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Executive Summary

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  • pg 1
									Project Wildcat


IT Due Diligence – Draft Deliverable




June 18, 2007
                                                      Disclaimer


         In connection with Norwest Equity Partners’ (“NEP”) consideration of a possible investment in Target code
         named. (“Wildcat”), Protiviti has been asked to provide an initial assessment of the Information Technology
         organization of Wildcat. as outlined in our Scope Letter (SOW) of May 17, 2007 SOW and its associated
         Master Services Agreement, we understand that NEP is undertaking this effort as part of its overall due-
         diligence on behalf of such a potential investment.



         Purpose of review and Restrictions on use

         Our due diligence was conducted in accordance with the terms of reference as contained in the Scope Letter
         as required by NEP for its proposed investment in Wildcat and should not be relied upon for any other
         purpose. This report should not be disclosed to any other party, without our prior consent in writing. This
         report is strictly confidential, and no part thereof may be reproduced or used by any other party other than
         NEP for its intended use. The terms of reference for this engagement have been established between NEP
         and Protiviti in the Scope Letter and we will not accept any responsibility whatsoever to any other party to
         whom the report may be shown or who may acquire a copy of the report. If others choose to rely in any way
         on the contents of this report they do so entirely at their own risk.



         Sources of Information

         Unless otherwise specified, the information contained in this report has been collated solely from the data
         provided by Wildcat and information and explanations given to us by IT’s management. In this report and in
         our prior discussions, we have reported broadly on matters, which we have noted, and which appeared
         significant to us but our review may not have revealed matters, which could have been identified by a
         detailed investigation. In our discussion and in this report, we have been asked to provide an assessment of
         Wildcat’s Information Technology organization as part of a due-diligence initiative on behalf of NEP. We
         have based our findings on information obtained through inquiry and review of relevant documentation. Our
         approach was risk-based and results-focused, in that we have been asked to examine information which we
         believed would provide the most relevant facts within the allotted time frame. Having access to other
         information (whether documents or people) may have changed our findings and review of potential issues.
         Any information contained within this document must be taken within that context.



         Limitations of review

         Our report is subject to the limitations of the review enclosed in “Scope Limitation” section of this report and
         to the limitations outlined in our Scope Letter. Our report to you is based on inquiries of and discussions with
         management, a review of accounts/data provided, and other documents made available to us, and analytical
         procedures applied to data provided. We have relied solely on the information provided by management and
         have not carried out any investigation to verify the same. No representation is made as to the accuracy or
         completeness of such information unless expressly stated and nothing in this report is or shall be relied as a
         representation of the future. Further, Protiviti is not a public accounting firm and does not issue opinions on
         financial matters or offer any attestation services.

The decision as to whether to consummate any transaction lies solely with NEP and our findings or other work shall not
in any way constitute a recommendation as to whether NEP should or should not consummate any transaction or
agree to pricing or other terms upon which any transaction should be consummated. NEP’s management shall be fully
and solely responsible for applying independent business judgment with respect to the services and work product
provided by us, and to determine further courses of action with respect to any matters addressed in any services,
reports or other work product or deliverables to NEP



Project Wildcat                                  IT Due Diligence                                                           2
                                       DRAFT For Discussion Purposes Only
Table of Contents

Background ........................................................................................................................................................... 4
  Overview of Data Gathered and Interviews Performed ........................................................................... 4
Executive Summary ............................................................................................................................................. 6
  Key IT Strengths .............................................................................................................................................. 6
  Most Significant IT Issues .............................................................................................................................. 7
  Significant Opportunity .................................................................................................................................. 8
  Negotiation Strategies ..................................................................................................................................... 9
  IT Spend Analysis ............................................................................................................................................ 9
Detailed Findings................................................................................................................................................12
  Description of IT Environment ..................................................................................................................12
  Comparison of IT Environment with External IT Trends ....................................................................21
  SWOT Analysis ..............................................................................................................................................21
  Recommended Improvements ....................................................................................................................27




Project Wildcat                                                   IT Due Diligence                                                                                         3
                                                        DRAFT For Discussion Purposes Only
                  Background

                  This memo reflects the results of IT due diligence performed in relation to
                  Norwest Equity Partners’ potential acquisition of the company code-named
                  Wildcat (hereafter referred to as “Wildcat,” “the target,” or “the Company”)



                  The objectives of our investigation were to:
                      To gain an understanding of the target’s current IT assets and IT costs.
                     To review the target’s forward-looking IT strategy and tactics, including
                     projects that are in progress or planned for the future.
                      To identify deficiencies in the target’s IT capabilities and plans, and to
                     understand the impact that these deficiencies have on the achievement of
                     business results. The types of deficiencies to be identified include, among
                     others, those that cast serious doubt on the logic of the acquisition
                     (“dealbreakers”), and those that call into question the quality of earnings
                     included in the target’s historical or pro forma financial statements.
                      To perform a qualitative assessment of the target’s IT personnel.
                      To develop a high-level plan for improving IT. This plan will include
                     recommendations for actions and projects that should be undertaken post-
                     acquisition. It will also establish approximate timeframes for completing the
                     recommended actions and projects.
                     To develop estimates of future IT operating and capital costs. Estimates will
                     be prepared that reflect a Base Case scenario and a Conservative scenario.

Overview of       The information we were able to collect and resulting assessment was based
Data Gathered     upon limited scope. The information we collected included:
and Interviews
Performed             IT Operating Budget for FY 2008
                      Actual IT Capital Expenditures for FY 2007 and Budgeted IT Capital
                      Expenditures for FY 2008
                      Resumes of IT Department resources
                      Matrix Showing Roles and Responsibilities for IT Department Resources
                      Wide Area Network Diagram
                      Diagram Showing Equipment in Data Center
                      List of Servers
                      List of Software in Use
                      Overview of Active Directory Structure
                      Business Continuity Plan
                      Schematic showing systems in place and potentially planned for the future
                      Information Technology Acceptable Use Policy
                      Early Implementation Proposal from IFS (March 2001)
                      Internal Project Proposal for the Implementation of IFS at the Polar Plant
                      Examples of Status Reports Related to the Polar Implementation Project


Project Wildcat                       IT Due Diligence                                               4
                            DRAFT For Discussion Purposes Only
                      Quotes or Price Estimates for the following Projects – IFS Upgrade, EDI,
                      Barcoding
                      Copies of contracts with AT&T (Managed Internet Service), IFS North
                      America (Master Agreement and Escrow Agreement), De Lage Langden
                      Financial Services (Lease of Clariion Storage Network and EMC Replistor
                      software), Cincinnati Bell Technology Solutions (Master Agreement for Data
                      Center Co-Location and Management Services), Microsoft (Open License
                      Agreement), Veritas (Licensing of Backup Exec software)
                       Examples of Business Process and System User Documentation

                  In addition, we conducted a two-day site visit at the Polar Plant and a one-day
                  site visit of the Chelmsford data center, during which we interviewed the
                  following individuals (either in-person or by teleconference):
                      Paul Reed – Information Technology Director
                      Sherri Worley – Data Center Manager
                      Jody Beal – Systems Analyst
                      Michael Christopher – Chief Financial Officer
                      Raymond Chan – Plant Controller
                      David Dion – Shop Floor Productivity
                      Ron Hammill – Production Scheduling
                      Jim Dorr – IFS Sales Representative




Project Wildcat                       IT Due Diligence                                              5
                            DRAFT For Discussion Purposes Only
                  Executive Summary

Key IT              IT Organization. The Company’s four person IT Department seems to be
Strengths           competent and hard-working. In general, they have made intelligent,
                    mainstream technology decisions. They have been economical in the
                    deployment of technology, performing much implementation work
                    internally.

                    The Company’s IT Director, Paul Reed, has a deep background in ERP
                    implementation. He has been instrumental in the successive implementation
                    and adoption of IFS at each of the Company’s plants. We believe that the
                    implementations have been well-executed. One notable accomplishment is
                    the fact that there is one enterprise-wide instance of IFS, which implies a level
                    of consistency in business processes. Another accomplishment, testifying to
                    the success of the implementation efforts to date, is that the monthly close
                    process has been shortened from approximately 15 days to three to five days.

                    The IT Department’s skills are less developed in the areas of IT infrastructure
                    and networking. Recognizing the team’s limitations, the Department has
                    taken an outsourcing approach in these areas (notably, with the outsourcing
                    of network management to AT&T). We believe that this has been a
                    reasonable approach.

