Exhibit 99.2
April 22, 2005
The Board of Directors
Opinion Research Corporation
000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxxxxxxxx, Xxx Xxxxxx 00000
Members of the Board:
Opinion Research Corporation ("ORC" or the "Company") and LLR Equity Partners
L.P. and LLR Partners Parallel L.P., (collectively "LLR") have entered into a
Purchase Agreement dated March 25, 2005 (the "Agreement"), pursuant to which,
upon consummation of an equity offering, the Company would redeem LLR's entire
position except for $2 million in shares of the Company's Common Stock (the
"Transaction") for payment of $18 million in cash (collectively the "Aggregate
Consideration.")
We have been requested by the Company to render our opinion to the Board of
Directors of the Company with respect to the fairness, from a financial point of
view, to the shareholders of the Company other than LLR, of the Aggregate
Consideration offered to LLR in the Agreement. The terms and conditions of the
transaction are set forth in more detail in the Agreement.
In arriving at our opinion, we have, among other things:
(i) reviewed the Agreement and the original documentation surrounding the
securities owned by LLR;
(ii) reviewed historical results of operations for ORC, including Form 10-K for
the fiscal years ended December 31, 2004, 2003, 2002, and 2001 and certain
other filings with the Securities and Exchange Commission made by ORC,
including proxy statements, Form 10-Qs and Form 8-Ks;
(iii) reviewed certain other publicly available information concerning ORC and
the trading market for ORC's Common Stock;
(iv) reviewed the terms and conditions of the Company's loan documentation;
(iv) reviewed certain non-public information, relating to ORC, including
financial forecasts and projections for ORC furnished to us by or on
behalf of the Company.
(v) reviewed certain publicly available information, including research
reports, concerning certain other companies engaged in businesses which we
believe to be comparable to the Company and the trading markets for
certain of such companies' securities;
(vi) reviewed the financial terms of certain recent mergers and acquisitions
which we believe to be relevant;
April 22, 2005
The Board of Directors
Opinion Research Corporation
Page 2
(vii) conducted discussions with certain members of senior Management of the
Company concerning their business and operations, assets, present
condition and future prospects; and
(viii) performed such other analyses, examinations and procedures, reviewed such
other agreements and documents, and considered such other factors, as we
have deemed in our sole judgment, to be necessary, appropriate or relevant
to render an opinion.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the financial and other information discussed with or
reviewed by us in arriving at our opinion. With respect to the financial
forecasts of the Company provided to or discussed with us, we have assumed, at
the direction of the Management of the Company and without independent
verification or investigation, that such forecasts have been reasonably prepared
on bases reflecting the best currently available information, estimates and
judgments of the Management of the Company as to the future financial
performances of the Company. In arriving at our opinion, we have not conducted a
physical inspection of the properties and facilities of the Company and have not
made nor obtained any evaluations or appraisals of the assets or liabilities
(including, without limitation, any potential environmental liabilities),
contingent or otherwise, of the Company. As disclosed in recent filings with the
Securities and Exchange Commission made by ORC, ORC intends to conduct an
offering of primary shares to the public in an underwritten offering, part of
the proceeds of the offering are to be used to pay the cash portion of the
Aggregate Consideration to LLR. We have assumed in our analysis that the Company
is successful in raising the public equity. We have also assumed that the
Transaction will be consummated in accordance with the terms of the Agreement.
Our opinion is necessarily based upon market, economic and other conditions as
they exist on, and can be evaluated as of, the date of this letter. We express
no opinion as to the underlying valuation, future performance or long-term
viability of the Company. Our opinion solely addresses the fairness from a
financial point of view of the Aggregate Consideration to the holders of Common
Stock of the Company, other than LLR. Our opinion does not address the relative
merits of the Transaction as compared to other transactions or business
strategies that might be available to the Company, nor does it address the
Company's underlying business decision to proceed with the Transaction or the
public offering of Common Stock. It should be understood that, although
subsequent developments may affect this opinion, we do not have any obligation
to update or revise the opinion.
We have not acted as financial advisor to the Company in connection with the
Transaction and while we will receive a fee for our services, no portion of the
fee is contingent upon the consummation of the Transaction. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of the
rendering of this opinion. In the ordinary course of our business, we and our
affiliates may actively trade in debt and equity securities of the Company for
our own account and for the accounts of our customers and, accordingly, may at
any time hold a long or short position in such securities. In addition, we may
have other financing and business relationships with the Company in the ordinary
course of business.
