areas during the state budget cutbacks—doesn’t that
mean that you are in a strategically vulnerable position in recessionary
times?
•
How can you compete successfully against School Specialty once they
focus on this market?
•
Why should we pay value for the Elementary School business?
•
School Specialty had a number of company-specific missteps with
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 company’s market position
and strategy and School Specialty maintained its guidance for FY07.
•
The earnings growth outlook for School Specialty is much lower than
for Socrates.  Our better growth opportunities will allow for extremely
strong equity returns with only modest leverage.
•
Our growth has not and will not be constrained by state funding.
The
childcare market is 75% private pay, and the expansion of state
sponsorship for the early childhood market will more than compensate
for spending constraints in individual states.
•
We are already a very formidable competitor for School Specialty.  For
example, we believe we are further along in two areas that School
Specialty is attempting to improve—direct marketing analytics and
overseas sourcing.
•
The Elementary School business is an excellent product that is simply
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.

SECTION VII
Potential Buyers

56
POTENTIAL BUYERS
Overview of Potential Acquirors
+
Would allow expansion into growing, less government-dependent U.S. early
childhood market
+
Potential revenue synergies from Socrates’
distribution channel
–
Many lack size necessary to complete acquisition
–
Some focus exclusively on proprietary products
Educational Products
Toy Manufacturers
Office Products Suppliers
Catalog / Direct Marketers
Educational Content Providers
Childcare Providers
K-12 Educational Services
Arts / Crafts Suppliers
Private Equity Firms
+
Socrates’
market positioning allows for early customer acquisition
+
For some, good fit with existing arts and crafts businesses
–
Larger toy companies focus on branded products, distribution through channel
–
Mixed success with acquisitions in educational products sector
+
This category includes most of the largest B2B catalog companies
+
Often focus on the education market
–
Less experience with higher-end educational products
–
Not “high-touch”
services model
+
Early childhood is undertargeted
slice of overall market opportunity
+
Could leverage Socrates distribution to sell content
–
Product business model differs from Content/Publishing business
model
–
Potentially dilutive to margins
+
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
+
Good fit with current arts & crafts focus of Socrates
+
Would address current seasonality issues (focused in Q4)
–
Primarily retail distribution
–
Less experience with higher-end educational products
+
Best understanding of market growth dynamics, product needs
–
Socrates’
customer base may not want to purchase from competitor
+
Early childhood is undertargeted
slice of overall market opportunity
+
Could leverage Socrates distribution to sell content
–
Product business model differs from Content/Publishing business
model
–
Potentially dilutive to margins
+
Multiple firms with relevant sector expertise in education, marketing
+
Tremendous amount of capital available drives strong appetite
+
Attracted to platforms with strong management
–
Would have to compete with natural strategic acquirer

57
SCHS: Tailoring The Message
School Specialty Issues
Socrates Positioning Points
POTENTIAL BUYERS
•
“We are the natural acquirer and your best liquidity option.”
•
Stock is suffering from post-Bain hangover.  Growth outlook
for near-term is modest.
•
Recent performance in Early Childhood and Arts and Crafts has
been disappointing.
•
Desire to be #1 in each of its market segments.
•
Strategic shift in positioning underway from “Distribution
Company”
to “Education Company.”
•
Strategic shift in focus from provider of general products that
are
delivered
from
“top
down”
to
specialty
products
that
are
delivered from “bottoms up.”
•
Acquisition focus on specialty products providers with high
percentage of proprietary products.
•
Maintains double digit operating margins.
•
The Bain transaction has raised awareness of the opportunities for
the sector.  We are receiving multiple inbound calls.
•
Socrates acquisition would help restore market confidence in
SCHS growth story.
•
Socrates would provide SCHS with a better performing, better
positioned platform in the Early Childhood sector.
•
Socrates would enable SCHS to assume #1 position in the Early
Childhood segment, which is 18% of preK-12 population.
•
Socrates model is very much a high-value Early Education
products company.
•
Socrates is very much a specialty products provider with very
well-established “bottoms up”
marketing channels to Early
Childhood Education professionals.
•
Socrates percentage of 37% proprietary products is very good and
would not dilute School Specialty’s focus.
•
Significant potential for immediate cost synergies that will
comfortably
allow School Specialty to maintain their current
levels of profitability.

