EX-99.(C)(2) 13 dex99c2.htm PRESENTATION MATERIALS, DATED OCTOBER 2007. Presentation Materials, dated October 2007.
Project Jefferson
October 2007
Discussion Materials
STRICTLY CONFIDENTIAL
Exhibit (c)(2)

1
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2
Project Jefferson: Catterton
Offer Progression
On October 22, 2007, the Independent Committee received a proposal letter from
Eddie Lampert
and Sears Holdings at $4.00 per share
Catterton
Original Offer
10/10/07
Catterton
Revised Offer
10/17/07
Catterton
Current
Offer
10/18/07
Consideration
Closing Conditions;
MAE
Go-Shop
Fiduciary out
Termination Right
Reverse
Break-up Fee
No Vote Break-up
-
Fee
Shareholder
Rollover
$6.50 per share in cash, without interest
$6.60 per share in cash, without interest
$6.70 per share in cash, without interest
Consent to change of control for leases
that require such consent
Bank of America waiver of Change in
Control is in effect
Consent to change of control for leases
that require such consent
Bank of America waiver of Change in
Control is in effect
Working
through
11
leases
to
eliminate/define scope of condition;
currently remains as a proposed condition
Working with Bank of America to provide
committed financing
No MAE; current Jefferson ask: No bring-
down of MAE rep to closing
20 Days
30 Days with open go-shop provision (i.e.,
Topps)
35 Days with open go-shop provision (i.e.,
Topps)
Subject to matching rights
Subject to matching rights
–
to be discussed
Subject to matching rights
–
Catterton
proposed
5
business
days
to match
5.00% of equity value during go-shop
period or if deal is signed with an
"excluded party" following go-shop period
(plus expense reimbursement); 6.00%
(plus expense reimbursement) otherwise
3.00% of equity value during go-shop
period or if deal is signed with an
"excluded party" following go-shop period
(plus expense reimbursement); 5.00%
(plus expense reimbursement) otherwise
2.50 % of equity value (plus expense
reimbursement) not to exceed 3.00% of
equity
value
during
go-shop
period
or
if
deal is signed with an "excluded party"
following go-shop period; 4.00% (plus
expense reimbursement) otherwise
3.00% of equity value.  Payment of this
fee shall be the sole and exclusive remedy
available to the Company in the event it
suffers any damages for which Buyer is
liable in connection with the execution of
the merger agreement
3.50% of equity value (plus expense
reimbursement)
Fund guarantee of obligations
4.00% of equity value (plus expense
reimbursement)
Fund guarantee of obligations
None
1% of equity value (plus expense
reimbursement)
1% of equity value
7.5 million shares
Institutional shareholder group was not
identified
7.5 million shares
Potential rollover shareholders:
–
Gary Friedman
6.7%
–
Glenhill
Advisors
12.7%
–
Palo Alto Investors
10.4%
–
Reservoir Capital
6.5%
–
Total
36.3%
Additional provisions to be discussed
7.5 million shares
–
Glenhill
Advisors and Reservoir Capital
to agree to underwrite all 7.5mm
shares
Potential rollover shareholders:
–
Gary Friedman
6.7%
–
Glenhill
Advisors
12.7%
–
Palo Alto Investors
10.4%
–
Vardon
Capital
9.6%
–
Reservoir
Capital
6.5%
–
Total
45.9%
Additional provisions to be discussed
Break-up
Fee

3
Valuation Matrix
Current Price
At Offer
10/23/07
($mm)
$2.92
$6.70
Premium to Current Price ($2.92)
-
129.5%
Fully Diluted Share Count
38.8
39.8
Equity Value
$113.4
$266.8
Plus: Debt (8/4/07)
106.5
106.5
Less: Cash (8/4/07)
2.7
2.7
Total Enterprise Value
$217.1
$370.5
Premium
Data
1 Month Average
$3.17
(7.9%)
111.2%
6 Month Average
$4.65
(37.3%)
44.0%
1 Year Average
$6.15
(52.6%)
8.9%
52 Week High
$9.63
(69.7%)
(30.4%)
52 Week Low
$2.82
3.5%
137.6%
TEV / LTM Revenue
$ 726.0 mm
0.30x
0.51x
TEV / LTM EBITDA
$ 16.5 mm
13.2x
22.5x
TEV / 2007E EBITDA (Management)
$ 17.9 mm
12.1x
20.7x
TEV / 2007E EBITDA (Wall Street)
$ 25.0 mm
8.7x
14.8x
TEV / 2008E EBITDA (Management)
$ 27.2 mm
8.0x
13.6x
TEV / 2008E EBITDA (Wall Street)
$ 43.0 mm
5.0x
8.6x

4
Premiums Paid Analysis
Premium¹
to Target Market Price (%)
1 Day Prior
1 Week Prior
4 Weeks Prior
All Transactions (195 Transactions)²
24.1
25.9
29.5
Catterton
Offer @ $6.70
129.5
125.6
123.3
Notes:
1   Premiums reflect median premiums.
2
From
Securities
Data
Corporation
for
select
domestic
transactions
since
October
2004
to
October
2007
deemed
relevant
by
UBS
Investment
Bank.
Excluded oil & gas and financial service transactions, transactions between $100 million to $1 billion in equity value.