April 22, 2005
The Board of Directors
Opinion Research Corporation
Page 3
This opinion is delivered to the Board of Directors of ORC solely for its use in
considering the Transaction and may not be used for any other purpose except as
described in the engagement letter between ORC and us dated September 15, 2004.
We note that we have been retained only by ORC and, subject to applicable law,
our engagement is not deemed to be on behalf of, and does not confer any rights
upon, any stockholder of the Company or any other person. This opinion may not
be reproduced, disseminated, quoted or referred to in any manner, without our
prior written consent.
Based upon and subject to the forgoing, and such other factors as we deemed
relevant, we are of the opinion as of the date hereof that the Aggregate
Consideration offered to LLR by the Company is fair, from a financial point of
view, to the shareholders of the Company, other than LLR.
Very truly yours,
XXXXXX XXXXXXXXXX XXXXX LLC
XXXXXX XXXXXXXXXX XXXXX LLC
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I N V E S T M E N T B A N K I N G
Established 1832
Update on Fairness Opinion
Presentation to the Board of Directors of
[OPINION RESEARCH CORPORATION LOGO]
April 22, 2005
Disclaimer
The following materials (the "Presentation") were prepared as of April 21, 2005
for discussion at the Opinion Research Corporation ("ORC" or the "Company")
Board of Directors Meeting scheduled for April 22, 2005, at which Xxxxxx
Xxxxxxxxxx Xxxxx LLC ("Xxxxxx") has been requested to provide update /bring down
its opinion, as investment bankers, as to the fairness from a financial point of
view of the consideration to be offered to LLR Equity Partners L.P. and LLR
Partners Parallel L.P., (collectively "LLR") by ORC for all securities of ORC
owned by LLR, except for $2,000,000 in common stock.
In preparing this presentation, we have relied solely upon information provided
by or on behalf of ORC. We have not independently verified any such information
and have relied on it being complete and accurate in all respects. This
Presentation is based on the business and operations of ORC as represented to us
as of the date hereof, and does not purport to take into consideration any
information or event arising subsequent to such date. We make no representation
or warranty that there has been no change since the date as of which relevant
information was provided to us or since the preparation of the Presentation.
The information contained in this Presentation is confidential and has been
prepared for the sole use and benefit of the Board of Directors of ORC and,
subject to applicable law, is not for the benefit of, and does not convey any
rights or remedies to, any holder of securities or any other person. Such
information may not be used for any other purpose (except as described in the
engagement letter between Janney and XXX dated September 15, 2004), or
reproduced, disseminated, quoted, referred to or disclosed or otherwise made
available to, or relied upon by any other party nor may reference be made
thereto or to Janney without the written consent of Janney. This Presentation
does not constitute a recommendation by Janney to the Board of Directors of ORC
to enter into any transaction described within the Presentation.
The estimates of value prepared within the Presentation represent hypothetical
values that were developed solely for purposes of the Presentation. Such
estimates reflect computations of the potential values through the application
of various generally accepted valuation techniques, which may not reflect actual
market values. Estimates of value are not appraisals and do not necessarily
reflect values which may be realized if any assets of ORC or LLR otherwise are
sold. We have not appraised nor undertaken any valuation of any assets or
property nor made any solvency analysis of ORC. Because such estimates are
inherently subject to uncertainty, Janney does not assume any responsibility for
their accuracy. The presentation assumes that the financial forecasts and
guidance provided to us and prepared by management of ORC have been reasonably
prepared on a basis reflecting the best currently available respective judgments
of the management of ORC as to the future financial performance of ORC. In its
analyses, Janney made numerous assumptions with respect to general business and
economic conditions and other matters. Any assumptions employed by Xxxxxx'x
analyses are not necessarily indicative of actual outcomes, which may be
significantly more or less favorable than those developed for the Presentation.
This Presentation necessarily is based on regulatory, economic, market and other
conditions as they exist on, and the information made available to us as of, the
date hereof. Subsequent developments may affect this Presentation, and we do not
have any obligation to update or reaffirm this Presentation.
