The document evaluates strategic alternatives for holdco, focusing on an acquisition of fashionco for $85 million to enhance growth and achieve cost synergies. It discusses various options including mergers and divestitures, with a recommendation to merge apparelco with fashionco to meet financial targets and streamline operations. Valuations indicate holdco's growth objectives can be met through this acquisition, despite challenges in the publishing and apparel industries.

1. Evaluating Strategic Alternatives January 28, 2009 HoldCo Proprietary and Confidential

2. Table of Contents

3. Company Overview Owns all outstanding shares of EntCo and ApparelCo Little potential for organic growth, risks associated with small firm size Products & Services: Newspapers and publications, web site, TV production company, all focused on consumer product reviews Revenues: Over 90% from publishing; TV production increases market reach but contributes little to revenues Expected Growth: Low or no organic growth Products: High-end branded apparel & accessories No synergies between EntCo & ApparelCo Margins are lower than industry average due to high SG&A – can be reduced with scale Enhance fundamental value of HoldCo to satisfy shareholders Buy FashionCo for $85M HoldCo EntCo ApparelCo Objective Opportunity

4. Operating Performance EntCo Wide margins; flat revenue ApparelCo Narrow margins; highly cyclical FashionCo Wider margins than ApparelCo; steady growth in $ millions in $ millions in $ millions

5. Industry Overview Poor performance due to economy, decrease in advertising dollars Consolidations are common: larger companies acquire smaller, niche firms Publishing is expected to have little or no growth in the nearest future EntCo remains attractive despite low future growth, due to high operating and profit margins Industry is highly cyclical: brands fall in and out of favor Trendy brands are less affected by economy Trendier brands trade at higher multiples Publishing & Media Apparel & Accessories Both industries are expected to have low revenue growth in the future

6. Transaction Proposal Recommended Action: Purchase FashionCo Bid Range: $82 - $88M Transaction Type: Stock & Cash Value Created: Cost Synergies The following strategy will: (1) meet the growth objective of $100 million EBITDA by 2011 for HoldCo (2) achieve cost synergies (3) provide strategic benefits

7. Strategic Alternatives Option Advantages Disadvantages Recommendation Merge ApparelCo with FashionCo Growth objective met – HoldCo’s EBITDA of $100M achieved by 2011 Synergies resulting from lower SG&A New market – low-end affordable products Owners seeking exit – results in reasonable premium Accretive effects on EPS Additional financing needed BEST OPTION Sell Off ApparelCo Spin off poorly-performing unit (low EBITDA margins, cyclicality) Focus on the core business No additional funding needed Stock buyback or one-time dividend Growth objective not met Dissatisfaction among investors/founders Due to unusually low margins in 2008, will sell at a discount NOT RECOMMENDED Sell Off ApparelCo, Buy FashionCo Spin off poorly-performing unit (low EBITDA margins, cyclicality) FashionCo is well performing company with wide acceptance in the market Growth objective not met Low projected growth of FashionCo Additional funding needed NOT RECOMMENDED Do Nothing (1) No additional financing needed (1) Growth objective not met NOT RECOMMENDED Seek Mergers with Publishing Companies Expansion of the core publishing business Possible strategic partnerships Synergies Supported by management Reinvesting in low growth industry NOT RECOMMENDED Decrease SG&A Internally ApparelCo’s margins will increase, positively affecting HoldCo’s earnings Growth objective not met Restructuring will require resources and impose additional risks They may be little opportunity for decreasing SG&A internally NOT RECOMMENDED

8. Valuation Summary ApparelCo $47m FashionCo $76m NEW HOLDCO VALUE Stand Alone Sum $123m Synergies (Base Case*) $10m Intrinsic CombineCo $133m EntCo $563m *See Page 13 for Base Case