58
POTENTIAL BUYERS
Summary of Potential Buyers
Educational Products
Aristotle (Geneve)
Courier Corp.
Findel
Knowledge Universe
LeapFrog
Lakeshore Learning
School Specialty
Toy Manufacturers
Hasbro
JAKKS Pacific
Mattel
RC2
Educational Services
Educate
Follett
Washington Post (Kaplan)
Arts / Crafts Suppliers
A.C. Moore Arts & Crafts
American Greetings
CSS Industries
Hallmark (Binney
& Smith)
Hobby Lobby Stores
Jo-Ann Stores
Mega Bloks
(Rose Art)
Michaels Stores
Plaid Enterprises
Office Products Suppliers
Buhrmann (Corporate Express)
Genuine Parts (S.P. Richards)
Office Depot
OfficeMax
Staples
United Stationers
Catalog / Direct Marketers
Colorbök
(FdG)
Oriental Trading (Brentwood)
Childcare Providers
A.B.C. Learning Centres
Bright Horizons
Knowledge Learning
Haights
Cross
Houghton Mifflin
John Wiley & Sons
McGraw-Hill
Pearson
Plato Learning
ProQuest
Educational Content Providers
Reed Elsevier
Renaissance Learning
Riverdeep
Scholastic
Thomson
WRC Media (Ripplewood)

59
POTENTIAL BUYERS
Strategic Buyers –
Educational Products
Company
Revenues
($ MM)
Market Cap
($ MM)
Net Debt
($ 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, children’s 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 company’s 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.

60
POTENTIAL BUYERS
Strategic Buyers –
Educational Products (cont’d)
Company
Revenues
($ MM)
Market Cap
($ MM)
Net Debt
($ 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 company’s 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.

61
POTENTIAL BUYERS
Strategic Buyers –
Toy Manufacturers
Company
Revenues
($ MM)
Market Cap
($ MM)
Net Debt
($ 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 company’s 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.

62
POTENTIAL BUYERS
Strategic Buyers –
Office Products Suppliers
Company
Revenues  
($ MM)
Market Cap  
($ MM)
Net Debt
($ MM)
Headquarters  
Description  
Buhrmann
NV
$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,
desk
accessories,
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 company’s 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.

63
POTENTIAL BUYERS
Strategic Buyers –
Arts / Crafts Suppliers
Company  
Revenues  
($ MM)
Market Cap   
($ MM)
Net Debt
($ 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 Greetings’
channels 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
company’s 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 manufacturers’
representatives.
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.

64
POTENTIAL BUYERS
Strategic Buyers –
Arts / Crafts Suppliers (cont’d)
Company    
Revenues   
($ MM)
Market Cap   
($ MM)
Net Debt    
($ 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 Bloks
Inc.  
(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 company’s 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 company’s scrap booking/ paper crafting retail concept, operates locations in Arizona,
Maryland, and Texas. Michaels also operates Star Decorators’
Wholesale 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, kids’
crafts, glues, plastic
crafts, and mosaics. Plaid Enterprises, Inc. is a portfolio company of Dyson-Kissner-Moran Corp.

65
POTENTIAL BUYERS
Strategic Buyers –
Catalog / Direct Marketers
Company    
Revenues   
($ MM)
Market Cap   
($ MM)
Net Debt
($ MM)
Headquarters   
Description   
Colorbök
(FdG)
$38
N/A
N/A
Dexter, MI
Colorbok
engages 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.