2 [JANNEY LOGO]
TABLE OF CONTENTS
SECTION
INTRODUCTION 1
ANALYSES 2
JMS OPINION 3
3 [JANNEY LOGO]
INTRODUCTION
INTRODUCTION
x Xxxxxx was retained by Opinion Research to opine as to the fairness, from
a financial point of view, to the shareholders of ORC, other than LLR, of
the consideration offered by the Company in exchange for LLR's entire
position in ORC, except for $2 million in common stock, as set forth in a
letter from LLR to ORC dated August 5, 2004, "the LLR Purchase Agreement."
x Xxxxxx was asked to update or "bring down" its opinion to incorporate
changes in the structure of the transaction, the sources of funds, and to
incorporate any additional changes in the current or future financial
prospects for ORC.
o We have conducted additional procedures and reviewed additional material,
as referred to in our original opinion dated October 5, 2004.
5 [JANNEY LOGO]
INTRODUCTION CONT'D
o In connection with updating our opinion we have, among other things:
(i) reviewed the revised LLR Purchase Agreement;
(ii) reviewed historical results of operations for ORC since the date of
our original opinion, including Form 10-K for the fiscal year ended
December 31, 2004 and certain other filings with the Securities and
Exchange Commission made by ORC;
(iii) reviewed certain other publicly available information concerning
ORC and the trading market for ORC's Common Stock;
(iv) reviewed certain non-public information, relating to ORC, including
financial forecasts and projections for ORC furnished to us by or
on behalf of the Company;
(v) reviewed certain publicly available information, including research
reports, concerning certain other companies engaged in businesses
which we believe to be comparable to the Company and the trading
markets for certain of such companies' securities;
(vi) reviewed the financial terms of certain recent mergers and
acquisitions which we believe to be relevant;
(vii) conducted discussions with certain members of senior management of
the Company concerning their respective businesses and operations,
assets, present condition and future prospects; and
(viii) performed such other analyses, examinations and procedures,
reviewed such other agreements and documents, and considered such
other factors, as we have deemed in our sole judgment, to be
necessary, appropriate or relevant to render an opinion.
6 [XXXXXX XXXX]
UPDATED SUM OF THE PARTS VALUATION ANALYSES
ANALYSES
x Xxxxxx incorporated the following changes into their analyses:
- Size of expected offering was reduced to $30M;
- Timing changes affected certain parts of the analysis;
- Interest rates have changed;
- Original shares outstanding number has changed (affects number of
anti-dilution and contingent warrants issued).
8 [XXXXXX XXXX]
CONTINGENT WARRANT CALCULATION - $30M OFFERING
Price per share 6.00 6.50 7.00 $ 7.50 $ 8.00
Calculation of dilution per anti-dilution warrant
RCP = Revised Conversion Price = 7.40 7.66 7.90 8.12 8.32
CP * ((OS + (Con / CP) / (OS + (Con / P))
PC = Initial number of preferred "C" share 588,229 588,229 588,229 588,229 588,229
CR = Conversion rate of preferred to common = CA / CP 2.0 2.0 2.0 2.0 2.0
CA = Conversion amount = 17.00 17.00 17.00 17.00 17.00
CP = The Conversion Price; which was initially = 8.50 8.50 8.50 8.50 8.50
OS = Outstanding shares before dilution 6,409,346 6,409,346 6,409,346 6,409,346 6,409,346
Con = consideration 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000
P = price per share of issued new shares 6.00 6.50 7.00 7.50 8.00
------------ ------------ ------------ ------------ ------------
Additional shares to issue = (CA / RCP * PC) - (CR * PC) 174,075 128,547 89,524 55,704 26,111
------------ ------------ ------------ ------------ ------------
1) Assumes $30 million offering.