                    IFS. In 2003, the Company selected IFS as its enterprise-wide ERP
                    application. In discussing the objectives for IT diligence, NEP expressed
                    concerns regarding IFS’s capabilities (particularly for customer profitability
                    reporting), and asked for an opinion on whether IFS should be replaced.

                    Based on our research, we believe that IFS is an appropriate product. It offers
                    much more functionality than the Company has implemented, thus
                    providing the Company a “growth path.” Some of the IFS functions the
                    Company is considering for implementation are Demand Planning,
                    Production Scheduling, and Budgeting.

                    We believe that the difficulties NEP has experienced in obtaining customer
                    and product line profitability information is a function of the way Wildcat
                    has implemented IFS, rather than inherent limitations in the product itself.

                    Tracking customer and product line profitability may require a Make to
                    Order approach, whereas the Company currently uses a Make to Stock
                    approach. It also would require the attribution of actual costs to specific
                    orders for particular customers, whereas the Company currently uses
                    standard costs and reports variances from standard on a plant-by-plant basis
                    (rather than a product-by-product or customer-by-customer basis).




Project Wildcat                     IT Due Diligence                                                    6
                          DRAFT For Discussion Purposes Only
                       As for scalability, Wildcat is somewhat larger than the average IFS customer,
                       but not nearly the largest. IFS states that the system can support many times
                       Wildcat’s current user base. Given the scalability of the technologies on
                       which the product is built (Oracle and Windows or Unix / Linux), we have
                       no reason to doubt this claim.

                       The Company has invested significantly in IFS. Over the last five years it has
                       spent a significant amount of time and money configuring and implementing
                       the product, developing certain customizations (e.g., to handle rebates), and
                       developing custom reports (of which, approximately 500 have been
                       completed to date).

                       Given its rich functionality and scalability we believe that IFS represents a
                       solid ERP choice that can support Wildcat’s growth (at least at its current
                       trajectory). Particularly given the investment Wildcat has made in
                       implementation, we do not recommend replacing IFS.

                       Disaster Recovery. The Company has provisions in place for the rapid
                       recovery of IFS in the event of a disaster. This includes a contract with
                       Cincinnati Bell Technology Solutions that provides a disaster recovery data
                       center facility (with Internet connectivity), and a contract with EMC for real-
                       time replication of IFS data between the Chelmsford data center and the
                       Cincinnati Bell disaster recovery data center.

                       This level of preparedness is unusual in a Company of Wildcat’s size.


Most Significant   The most significant IT issues are:
IT Issues
                       Staffing Levels. The IT Department is leanly staffed, which presents several
                       issues:

                       -   First, there is not sufficient backup for certain key resources (in
                           particular, the Data Center Manager, Sherri Worley). This is difficult on
                           the staff. It also leaves the Company vulnerable, if these key resources
                           should become unavailable.
                       -   Second, projects tend to be “single-threaded,” based on the capacity and
                           availability of key resources. In particular, the organization’s capacity to
                           implement IFS improvements tends to be limited by Paul Reed’s
                           availability.
                       -   Third, there are certain gaps in the IT Department’s expertise,
                           particularly related to networking and database administration.

                       IFS Version. The Company is currently using an older version of IFS (circa
                       2002). Since 2006, it has had plans to upgrade to a more recent version.
                       These plans have been deferred.

                       The Company incurs certain risks and loses certain opportunities by not
                       performing this upgrade. Among the risks are that the vendor will cease
                       support for the version the Company is using. Among the lost opportunities


Project Wildcat                        IT Due Diligence                                                   7
                             DRAFT For Discussion Purposes Only
                  is the inability to utilize functionality that has been incorporated into IFS over
                  the last five years.

                  At present, the Company plans to upgrade to the latest version (Application
                  7) in the third quart of calendar year 2007. Estimated costs for this upgrade
                  are $170,000 to $190,000.

                  Infrastructure Deficiencies. There has not been a master plan for the data
                  center, or a program to refresh data center equipment (servers and switches)
                  on a regular basis. This has led to the following issues:

                  -   Much of the equipment is older, and at or nearing end-of-life.
                  -   Some of the equipment is not well-designed for the purpose it serves.
                      For example, many of the servers are under-utilized.
                  -   There are significant information security gaps. As an example, there are
                      wireless access points at each plant that are unsecured, allowing access to
                      the internal network.
                  -   The data center physical environment is not “hardened,” making it
                      vulnerable to disaster.

                  An overall data center refresh and modernization could improve
                  performance, reduce risk, and simplify maintenance.

                  Gaps in Backup and Disaster Recovery Process. There are a couple of
                  weaknesses in the Company’s backup and disaster recovery procedures.
                  Specifically:

                  -   Backup tapes are not stored offsite. They are stored in a building
                      adjacent to the data center. A single disaster could certainly “take out”
                      both buildings.
                  -   Disaster recovery plans have been implemented for IFS, but not for any
                      other systems. Most significantly, there is no provision for the recovery
                      of email.


Significant       Continued Investment in ERP. The Company’s IFS implementation to date
Opportunity       has enabled a level of consistency and automation in baseline business
                  processes. The next level of proficiency involves the use of the ERP to drive
                  performance (for example, driving the takeout of costs from the
                  manufacturing process, or focusing sales and marketing efforts on the most
                  profitable lines of business).

                  We believe that an annual program of investment in IFS (and /or bolt-on
                  applications) offers significant opportunities for performance improvement.
                  Specific opportunities that have been identified include the use of IFS for
                  demand planning, production scheduling (including multi-plant production
                  scheduling), and production profitability analysis.




Project Wildcat                   IT Due Diligence                                                     8
                        DRAFT For Discussion Purposes Only
Negotiation           Issue: Deferral of IFS Upgrade
Strategies
                      -   There is an argument to be made that the Company should have
                          upgraded IFS previously, and that its deferral of this $170,000 to $190,000
                          investment could have inflated earnings.

                      Issue: Software Licensing (particularly for Microsoft and Symantec products)
                      -   Negotiation strategy: NEP should seek appropriate protections in the
                          Purchase Agreement. For instance, the parties could agree that an
                          independent auditor will be hired to review the Company’s software
                          licenses, and that the costs to remedy licensing deficiencies will be paid
                          from an escrow account. In addition, NEP could seek a Warranty with
                          the effect that that the Company would pay any damages, attorney fees,
                          and costs of licenses required as a result of potential actions by Microsoft
                          or its agents (e.g., the Business Software Alliance).


IT Spend          Our estimates for future operating and capital expenses for each of these
Analysis          scenarios is provided on the subsequent two pages:




Project Wildcat                       IT Due Diligence                                                   9
                            DRAFT For Discussion Purposes Only
IT Spend Analysis - Incremental Operating Expense Projections
(dollar amounts in thousands)

                                                                                              Projections
                                                    Current                  Base Case                        Conservative Case
                                                   Run Rate     YE Mar 2008 YE Mar 2009 YE Mar 2010 YE Mar 2008 YE Mar 2009 YE Mar 2010
Salaries & Wages (Direct)                                   332         499         674         707         529          735        772
Salaries & Wages (Indirect)                                 229         240         252         265         240          252        265
Software Maintenance Expense                                237         237         257         292         237          272        322
Hardware Maintenance Expense                                 31          31          36          36          31           41         41
Contracted Services                                         118         122         122         122         124          124        124
Telecommunications                                          160         160         160         160         160          160        160
Other                                                        14          14          14          14          14           14         14
Total                                                    1,121       1,303        1,515      1,596        1,335       1,599      1,698

Basis of Projections
                                                     Current                                                            Projections
                                                    Run Rate                               Base Case                                             Conservative Case
Salaries & Wages (Direct - Central IT         Provided in Data        Assumes addition of 2 infrastructure support              Assumes addition of 2 infrastructure support
Department)                                   Room - includes         resources at $150 in YE 08 and 2 application support      resources at $180 in YE 08 and 2 application support
                                              Reed, Worley, Beal,     resources at $150 in YE 09, and 5% across-the-            resources at $180 in YE 09, and 5% across-the-
                                              and Chauncey            board salary increase per year                            board salary increase per year

Salaries & Wages (Indirect - Included in Plant Provided in Data       Assumes 5% across-the-board salary increase per           Assumes 5% across-the-board salary increase per
Budgets)                                       Room - includes        year                                                      year
                                               Cochrane, Lozano,
                                               Valentine, and Henri

Software Maintenance Expense                  Provided by             Includes additional annual cost of $20 starting in YE     Includes additional annual cost of $35 starting in YE
                                              Company. Primarily      09 (for barcoding application), $20 starting in YE 10     09 (for barcoding application), $30 starting in YE 10
                                              IFS ($208), Oracle      (for production scheduling application),and $15           (for production scheduling application), and $20
                                              ($13), and Antivirus    starting in YE 10 (for virtualization software)           starting in YE 10 (for virtualization software)
                                              ($9)

Hardware Maintenance Expense                  Provided by Company Includes additional annual cost of $5 starting in YE Includes additional annual cost of $10 starting in YE
                                                                  09 (for maintenance of switches and wireless access 09 (for maintenance of switches and wireless access
                                                                  points).                                             points).




