Pearlman and Company

Transaction Assumptions
In Thousands of Canadian Dollars
Please only change blue cells.
Transaction Assumptions
Amount $2,150 Click on this button to print entire worksheet.

Return
Work Fee 2.0% As a percentage of the deal size
Coupon Rate 9.0%
2000 2001 2002 2003 2004 2005 2006
Bonus Interest $0 $0
### $0
### $115
### $120
### $160
### $200

Repayment 2000 2001 2002 2003 2004 2005 2006

Repayment Schedule $0 $150 $150 $350 $350 $450 $700
Cash Sweep (% of EBITDA) 6.0%

Covenants 2000 2001 2002 2003 2004 2005 2006

Current Ratio 1.40x 1.50x 1.60x 1.60x 1.60x 1.60x 1.60x If not applicable then type NA
Interest Coverage 1.60x 1.70x 1.80x 2.00x 2.00x 2.00x 2.00x If not applicable then type NA
Debt Coverage NA NA NA NA NA NA NA If not applicable then type NA
Fixed Charge Coverage NA NA NA NA NA NA NA If not applicable then type NA
Debt to Equity 2.75x 2.60x 2.40x 2.20x 2.00x 2.00x 2.00x If not applicable then type NA
Debt to Total Capitalization NA NA NA NA NA NA NA If not applicable then type NA

Financial Assumptions
2000 2001 2002 2003 2004 2005 2006
Sales Growth 2.0% 1.0%
### 1.0%
### 1.0%
### 1.0%
### 1.0%
### 1.0%
Gross Margin 30.0% 29.0%
### 28.0%
### 28.0%
### 28.0%
### 28.0%
### 28.0%
Days of Receivables 145 145
### 145
### 145
### 145
### 145
### 145
Days of Inventory 107 107
### 107
### 107
### 107
### 107
### 107
Days of Payables 96 ###
96 ###
96 ###
96 ###
96 ###
96 96
Capital Expenditures $45 $45
### $45
### $45
### $45
### $45
### $45
Pearlman and Company
Transaction Summary
In Thousands of Canadian Dollars

Projected
2000 2001 2002 2003 2004 2005 2006

RoyNat Return 14.00%

Income Statement Items

Sales $23,494 $23,729 $23,966 $24,206 $24,448 $24,693 $24,939
Gross Margin 30.00% 29.00% 28.00% 28.00% 28.00% 28.00% 28.00%
EBITDA $1,880 $1,661 $1,438 $1,452 $1,467 $1,482 $1,496
EBITDA Margin 8.00% 7.00% 6.00% 6.00% 6.00% 6.00% 6.00%
Total Interest $640 $594 $513 $586 $517 $506 $454
Net Income $1,190 $1,035 $886 $828 $865 $876 $894

Balance Sheet Items

Total Debt (1) $7,130 $6,192 $5,405 $4,672 $3,904 $3,126 $2,332
Total Equity (2) $3,167 $4,203 $5,089 $5,917 $6,782 $7,658 $8,553

Cash Flow Items

Cash Flow From Operations $719 $984 $832 $778 $813 $823 $839
Capital Expenditures $45 $45 $45 $45 $45 $45 $45

Ratio / Covenants
Current Ratio 1.53x 1.65x 1.77x 1.84x 1.92x 1.99x 2.19x
Covenant 1.40x 1.50x 1.60x 1.60x 1.60x 1.60x 1.60x

Interest Coverage 2.94x 2.79x 2.80x 2.48x 2.84x 2.93x 3.30x

Covenant 1.60x 1.70x 1.80x 2.00x 2.00x 2.00x 2.00x

Debt Coverage NA NA NA NA NA NA NA
Covenant NA NA NA NA NA NA NA

Fixed Charge Coverage NA NA NA NA NA NA NA

Covenant NA NA NA NA NA NA NA

Debt to Equity 2.25x 1.47x 1.06x 0.79x 0.58x 0.41x 0.27x

Covenant 2.75x 2.60x 2.40x 2.20x 2.00x 2.00x 2.00x

Debt to Total Capitalization NA NA NA NA NA NA NA

Covenant NA NA NA NA NA NA NA

Note: Blue cells indicate covenant met, red cells indicate covenant broken.
(1) Total debt includes bank indebtedness, long term debt and RoyNat loan.
(2) Total equity includes shareholders' equity and shareholder loan.
Pearlman and Company
Return Calculation
In Thousands of Canadian Dollars