66
POTENTIAL BUYERS
Strategic Buyers –
Educational Content Providers
Company    
Revenues   
($ MM)
Market Cap   
($ MM)
Net Debt    
($ 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 company’s 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
Mifflin
Companyoperates
as
apublisher
in
theprekindergarten
throughgradetwelve
(K-12)
and
college
education,         
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
provides
educational
andprofessionaldevelopment
materials
in
various
formatsto
the
prekindergarten
to           
12th grade market, as well as assessment and reporting services in the United States. This segment’s 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
Information
and
Learning
(PQIL),
and
ProQuest
Business
Solutions
(PQBS).
The
ProQuest
Information
and       
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.

67
POTENTIAL BUYERS
Strategic Buyers –
Educational Content Providers (cont’d)
Company    
Revenues   
($ MM)
Market Cap   
($ MM)
Net Debt
($ 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 pre-
kindergarten 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.  Riverdeep’s
Web-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 children’s 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; children’s 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 marketing
supplemental 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.

68
POTENTIAL BUYERS
Strategic Buyers –
Childcare Providers
Company   
Revenues  
($ MM)
Market Cap  
($ MM)
Net Debt
($ 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 in
the 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.

69
POTENTIAL BUYERS
Strategic Buyers –
Educational Services
Company
Revenues
($ MM)
Market Cap
($ MM)
Net Debt
($ 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 pre-
kindergarten 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. Follet
also
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.

70
POTENTIAL BUYERS
Financial Buyers
ABS Capital Partners
American Capital Strategies
American Securities Capital Partners
Apax
Partners
Arcapita
Bain
Banc of America Equity Partners
Bear Stearns Merchant Banking
Berkshire Partners
Brentwood
Brockway Moran
Bruckmann, Rosser, Sherrill & Co.
Carlyle Group
Centre Partners
Charlesbank
Capital Partners
Charterhouse
Chicago Growth Partners
CIVC Partners
Cortec
Group
Cravey, Green and Wahlen
Dyson-Kissner-Moran Corp.
Fenway
Partners Inc.
Falconhead
FdG
First Atlantic Capital
Freeman Spogli
& Co.
Friedman Fleischer & Lowe, L.L.C.
Frontenac
Golden Gate Capital
Goldner
Hawn Johnson Morrison
Great Hill
Gryphon
GTCR
Haas Wheat & Partners
Harbour
Group Ltd.
Harvest Partners, Inc.
Hicks, Muse, Tate & Furst, Inc.
ICV Capital
Jordan Company, L.P.
JP Morgan
Knowledge Universe
KRG Capital
Leeds Leonard Green & Partners, L.P.
Liberty Partners
Linsalata
Capital
MidOcean
Partners
Morgenthaler
Partners
Nautic
Partners, LLC
New Mountain Capital
Norwest Equity Partners
Oak Hill Capital Management, Inc.
Oaktree Capital Management, LLC
Olympus Partners
Parthenon Capital, Inc.
Quad-C Management, Inc.
Summit Partners
TA Associates
Texas Growth Fund
Trimaran
Capital Partners
Warburg Pincus
& Co., LLC
Wellspring Capital Management, L.L.C.
Weston Presidio
Whitney & Co
William Blair
Willis Stein
Wind Point Partners
Windjammer Capital Investors

SECTION VIII
Transaction Process and Timing

72
TRANSACTION PROCESS AND TIMING
Overview and Recommendations
•
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

73
TRANSACTION PROCESS AND TIMING
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
Confidentiality
Business Interruption
Timing
Value Maximization
Multiple Alternatives
Competition
Deal Momentum
Number of Buyers
High
Low
Make Public Announcement
Yes
No
“The Balancing Act”

74
TRANSACTION PROCESS AND TIMING
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
•
Fast speed to close (approx.
2-3 months)
•
Proven ability to negotiate
price and terms with a single
buyer
•
Create urgency by preparing
to go to a broader group of
buyers
•
Contact a limited number of
buyers (approx. 5-20 buyers)
•
Creates a streamlined
process
•
Focuses on most logical
buyers
•
Process duration of
approximately 3-5 months
•
Contact a diverse universe
viable buyers (over 50)
•
Maximizes alternatives
•
Eliminates any doubts that
the best offer was received
•
Process duration of
approximately 5-6 months
Process Alternatives
We Have Run all of These Processes with Tremendous Success
Exclusive Negotiation
Targeted Process
Comprehensive Process

