May 19, 2001

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Soup to Nuts Seminar Series
May 19, 2001
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• Presenter Brian Kasser, Principal, Software
  Investment Banking Practice
• Founded in Q4 1998 by Thom Weisel, former CEO of
  Montgomery Securities for 27 years, and
  officially opened doors for business February
  1999
• Capital raised 1999 16B 2000 28B
• in MA advisory transactions 1999 7B
  2000 76B
• Annual revenue 1999 186MM 2000 492MM
• 810 employees at 5/19/01
• Offices in San Francisco, Menlo Park, New York,
  Boston and London
• Focused exclusively on investment themes
  transforming the economy targeting the high
  quality growth companies
• Merchant banking approach combining research,
  underwriting, MA advisory and private equity
  investment activities
• Combines deep domain expertise with bulge bracket
  execution capabilities

Thomas Weisel Partners is the Leading Investment
Bank Exclusively Focused on Emerging Growth
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Table of Contents

• IPO Process Overview
• IPO Market Overview
• Overview of Thomas Weisel Partners

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IPO Process Overview
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IPO Process Overview

• Select the Team
• Draft a Document / Conduct Due Diligence (Bankers
  Research)
• File Registration Statement with the SEC
• Marketing (Roadshow)
• Pricing / Trading

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Characteristics of Companies that are Ready for
an IPO
Today Institutional Investors are evaluating
potential technology IPOs based on the following
metrics / attributes

• Quarterly revenue run rate greater than 10
  million and attractive sequential growth
• Visibility (2 quarters out)
• Profitability ( 2 quarters after filing)
• Market position (first mover advantage market
  leaders)
• Stable customers (Global 1000)
• Solution sold at sizable average selling prices
  (ASP)
• Proven business model
• Strong strategic channel partners
• Reasonable mix between license / service revenue
• Reasonable mix between direct / indirect sales
  channels
• Strong board representation
• Well-recognized investors
• Management (seasoned / experienced)

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Identifying and Selecting Investment Banks for an
IPO

• Full-Service Investment Bank
• Strong Research Capability with Domain Expertise
  and Active Approach Names (Publishing) Dialogue
  with both Sales Force and Institutions
• Focused and Active Sales and Trading within the
  Companys Sector
• Experienced Investment Banking Professionals with
  Sector Wide Knowledge and Advisory Capabilities
• Reputation and Strength of Firm
• Fit and Comfort with the Firm

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Landscape of the Leading Investment Banks
(Unbiased)
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Timing, Participants and Tasks of the IPO Process
Drafting / Due Diligence
SEC Review Period
Marketing / (Roadshow)
Pricing
After Market Support
Time Frame
Key Participants
Core Tasks
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Proceeds of the Offering
Gross Proceeds The total offering size.
Shares Offered Expected Price Gross Spread
The percentage of the gross proceeds paid to
underwriters to cover management fees,selling
commissions and underwriting concessions.
Almost always 7 on IPOs less on follow-ons
(usually negotiable) Offering Expenses
Expenses of the offering borne by the company.
Typically accounting and legal fees, filing
fees and printing costs. Net Proceeds Gross
Proceeds - Gross Spread - Offering
Expenses Example Gross Proceeds -- 5.0 million
shares issued X 10.00/share expected
price 50.0 million Less Gross Spread _at_ 7
--10.00 X .07 0.70 X 5.0 million shares
3.5 million Less Offering Expenses
---700,000 .7 million Equals Net
Proceeds 45.8 million
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Mechanics of an IPO Valuation

• Some Form of Public Comparable Company Analysis
  Price-to-Revenue, Price-to-Earnings, Combined
  with a Discounted Cash Flow
• Pricing an Art Not a Science (Within Accepted
  Metrics)
• Aftermarket Demand and Performance
• Majority of Shares Still Held by Founders and
  Existing Investors
• Market Ultimately Prices the Deal Based Upon
  Demand Characteristics
• Post Offering, Valuation Fluctuates Based on
• Operational Progress and Announcements
• Meeting Street Expectations Quarter After
  Quarter
• Research Coverage and Visibility
• Trading Volume and Liquidity

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Variables of an IPO Valuation