PF Projected
1999 2000 2001 2002 2003 2004 2005 2006

Outflows:
Loan ($2,150)
Total ($2,150) $0 $0 $0 $0 $0 $0 $0

Inflows
Work Fee $43
Principal Repayment $0 $150 $150 $350 $350 $450 $137
Contractual Interest $194 $183 $161 $140 $100 $61 $12
Bonus Interest $0 $0 $0 $115 $120 $160 $200
Cash Sweep $113 $100 $86 $87 $88 $89 $0
Total $43 $306 $433 $397 $692 $658 $760 $350

Inflows / Outflows ($2,107) $306 $433 $397 $692 $658 $760 $350

IRR 14.00%
Pearlman and Company
Balance Sheet
In Thousands of Canadian Dollars

Historical Pro Forma Projected

1996 1997 1998 1999 Adjustments 1999 2000 2001 2002 2003 2004 2005 2006
ASSETS

Accounts Receivable $4,836 $5,400 $9,022 $8,948 $8,948 $9,333 $9,427 $9,521 $9,616 $9,712 $9,809 $9,907
Inventories 3,500 4,142 5,834 5,076 5,076 4,821 4,939 5,059 5,109 5,160 5,212 5,264
Prepaid Expenses 43 153 296 245 245 245 245 245 245 245 245 245
Current Assets $8,380 $9,695 $15,153 $14,268 $0 $14,268 $14,399 $14,610 $14,824 $14,970 $15,117 $15,266 $15,416

Capital Assets 189 162 169 235 235 224 215 208 202 198 194 191
Fixed Assets $189 $162 $169 $235 $0 $235 $224 $215 $208 $202 $198 $194 $191

Total Assets $8,568 $9,857 $15,322 $14,503 $0 $14,503 $14,623 $14,825 $15,032 $15,172 $15,315 $15,460 $15,608

LIABILITIES

Bank Indebtedness $4,341 $4,966 $6,583 $5,654 $5,654 $5,093 $4,404 $3,854 $3,558 $3,228 $2,989 $2,332
Accounts Payable 2,824 2,797 5,775 4,721 4,721 4,325 4,431 4,538 4,584 4,630 4,676 4,723
Curent Maturity of Long Term Debt 25 25 0 0 0 0 0 0 0 0 0 0
Current Liabilities $7,191 $7,788 $12,358 $10,375 $0 $10,375 $9,419 $8,835 $8,392 $8,142 $7,857 $7,665 $7,055

Long Term Debt $36 $20 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

RoyNat Loan 0 0 0 0 2,150 2,150 2,037 1,788 1,551 1,114 676 137 0
Shareholder's Loan (1) 2,128 2,128 2,128 2,128 (1,528) 600 600 600 600 600 600 600 600
Long Term Liabilities $2,164 $2,148 $2,128 $2,128 $622 $2,750 $2,637 $2,388 $2,151 $1,714 $1,276 $737 $600

Total Liabilities $9,355 $9,936 $14,486 $12,503 $622 $13,125 $12,056 $11,223 $10,544 $9,856 $9,134 $8,402 $7,655

SHAREHOLDERS' EQUITY

Capital Stock $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4 $4
Retained Earnings (2) (790) (83) 832 1,995 (622) 1,373 2,563 3,599 4,485 5,313 6,178 7,054 7,949
Total Shareholders' Equity ($787) ($79) $836 $1,999 ($622) $1,377 $2,567 $3,603 $4,489 $5,317 $6,182 $7,058 $7,953

Total Liabilities and SE $8,568 $9,857 $15,322 $14,503 $0 $14,503 $14,623 $14,826 $15,033 $15,173 $15,316 $15,461 $15,608
Check $0 $0 $0 $0 ($0) ($0) ($0) ($0) ($0) ($0) ($0) ($0) ($0)

(1) Sharedholder loan payable to majority shareholder, Heropa Investments pre-transaction and payable to Pearlman management post transaction.
(2) Dividend paid to Heropa Investments as well as transaction fees accounted through retained earnings.
Pearlman and Company
Income Statement
In Thousands of Canadian Dollars

Historical Projected
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Sales $13,366 $15,867 $21,768 $23,033 $23,494 $23,729 $23,966 $24,206 $24,448 $24,693 $24,939

Cost of Goods Sold $9,533 $11,261 $15,924 $16,463 $16,446 $16,848 $17,256 $17,428 $17,603 $17,779 $17,956
Gross Profit $3,833 $4,606 $5,844 $6,570 $7,048 $6,881 $6,711 $6,778 $6,845 $6,914 $6,983
Gross Margin 28.68% 29.03% 26.85% 28.52% 30.00% 29.00% 28.00% 28.00% 28.00% 28.00% 28.00%