75
TRANSACTION PROCESS AND TIMING
Stapled Financing
•
Stapled financing can help to accelerate the process,
maximize value and ensure closing if a private equity
group emerges as the most likely winner
–
Enables management to present the story first-hand
–
Allows lenders to become more familiar with the
business earlier in the process
–
Provides a floor for potential buyers to improve
upon
–
Enhances confidence in first round initial
indications
•
Using third-party sources eliminates any potential
conflicts of interest by ensuring that:
–
Seller advisory role is independent from providing
buyer financing
–
All advisor incentives and objectives are aligned
with the client's
–
Focus is on value maximization, regardless of the
financing package utilized
Select Recent Pre-Arranged Financing Packages
has redeemed the equity interest of
and the Silverstein Family has
recapitalized the company with
a portfolio company of
has been acquired by
a portfolio company of
has been acquired by
Wind Point Partners
•
Financing provided by Comerica Bank
of 5.2x total leverage
•
Stapled financing package was used to
close the transaction
•
Antares provided financing of 5.0x total
leverage
•
Stapled financing package was ultimately
used to close the transaction
•
GE Capital committed to provide senior
financing portion of the capital structuring
•
Norwest Mezzanine Partners prepared to
underwrite mezzanine portion of the
capital structure
a portfolio company of
has been acquired by
•
Financing provided by Antares
at 5.0x
+ total leverage
•
Stapled financing package was used to
close the transaction

76
TRANSACTION PROCESS AND TIMING
Mitigating Confidentiality Risk During the Selling Process
•
Announce only
if required or
beneficial
•
Limit due
diligence
period
•
Require
confidentiality
clause
•
Conduct off-site, if
possible
•
Conduct off-site
meetings, but
include tours
•
Limit number of
meetings
•
Piper Jaffray acts
as conduit
(facilitator and
coordinator)
•
Portray as potential
investors/creditors/
other relationships
•
Piper Jaffray and
management
research qualified
buyers
•
Execute strict
confidentiality
agreements
•
Confidential initial
description
•
Limit and sequentially
number memoranda
•
All communication
through Piper Jaffray
•
Limit site visits
•
Collect
information
expeditiously
•
Involve only key
employee(s)
•
Alternative
methods of
communication
(home vs. office)
Methods to
Mitigate Risk
High
High
Medium
Medium
Low
Risk of
Confidentiality
Leak
Closing    
Events
Buyer Due
Diligence
Management
Meetings
Contacting   
Buyers
Preliminary
Due
Diligence

77
TRANSACTION PROCESS AND TIMING
Timing for a Typical Two-Stage Auction
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
•
Conduct due diligence
•
Develop marketing strategy and buyer list
•
Prepare selling memorandum
•
Prepare confidentiality agreements (C.A.)
•
Finalize marketing materials
•
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)
•
Establish ground rules for Phase II
•
Conduct company visits / management presentations
•
Support buyer due diligence
•
Distribute draft of purchase agreement
•
Solicit final offers
•
Evaluate final offers
•
Further negotiate terms
•
Select preferred buyer
•
Draft and execute definitive agreement
•
Conduct final due diligence
•
Submit regulatory filing
Phase I Marketing 4 weeks
Due Diligence 4-5 weeks
Agreement Negotiation/Presentation 3-4 Weeks
Phase II Marketing 4-5 weeks
Select Buyer 2 Weeks
•
Prepare and file proxy materials
•
Press release
SEC Review/Comment 6 Weeks
Stock Holder Meeting 4 Weeks
•
Close transaction
Sign Merger  Agreement 1-3 Weeks