9. EntCo Valuation Equity Value: $563 Final Valuation Range: $529 – 596M Final Equity Value is based on the average of DCF, Precedent Transactions, and EV/EBITDA Equity Range $529 - $596 in $ millions DCF Forward-looking; Terminal Value based on EV/EBITDA Exit Multiple Precedent Transactions Based on comparable transactions from 2006-2008 EV/Revenue Not a good indicator of operating performance in this industry due to differences in comparable companies’ efficiencies and operating margins EV/EBITDA Based on comparable firms’ EV/EBITDA

10. ApparelCo Valuation Equity Value: $46.4 Final Valuation Range: $43.6 - $49.2M Final Equity Value is based on DCF with EBITDA Exit Multiple Equity Range$43.6 - $49.2 in $ millions DCF Forward-looking: Aggressive growth forecast; Terminal Value based on EV/EBITDA Exit Multiple Precedent Transactions Undervalued due to unusually low EBITDA in 2008; does not reflect aggressive growth expected in 2009-11 EV/Revenue Not a good indicator of operating performance due to differences in comparable companies’ efficiencies and operating margins EV/EBITDA Undervalued due to unusually low EBITDA in 2008; does not reflect aggressive growth expected in 2009-11

11. FashionCo Valuation Equity Value: $76.2 Final Valuation Range: $71.7 - $80.8M Equity Range $71.7 - $80.8 Final Equity Value is based on the average of DCF, Precedent Transactions, and EV/EBITDA in $ millions DCF Forward-looking; Terminal Value based on EV/EBITDA Exit Multiple Precedent Transactions Based on comparable transactions from 2005-2008 EV/Revenue Not a good indicator of operating performance due to differences in comparable companies’ efficiencies and operating margins EV/EBITDA Based on comparable firms’ EV/EBITDA

12. CombineCo Valuation Equity Value: $133 Final Valuation Range: $125 - $141M Equity Value $125 - $141 Final Equity Value is based on the average of DCF, Precedent Transactions, and EV/EBITDA * 2008 EBITDA was derived from 2009 EBITDA, adjusted for 2009 revenue growth, which includes 0.5% reduction in SG&A from redundancies, as well as Base Case additional SG&A savings: 2.5% in 2009, 5% in 2010, and 7.5% 2011 (See Page 13) in $ millions DCF Forward-looking; Terminal Value based on EV/EBITDA Exit Multiple Precedent Transactions* Based on comparable transactions from 2005-2008; EV/Revenue Not a good indicator of operating performance due to differences in comparable companies’ efficiencies and operating margins EV/EBITDA* Based on comparable firms’ EV/EBITDA

13. Synergies result from reductions in SG&A: Eliminating redundant back-office functions produces 0.5% reduction in SG&A for both ApparelCo and FashionCo Achieving greater scale provides opportunity to decrease ApparelCo’s SG&A by up to 10% Synergies resulting in CombineCo depend on the expected annual SG&A reductions Assumed Base Case Reductions are 2.5% in 2009, 5% in 2010 and 7.5% in 2011 Anticipated Synergies 0.5% SG&A savings from redundancies CombineCo Value ApparelCo + FashionCo Up to 10% SG&A savings due to scale Assuming a purchase of FashionCo at $85M, various scenarios of annual SG&A reductions result in the following synergies and economic gains CombineCo Value Less: Stand-Alones = Synergies Less: Premium Paid = Economic Gain in $ millions

14. FashionCo Economic Gain Economic gain is the difference between value of synergies realized and premium paid Assuming Base Case synergies of $10M and acquisition price of $85M, economic gain is calculated at $1.5 This determines the appropriate bid range depending on management’s confidence in expected SG&A reductions In $ millions Synergies

15. Financing Options Advantages: - No interest expense drain on earnings - Greater accretion than 100% equity acquisition Disadvantages: - Ownership dilution - Success dependent on the shareholders’ confidence of the management’s decision Advantages: - Provides for a strong balance sheet - No interest expense drain on earnings - Provides tax benefits to FashionCo’s shareholders Disadvantages: - Ownership dilution - Success dependent on the shareholders’ confidence of the management’s decision Disadvantage: - Credit Rating Impact / higher cost of debt Equity / Cash Hybrid $41 Million Cash on HoldCo’s Balance Sheet Stock swap to finance acquisition with covenants - Lock-in current stock price of $15.50 as floor to limit risk On the condition that on the day of transaction, HoldCo’s stock price is higher than the minimum, a 20 day volume-weighted average of price (VWAP) 100% Equity Same covenant option as Equity/Cash Hybrid 100% Debt / Cash Advantages: - Tax Benefits - Reduction of HoldCo’s Cost of Capital - Quicker Transaction