Expenses
Selling $1,376 $1,728 $2,294 $2,413 $2,584 $2,610 $2,636 $2,663 $2,689 $2,716 $2,743
Administrative 1,497 1,706 2,077 2,408 2,584 2,610 2,636 2,663 2,689 2,716 2,743
Total $2,873 $3,433 $4,371 $4,821 $5,169 $5,220 $5,273 $5,325 $5,379 $5,432 $5,487

EBITDA $960 $1,172 $1,473 $1,749 $1,880 $1,661 $1,438 $1,452 $1,467 $1,482 $1,496
EBITDA Margin 7.18% 7.39% 6.77% 7.60% 8.00% 7.00% 6.00% 6.00% 6.00% 6.00% 6.00%

Depreciation $48 $56 $52 $44 $56 $54 $52 $51 $49 $49 $48

EBIT $912 $1,116 $1,421 $1,706 $1,824 $1,607 $1,386 $1,402 $1,417 $1,433 $1,449

Interest Expense $476 $375 $487 $577 $640 $594 $513 $586 $517 $506 $454

Income Before Undernoted Items: $437 $741 $933 $1,128 $1,587 $1,380 $1,182 $1,104 $1,154 $1,169 $1,193
Foreign Exchange (Gain) / Loss (11) 34 18 (34) 0 0 0 0 0 0 0

Income Before Tax $448 $708 $915 $1,163 $1,587 $1,380 $1,182 $1,104 $1,154 $1,169 $1,193
Income Tax (1)
$0 $0 $0 $0 $397 $345 $295 $276 $288 $292 $298

Net Income $448 $708 $915 $1,163 $1,190 $1,035 $886 $828 $865 $876 $894

(1) The company utilized prior years' losses carried forward to eliminate income taxes otherwise payable.
Pearlman and Company
Cash Flow Statement
In Thousands of Canadian Dollars

Historical PF Projected
1996 1997 1998 1999 1999 2000 2001 2002 2003 2004 2005 2006
Funds Provided by Operating Activities
Net Income $448 $708 $915 $1,163 $1,190 $1,035 $886 $828 $865 $876 $894
Amortization 48 56 52 44 56 54 52 51 49 49 48

Changes in Working Capital 367 1,343 2,480 169 527 105 107 100 101 102 103
$129 ($579) ($1,512) $1,038 $0 $ 718.70 $984 $832 $778 $813 $823 $839

Funds Provided by Financing Activities

Increase in Long Term Debt $61 ($16) ($45) $0 $0 $0 $0 $0 $0 $0 $0 $0
Increase RoyNat Loan 0 0 0 0 $2,150 ($113) ($250) ($236) ($437) ($438) ($539) ($137)
Increase in Shareholder Loan 0 0 0 0 ($1,528) $0 $0 $0 $0 $0 $0 $0
Increase in Capital Stock 0 0 0 0 0 0 0 0 0 0 0 0
$61 ($16) ($45) $0 $622 ($113) ($250) ($236) ($437) ($438) ($539) ($137)

Funds Provided by Investing Activities

Capital Expenditures ($107) ($30) ($59) ($109) ($45) ($45) ($45) ($45) ($45) ($45) ($45)
Dividends $0 $0 $0 $0 ($622) $0 $0 $0 $0 $0 $0 $0
($107) ($30) ($59) ($109) ($622) ($45) ($45) ($45) ($45) ($45) ($45) ($45)

Bank Indebtedness
(Increase) / Decrease $83 ($625) ($1,617) $929 $0 $560.9 $689 $550 $296 $330 $239 $657

Beginning of the Year ($4,425) ($4,341) ($4,966) ($6,583) ($5,654) ($5,654) ($5,093) ($4,404) ($3,854) ($3,558) ($3,228) ($2,989)
End of the Year ($4,341) ($4,966) ($6,583) ($5,654) ($5,654) ($5,093) ($4,404) ($3,854) ($3,558) ($3,228) ($2,989) ($2,332)
Pearlman and Company
Debt Schedule
In Thousands of Canadian Dollars

Projected
2000 2001 2002 2003 2004 2005 2006

Bank Indebtedness
Opening $5,654 $5,093 $4,404 $3,854 $3,558 $3,228 $2,989
Closing $5,093 $4,404 $3,854 $3,558 $3,228 $2,989 $2,332
Interest $403 $367 $309 $288 $253 $242 $198