78
Support Purchase Agreement
Negotiations
Support Purchase Agreement
Negotiations
Lead Negotiations/                             
Coordinate with Attorneys
Plan Post-Closing
Assimilation
Negotiations to
Close
Provide
Recommendations
Support Negotiations
Lead Negotiations with Buyers/
Provide Recommendations
Final Buyer Approval
Buyer Selection
Coordinate Information
Facilitate Process
Establish Ground Rules/                 
Maintain Dialogue
Provide Information/
Respond to Data Requests
Buyer Due Diligence
Assist
Assist in Production
Prepare Draft/Organize Meetings
Prepare Management Team/            
Attend Presentations
Provide Input and
Direction/ Lead
Presentations
Management
Presentations
Provide
Recommendations
Analyze Initial Offers
Clarify Terms and Valuation/
Develop Recommendations
Approve
Recommendations
Indications of
Interest
Specific Financial
Buyers
Strategic and Financial Buyers
Key Strategic and Financial
Buyers
None
Initial Buyer Contact
Negotiate                                                        
(with Legal Counsel if Necessary)
As Necessary                                             
(with Legal Counsel if necessary)
None
Confidentiality
Agreements
Final Review
Research Potential Buyers
Assess Prospective Buyers/              
Develop Marketing Pitch
Final review/Analyze Viability
Approve Candidates
Prepare Buyer List
Assist
Assist in Drafting and Production
Create Drafts/                                        
Incorporate Company Information
Highlight Key Areas/                 
Formulate Selling Strengths
Provide Input and
Direction/ Review Drafts/                        
Final Approval
Prepare Confidential
Memorandum
Assist in Developing
Marketing Highlights
Develop Marketing Highlights/           
Draft Company Description
Outline Key Positioning Points/
Anticipate Potential Issues
Guide Company and
Industry Perspectives
Develop Marketing
Strategy
Create Model
Analyze Model and Assumptions
Review Model
Provide Key Assumptions
and Data
Prepare Financial
Forecast
Record Discussions/                
Review Data
Develop List of Topics/                         
Generate Data Request
Lead Diligence Sessions
Provide Information /
Respond to Data requests
Due Diligence and
Interviews
Specialists
(Gurtcheff/Hogan)
Execution Support
(Vaynberg/Kenworthy)
Execution Leaders
(Frost/Sznewajs)
Team Leaders
(Frost/Will)
Board of
Directors and/or
Management
TRANSACTION PROCESS AND TIMING
Significant Senior Level Commitment

79
•
Tailored processes to meet objectives
•
The
highest quality selling memorandums
•
Premier middle market reputations –
we have access
to key decision makers
•
Customized marketing script and strategy for each
buyer
•
Senior bankers lead marketing
•
Critical decision point –
“all hands”
involvement
•
Experience in optimizing competitive environment
•
Disciplined process management
–
Significant diligence completed up front
–
Negotiate purchase agreement
–
Compress time to close
•
Track record of delivering exceptional results
–
Economic and non-economic terms
TRANSACTION PROCESS AND TIMING
Planning
Phase I Marketing
Phase II Marketing
Select Buyer
Finalize Transaction
Our Reputation is Built on the Quality of Our Execution
Piper Jaffray
Tenacious “Hands On”
Execution
Key Objectives
Create a Highly Competitive
Environment
Maximize Value
Expedite Closing
Generate Enthusiasm
and Interest in the
Marketplace
The Right Message,
The Right Process

Section IX
Why Partner With Us?

81
Premier Public Company
Middle Market Advisors
WHY PARTNER WITH US?
•
Significant experience in the Learning Services industry
•
Relationships
with
and
access
to
key
decision
makers
at
strategic
buyers
•
Close
relationships
with
relevant
private
equity
buyers
Industry Knowledge and
Experience
Senior Level Attention
•
Reputation for representing high quality companies
•
Long
history
of
successfully
serving
smaller
capitalization
public
companies
•
Tailored processes to meet objectives
•
Commit experienced investment bankers throughout all phases of the
transaction
•
Client satisfaction is our number one objective
Rigorous Process Management and Strong Track Record In Sell-Side Assignments