16. Accretion/Dilution Scenarios Both scenarios yield accretion for HoldCo shareholders within a wide range of FashionCo purchase prices and possible synergies Combination of stock and cash yields higher accretion for shareholders than a pure stock swap Percentages shown are accretive / (dilutive) effects on EPS in $ millions in $ millions

17. Bidding Strategy Recommended Bid Range: $82 - $88M Transaction Type: Stock Swap & Cash Financing: Cash $20 million Equity $62-68 million # of Shares Issued: 4.00 – 4.39 million shares (Based on the current stock price of $15.50)

18. Shareholder/Stakeholder Implications HoldCo’s Shareholders: Will benefit from the accretion of EPS and possible increase in stock price Positive market performance of HoldCo will please the Hedge Funds HoldCo’s Management: Further diversification to dampen cyclical risk Exit strategy is aligned with management’s goals FashionCo’s Shareholders: Receive expected purchase price for their company Merger will provide additional liquidity (Cash & Public Shares) to their investors CombineCo’s Customers: Will benefit from additional product choices (Private Label & Branded) Suppliers: May lose bargaining power due to the Company’s increase in economies of scale Competitors: Will face a less desirable competitive environment

19. Future Considerations (IRR) Should HoldCo’s management decide to divest CombineCo after a three-year holding period, the FashionCo acquisition will result in an IRR of 24% assuming: 2011 EBITDA reaches forecasted $31 million Industry Exit EBITDA multiple remains at 5.8x Sensitivity table illustrates the effects of changes in assumptions above Exit EBITDA Multiple in $ millions

20. Appendix

21. Appendix Outline

22. 1.1 Comparables: EntCo Company Product / Service Type Brands / Web Sites / Strategic Partners Geographical Market Gannett Co., Inc. Publishing: newspapers & publications; internet advertising & online search technology; commercial printing, newswire, marketing & data services Broadcasting: 23 TV stations, web sites offering news, entertainment & ads Web: HighSchoolSports.net Strategic partners: CareerBuilder.com, Classified Ventures, ShopLocal.com, Topix.net, Metromix LLC UK, US, Guam GateHouse Media, Inc. Publishing: print & online publications, directories; local niche publications on recreation, sports, healthcare & real estate Web: Sacramento.com Sacramento, CA Other local markets Journal Register, Co. Publishing: newspapers, print & online publications focusing on local interests Commercial Printing: 3 owned facilities Web: 228 web sites affiliated with newspapers & publications; 20 employment web sites US Lee Enterprises Inc. Publishing: print & online newspapers, specialty publications focusing on local interests; advertising; online infrastructure for 1,500 daily newspapers & shoppers Web: affiliated with publications Strategic partners: Yahoo! Inc. US McClatchy Co. Publishing: newspapers, affiliated web sites offering news, ads, e-commerce, publishing tools, hosting & software development Web: affiliated; 14.4% interest in CareerBuilder.com; 25.6% interest in Classified Ventures US The New York Times Company Publishing: major newspapers & publications Diversified Media: various web services, radio, interests in newsprint & paper manufacturing, cable network Web: Affiliated with newspapers Strategic partners: Monster Worldwide, Inc. US