Contracted Services                           Provided by             Includes an additional $4 starting in YE 08 for offsite   Includes an additional $6 starting in YE 08 for offsite
                                              Company. Includes:      storage of backup tapes                                   storage of backup tapes
                                              disaster recovery
                                              services ($61), Mike
                                              Diamond onsite
                                              support in Dallas
                                              ($37), and Oracle
                                              database
                                              administration ($15)

Telecommunications                            Provided by Company Assumes steady state                                          Assumes steady state
                                              (only includes data
                                              communications, not
                                              voice).




Other                                         Provided by Company Assumes steady state                                          Assumes steady state




Project Wildcat                                                      IT Due Diligence                                                                                                     10
                                                           DRAFT For Discussion Purposes Only
IT Spend Analysis - Capital Expenditure Projections
(dollar amounts in thousands)

                                                                                                               Projections
                                                                         Base Case                                                           Conservative Case
             YE Mar 2007                       YE Mar 2008              YE Mar 2009               YE Mar 2010           YE Mar 2008            YE Mar 2009                 YE Mar 2010
                                      458                765                      945                       455                   920                   1,455                        755

Basis of Projections
              YE Mar 2007                                                  Base Case                                                            Conservative Case
Polar IFS implementation $240               YE Mar 2008                                                              YE Mar 2008
IFS customizations $151                     Project II: IFS upgrade $170                                             Project II: IFS Upgrade $190
Disaster recovery $17                       Project III, Year 1: EDI replacement $50                                 Project III, Year 1: EDI replacement $100
New servers and networking gear $48         Project III, Year 1: Implement Barcoding $375                            Project III, Year 1: Implement Barcoding $400
Other $2                                    Project IV: Address gaps in network security $50                         Projectd IV: Address gaps in network security $75
                                            Project V: Improve disaster recovery to include email $20                Project V: Improve disaster recovery to include email $30
                                            Project X, Year 1: Annual equipment refresh and growth $100              Project X, Year 1: Annual equipment refresh and growth $125
                                            YE Mar 2009                                                              YE Mar 2009
                                            Project III, Year 2: Implement Production Profitability Analytics $250   Project III, Year 2: Implement Production Profitability Analytics $500
                                            Project III, Year 2: Implement Production Scheduling $400                Project III, Year 2: Implement Production Scheduling $600
                                            Project VI: Server Consolidation $175                                    Project VI: Server Consolidation $200
                                            Project VII: Expanded use of Citrix $20                                  Project VII: Expanded use of Citrix $30
                                            Project X, Year 2: Annual equipment refresh and growth $100              Project X, Year 2: Annual equipment refresh and growth $125
                                            YE Mar 2010                                                              YE Mar 2010
                                            Project III, Year 3: Implement Budgeting and Forecasting in IFS $25      Project III, Year 3: Implement Budgeting and Forecasting in IFS $75
                                            Project III, Year 3: Implement Sales Configurator $25                    Project III, Year 3: Implement Sales Configurator $75
                                            Project III, Year 3: Implement Warehouse Management $250                 Project III, Year 3: Implement Warehouse Management $400
                                            Project VIII: Improve data center physical environment $55               Project VIII: Improve data center physical environment $80
                                            Project X, Year 3: Annual equipment refresh and growth $100              Project X, Year 3: Annual equipment refresh and growth $125




Project Wildcat                                           IT Due Diligence                                                            11
                                                                      DRAFT For Discussion Purposes Only
                    Detailed Findings

Description of IT   The target’s IT environment is comprised of:
Environment
                       Applications Portfolio
                            IFS Applications. IFS Applications is an ERP system geared towards
                            mid-market manufacturing organizations. It is a product of Industrial
                            and Financial Systems, IFS AB of Linkoping, Sweden (OMXS: IFS,
                            www.ifsworld.com), which was founded in 1983 and currently has 2,600
                            employees throughout the world. IFS North America is headquartered
                            in Chicago.

                            As an application suite, IFS is full-featured, with over sixty modules
                            covering numerous business processes. Wildcat currently utilizes four of
                            those modules: Production, Distribution, Maintenance, and Finance.
                            These modules provide the following major functions: Order Entry, Bill
                            of Materials, Production Order Processing, Inventory, MRP, Purchasing,
                            Maintenance, Accounts Payable, Accounts Receivable, and General
                            Ledger. The Company has developed over 500 customized Crystal
                            reports to extract and present data from IFS to satisfy particular business
                            information needs.

                            In addition, Wildcat has developed and implemented two custom
                            modules, which handle commissions/rebates and special pricing (for
                            government customers). Development and maintenance of these
                            modules has been performed by IFS. While these modules do not change
                            the standard functionality of the application, they could require
                            modification as IFS is upgraded.

                            Wildcat began implementing IFS in 2003. Currently, all five
                            manufacturing plants (approximately 210 users) are “live” on the system
                            (he Polar plant having just gone live on May 29, 2007).

                            Wildcat is currently running IFS Application 2002 on an Oracle 8.5
                            database and Windows Server 2000 operating system. The Company is
                            two major releases behind the current version, which is called
                            Application 7. It plans to upgrade to Application 7 later this year.

                            The database and one application server are housed at the Comet East
                            data center in Chelmsford. Each of the five manufacturing sites also has
                            an application server. This presents some performance issues, especially
                            related to the transmission of large amounts of data to local sites to
                            generate reports. To alleviate these issues, the Company has made
                            selective use of Citrix (which minimizes traffic over the Wide Area
                            Network). The IT Department would like to further expand the use of
                            Citrix.



Project Wildcat                         IT Due Diligence                                               12
                              DRAFT For Discussion Purposes Only
                  ProductionACE. The Company uses a system called ProductionACE to
                  capture shop floor data and measure shop floor efficiency. The type of
                  data the system captures includes machine uptime, cycle time, rejects /
                  scrap, etc. This data can be used in several ways, including:

                      Analyzing variances between the actual cycle time for a particular
                       machine versus the standard for that machine.
                      Capturing and reporting shop floor statistics for particular
                       production orders, shifts, etc.
                      Real-time monitoring of production processes.
                      Scheduling maintenance based on the actual usage of the machines in
                       the shop.

                  The ProductionACE system has been implemented in the Chelmsford
                  plant. The system is comprised of hardware that captures signals from
                  the shop floor equipment (Machine Data Transducer units, or “MDTs”)
                  and software that gathers and manages the data from the MDTs.
                  Currently, the software is running on a Windows-based desktop PC, but
                  the Company plans to migrate the software to a dedicated server.

                  ProductionACE is a product of Production Process
                  (www.productionprocess.com), located in Londonderry, New
                  Hampshire. Production Process was founded in 1975 to develop custom
                  controls and instruments, and later began offering software.
                  ProductionACE was first released in 1999.

                  Within the last year, the Company hired David Dion, a former employee
                  of Production Process. One of his primary responsibilities is to increase
                  the use of and benefit from the ProductionACE system.

                  EDI. The Company uses EDI software, TrustedLink (www.inovis.com)
                  and LexiCom (www.cleo.com), to transact a large percentage of its
                  business, particularly in the Comet East and Comet West plants. Over
                  the next year, the Company hopes to upgrade these packages to take
                  advantage of newer technologies for B2B commerce (e.g., XML).

                  Other applications. In addition to the applications described above, the
                  Company uses the following:

                      ADP – payroll processing
                      FAS Asset Accounting – fixed asset accounting system that maintains
                       a database of the company’s asset and calculates depreciation, which
                       is then entered into the General Ledger via journal entry. FAS is a
                       product of Best Software, Inc., located in Herndon, Virginia. Best
                       Software is a subsidiary of The Sage Group plc, listed on the London
                       Stock Exchange (SGE.L), with annual revenues of approximately
                       ₤935 million.
                      Email – Microsoft Exchange, Outlook Web Access, and Blackberry
                       Enterprise Server.