Appendix A
M&A Market Update

83
•
M&A activity remains strong in 2005, with YTD
transaction values up almost 30% over 2004
•
Approximately 8,000 transactions have been
announced in the last 12 months, representing
nearly $900 billion in transaction value
•
Economic and market factors remain largely
favorable
-
Strong business performance and a growing
economy
-
Strategic buyers are active and seeking growth
through acquisitions
-
Large overhang of uninvested private equity
capital
-
Aggressive lending markets combined with low
interest rates
-
Higher energy prices beginning to impact the
economy
M&A Market Continues to Build Momentum
Source:  Thompson Financial
M&A MARKET UPDATE
Reported Deal Values      
$400 
$800 
$1,200 
$1,600 
Historical M&A Activity   
$0
0
3,000 
6,000 
9,000 
12,000 
15,000 
Total Reported Deal Values      
Number of Deals  
Recent M&A Activity  
$0
$50
$100 
$150 
$200 
$250 
$300 
0
500 
1,000 
1,500 
2,000 
2,500 
Number of Deals  

84
M&A MARKET UPDATE
•
More than 50% of our closed transactions over the past
18
months involved strategic acquirors
Recent
Piper
Jaffray
“Strategic
Buyer”
Transactions
and management have sold
to
American Coin Merchandising,
Inc.
a portfolio company of
Wellspring
Capital Management
has been acquired by
a portfolio company of
has been acquired by
a portfolio company of
has been acquired by
Piper Jaffray has Access to and Transaction Experience with Key Strategic Buyers
Worldwide
a portfolio company of
Wellspring Capital Management
has been acquired by
Strategic Buyer Activity is Increasing
•
Beginning in the third quarter of 2003, we saw a
significant increase in strategic buyer activity
–
Strategic buyer activity accelerated in 2004
–
Willingness to outbid sponsors in competitive
auctions
–
Once again approaching targets on an unsolicited
basis
•
Amongst our recent closed and pending transactions,
strategic acquirers have been very aggressive
–
Extremely high TTM EBITDA multiples in certain
circumstances
–
Pushing to “pre-empt”
the process and moving
very quickly
•
With investors once again focused on growth, we
expect that strategic acquirers will continue to be
aggressive
has acquired
a manufacturer of premium residential
and commercial windows and doors
has acquired the assets of
and its related subsidiaries
Colder Products Company
has been acquired by
Dover Electronics
a subsidiary of
has been acquired by
a portfolio company of

85
M&A MARKET ENVIRONMENT
•
Favorable lending markets have
allowed sponsors to be even
more aggressive
•
Cash flow and asset based
lenders have been more
aggressive since 2004
–
Continuation of trend started
in the fourth quarter of 2003
–
Driven by improved economic
performance
Source:  Piper Jaffray & Venture Economics
Source:  Portfolio Management Data
•
Faced with the challenge of finding
ways to put their large pools of
capital to work, sponsors continue
to be aggressive
•
Despite a high level of LBO activity
in recent years, there remains a
tremendous amount of uninvested
equity capital that is under
pressure to be put to work
•
LBO transaction value more than
doubled from 2002 to 2003 and
doubled again in 2004.  Activity
in 2005 continues to be brisk
•
Sponsors are using a variety of
strategies to gain a competitive
edge, but certain funds struggle
to differentiate themselves (other
than by price) in competitive
situations
Source:  Portfolio Management Data
Private Equity Remains Active
$13
$19
$25
$37
$37
$64
$101
$100
$118
$123
$120
$110
$100
$0
$20
$40
$60
$80
$100
$120
$140
Univested
Equity Capital            
$28.3
$33.0
$56.7
$52.5
$40.5
$19.5
$21.9
$47.1
$93.9
$119.8
$0
$20
$40
$60
$80
$100
$120
LBO Activity           
Breakdown of Cash Flow Lending Multiples               
3.6x
3.5x
3.3x
2.9x
2.2x
2.4x
2.3x
3.2x
3.4x
3.6x
3.7x
2.1x
1.7x
1.2x
1.2x
1.6x
1.4x
1.7x
1.0x
1.0x
1.0x
1.0X
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Bank Debt/EBITDA
Non-Bank Debt/EBITDA

