Xxxxxx Group Acquisitions, LLC
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
June 27, 2007
BY HAND & FACSIMILE
Everlast Worldwide Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx
Re: ACQUISITION PROPOSAL
Ladies and Gentlemen:
Reference is made to (a) the Agreement and Plan of Merger dated as of June
1, 2007 (the "MERGER AGREEMENT") among Xxxxxx Group Acquisitions, LLC
("XXXXXX"), Xxxxxx Group Acquisitions, Inc. and Everlast Worldwide Inc. and (b)
the letter dated June 21, 2007 (the "NOTICE LETTER") from the Company to Xxxxxx
relating to the Acquisition Proposal (as defined in the Merger Agreement)
received by the Company from Brand Holdings Limited ("BRAND HOLDINGS").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Merger Agreement.
Xxxxxx hereby proposes and is prepared to immediately execute an amendment
to the Merger Agreement to modify the terms and conditions of the Merger
Agreement as follows:
1. An increase in the Merger Consideration from $26.50 per
share to $30.55 per share.
2. An increase in the Termination Fee to $5,400,000.
3. An increase in the Parent Termination Fee to $3,900,000.
Enclosed is a copy of a letter sent earlier today to Xxxxxx Xxxxxxxx Frome
Xxxxxxxxxx & Xxxxxxx LLP ("XXXXXX") containing a description of the financing
arrangements that have been obtained by Xxxxxx. Documentation regarding these
arrangements has been sent to Xxxxxx and will be forwarded to the Company under
separate cover.
As a result of the proposal described in this letter, the Acquisition
Proposal described in the Notice Letter (the "BH PROPOSAL") does not constitute
a Superior Proposal under the Merger Agreement. Further, we believe the BH
Proposal is defective for the following reasons:
June 27, 2007
Page 2
(i) in contrast to our proposal, the BH Proposal includes a
vague condition that there has been no change in disclosure regarding the
Company's "prospects"; the term "prospects" is not included in the definition of
Material Adverse Effect in the Merger Agreement;
(ii) as we understand, Brand Holdings has not yet completed
its due diligence of the Company, since it has not entered into an Acceptable
Confidentiality Agreement and, accordingly, was not permitted to receive any
non-public information from the Company;
(iii) based on Brand Holdings' letter to you dated June 20,
2007, which makes reference to an enterprise value of $163 million, it may not
fully understand the cash required to close its proposed transaction, which is
substantially higher than the $163 million amount; and
(iv) the BH Proposal requires an additional condition to
closing, as Brand Holdings requires approval under the HSR Act and related
anti-trust review.
These issues raise serious questions as to whether the BH Proposal will be
consummated on the terms set forth therein. The Company should consider whether
it is merely granting Brand Holdings an option (the price of which is simply the
$3,800,000 parent termination fee provided in Brand Holding's draft merger
agreement). In contrast, Xxxxxx has conducted full due diligence of the Company,
providing greater certainty of Xxxxxx'x closing the contemplated acquisition of
the Company.
Because of the deficiencies in the BH Proposal, we believe it does not meet
the requirements for being considered a "Superior Proposal".
As you will appreciate, applicable federal securities laws require that
this letter be filed with the Securities and Exchange Commission as an exhibit
to an amendment to the Schedule 13D which was filed on June 26, 2007. In
accordance with Section 7.06 of the Merger Agreement, we anticipate that we will
be providing the Company a draft of such 13D amendment for the Company to review
and comment on prior to its filing. We would similarly anticipate that the
Company will provide us reasonable time to comment on any press release or
public filings that it will be making in connection with the Merger Agreement
and the transactions contemplated thereby, including with respect to this
letter.
Xxxxxx and its representatives would be pleased to have further discussions
with the Company and its representatives as contemplated by Section 7.03(d) of
the Merger Agreement to clarify any aspects of this proposal and to consider any
additional modifications thereto as the Company may request. Please do not
hesitate to call Xxxx X. Xxxxxx (917.974.2366) or Xxxxxxxx Xxxxxx (917.796.4319)
to discuss this letter.
June 27, 2007
Page 3
Sincerely,
XXXXXX GROUP ACQUISITIONS, LLC
By: The Xxxxxx Group LLC,
its managing member
By: /s/ Xxxx X. Xxxxxx
----------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Member
Enclosure
cc: Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxx Xxxxx
