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[XXXXXXX XXXXX LETTERHEAD]
November 3, 1995
Board of Directors
Xxxxx & Xxxxxxx United, Inc.
00 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Xxxxx & Xxxxxxx United, Inc. (the "Company"), The
Xxxxxxx-Xxxxxxxx Company (the "Acquiror") and SWACQ, Inc., a wholly-owned
subsidiary of the Acquiror (the "Acquisition Subsidiary"), propose to enter
into an agreement (the "Agreement") pursuant to which the Acquisition
Subsidiary will make a tender offer (the "Offer") to acquire all of the
Company's common stock, par value $.01 per share (the "Shares"), at $35.00 per
Share, net to the seller in cash. The Agreement also provides that, following
consummation of the Offer, the Acquisition Subsidiary will be merged with and
into the Company in a transaction (the "Merger") in which each remaining Share
will be converted into the right to receive $35.00 in cash or any higher price
paid for each Share in the Offer, without interest. In connection with the
Offer and the Merger, certain shareholders of the Company who are the
beneficial owners of approximately 40% of the outstanding fully diluted Shares
propose to enter into a stock option, pledge and security agreement (the
"Option, Pledge and Security Agreement") with the Acquiror and the Acquisition
Subsidiary pursuant to which such stockholders will (1) grant to the Acquiror a
proxy to exercise all voting and other rights with respect to the Shares
beneficially owned by them or thereafter acquired prior to the consummation of
the Merger, (2) grant to the Acquiror an option to acquire such Shares at
$35 per Share in certain circumstances, and (3) agree to tender such Shares
at $35.00 per Share in certain circumstances.
You have asked us whether, in our opinion, the proposed cash
consideration to be received by the holders of the Shares in the Offer and the
Merger is fair to such shareholders from a financial point of view.
In arriving at the opinion set forth below, we have, among
other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and
related financial information for the three fiscal
years ended December 31, 1994 and the Company's Forms
10-Q and the related unaudited financial information
for the quarterly periods ended March 31, 1995 and
June 30, 1995;
(2) Reviewed certain information, including unaudited
financial information for the quarterly period ended
September 30, 1995 and financial forecasts, relating
to the business, earnings, cash flow, assets and
prospects of the Company, furnished to us by the
Company;
(3) Conducted discussions with members of senior
management of the Company concerning its businesses
and prospects;
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(4) Reviewed the historical market prices and trading
activity for the Shares and compared them with those
of certain publicly traded companies that we deemed
to be reasonably similar to the Company;
(5) Compared the results of operations of the Company
with those of certain companies that we deemed to be
reasonably similar to the Company;
(6) Compared the proposed financial terms of the
transactions contemplated by the Agreement with the
financial terms of certain other mergers and
acquisition which we deemed to be relevant;
(7) Reviewed a draft dated October 29, 1995 of the
Agreement;
(8) Reviewed a draft dated October 29, 1995 of the Option,
Pledge and Security Agreement; and
(9) Reviewed such other financial studies and analyses
and performed such other investigations and took into
account such other matters as we deemed necessary.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company, and we have not independently verified such information or
undertaken an independent appraisal of the assets of the Company. With respect
to the financial forecasts furnished by the Company, we have assumed that they
have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's management as to the expected future
financial performance of the Company.
In connection with the preparation of this opinion, we were
authorized by the Company to solicit indications of interest from a limited
number of potential acquirers.
In the ordinary course of our business, we actively trade in
the securities of the Company and the Acquiror for our own account and for the
accounts of our customers and, accordingly, may at any time hold long or short
positions in such securities.
On the basis of, and subject to the foregoing, we are of the
opinion that the proposed cash consideration to be received by the holders of
the Shares pursuant to the Offer and the Merger is fair to such shareholders
from a financial point of view.
Very truly yours,
XXXXXXX LYNCH, XXXXXX, XXXXXX &
XXXXX INCORPORATED