Appendix B
Fee Proposal

87
Fee Proposal
•
Our investment banking fees are directly linked
to achieving a successful outcome
•
An initial retainer serves two purposes
-
Establishes commitment to the process
-
Helps defray the cost of initial preparation
and the implementation process
•
Reimbursement of out-of-pocket expenses and 
industry-standard indemnification
•
Non-refundable, credited retainer of $100,000 due
at initiation of engagement
•
Contingent success fee payable at closing of 1.5%
aggregate transaction value up to $105 million plus
3% of the incremental aggregated transaction value
to $125 million plus 5.0% of total transaction value
over $125 million
•
Non-refundable, credited fairness opinion fee of
$250,000 due upon delivery of the fairness opinion
•
Minimum success fee
Fee Proposal

Appendix C
The Socrates Team

89
THE SOCRATES TEAM
Matthew Sznewajs
Vice President
Middle Market Mergers &
Acquisitions Group
612-303-2030
matthew.m.sznewajs@pjc.com
Bob
Frost
is
a
principal
and
member
of
the
Middle
Market
Mergers
&
Acquisitions
Group
at
Piper
Jaffray.
Prior to joining Piper Jaffray, Frost spent seven years in public accounting with Deloitte & Touche LLP
providing accounting, auditing, financial reporting and mergers and acquisitions support services.
Frost graduated from the University of Nebraska with a bachelor’s 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.
Robert D. Frost
Principal
Middle Market Mergers &
Acquisitions Group
612-303-8248
robert.d.frost@pjc.com
Matt Sznewajs is a vice president and member of the Middle Market Mergers & Acquisitions Group,
providing a full range of investment banking services to high growth companies.
Prior to joining Piper Jaffray, Sznewajs spent five years with Ernst & Young LLP providing accounting,
auditing
and
fixed
income
transaction
advisory
services.
He
also
structured
commercial
mortgage
backed securities at Nomura Securities.
Sznewajs graduated from Indiana University with a bachelor’s degree in accounting and finance and
received a Master of Business Administration degree from the Kellogg School of Management at
Northwestern.
Jerry Will is a managing director on the Business Services Team and leads the Learning Services and
Technology & Business Services practice. He has extensive transaction experience, including public
offerings, private placements, mergers and acquisitions and strategic advisory engagements.
Will
joined
Piper
Jaffray
from
the
law
firm
of
Faegre
&
Benson
located
in
Minneapolis,
where
he
was
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. John’s University in Collegeville, Minn. and received a master’s degree in
physics
from
the
University
of
Wisconsin-Madison
and
a
juris
doctorate
degree
from
Stanford
Law
School.
Jerry T. Will
Managing Director
Technology  &
Communications Group
612-303-6309
Jerome.t.will@pjc.com

90
THE SOCRATES TEAM
Michael S. Kenworthy
Analyst
Middle Market Mergers &
Acquisitions Group
612.303.6477
michael.s.kenworthy@pjc.com
Michael Kenworthy is an analyst in Piper Jaffray’s Middle Market Mergers & Acquisition Group. 
Kenworthy is responsible for performing quantitative analysis and financial modeling of mergers and
acquisitions, leveraged buyouts, equity offerings, private placements and other investment banking
transactions. 
Kenworthy has a bachelor’s degree in economics from the University of Wisconsin-Madison.
Garry Vaynberg
Associate
Middle Market Mergers &
Acquisitions Group
612.303.6348
garry.x.vaynberg@pjc.com
Garry Vaynberg is an associate and member of the Middle Market Mergers & Acquisitions Group.
Prior to joining Piper Jaffray, Vaynberg spent five years with A.G. Edwards & Sons and Delphi Financial
Corp. where his experience included exclusive sell-side assignments, buyer advisory services, fairness
opinions
and
public
and
private
offerings
of
equity
and
debt.
He
also
co-founded
a
venture
capital
financed media company.
Vaynberg graduated from University of Minnesota with a bachelor’s 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.