Long Term Debt

Opening $0 $0 $0 $0 $0 $0 $0
Advancements 0 0 0 0 0 0 0
Repayments 0 0 0 0 0 0 0
Closing $0 $0 $0 $0 $0 $0 $0
Interest $0 $0 $0 $0 $0 $0 $0

RoyNat Loan
Opening $2,150 $2,037 $1,788 $1,551 $1,114 $676 $137
Advancements 0 0 0 0 0 0 0
Repayments 0 150 150 350 350 450 137
Cash Sweep 113 100 86 87 88 89 0
Closing $2,037 $1,788 $1,551 $1,114 $676 $137 $0
Interest $194
### $183
### $161
### $140
### $100
### $61
### $12
Bonus Interest 0 0 0 115 120 160 200
Total Interest $194 $183 $161 $255 $220 $221 $212

Shareholder Loan
Opening $600 $600 $600 $600 $600 $600 $600
Advancements 0 0 0 0 0 0 0
Repayments 0 0 0 0 0 0 0
Closing $600 $600 $600 $600 $600 $600 $600
Interest $44 $44 $44 $44 $44 $44 $44

Total Interest $640 $594 $513 $586 $517 $506 $454

Scheduled Repayments $0 $150 $150 $350 $350 $450 $137
Total Debt $7,130 $6,192 $5,405 $4,672 $3,904 $3,126 $2,332

*Bank Indebtedness interest calculated in two rounds to avoid circularity

Total Non-Circular Interest $237 $227 $204 $298 $264 $264 $256
Bank Indebtedness Round 1 $403 $367 $309 $288 $253 $242 $198
Bank Indebtedness Round 2 414 366 318 286 262 240 205
Pearlman and Company
Ratio and Covenant Calculations
In Thousands of Canadian Dollars

Projected
2000 2001 2002 2003 2004 2005 2006

Liquidity Ratios
Current Ratio (1) 1.53x 1.65x 1.77x 1.84x 1.92x 1.99x 2.19x
Covenant 1.40x 1.50x 1.60x 1.60x 1.60x 1.60x 1.60x

Coverage Ratios
Interest Coverage 2.94x 2.79x 2.80x 2.48x 2.84x 2.93x 3.30x
Covenant 1.60x 1.70x 1.80x 2.00x 2.00x 2.00x 2.00x
Debt Coverage (2) 3.79x 3.73x 3.76x 3.22x 2.66x 2.11x 1.56x
Covenant NA NA NA NA NA NA NA
Fixed Charge Coverage 1.74x 1.46x 1.43x 1.16x 1.22x 1.15x 1.60x
Covenant NA NA NA NA NA NA NA

Leverage Ratios
Debt to Equity (2) 225.1% 147.3% 106.2% 79.0% 57.6% 40.8% 27.3%
Covenant 275.0% 260.0% 240.0% 220.0% 200.0% 200.0% 200.0%
Debt to Total Capitalization (2)
69.2% 59.6% 51.5% 44.1% 36.5% 29.0% 21.4%
Covenant NA NA NA NA NA NA NA
(1) Current liabilities excludes current portion of long term debt.
(2) Total debt excludes shareholder loan which is considered equity.
Pearlman and Company
Detailed Assumptions
In Thousands of Canadian Dollars

Projected
2000 2001 2002 2003 2004 2005 2006

Income Statement Assumptions

Sales Growth 2.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Gross Margin 30.00% 29.00% 28.00% 28.00% 28.00% 28.00% 28.00%
Selling Expense (% of sales) 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% 11.00%
Administrative Expense (% of sales) 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% 11.00%
Amortization (% of Capital Assets) 20.00% 20.00% 20.00% 20.00% 20.00% 20.00% 20.00%
Income Tax Rate 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%

Balance Sheet Assumptions

Days of Receivables 145 145 145 145 145 145 145
Days of Inventory 107 107 107 107 107 107 107
Days of Payables 96 96 96 96 96 96 96

Cash Flow Assumptions

Capital Expenditures 45 45 45 45 45 45 45

Debt Schedule Assumptions

Prime (1) 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%
Bank Indebtedness (+ prime) 0.50% 0.50% 0.50% 0.50% 0.50% 0.50% 0.50%
Long Term Debt (+ prime) 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
RoyNat Loan (fixed) 9.00% 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
Shareholder Loan (+ prime) 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
(1) Based on projections as at March 2000.