23. 1.2 Comparables: ApparelCo & FashionCo Company Product Type Distribution Channels Target Customer Geographical Market Cygne Designs Inc. Private label and branded – Apparel Retailers Men & women US Delta Apparel Inc. Private label and branded – Apparel: active wear, specialty sizes Printing companies, retailers, college bookstores, sporting goods stores, other Adults, youth, kids US Ever-Glory International Group, Inc. Private label – Apparel Brands, retailers Men, women, kids Worldwide (focus on China) G-III Apparel Group, Ltd. Branded, minimal private label – Apparel Department stores, specialty stores, catalogs Men & women US Oxford Industries Inc. Private label and branded – Apparel; footwear; bedding, bath, personal & home accessories; luggage Wholesale – chain stores, department stores, mass merchants, specialty stores & catalogs Retail – owned retailers & Internet Men, women, kids US, UK Hartmarx Corp. Branded – Career Department & specialty stores, ecommerce Men & women US Jones Apparel Group, Inc. Branded – Apparel: sports and career; silver jewelry (low end) Department & specialty stores, mass merchants, retailers, factory outlets Women & kids US, Canada Perry Ellis International Inc. Branded – Apparel, swimwear, accessories (upscale) Department stores, national regional chain stores, mass merchants, retailers Men & women US, Worldwide Phillips-Van Heusen Corp. Branded – Apparel , sportswear, footwear, neckwear, accessories, home furnishing, other Department & specialty stores, mass merchants, retailers Men, women & kids Worldwide VF Corp. Branded – Apparel, accessories, sportswear Department & specialty stores, national chain stores, mass merchants, distributors, owned retailers Men & Women US, international

24. 2.1 ApparelCo WACC Companies identified as comparable: Branded & branded/private label Companies eliminated from comparable group: Cygne Designs, Phillips-Van Heusen & VF Corp. eliminated based on size (Total Cap) Ever-Glory eliminated as a private label company Hartmarx eliminated due to unusually high leverage & small market cap Averages of unlevered beta, cost of equity & cost of debt were used in WACC calculation

25. 2.2 ApparelCo WACC (Cont’d)

26. 2.3 FashionCo WACC Companies identified as comparable: Private label & branded/private label Companies eliminated from comparable group: Cygne Designs eliminated based on size (Total Cap) G-III Apparel, Hartmarx, Jones Apparel, Perry Ellis International, Phillips-Van Heusen & VF Corp. eliminated as branded companies Hartmarx eliminated due to unusually high leverage & small market cap Averages of unlevered beta, cost of equity & cost of debt were used in WACC calculation

27. 2.4 FashionCo WACC (Cont’d)

28. 2.5 EntCo WACC Companies identified as comparable: Publishing & Publishing/Media No companies eliminated from comparable group Due to negative equity, reported on 2008 Balance Sheet, WACC was calculated as average of comparable companies’ WACCs

29. 2.6 CombineCo WACC Companies identified as comparable: Private label, branded & branded/private label Companies eliminated from comparable group: Cygne Designs, Phillips-Van Heusen & VF Corp. eliminated based on size (Total Cap) Hartmarx eliminated due to unusually high leverage & small market cap Averages of unlevered beta, cost of equity & cost of debt were used in WACC calculation

30. 2.7 CombineCo WACC (Cont’d)

31. 3.1 Other Comparable Company Info

32. 4.1 EntCo DCF Valuation

33. 4.2 ApparelCo DCF Valuation

34. 4.3 FashionCo DCF Valuation

35. 4.4 CombineCo DCF Valuation

36. 4.5 DCF Sensitivity Tables demonstrate sensitivity of DCF equity values to WACC and Exit EBITDA Multiple WACC WACC WACC WACC in $ millions in $ millions

37. 4.6 DCF Sensitivity Tables demonstrate sensitivity of DCF equity values to WACC and Exit EBITDA Multiple WACC WACC WACC WACC in $ millions in $ millions

38. 5.1 Ratio Analysis Ratio Analysis indicates an improvement in operating efficiency of CombineCo, compared with ApparelCo

39. 6.1 Financial Statements

40. 6.2 Financial Statements

41. 6.3 Financial Statements

42. 6.4 Financial Statements

43. 6.5 Financial Statements

44. 6.6 Financial Statements

45. 6.7 Financial Statements

46. 6.8 Financial Statements