• Trading Multiple Based on comparable analysis,
  the multiple at which the investment banks
  believe a company will trade in the public
  markets.
• IPO Discount The amount by which the
  investment bank discount the trading multiple
  to calculate the IPO Multiple. Typically, IPOs
  are priced such that the stock price is
  expected to appreciate 15.
• IPO Multiple The multiple at which a company
  is taken public.
  Trading Multiple/ (1 IPO Discount)
• Post Money Equity Value The equity value of the
  company at an assumed IPO price. Post Deal
  Shares Outstanding IPO Price
• Pre-Money Equity Value Post-Money Equity Value
  - Offering Size
• Primary Shares New Shares sold by the company
• Secondary Shares Existing Shares Sold by
  Insiders (Typically Not Applicable for an
  IPO)

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Typical Stock Splits Prior to an IPO

• Prior to going public, companies will usually
  effect a stock split or reverse stock split.
• This is done to manipulate the price range of the
  common stock. To get it into a reasonable
  filing range (Typically low to mid teens)
• A stock split does not change the companys
  capitalization just the number of shares
  outstanding and consequently the earnings per
  share and per share price.

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IPO Market Overview
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Overview of the Current Economy

• The slowing U.S. economy has resulted in a
  reduction of capital spending by enterprises,
  especially on IT equipment and software
• The reduction in IT equipment and software
  spending has resulted in weak financial
  performance for technology companies and
  significant stock price declines
• The combination of a slowing U.S. economy and
  significant valuation adjustments has all but
  dried up the IPO market for early-stage emerging
  growth companies
• Investors have returned to historical less
  aggressive metrics to evaluate public technology
  companies and initial public offerings
• Companies architected for the investor
  environment of 1999 and 2000 must be restructured
• No more top line growth at any cost mentality
• Earnings matter!!!

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Return to Historical Valuations
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IPO Market Overview
Monthly Initial Public Offerings 1996 to Present
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IPO Market Overview
Pricing Trends in IPOs
The Big IPO Party...
Initial Public Offerings
..And The Morning Hangover
Priced Below Filing Range
Priced Within Filing Range (a)
Priced Above Filing Range
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IPO Market Overview
After Market Performance of IPOs that priced in
2001, 2000, and 1999
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Overview of Thomas Weisel Partners
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Overview of Thomas Weisel Partners

• Focused exclusively on investment themes
  transforming the economy
• Target selected growth industries and highest
  quality companies
• Merchant banking approach combining traditional
  institutional brokerage with significant private
  equity investment activities
• Comprehensive banking services for growth
  companies including equity underwriting,
  convertible debt, private placements, MA
  advisory and private client services
• Founded in Q4 1998, officially opened doors for
  business February 1999
• 810 employees, expected to increase to over 900
  by end of 2001
• 40.4 billion in equity capital raised
• 85.7 billion in MA advisory transaction volume
  announced/completed
• Thom Weisel, CEO of Montgomery Securities for 27
  years
• At Montgomery, Thom and other founders supervised
  an organization that in the 1990s raised 100
  billion in 988 equity offerings and executed 385
  MA transactions representing 100 billion in
  value
• Other senior executives with 20 years experience
  at Merrill Lynch, Credit Suisse First Boston,
  Salomon Smith Barney, Alex. Brown and others
• San Francisco Institutional Brokerage, Research,
  Corporate Finance, Private Client Dept. Private
  Equity
• New York Research, Private Client Dept.
  Corporate Finance
• Boston Institutional Brokerage Corporate
  Finance
• London Institutional Brokerage Corporate
  Finance

Strategic Positioning
Business Momentum
Management Team
Global Reach
Thomas Weisel Partners is the Leading Investment
Bank Exclusively Focused on Emerging Growth
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Overview of Thomas Weisel Partners
Thomas Weisel Partners Status Report

• IPOs and Follow-ons Completed
• 156 transactions
• 40.4 billion raised
• 18 lead managed offerings
• IPOs and Follow-ons Pending
• 14 transactions filed/announced
• 1.4 billion filed/announced
• 2 lead-managed offerings
• Mergers and Acquisitions
• 68 transactions completed/announced
• 42 transactions in backlog
• 85.5 billion in completed transactions
• 178 million announced
• Private Placements
• 25 transactions completed
• 15 transactions in process