91
THE SOCRATES TEAM
Glenn A. Gurtcheff
Head of Financial Sponsors
Managing Director
612-303-5548
glenn.a.gurtcheff@pjc.com
Glenn Gurtcheff is a managing director and co-head of the Middle Market Mergers & Acquisitions Group
and based in the firm’s Minneapolis office. His transaction experience includes numerous exclusive sale
mandates, buy-side advisory services, leveraged buyouts, divestitures, fairness opinions, defensive
advisory
assignments
and
financings
for
a
wide
range
of
clients,
including
private
equity
groups,
public
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 bachelor’s degree in mechanical
engineering and from the University of Minnesota with an master’s 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.
Head of Financial Sponsors
Managing Director
612-303-6380
john.a.hogan@pjc.com
John Hogan is a managing director and head of Financial Sponsors.  He is focused on developing
relationships with private equity groups. Previously Hogan worked as a senior banker on the  Middle
Market M&A team and started his career at Piper Jaffray in 1997 with responsibility for investment
banking activities in the Transportation Equipment & Services industry sector. His transaction
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
bank’s portfolio.
Hogan graduated cum laude from Carleton College with a bachelor’s degree in economics and received
a Master of Business Administration degree from the University of Minnesota Carlson School of
Management.

92
THE SOCRATES TEAM
David I. Wilson
Managing Director, Head
of European Investment
Banking
44-20-7743-8701
david.i.wilson@pjc.com
David Wilson is a managing director in the Investment Banking Group at Piper Jaffray and heads up
the firm’s London office. He has significant experience in the UK waste, health care, support services,
transport, engineering/ construction, leisure, utilities and TMT
sectors.
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
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.

Appendix D
Valuation Detail

94
VALUATION DETAIL
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

95
VALUATION DETAIL
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 Centres
Ltd.
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
educ
software
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
educ
services
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
educ
svcs
Knowledge Learning Corp.
Pvd
educ
svcs
$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
educ
via 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
NetSchools
Corp.
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
educ
svcs
$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 Cos
Inc.
Publishing co
$635
-
-
-
-
-
-
-
-
-
6/30/00
Global Video Inc.
Dvlp
educ
videos
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
educ
materials
$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

96
VALUATION DETAIL
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

97
VALUATION DETAIL
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

98
VALUATION DETAIL
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

99
VALUATION DETAIL
Going Private Transactions & Premiums –
1/1/00 -
12/1/05
Source:
SDC;
Transactions
sizes
between
$50
-
$500 mm.    
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-Iseman
Capital 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.com
Inc
Pvd
ticket distn
svcs
MLB Advanced Media LP
Multi-media company
32.5%
29.4%
46.7%
Jan-05
MAPICS Inc
Develop ERM software
Infor
Global Solutions
Dvlp
entrp
software
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,supply
mechsoftware
ValueAct
Capital Partners LP
Investment company
12.6%
16.1%
19.8%
May-04
CompuCom
SystemsInc(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
WorkFlow
Management 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 Cos
Inc
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 hldg
co
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,fitness
clubs
Investor Group
Investor group
25.0%
24.5%
31.6%
Mar-03
Colorado MEDtech
Inc
Mnfr
surgical,med
prod
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,framing
supplies
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,advisory
svcs
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%

100
VALUATION DETAIL
Going Private Transactions & Premiums –
1/1/00 -
12/1/05 (cont’d)
Source:
SDC;
Transactions
sizes
between
$50
-
$500
mm.      
Transaction Premiums   
1 Day
1 Week
4 Weeks
Date
Target
Target Business
Acquiror
AcquirorBusiness
Prior
Prior
Prior
Mar-02
Associated Materials Inc
Mnfr
steel,aluminum
siding
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,design
custom 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'Lakes
Inc
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
NextHealth
Inc
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,Oak
Park,Illinois
Commercial bank;holding
co
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,casualty
ins 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;whl
furniture
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
EndoSonics
Corp
Mnfr
image processing equip
Jomed
NV
Whl
medical,dental,hosp
equip
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,lock
systems
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,commun
svcs
VeronisSuhler
& Asoc
Commun
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%