Project Wildcat                 IT Due Diligence                                              13
                      DRAFT For Discussion Purposes Only
                         Backup – Veritas Backup Exec (for backups to tape), EMC Replistor
                          (for real-time replication of data to the disaster recovery data center
                          site), and Novell iFolder (for backup of files from local drives on
                          desktops / laptops to the network)
                         Antivirus / Antispam – Symantec Antivirus Corporate Edition and
                          Barracuda Spam Filtering software (integrated on Barracuda Spam
                          Firewall device).
                         Office Productivity – Microsoft Office (primarily Office 2003).
                         Network Monitoring – WhatsUp Gold, which polls the network to
                          determine if there are any devices or services that are not functioning
                          properly. If so, it issues an alert (e.g., a page or email message), so
                          that the issue can be addressed proactively. WhatsUp Gold provides
                          basic network monitoring functions at low cost (approximately
                          $1,500). It is targeted at small- and mid-sized businesses. It is a
                          product of Ipswitch, Inc. (www.ipswitch.com), a privately held
                          company located in Lexington, Massachusetts.

                     All of these are widely used, mainstream products.

                  Technology Infrastructure
                     Servers – the company has approximately 30 servers, as follows:

                         Network servers (approximately 10) – there is a domain controller
                          (handles network operations, such as user authentication), file server,
                          print server, iFolder (backup of users’ files), and Citrix server in
                          Chelmsford. In addition, there is a backup domain controller/file
                          server at each of the other four plants and at the Covington
                          headquarters.
                         Database / application servers (approximately 12) – nine of these
                          servers are associated with the IFS application; there are six IFS
                          production servers (one at each plant and on at the Cincinnati Bell
                          disaster recovery site) and three IFS test servers. In addition, there
                          are standalone application servers for ADP, EDI, and
                          ProductionACE.
                         Email / messaging (3) – there are two email servers in Chelmsford
                          (one is a front-end server that sits in the DMZ and the other is a back-
                          end mail store). In addition, there is a Blackberry Enterprise Server.
                         Web server – there is one server for the Company’s intranet (which
                          makes use of Microsoft’s Sharepoint website development tools).
                         Other servers – the Network Administrator did not know the
                          functions of several computers on he Company’s server list. Most of
                          these were located at the plants (not in the data center).

                     The Company uses HP / Compaq servers (Proliant DL 360s and DL
                     380s). Four of the servers that run critical applications (in particular, IFS
                     and Exchange) were purchased in the last year. Many of the other
                     servers were purchased five or more years ago and are at or near end-of-
                     life.



Project Wildcat                    IT Due Diligence                                                  14
                         DRAFT For Discussion Purposes Only
                  Desktops / laptops – the Company has approximately 350 desktops /
                  laptops, most of which run Windows XP.

                  Wide Area Network (WAN) – the Company has a Managed Internet
                  Service contract with AT&T. Under the terms of this agreement, AT&T
                  provides a completely outsourced solution for wide area networking.
                  Specifically, AT&T provides telecommunications lines, networking
                  equipment (routers and firewalls), DNS services (network addressing),
                  and network management and monitoring services.

                  In the Chelmsford Data Center, AT&T provides three T1 lines to connect
                  to the Internet, a Cisco 2621 router, a Cisco VPN 3005 Concentrator (for
                  establishing secure remote connections to the network), and a Cisco Pix
                  515E firewall.

                  In each of the Company’s other locations, AT&T provides a T1 line (with
                  the exception of Polar where another vendor provides a business class
                  DSL line), a Cisco 1700 router, and a NetGate 4100 VPN appliance (for
                  establishing secure remote connections to the network).

                  At this point, the equipment provided by AT&T is old (both the 2621 and
                  1700 routers are end-of-life, and no longer supported by Cisco).

                  Local Area Networks (LANs) – the Company maintains Local Area
                  Networks in each of its locations. The Network Administrator was
                  unable to provide specifications on the makes or models of the switches
                  used for Local Area Networking. She believed, however, that Cisco layer
                  2 switches were used in the Chelmsford data center, and a variety of low-
                  end switches in the other locations.

                  The Company has installed low-end NETGEAR wireless access points at
                  each of its locations (primarily to provide Internet access to visitors).
                  These devices are unsecured.

                  Barracuda Spam Firewall 300 – this device provides hardware and
                  integrated software designed to eliminate spam and viruses from the
                  email system. It does so through several mechanisms, including
                  algorithms to detect spam / viruses, a blacklist of known senders of
                  spam, and the use of Spam Assassin (an open source spam filtering
                  program). An annual subscription is required to update the algorithms
                  and the IP blacklist. This device is offered by Barracuda Networks
                  (www.barracudanetworks.com).

                  Data Center – the data center environment has the following features:

                      Locked door – the Data Center Manager was unsure as to the
                       number of individuals who have keys to this lock.


Project Wildcat                 IT Due Diligence                                              15
                      DRAFT For Discussion Purposes Only
                         Power – the data center is connected to one power grid. All of the
                          equipment is connected to one Power Distribution Unit. UPS devices
                          connected to critical servers provide short-term battery backup in the
                          event of a power failure. There is not a backup generator.
                         Fire – there are wet sprinkler heads in the data center connected to
                          the building’s fire suppression system. There are no environmental
                          monitoring devices to detect heat or fires.
                         Air conditioning – the data center is cooled by three chillers. The loss
                          of one chiller would not have an adverse impact.

                     Disaster Recovery Site – the Company has implemented a basic disaster
                     recovery plan that provides for the continued operation of the IFS system
                     in the event of a disaster in the Chelmsford data center. The Company
                     has a contract with Cincinnati Bell Technology Solutions that provides
                     data center space and connectivity to the internet from a professionally
                     run co-location facility. Wildcat has installed a backup IFS server and an
                     EMC Clariion Storage Device in this facility, and continuously replicates
                     its data from the Chelmsford IFS server to the backup IFS server in
                     Cincinnati.

                  IT Organization and Personnel
                     The IT organization consists of four individuals:

                         Paul Reed, Information Technology Director – Paul leads the IT
                          Department. Paul’s core skills are in ERP implementation. Prior to
                          joining the Company in 2003, he spent approximately eight years
                          implementing ERP systems (including Baan, SAP, and Flextronics) as
                          an employee at Philips Electronics and as a consultant at Atos-
                          Origin.

                          Paul’s initial involvement with Wildcat was in 2002 as a consultant,
                          managing the IFS implementation. Paul has been a key driving force
                          behind the implementation of IFS at all of the Company’s plants.
                          Based on the knowledge he displayed during our interviews, we
                          believe that Paul has a very good understanding of the
                          manufacturing process, the capabilities of ERP systems in supporting
                          business processes, and the ERP implementation process.

                          Although Paul has less “hand-on” experience with other aspects of
                          IT (such as networking and infrastructure), he has been able to
                          accomplish quite a bit in these areas as well. For example, he has
                          overseen the roll-out of Windows Active Directory and Microsoft
                          Exchange enterprise-wide. And he has implemented some level of
                          disaster recovery / business continuity.

                          Paul oversees a productive (although thinly staffed) IT Department.
                          To compensate for gaps in capabilities and manpower, he has
                          outsourced some functions (e.g., networking to AT&T).



Project Wildcat                    IT Due Diligence                                              16
                         DRAFT For Discussion Purposes Only
                       In our opinion, Paul is a key asset to the Company. He is intelligent,
                       hardworking, and productive. If there is a shortcoming, it may be
                       that he takes too much of a “hand-on” role in the ERP
                       implementation process, and that progress is limited by his capacity
                       and availability. At present, given the Company’s size, Paul’s
                       approach of “single-threading” IT initiatives does not present a
                       problem. If the Company were to grow significantly and had to
                       achieve large-scale change quickly, this approach would not work.

                      Jody Beal, Senior Systems Analyst – Jody provides IFS application
                       support, particularly in the areas of Sales and Marketing, Shipping,
                       Inventory and Inter-Company. On a day-to-day basis much of her
                       time is spent supporting and training end users. In addition, she is
                       responsible for bug fixes, new modifications, and issue resolution in
                       her areas of responsibility. This often entails providing technical
                       documentation to and communicating with the ERP vendor (IFS),
                       configuring the system, and developing and documenting business
                       and system processes.

                       Jody has worked closely with IFS on the development of custom
                       modules for commissions / rebates and special pricing. She also
                       works closely with Linda Chauncey on the design of custom Crystal
                       reports.