5
0.00
2.00
4.00
6.00
8.00
10.00
10/23/06
1/4/07
3/18/07
5/30/07
8/11/07
10/23/07
At Offer = $6.70
Stock Price Performance
Moving Averages:
30-Day:
$3.17
60-Day:
$3.20
90-Day
$3.55
As of October 23, 2007, Jefferson’s stock price is $2.92
Source:     FactSet

6
Selected Trading Statistics
1
Enterprise Value/
Enterprise Value/
Market
Enterprise
LTM
FY07E
FY08E
LTM
FY07E
FY08E
P/E
P/E/G
LT EPS
LTM EBITDA
Cap
Value
Sales
Sales
Sales
EBITDA
EBITDA
EBITDA
FY07E
FY08E
FY07E
FY08E
Growth
Margin
Company
($mm)
($mm)
(x)
(x)
(x)
(x)
(x)
(x)
(x)
(x)
(x)
(x)
(%)
(%)
Jefferson (Wall Street) @ Market
113
217
0.30
0.29
0.26
13.2
8.7
5.0
nm
nm
nm
nm
33.8
2.3
Jefferson (Management) @ Market
113
217
0.30
0.29
0.29
13.2
12.1
8.0
nm
nm
nm
nm
33.8
2.3
Jefferson (Wall Street) @ $6.70 Bid
267
371
0.51
0.49
0.44
22.5
14.8
8.6
nm
nm
nm
nm
33.8
2.3
Jefferson (Management) @ $6.70 Bid
267
371
0.51
0.50
0.50
22.5
20.7
13.6
nm
nm
nm
nm
33.8
2.3
Home Furnishings / Improvement
Home Depot
52,255
60,874
0.68
0.77
0.75
5.6
6.4
6.3
11.9
12.5
1.0
1.0
12.4
12.1
Lowe's
39,545
43,824
0.91
0.89
0.82
6.8
6.9
6.6
13.3
12.8
0.9
0.8
15.1
13.5
Bed Bath & Beyond
9,087
8,503
1.23
1.19
1.08
8.2
8.1
7.5
15.2
14.1
1.0
0.9
15.1
15.0
Williams-Sonoma
3,286
3,256
0.86
0.82
0.77
6.9
6.8
6.4
15.9
14.6
1.1
1.0
14.4
12.4
Ethan Allen
981
1,037
1.03
0.99
0.94
7.0
6.7
6.4
12.0
11.1
1.4
1.3
8.7
14.7
Mean
0.94
0.93
0.87
6.9
7.0
6.6
13.7
13.0
1.1
1.0
13.1
13.5
Median
0.91
0.89
0.82
6.9
6.8
6.4
13.3
12.8
1.0
1.0
14.4
13.5
Other Specialty Retail -
Large Cap
Best Buy
20,092
20,596
0.54
0.52
0.47
8.1
7.4
6.7
14.3
13.3
0.9
0.9
15.3
6.7
Staples
15,906
15,574
0.82
0.80
0.73
8.2
8.0
7.1
15.5
13.7
1.0
0.8
16.3
10.0
Office Depot
5,533
6,058
0.39
0.39
0.37
5.6
5.9
5.6
10.6
10.1
0.8
0.7
13.8
7.0
OfficeMax
2
2,348
2,602
0.29
0.28
0.27
5.7
5.3
5.0
13.0
11.4
0.8
0.7
15.4
5.0
Mean
0.51
0.50
0.46
6.9
6.6
6.1
13.4
12.1
0.9
0.8
15.2
7.2
Median
0.47
0.45
0.42
6.9
6.6
6.1
13.7
12.3
0.9
0.8
15.4
6.9
Other Specialty Retail -
Mid Cap
Cabela's
1,351
1,669
0.76
0.70
0.58
8.4
7.0
6.0
14.4
12.2
1.0
0.8
15.1
9.1
Conn's
558
514
0.65
0.61
0.55
6.8
6.5
5.8
12.8
11.6
1.0
0.9
12.8
9.5
Jo-Ann Stores
500
642
0.34
0.34
0.33
8.9
7.2
6.2
32.2
20.9
2.1
1.4
15.0
3.8
hhgregg
499
637
0.57
0.51
0.41
8.6
8.4
7.0
16.4
12.3
0.8
0.6
20.8
6.7
A.C. Moore
333
301
0.51
0.50
0.44
13.5
9.6
6.8
26.9
17.0
1.2
0.8
22.2
3.8
Mean
0.57
0.53
0.46
9.2
7.7
6.4
20.5
14.8
1.2
0.9
17.2
6.6
Median
0.57
0.51
0.44
8.6
7.2
6.2
16.4
12.3
1.0
0.8
15.1
6.7
Overall High
1.23
1.19
1.08
13.5
9.6
7.5
32.2
20.9
2.1
1.4
22.2
15.0
Overall Mean
0.69
0.66
0.61
7.7
7.2
6.4
16.0
13.4
1.1
0.9
15.2
9.2
Overall Median
0.66
0.66
0.56
7.6
7.0
6.4
14.3
12.7
1.0
0.9
15.1
9.3
Overall Low
0.29
0.28
0.27
5.6
5.3
5.0
10.6
10.1
0.8
0.6
8.7
3.8
Notes:
1    As of 10/23/07
2
Adjusted
for
Securitized
Timber
Notes