Dollars (mm)
As of April 9, 2001IPOs and follow-ons completed
include over-allotment and convertibles do not
include over-allotment
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Overview of Thomas Weisel Partners
Comprehensive Services Across the Entire
Lifecycle of Todays Emerging Growth Companies
Private
Public
MA Advisory
Research, Sales Trading
IPO
Capital Raisings
Stage of Development
Private Client Services
Private Placements
Late Stage Private Equity (TWCP)
Venture Capital (TWVP)
Company Life Span
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Overview of Thomas Weisel Partners
Thomas Weisel Partners Equity Underwriting
Expertise
Experience

• 20 years experience in investment banking
• Completed over 156 financings in Thomas Weisel
  Partners short history
• Focused exclusively on emerging growth
  companies
• Raised over 40 billion in equity financing
  since inception
• Deep relationships with strategic and
  institutional investors
• Understanding of the strategic investor
  landscape
• Highly integrated with MA and Equity Research
  teams
• Experience in managing and completing IPOs and
  secondary offerings
• 18 lead managed offerings completed
• Deliver size and valuation objectives for
  clients

Dedicated Integrated Team
Track Record of Success
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Overview of Thomas Weisel Partners
Thomas Weisel Partners Equity Expertise
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Overview of Thomas Weisel Partners
Thomas Weisel Partners MA Advisory Expertise
Experience

• Average of 15 years experience in mergers and
  acquisitions advisory
• Blend of bulge bracket, boutique and
  growth-oriented MA experience
• Led by two of the industrys most respected MA
  professionals
• Mark Shafir -- former Head of Global
  Technology Investment Banking at Merrill Lynch
• -- advised Cisco on more than 10 transactions
• -- advised SDL on its 41 billion sale to JDS
  Uniphase
• Bob Kitts -- former Managing Director in
  the MA Group at Morgan Stanley
• Deep understanding of the growth sector MA
  landscape
• Highly integrated with Investment Banking and
  Equity Research teams
• Experience in managing and completing MA
  transactions
• 68 transactions completed/announced

Dedicated Integrated Team
Track Record of Success
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MA Environment TWP Capabilities
Strategic US Advisory Rankings 2001 YTD Ranked
by Dollar Volume
MA Technology Sectors (1)
MA All Sectors
(1) Technology Includes SDC Tech Industries (e.g.
Biotechnology, Computer Equipment,
Communications, Electronics, Robotics,
etc Transactions counted in the period in which
they are announced. Excludes spinoffs, buybacks
withdrawn deals Transactions with undisclosed
values are included in the deal count but do not
contribute to the Txn Value Total Source
Securities Data Corp. 4/4/01 - Transaction Values
are equivalent to SDCs rank values.
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Overview of Thomas Weisel Partners
Thomas Weisel Partners Private Placement Expertise

• 17 years experience in dedicated private equity
  effort
• Completed over 100 financings at Montgomery
  Securities during the 1990s
• Focus on a broad set of growth company industry
  groups
• Raised over 3 billion in private equity in the
  1990s
• Private equity team focused solely on the
  private equity placement market
• Deep relationships with private equity
  investors
• Understanding of the strategic investor
  landscape
• Highly integrated with Investment Banking, MA
  and Equity Research teams
• Experience in managing and completing private
  placements
• Completion in 8 to 14 weeks

Experience
Dedicated Integrated Team
Track Record of Success
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Overview of Thomas Weisel Partners
Thomas Weisel Partners Private Placement
Transactions
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Overview of Thomas Weisel Partners
Thomas Weisel Partners Private Placement
Transactions
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Overview of Thomas Weisel Partners
Thomas Weisel Partners Private Equity Funds
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Overview of Thomas Weisel Partners
Thomas Weisel Capital Partners,
L.P. 1,311,503,386
TechnologyServices
Healthcare Technology
Software Internet Infrastructure
Media Communications
Over 700 million committed to 28 leading
companies on the cutting edge of change in
software and internet infrastructure, technology
services, media communications, communications
equipment and healthcare technology.
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Overview of Thomas Weisel Partners
Private Client Services
Thomas Weisel Partners Private Client Services
strives to preserve the capital base of clients
through wealth diversification and asset
allocation
Management of cash flow and other short-term
capital needs
Corporate Cash Management
Investment Management Consulting
Comprehensive asset allocation and diversification
Brokerage Services
Identification of tax efficient investment
strategies
Brokerage services provided to friends of the
deal execution of restricted security
transactions
Corporate Services
Tax Estate Planning
Competitive execution and agent approach to fixed
income