                       Jody has been with the Company since 1999.

                      Linda Chauncey, Crystal Reports Developer – Linda joined the
                       Company in 2004. She designs, develops, and maintains reports,
                       primarily for Finance and Sales & Marketing. This involves the use
                       of Crystal Reports. It also involves certain database administration
                       tasks, such as the writing of SQL statements and the development
                       and maintenance of Oracle tables, views, stored procedures, and
                       triggers.

                      Sherri Worley, Data Center Manager – Sherri joined the Company
                       approximately eighteen months ago. She is responsible for
                       managing the Company’s technology infrastructure, including all of
                       the equipment in the Chelmsford data center and the Cincinnati Bell
                       disaster recovery site. She is also responsible for managing vendors,
                       most significantly AT&T.

                       Sherri’s experience is in Microsoft Windows and Microsoft Exchange
                       (email) administration. We perceive gaps in her skills and expertise
                       related to networking.

                  In addition to the members of the central IT Department described above,
                  there are local IT support resources in place at each of the plants,
                  primarily for desktop and Level 1 end user support. There are full-time


Project Wildcat                 IT Due Diligence                                                17
                      DRAFT For Discussion Purposes Only
                      resources in place in Chelmsford (Ian Cochrane), Los Angeles (Val
                      Lozano), Chattanooga (Jeff Valentine), and Montreal (Armand Henri).
                      There is a part-time contractor (Mike Diamond) who supports the Dallas
                      plant; he is under a contract that pays him $3,115 monthly for a
                      minimum of 32 hours.

                  IT Strategy, Policies, and Procedures


                      IT operates under a set of informal policies and procedures, including:

                          Governance – There is no formal IT strategic planning process,
                           although the IT Department provided a schematic showing the
                           initiatives it would like to pursue in coming years.

                           IT capital expenditures are considered as part of the Company’s
                           overall budgeting and planning process. We reviewed a formal
                           project proposal for the upgrade of the network and implementation
                           of IFS at the Polar plant. This 16-page document was thorough – it
                           included the objectives and scope of the project, resource / skill
                           requirements, and costs.

                           We do not believe there is a separate IT Department operating
                           budget (we assume it is part of another departmental budget). The
                           IT Director does not receive budget variance reports. He stated that
                           he tracks the expenditures in his department on an individually
                           maintained spreadsheet.

                          Technology Standards – while the Company does not have formal
                           standards, there are de facto standards.

                           Most significantly, with the recent implementation of IFS at the Polar
                           plant, there is now one enterprise-wide ERP system in place. Based
                           on our limited review, we believe that IFS is used in a consistent
                           manner across all of the plants. This enterprise-wide approach
                           enables the driving of efficiencies in business processes, and
                           enhances the reliability and comparability of data generated from the
                           system.

                           By and large, the Company uses HP / Compaq servers and Cisco
                           networking gear. Some of this standardization in the equipment and
                           network architecture is a result of the Managed Internet Service
                           arrangement with AT&T.

                           There do not appear to be standards in the desktop equipment,
                           operating systems, and switches deployed at the plants.

                          Documentation – the Company provided a wide range of
                           documentation, covering the roles and responsibilities of the IT staff



Project Wildcat                     IT Due Diligence                                                18
                          DRAFT For Discussion Purposes Only
                       members, network architecture, data center configuration, IT
                       Acceptable Use Policy, project plans and status reports, disaster
                       recovery plan, and business processes.

                       The documentation was of reasonably high quality (especially as
                       compared to the documentation that we’ve seen at other companies
                       of comparable size). In most cases, however, it was incomplete. This
                       suggests that the company is well-intentioned, but that there are not
                       sufficient IT resources to complete documentation tasks (which tend
                       to take lower priority than implementation and troubleshooting
                       activities).

                      Licensing – while we did not perform a software license audit, the
                       Company did provide documentation showing licensing in place
                       with Microsoft (Windows, Exchange, Office), Veritas (Backup Exec),
                       and IFS.

                       We do not believe that the Microsoft documentation covers all of the
                       Microsoft products the Company uses (just that acquired under
                       Microsoft’s volume licensing program). Also, we did not see any
                       documentation for Symantec Antivirus, ProductionACE, or the EDI
                       applications.

                       Bottom line, we believe that the Company has probably acquired
                       most or all of the necessary software licenses, but its documentation
                       is incomplete.

                      Outsourcing – the Company has made use of outsourcing in the
                       following areas:

                       -   Custom development services – for custom development
                           requirements associated with IFS, the Company uses the services
                           of IFS and several independent IFS contractors
                       -   AT&T Managed Internet Service – Managed Internet Service
                           (described previously)
                       -   Cincinnati Bell Technology Solutions – data center co-location
                           facility for disaster recovery services (described previously)
                       -   Desktop support at the Dallas plant (described previously)

                      Security – security measures the Company takes include:

                       -   Scanning of all incoming and outgoing email for viruses and
                           spam via a Barracuda Networks security appliance.
                       -   Virus scanning through the use of Symantec AntiVirus software
                           running on the servers and desktops / laptops
                       -   Establishment of secure VPN tunnels that encrypt
                           communications between the various locations and the
                           Chelmsford data center
                       -   Use of firewalls at the Chelmsford data to inspect data passing


Project Wildcat                 IT Due Diligence                                               19
                      DRAFT For Discussion Purposes Only
                           between the company’s Chelmsford data center and the internet
                       -   Use of a DMZ, a subnetwork that sits between the internal
                           network and the external network, that prevents external users
                           from connecting to the internal network
                       -   Use of Windows Active Directory to define user permissions
                           (folders and computing resources)
                       -   Formal policies documented in the Company’s IT Acceptable
                           Use Policy

                       There are several very significant holes in the Company’s security
                       environment. First and foremost is the use of unsecured wireless
                       networking at each of the Company’s locations. In addition, there is
                       no network segregation between the test and production
                       environments, and there are some holes in the Chelmsford firewall
                       that could enable external users to access the internal network.

                      Backups – on a daily basis, the Company makes tape backups of its
                       data, and moves these tapes from the data center room in
                       Chelmsford to an adjacent building.

                       In addition, there is real-time replication of the IFS data between
                       Chelmsford and the disaster recovery site in Cincinnati.

                       On an as-needed basis, the Company has restored selective data files
                       from backup tape, but it does not follow a systematic program to test
                       its recovery capabilities.

                      Disaster Recovery – the Company has a written disaster recovery
                       plan. In addition, it has implemented steps to make IFS available in
                       the event of a disaster at the Chelmsford data center. As noted
                       previously, this entails the placement of an IFS server and EMC
                       storage device in a Cincinnati Bell co-location facility and the real-
                       time replication of IFS data between Chelmsford and this disaster
                       recovery site. We were told that the Company has tested the ability
                       to “cutover” to the disaster recovery site.

                       Disaster recovery provisions have not been put into place for other
                       systems besides IFS (e.g., email).

                      Support – the Company does not maintain a formal Help Desk or an
                       IT trouble ticket tracking system.

                       First level support is provided by onsite resources at each location
                       (see IT Organization section). Issues that cannot be solved at this
                       level are escalated to the central IT staff. Sherri Worley is a key
                       player in providing second level support. There is no backup
                       resource if she is unavailable; Sherri stated that she rarely takes
                       vacations (other than the occasional long weekend), and always
                       carries a beeper.


Project Wildcat                 IT Due Diligence                                                20
                      DRAFT For Discussion Purposes Only
Comparison of      Comparison of target’s IT expenditures with industry benchmarks:
IT Environment
with External IT       Results of Gartner’s 2003 IT Spending and Staffing Survey shows the
Trends                 average process manufacturer’s IT operating budget at 1.51% of revenues
                       and IT capital budget at 0.3% of revenues. This compares to the
                       company’s current run rate for IT operating expenditures at
                       approximately 0.43% of revenues ($1,121/$262,589) and capital
                       expenditures at .17% of revenues ($458/$262,589).

                       That the company’s IT expenditures are below average is attributable to
                       several factors: (a) the IT Department is understaffed, (b) the IT
                       environment has been kept “clean” (there are not unnecessary or
                       duplicative systems; the technologies are mainstream), and (c) the
                       Company seems to extend the life of its systems as long as possible (as
                       noted above, much of the hardware is five or more years old and the
                       version of IFS the Company is using is also five or more years old).

                   Areas where the target’s IT environment does not conform to widely
                   accepted and reasonably current technology standards:

                       In all areas, we found that the Company uses mainstream technologies.