7
Selected Precedent Transaction Statistics
Notes:
1
Enterprise Value equal to fully diluted equity value plus total debt and minority interest minus cash and cash equivalents (all at book value)
2
Ares
acquired
19.9%
of
the
equity;
precedent
assumes
exercise
of
option
for
additional
30.2%
equity
stake
at
$126.8mm,
with
equity
value
grossed
up
to
100%
and
includes
revolver,
CMBS
and
seller note to Sears
3
Offer price for Brookstone was revised from $20.50 down to $20.00 in July 2005 prior to closing due to weak financial results post transaction announcement
Announcement
Date
Acquiror
Target
FD Market
Value
($mm)
EV¹
($mm)
LTM
Sales
(x)
LTM EBITDA
(x)
LTM
EBITDA
Margin (%)
Nov-06
Dick’s Sporting Goods
Golf Galaxy
220
210
0.84
10.9
7.7
Jul-06
Leonard Green, Texas Pacific Group
PETCO
1,679
1,815
0.89
8.9
10.0
Jun-06
Bain Capital, Blackstone
Michaels Stores
6,046
5,604
1.52
11.0
13.8
May-06
PPR
Sportsman Guide
265
256
0.88
14.3
6.1
Jan-06
Leonard Green & Partners
The Sports Authority
1,021
1,372
0.55
8.3
6.7
Dec-05
Best Buy
Pacific Sales Kitchen and Bath Centers
na
410
1.28
na
na
Nov-05
Ares Management
Orchard Supply Hardware
2
na
776
na
na
na
Nov-05
Apollo Management
Linens'n
Things
1,292
1,284
0.48
9.1
5.3
Sep-05
Berkshire Partners, Weston Presido
Party City
374
363
0.72
13.1
5.5
Apr-05
J.W.
Childs,
Osim
International,
Temasek
Holdings
Brookstone
3
441
402
0.80
8.5
9.4
Jun-03
Bed Bath & Beyond
Christmas Tree Shops
na
200
0.54
na
na
High
6,046
5,604
1.52
14.3
13.8
Mean
1,417
1,154
0.85
10.5
8.1
Median
731
410
0.82
10.0
7.2
Low
220
200
0.48
8.3
5.3
Jefferson @ $6.70 Bid
267
371
0.51
22.5
2.3
2

8
32.6
Premiums Paid to Retail Precedent Transactions
Premium to Target Market Price (%)
Date Announced
Acquiror
Target
1 Day Prior
1 Week Prior
4 Weeks Prior
Nov-06
Dick’s Sporting Goods
Golf Galaxy
19.0
21.2
40.6
Jul-06
Leonard Green, Texas Pacific Group
PETCO
49.1
48.3
57.9
Jun-06
Bain Capital, Blackstone
Michaels Stores
29.6
34.2
37.7
May-06
PPR
Sportsman Guide
14.8
17.8
18.1
Jan-06
Leonard Green & Partners
The Sports Authority
20.0
26.0
20.7
Dec-05
Best Buy
Pacific Sales Kitchen and Bath Centers
na
na
na
Nov-05
Ares Management
Orchard Supply Hardware
na
na
na
Nov-05
Apollo Management
Linens'n
Things
7.9
14.9
17.0
Sep-05
Berkshire Partners, Weston Presido
Party City
42.5
33.8
Apr-05
J.W.
Childs,
Osim
International,
Temasek
Holdings
Brookstone
28.2
21.8
40.7
Jun-03
Bed Bath & Beyond
Christmas Tree Shops
na
na
na
High
49.1
48.3
57.9
Mean
26.4
27.2
33.2
Median
24.1
23.9
35.1
Low
7.9
14.9
17.0
Jefferson @ $6.70 Bid
129.5
125.6
123.3
Source:  Securities Data Corporation

9
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