9 [XXXXXX XXXX]
LLR COMMON STOCK VALUATION
$30 MILLION OFFERING
-------------------------------------------------
STOCK PRICE ASSUMPTIONS
----- ----- ----- ----- -----
Stock Price $6.00 $6.50 $7.00 $7.50 $8.00
Shares Issued 5.0 4.6 4.3 4.0 3.8
----- ----- ----- ----- -----
NUMBER OF SHARES
Original LLR shares 1.18 1.18 1.18 1.18 1.18
Open market Purchases 0.04 0.04 0.04 0.04 0.04
Anti dilution shares (nominal warrants) (1) 0.17 0.13 0.09 0.06 0.03
----- ----- ----- ----- -----
Total shares 1.39 1.34 1.31 1.27 1.24
SHARE VALUE
Original LLR shares $7.06 $7.65 $8.24 $8.82 $9.41
Open market Purchases 0.24 0.26 0.28 0.30 0.32
Anti dilution shares (nominal warrants) (1) 1.04 0.84 0.63 0.42 0.21
----- ----- ----- ----- -----
SHARE VALUE ($MILLIONS) $8.34 $8.74 $9.14 $9.54 $9.94
----- ----- ----- ----- -----
1) Assumes $30 million offering.
10 [XXXXXX XXXX]
WARRANTS
o The following are necessary changes in our assumptions based on timing and
changes in interest rate:
- Risk free rate: yield on U.S. Government Treasury Note due August,
2010; 3.87%
- Life of Options: 5.36 years
11 [XXXXXX XXXX]
WARRANTS - ANTI-DILUTION CALCULATION (1)
Warrant Exercise Price:
A = exercise price before dilution event 12.0 12.0 12.0 12.0 12.0
B = Stock outstanding before dilution event 6,409,346 6,409,346 6,409,346 6,409,346 6,409,346
C = consideration 30,000,000 30,000,000 30,000,000 30,000,000 30,000,000
D = Share outstanding after dilution event 11,409,346 11,024,731 10,695,060 10,409,346 10,159,346
Assumed price at issuance 6.00 6.50 7.00 7.50 8.00
Warrant Exercise price of dilution event = A*((B+(C/A))/D) 9.37 9.70 10.00 10.27 10.52
Number of shares subject to the warrants:
Y = Number of shares subject to warrants before dilution event 740,500 740,500 740,500 740,500 740,500
A = Exercise price before adjustment 12.00 12.00 12.00 12.00 12.00
B = Adjusted exercise price 9.37 9.70 10.00 10.27 10.52
Z = # of shares subject to warrants after dilution event = Y*(A/B) 948,287 916,320 888,920 865,172 844,394
1) Assumes $30 million offering.
12 [XXXXXX XXXX]
WARRANTS - VALUATION (1)
WARRANT VALUATION
Number of Warrants Post Dilution (1) 0.95 0.92 0.89 0.87 0.84
BLACK SCHOLES VALUATION ASSUMPTIONS
Current Stock Price $ 6.00 $ 6.50 $ 7.00 $ 7.50 $ 8.00
Exercise Price 9.37 9.70 10.00 10.27 10.52
Risk-Free Rate 3.87% 3.87% 3.87% 3.87% 3.87%
Time to Expiration (Years) 5.36 5.36 5.36 5.36 5.36
BLACK-SCHOLES VALUATION PER WARRANT
@ 45% Volatility $ 1.96 $ 2.21 $ 2.47 $ 2.74 $ 3.02
@ 55% Volatility 2.48 2.76 3.06 3.36 3.67
@ 65% Volatility 2.96 3.28 3.60 3.93 4.26
TOTAL VALUATION OF LLR WARRANTS ($MILLIONS)
------ ------ ------ ------ ------
Warrant Valuation @ 45% Volatility $ 1.86 $ 2.03 $ 2.20 $ 2.37 $ 2.55
Warrant Valuation @ 55% Volatility 2.35 2.53 2.72 2.90 3.09
Warrant Valuation @ 65% Volatility 2.81 3.00 3.20 3.40 3.60
------ ------ ------ ------ ------
1) Assumes $30 million offering.