                       It may be possible, however, for the Company to realize performance
                       improvements by switching the IFS operating system from Windows to
                       Unix / Linux. Most small-scale ERP implementations run on Windows,
                       while most large-scale ERP implementations run on Unix / Linux. The
                       switch to Unix / Linux adds some complexity, and probably necessitates
                       an additional IT resource. However, as the Company grows and uses the
                       system more intensively, it is nearing the inflection point where the
                       switch to Unix / Linux makes sense.

                   Vendor viability:

                       Although IFS is not very profitable (2005 Net Income of approximately $7
                       million, 2004 Net Loss of $33 million), it has been in business since 1983
                       and has a large installed base of customers (over 600,000 users, according
                       to the Company’s website). Were IFS to fail, we feel fairly certain that
                       another vendor would acquire its assets and continue to support the
                       system (or facilitate a graceful migration to another ERP offering).

                       Otherwise, we do not have vendor viability concerns.


SWOT Analysis      Strengths

                       IT Leadership. Paul Reed is a capable IT Director. He has been
                       instrumental in the successful implementation of IFS. In addition, he has
                       assembled a good team to support IFS, including Jody Beal for end user
                       support, Linda Chauncey for custom reporting, and a network of third-



Project Wildcat                    IT Due Diligence                                                21
                         DRAFT For Discussion Purposes Only
                  party contract resources (as needed). Where Paul and his staff are less
                  capable (such as in the area of networking), he has made effective use of
                  outsourcing (e.g., the use of AT&T for network management).

                  As noted previously, Paul is very “hands-on.” To this point, that has
                  been necessary and effective. If the demands of the job were to change,
                  and he were required to lead a larger portfolio of IT initiatives and a
                  larger IT team, his desire to be involved in all aspects of implementation
                  might become a limitation.

                  ERP System. IFS is an appropriate ERP package that has been
                  implemented successfully and is used consistently and effectively
                  enterprise-wide.

                      From a functionality perspective, Wildcat has implemented the core
                       capabilities provided by ERP systems – bill of materials, MRP,
                       production order processing, inventory, and accounting – and found
                       that IFS satisfies its needs in these areas. It is now contemplating the
                       implementation of more sophisticated functions, such as demand
                       planning and multi-plant production scheduling. IFS offers modules
                       to satisfy these needs.

                       The Company may find that a particular IFS module does not meet
                       its business requirements. If this occurs, the Company can probably
                       identify a “best of breed” solution that integrates with IFS.

                       NEP noted a specific interest in being able to track customer
                       profitability. We believe that IFS can probably satisfy this need
                       (possibly by taking a Make to Order versus a Make to Stock
                       approach, or by allocating production variances to particular orders).
                       If IFS cannot satisfy this need, then a “best of breed” package likely
                       can. Only as a last, and unlikely, resort would IFS have to be
                       replaced.

                      From a scalability perspective, we believe that IFS can accommodate
                       significant growth beyond Wildcat’s current size. In a conversation
                       with a representative from IFS, we learned that Wildcat is somewhat
                       larger than the average IFS customer, but that there are much larger
                       implementations. The IFS representative stated that the application
                       is designed to support thousand of users. Given the technologies on
                       which the application is built and operates (e.g., Oracle database), we
                       have no reason to doubt that the application is quite scalable.

                       To date, the only performance issues the Company noted have been
                       in the area of reporting – certain monthly reports (e.g., Accounts
                       Receivable aging) take a long time to run. The Company has taken
                       several approaches to addressing this issue. First, to reduce the level
                       of system taxation incurred by simultaneously running transactional
                       and reporting activities, it has developed separate database views,


Project Wildcat                 IT Due Diligence                                                 22
                      DRAFT For Discussion Purposes Only
                       used strictly for reporting, that are generated nightly via automatic
                       batch jobs. Second, the Company has implemented Citrix, which
                       helps to improve network performance by reducing the amount of
                       data that travels over the network.

                       There are several additional methods for improving system
                       performance as demand on the system grows. First, the Company
                       can upgrade the Oracle database. The version of IFS Wildcat is
                       currently using (Application 2002) runs on Oracle 8.5. By upgrading
                       to IFS Application 7, the Company can move to Oracle 10 (and also a
                       more recent version of Crystal reports). Second, the Company can
                       migrate from the Windows operating system to a Unix or Linux
                       operating system. IFS recommends that this migration occur at the
                       300-500 user level. Third, the Company can make greater use of
                       Citrix. Last, the Company can “tune” the database, which involves
                       techniques such as adding indexes to tables and spreading out
                       processing tasks across several computing resources.

                      From an implementation perspective, the Company has
                       demonstrated its ability to design and implement consistent business
                       processes and system functionality enterprise-wide.

                       Implementation practices the Company follows include the use of
                       conference room pilots with end users in order to confirm
                       functionality, the preparation of business process flow diagrams and
                       detailed procedural documentation including screenshots and
                       explanations of functionality, extensive testing prior to go-live, and
                       effective end user training. These practices mitigate implementation
                       risk.

                       Evidence of the success of these practices includes the vast
                       improvement in the time to close the books. Without the well-
                       conceived and enterprise-wide implementation of system
                       functionality, the organization would not have been able to transition
                       from a fifteen day month-end close to a three-to-five day close.

                       Several of our interviews (including those with Mike Christopher,
                       Ray Chan, Ron Hammill) confirmed that the business users of the
                       system are knowledgeable about IFS’s capabilities and satisfied with
                       its functionality and performance.

                       Another impressive achievement (and valuable asset) is the extensive
                       library of 500+ reports the Company has implemented. This library
                       of reports would take a significant amount of time to duplicate in a
                       new system.

                  Disaster Recovery. The Company has implemented some important
                  components of a disaster recovery plan. It has selected a backup data
                  center that could support IT operations in the event that the Chelmsford


Project Wildcat                 IT Due Diligence                                                23
                      DRAFT For Discussion Purposes Only
                     data center was unavailable, it has outfitted the backup data center with
                     the gear required to run IFS, and it has provided for the real-time
                     replication of IFS data between the primary and the backup data centers.
                     The Company believes that in a disaster, IFS could be brought on-line in
                     a matter of hours. This level of preparedness is unusual in the middle
                     market.

                     Outsourced Network Management. The use of AT&T for Managed
                     Internet Service ensures a level of professionalism and reliability in the
                     management of the Wide Area Network.

                  Weaknesses

                     Staffing Levels. The IT Department is staffed leanly, which leaves the
                     Company reliant on key individuals, particularly Paul Reed and Sherri
                     Worley. There is not effective coverage when these individuals are out.
                     And there are no contingency plans should these individuals become
                     unavailable.

                     IFS Version. The Company has not upgraded IFS since the initial
                     implementation of the system in 2003, and is currently two major releases
                     behind. It is important that an upgrade take place for several reasons:

                         First, if it does not upgrade, the Company runs the risk that the
                          vendor will cease support for the version it is using.

                         Second, if it does not upgrade, the Company will not be able to
                          benefit from new functionality IFS has added in the last five years.

                         Third, if it does not upgrade, the Company will not be able to use the
                          latest versions of the Oracle database or Crystal Reports application,
                          both of which offer better functionality and more scalability than the
                          current versions the Company is using.

                         Last, the further behind the Company falls, the more difficult the
                          upgrade process becomes.

                     Significant Network Security Gaps. There are several weakly secured
                     entry points into the Company’s internal network, including:

                         Unsecured wireless access points at each of the plants.
                         Exchange server in the DMZ has full access to the internal Exchange
                          server and domain controllers, which negates the access controls
                          provided by the firewall.
                         Direct access to internal LAN servers from the Internet via Citrix and
                          EDI.
                         Remote user access to IFS provided through Citrix, without
                          establishing a secure VPN connection.
                         No logical network separation of test and production (through the


Project Wildcat                    IT Due Diligence                                               24
                         DRAFT For Discussion Purposes Only
                       use of VLANs). This means that problems experienced in the test
                       environment could affect the performance of production
                       applications.

                  Abundance of Aging, Underutilized Servers. The Company has a lot of
                  servers, many of which are at or near end-of-life and may have to be
                  replaced. Many of the servers perform rather narrow functions, and are
                  likely underutilized. Therefore, rather than replace servers one-for-one,
                  it may be possible to consolidate servers (particularly through the use of
                  virtualization).

                  Old Networking Gear. The Cisco 2621 and 1700 routers supplied by
                  AT&T are end-of-life, and no longer supported. The Company should
                  request that AT&T replace these routers with more up-to-date gear.

                  Data Center Physical Environment. There are several weaknesses in the
                  data center physical environment, including:

                      The fire sprinkler pipes in the data center contain water that can leak
                       or be sprayed over the systems, which presents a high level of risk.

                      While the door to the data center is locked (with a key lock), there is
                       no record of who has keys and no access log showing who enters the
                       room. At a minimum, the Company should implement better
                       controls so that it knows who has keys. A card swipe system that
                       logs entry into the room would be superior.

                      While there are UPS modules in the racks, they are only connected to
                       critical servers. In the event of power loss, there is no assurance that
                       the other servers would shut down gracefully.

                      There is no environmental monitoring to generate alerts (e.g., by
                       phone or email) in the event of excessive heat or moisture, or power
                       loss.

                  Policies and Procedures. The Company has weaknesses in its IT policies
                  and procedures in the following areas:

                      Offsite Storage of Backup Tapes. It is a best practice to rotate backup
                       tapes offsite (at least once a week). The Company claims that its
                       practice of moving backup tapes from the data center to an adjacent
                       building is sufficient. We disagree. There are scenarios where both
                       buildings could become unavailable, in which the Company could
                       lose data.

                      Disaster Recovery. The Company has implemented disaster
                       recovery capabilities to recover the IFS system, but inexplicably has
                       failed to include other systems. At a minimum, we would expect the
                       Company to provide for access to email in the event of a disaster.


Project Wildcat                 IT Due Diligence                                                 25
                      DRAFT For Discussion Purposes Only
                  Opportunities

                     IFS. We see several potential opportunities to improve the use of IFS,
                     both to enhance performance and to support growth.

                         Demand Planning. Demand planning is currently done outside of
                          the system via spreadsheets. The requirements outlined in the
                          spreadsheets are then entered into the MRP module, which generates
                          production requirements for raw materials. Shop orders are then
                          manually entered based on the results of MRP. Management has
                          indicated that they have begun testing the Demand Planning module
                          within IFS by loading eighteen months of demand data.

                         Production Scheduling. Currently, production scheduling is
                          performed outside of the system via Excel spreadsheets that take into
                          account inventory stock status, customer demand, and total demand
                          by item. Each site has its own production scheduler. These
                          schedulers are focused on production at their individual sites. There
                          is very little management of capacity across sites, although in some
                          cases, dies are shared between sites. IFS offers functionality to
                          support the production scheduling process, including multi-plan
                          production scheduling.

                         Budgeting. Although detailed actual spending data is available in
                          IFS, the Finance Department currently compares budget to actual
                          data in spreadsheets outside of the system. Ray Chan, the controller
                          at Comet East, indicated that budget data can be loaded into IFS and
                          budget-to-actual reports produced from the system.

                          Other financial functions that can probably be performed in the
                          system include quarterly forecasting and production efficiency
                          analysis, although additional IFS modules may be required to do so.

                         Sales Configurator. Although Wildcat produces relatively standard
                          products across all sites and the raw materials are not complex, IFS
                          contains a significant amount of master data. Management estimates
                          that there are tens of thousands of products contained within the
                          product master data. Roughly 20% of the master data are unique
                          products. The remaining 80% are custom variations on those
                          products driven by the custom printing that is done for particular
                          customers. The current business process entails the creation of a new
                          SKU for each individual product. Conversations with the application
                          business analyst revealed that Wildcat owns the IFS Sales
                          Configurator module, which could enable a number of benefits. It
                          could allow a significant reduction in the number of products in the
                          product master. It could also greatly simplify product costing by
                          eliminating the need to create a new standard cost for each variation
                          on a product.


Project Wildcat                    IT Due Diligence                                              26
                         DRAFT For Discussion Purposes Only
                     Implementing some of these functions will entail significant changes in
                     the way Wildcat conducts business, whereas to date the implementation
                     of IFS has primarily involved automating and improving upon existing
                     business practices. This is particularly true when it comes to demand
                     planning, multi-plant scheduling, and production profitability analysis.
                     The challenge and cost of future implementation projects will be as much
                     organizational as technological.

                     Additional resources may be required to effect organizational change.
                     For example, a very skilled and experienced production manager would
                     be helpful in exploiting IFS’s advanced planning and scheduling
                     functionality. Similarly, a seasoned financial resource would be helpful
                     in better utilizing IFS’s forecasting, and profitability analysis capabilities.
                     Finally, expertise in organizational change management could be
                     necessary to lead the business process reengineering, cultural
                     transformation, and training initiatives that will be required to achieve
                     the next level of ERP competency. In some cases, the use of third-party
                     resources could be beneficial.

                     Warehouse Management / Barcoding. Currently, warehouse operations
                     are fairly manual. The use of a warehouse management application that
                     incorporates bar-coding could make this much more efficient. The
                     Company has begun to investigate alternatives and pricing for
                     warehouse management and barcoding applications.

                  Threats

                     Software licensing. As noted previously, the Company does not have
                     thorough, readily accessible documentation of its Microsoft or AntiVirus
                     licenses. This leaves it somewhat vulnerable to a license audit. NEP
                     should seek appropriate protections in the Purchase Agreement.


Recommended       Recommended High-Priority Initiatives
Improvements
                     Project I: IT Resources. We believe the Company will need additional IT
                     resources, as follows:

                           Year 1 – Two additional technology infrastructure support resources
                            – one to balance Sherri Worley’s workload, and the second to
                            facilitate the migration of IFS from a Windows platform to a Unix /
                            Linux platform.

                           Year 2 – Two additional application support resources – one
                            associated with the expansion of IFS functionality (in the areas of
                            demand planning, production scheduling, customer and product
                            profitability analysis, etc.), and the second to support new
                            applications (such as warehouse management, barcoding, and EDI).



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                  Time estimate for recruiting: one to two months for each individual.
                  Cost estimate: $75,000 (Base Case) to $90,000 (Conservative Case) in
                  annual salary per hire.

                  Business benefit: addition of expertise to facilitate growth, reduction in
                  reliance on certain individuals, more reasonable distribution of work
                  with greater likelihood of staff retention.

                  Project II: ERP Upgrade. As noted previously, it is important that IFS be
                  upgraded to the most current release.

                  Time estimate: two to three months. Cost estimate: $170,000 (Base Case)
                  to $190,000 (Conservative Case). This cost estimate is based on quotes
                  the Company provided.

                  Note: After speaking with the IFS CTO it appears that an increase in the
                  IFS upgrade budget should be considered to support the use of more
                  robust hardware ( twin Xeon processors) and a more sophisticated
                  implementation of Windows (64 bit) than management may be currently
                  contemplating. This would allow greater scalability, performance and
                  redundancy. If requested IFS will provide assistance with the exact
                  specifications of this configuration. Expected budget increase would be
                  $50,000 - $75,000.

                  If NEP anticipates doubling the current number of sites or any single site
                  acquisition equal to all of the current operations in the near term then it
                  should direct management to consider an even more scalable and
                  expensive UNIX platform. IFS’s very largest clients use a Unix
                  configuration but it does not appear warranted unless very significant
                  near term growth is anticipated by NEP.

                  Business benefits: better system performance, better ability to support
                  growth.

                  Project III: ERP Enhancement. Wildcat now has the opportunity to
                  capitalize on its successful implementation of IFS by adding more
                  sophisticated functionality, both to improve performance and support
                  growth. This will entail an annual investment in IFS or products that can
                  be integrated with IFS. There is a great deal of discretion regarding the
                  phasing of these investments. One possible path is:

                      Year 1

                       Demand Planning. The Company is already piloting IFS’s demand
                       planning functionality, but has yet to roll it out across the enterprise.
                       From a technology standpoint, the costs of this project are low
                       (Wildcat has already purchased the required IFS module). The
                       greater challenge will be to change longstanding business processes.


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                       This may require costs for operational resources or contracted
                       experts.

                       Upgrade of EDI (may be required with upgrade of IFS). The
                       Company has identified products from Radley Corporation
                       (www.Radley.com) as providing appropriate EDI functionality and
                       the ability to integrate with IFS. It estimates the costs to implement
                       between $50,000 (Base Case) and $100,000 (Conservative Case),
                       depending on the number of EDI transactions that are developed.

                       Barcoding. The Company has identified products from eNSYNC
                       Solutions (www.ensyncsolutions.com) as providing appropriate
                       barcoding functionality and the ability to integrate with IFS.
                       eNSYNC has provided a proposal with one-time costs ranging from
                       $375,000 (Base Case) to $450,000 (Conservative Case), depending on
                       the number of scanners and transactions are licensed. Annual
                       maintenance costs would be in the range of $20,000 (Base Case) to
                       $35,000 (Conservative Case).