13 [XXXXXX XXXX]
CASH FLOW - SERIES C DIVIDEND
($000) High Median Low
-------- -------- --------
Shares 588,229 588,229 588,229
Payment per share annually $ 2.04 $ 2.04 $ 2.04
Payment per share quarterly $ 0.51 $ 0.51 $ 0.51
Gross Dividends per quarter $ 300 $ 300 $ 300
Discount Rate 12.0% 14.5% 17.0%
Value of perpetuity at 9/30/05 $ 10,000 $ 8,276 $ 7,059
1 Month Accrual for Sept 2005 $ 97 $ 97 $ 96
-------- -------- --------
$ 10,097 $ 8,372 $ 7,155
======== ======== ========
Value of perpetuity at 4/21/05 $ 9,602 $ 8,372 $ 7,155
======== ======== ========
14 [XXXXXX XXXX]
SUM OF THE PARTS VALUATION
$30 MILLION OFFERING
--------------------------------------------------
STOCK PRICE ASSUMPTIONS
------ ------ ------ ------ ------
Stock Price $ 6.00 $ 6.50 $ 7.00 $ 7.50 $ 8.00
Shares Issued 5.0 4.6 4.3 4.0 3.8
------ ------ ------ ------ ------
------ ------ ------ ------ ------
SHARE VALUE ($MILLIONS) $ 8.34 $ 8.74 $ 9.14 $ 9.54 $ 9.94
------ ------ ------ ------ ------
TOTAL VALUATION OF LLR WARRANTS ($MILLIONS)
------ ------ ------ ------ ------
Warrant Valuation @ 45% Volatility $ 1.86 $ 2.03 $ 2.20 $ 2.37 $ 2.55
Warrant Valuation @ 55% Volatility 2.35 2.53 2.72 2.90 3.09
Warrant Valuation @ 65% Volatility 2.81 3.00 3.20 3.40 3.60
------ ------ ------ ------ ------
DIVIDEND VALUATION ($MILLIONS)
------ ------ ------ ------ ------
Perpetuity @ 17.0% discount rate $ 7.15 $ 7.15 $ 7.15 $ 7.15 $ 7.15
Perpetuity @ 14.5% discount rate 8.37 8.37 8.37 8.37 8.37
Perpetuity @ 12.0% discount rate 9.60 9.60 9.60 9.60 9.60
------ ------ ------ ------ ------
TOTAL VALUATION RANGE ($MILLIONS)
====== ====== ====== ====== ======
LOW $17.36 $17.92 $18.49 $19.07 $19.64
MID 19.06 19.64 20.23 20.82 21.40
HIGH 20.75 21.35 21.94 22.54 23.14
====== ====== ====== ====== ======
Total Valuation = Share Value + LLR Warrants + Dividends
1) Assumes $30 million offering.
15 [XXXXXX XXXX]
SUM OF THE PARTS VALUATION: VARIED OFFERING SIZE
$20 MILLION OFFERING
--------------------------------------------------
STOCK PRICE ASSUMPTIONS
------ ------ ------ ------ ------
Stock Price $ 6.00 $ 6.50 $ 7.00 $ 7.50 $ 8.00
Shares Issued 3.3 3.1 2.9 2.7 2.5
------ ------ ------ ------ ------
TOTAL VALUATION RANGE ($MILLIONS)
====== ====== ====== ====== ======
LOW $16.91 $17.53 $18.17 $18.80 $19.45
MID $18.59 $19.24 $19.89 $20.54 $21.20
HIGH $20.26 $20.92 $21.59 $22.26 $22.93
====== ====== ====== ====== ======
$30 MILLION OFFERING
--------------------------------------------------
STOCK PRICE ASSUMPTIONS
------ ------ ------ ------ ------
Stock Price $ 6.00 $ 6.50 $ 7.00 $ 7.50 $ 8.00
Shares Issued 5.0 4.6 4.3 4.0 3.8
------ ------ ------ ------ ------
TOTAL VALUATION RANGE ($MILLIONS)
====== ====== ====== ====== ======
LOW $17.36 $17.92 $18.49 $19.07 $19.64
MID $19.06 $19.64 $20.23 $20.82 $21.40
HIGH $20.75 $21.35 $21.94 $22.54 $23.14
====== ====== ====== ====== ======
$40 MILLION OFFERING
--------------------------------------------------
STOCK PRICE ASSUMPTIONS
------ ------ ------ ------ ------
Stock Price $ 6.00 $ 6.50 $ 7.00 $ 7.50 $ 8.00
Shares Issued 6.7 6.2 5.7 5.3 5.0
------ ------ ------ ------ ------
TOTAL VALUATION RANGE ($MILLIONS)
====== ====== ====== ====== ======
LOW $17.73 $18.24 $18.76 $19.28 $19.81
MID $19.45 $19.98 $20.51 $21.04 $21.58
HIGH $21.15 $21.69 $22.23 $22.77 $23.32
====== ====== ====== ====== ======
16 [XXXXXX XXXX]
JMS OPINION