                      Year 2

                       Production Profitability Analysis. NEP has expressed an interest in
                       tracking profitability by customer and by product. From the
                       technology perspective, this may require the use of additional IFS
                       modules that allow tracking of costs to particular orders using a
                       Make to Order approach versus the current Make to Stock approach
                       (at least for some orders). From the business process perspective,
                       this represents a significant change. The involvement of an
                       experienced production costing expert may be required to make the
                       business case for change. And the involvement of a change
                       management expert may be required to facilitate the adoption of this
                       new perspective throughout the organization. We estimate total
                       project costs in the range of $250,000 (Base Case) to $500,000
                       (Conservative Case).

                       Production Scheduling. The Company almost certainly can realize
                       efficiency improvements from the automation of the production
                       scheduling process, including the scheduling of production across
                       plants (with the goal of utilizing available capacity and producing at
                       the lowest cost). From the technology perspective, IFS’s production
                       scheduling functionality may or may not meet the Company’s needs
                       (advanced scheduling is typically an area where “bolt-on” products
                       are used in conjunction with an ERP). From the business process
                       perspective, multi-plant scheduling represents a significant change,
                       and may require the employment of a seasoned scheduling resource
                       (as well as change management expertise). We estimate one-time
                       project costs in the range of $400,000 (Base Case) to $600,000
                       (Conservative Case). Annual maintenance costs would be in the
                       range of $20,000 (Base Case) to $30,000 (Conservative Case).


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                      Year 3

                       Budgeting and Forecasting. The Company believes that IFS
                       functionality can satisfy its needs for budgeting and forecasting, and
                       that these functions can be implemented with internal resources. We
                       estimate project costs in the range of $25,000 (Base Case) to $75,000
                       (Conservative Case).

                       Sales Configurator. As noted previously, the Company believes that
                       the use of IFS’s Sales Configurator functionality can reduce the
                       number of inventory SKUs, thereby reducing system maintenance
                       and improving the efficiency of the costing process. These functions
                       can be implemented with internal resources. We estimate project
                       costs in the range of $25,000 (Base Case) to $75,000 (Conservative
                       Case).

                       Warehouse Management. A warehouse management application can
                       help to improve efficiency and reduce loss. From the technology
                       perspective, this likely would require the acquisition of a “bolt-on”
                       warehouse management application. We estimate one-time project
                       costs in the range of $250,000 (Base Case) to $400,000 (Conservative
                       Case). Annual maintenance costs would be in the range of $20,000
                       (Base Case) to $30,000 (Conservative Case).

                  Project IV: Network Security. As noted previously, there are several
                  significant holes in the Company’s information security environment that
                  make it vulnerable to malicious attacks of various kinds (e.g.,
                  information theft, network disruption, etc.). We highly recommend a
                  project to implement better security. For the most part, this entails
                  replacing and reconfiguring the Company’s data center switches and
                  wireless access points.

                  The high-level activities associated with this project include:

                      Developing requirements for performance and manageability
                      Selecting a vendor
                      Developing configurations both for the higher-capacity backbone
                       switches and for the access switches and wireless access points that
                       connect devices to local LANs
                      Developing a phased implementation plan
                      Placing equipment orders and tracking delivery
                      Planning for, installing, and testing the equipment at the data center
                       and at each plant

                  Time estimate: two to three months. Cost estimate: one-time costs of
                  $50,000 (Base Case) to $75,000 (Conservative Case). Annual maintenance
                  costs in the range of $5,000 (Base Case) to $10,000 (Conservative Case).



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                     Business benefit: less risk of information loss, network disruption, and
                     downtime. Also, better network performance.

                     Project V: Offsite Storage of Backup Tapes / Disaster Recovery. The
                     Company can shore up its already good disaster recovery capabilities in
                     two ways. First, it can contract for professional off-site storage of its
                     backup tapes (e.g., with a vendor like Iron Mountain). Second, it can add
                     an email server and email data replication at the Cincinnati Bell disaster
                     recovery data center.

                     The high-level activities associated with this project include:

                            Select vendor and contract for offsite storage of backup tapes
                            Acquire, install, and configure equipment and software to
                             provide for recovery of email at the disaster recovery data center.
                            Document and test new disaster recovery plans

                     Time estimate: one to two months. Cost estimate: $20,000 (Base Case) to
                     $30,000 (Conservative Case) in one-time expenses for equipment,
                     software, and implementation services; $4,000 (Base Case) to $6,000
                     (Conservative Case) annually for offsite storage of backup tapes.

                     Business benefit: management of risk.

                  Recommended Medium-Priority Initiatives

                     Project VI: Server Consolidation. In the next couple of years, the
                     Company is facing a situation where it will have to replace many servers.
                     Rather than replacing individual servers, it could take a more elegant
                     approach of consolidating servers using virtualization. This would
                     reduce complexity and simplify maintenance. Initially, this alternative
                     may be cost neutral, but ultimately could reduce expenditures as the
                     Company scales.

                     The high-level activities associated with this project include:

                            Develop the design and equipment specifications
                            Acquire, install, configure, and test servers and virtualization
                             software
                            Update infrastructure documentation

                     Time estimate: two to three months. Cost estimate: one-time costs of
                     $175,000 (Base Case) to $200,000 (Conservative Case) for equipment,
                     software, and implementation services. Annual maintenance costs in the
                     range of $15,000 (Base Case) to $20,000 (Conservative Case).

                     Business benefit: simplification of infrastructure architecture and IT
                     maintenance requirements.



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                  Project VII: Expanded Use of Citrix. The Company believes that it can
                  improve the performance of IFS through the use of Citrix. Currently, the
                  Company has 20 Citrix licenses, but would like to add 25 licenses (which
                  would also require the addition of a Citrix server). From our perspective,
                  this seems reasonable.

                  Time estimate: one to two months. Cost estimate: $20,000 (Base Case) to
                  $30,000 (Conservative Case) for equipment and software.

                  Business benefit: better IFS performance.

                  Project VIII: Improvements to Data Center Physical Environment. To
                  “harden” the Chelmsford data center, we recommend the installation of
                  fire suppression equipment, a backup generator, additional UPS
                  capacity, a card swipe system, possible video camera monitoring, and
                  environmental monitoring equipment.

                  High-level implementation activities include:

                         Develop specifications
                         Identify “short-list” of potential vendors
                         Obtain price quotes
                         Place equipment orders and track delivery
                         Plan for, install, and test the equipment

                  Time estimate: one to two months. Cost estimate: $55,000 (Base Case) to
                  $80,000 (Conservative Case).

                  Business benefit: risk management.

                  Project IX: Negotiation with AT&T. There are several directions in
                  which the Company could take further advantage of its Managed
                  Internet Services contract with AT&T. First, the Cisco routers AT&T has
                  provided are at end-of-life, and should be replaced. Second, the
                  Company should request regular reporting of bandwidth usage from
                  AT&T (so that it can better manage its network). Third, based on our
                  reading of the contract, it is unclear what service levels AT&T is
                  obligated to meet (other than for network uptime); the Company could
                  attempt to clarify service levels related to network performance, incident
                  response time, etc.

                  Time estimate: one month. Cost estimate: low or no cost.

                  Business benefit: better network performance, better vendor service.

                  Project X: Equipment Replacement Cycle. In addition to the
                  infrastructure upgrade projects described previously, the Company
                  should adopt an equipment replacement / refresh cycle for desktops,
                  laptops, and printers. Adopting a replacement cycle makes these costs


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                    DRAFT For Discussion Purposes Only
                  predictable. It also cuts down on the time and cost spent on equipment
                  support and maintenance.

                  High-level implementation activities include:

                         Determine replacement cycle for each type of equipment
                         Prioritize existing equipment for replacement
                         Establish supplier arrangements (may achieve advantageous
                          terms for leasing / financing, pre-configuration of equipment,
                          repair, etc.)
                         Implement ongoing replacement program

                  Time estimate: ongoing activity. Cost estimate: $100,000 to $125,000 per
                  year (assuming the annual replacement of approximately 60 desktops /
                  laptops and 15 printers).

                  Business benefit: ability to budget equipment costs, more reliable
                  equipment, potential to reduce support costs, and better supplier
                  arrangements.




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                    DRAFT For Discussion Purposes Only

								
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