EXHIBIT 99.3
DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LP 0000 XXXXXX XX XXX XXXXXXXX
00xx XXXXX
XXX XXXX, XX 00000
TEL 000 000-0000
May 8, 2006
Board of Directors
Xxxxx Supermarkets, Inc.
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Ladies and Gentlemen:
On behalf of our respective firms, Drawbridge Special Opportunities
Advisors LLC ("Drawbridge") and Cardinal Paragon, Inc. ("Cardinal"), we request
your consent, under the fifth paragraph of the letter agreement (the "Standstill
Agreement") dated March 13, 2006, between Cardinal and Xxxxx Supermarkets, Inc.
(the "Company"), to our again making the proposal to acquire the Company that we
made in our letter dated April 27, 2006, to Xxx Xxxxx (our "Proposal").
Frankly, we are surprised and disappointed to be in the position in which
we now find ourselves. As you no doubt know, our Proposal was that we acquire
the Company for an all-cash purchase price of $13.625 for each Class A and Class
B share of the Company, representing $2.50 per share more than the consideration
provided by the Company's announced merger transaction (the "Inferior Sun
Capital Transaction") with Sun Capital Partners. Our Proposal provided an
aggregate of $27 million more for the Company's shareholders and option holders
gross (approximately $21 million more net of the aggregate option exercise
price). We recognize that because the Company may have to pay expenses and/or a
termination fee to Sun Capital, our Proposal would effectively now be more
expensive to us, but we do not propose to change the $13.625 per share amount.
Our Proposal stated that "we have made a substantial investment in our due
diligence efforts to date" and that we are "highly confident that we can deliver
a fully-executed definitive merger agreement to the Company within 15 days." Our
Proposal indicated that Drawbridge together with its affiliates has in excess of
$20 billion in equity capital under management and has made 63 private equity
investments with a total enterprise value of $35 billion, and that Cardinal has
made in excess of $5 billion of portfolio acquisitions. We do not understand why
we never received any reply to our Proposal and why the Company chose instead to
enter into a transaction that is clearly inferior to the Company's shareholders.
Upon our receipt of the consent referred to above, we would again make our
Proposal, on the same terms. We have reviewed the Company's recently executed
merger agreement with MSH Supermarkets Holding Corp. (the "Sun Capital Merger
Agreement") and, subject to the completion to our satisfaction of a due
diligence investigation by us and our advisors of the Company and its
management, accountants and advisors, we would be prepared to execute a merger
agreement on substantially similar terms. As we noted in our Proposal, that due
diligence investigation would not take more than 15 days.
We believe that this letter "is a Superior Proposal or is reasonably likely
to be a Superior Proposal" within the meaning of Section 5.5(b)(i) of the Sun
Capital Merger Agreement, and therefore that Section permits you to "participate
in . . . discussions or negotiations" with us, "furnish or disclose ...
information" to us and "take any other action to facilitate" our Proposal (all
as specified in Section 5.5(a)(ii)).
If you have any questions about this letter or would like to discuss it
further, please contact Xxxxx Xxxxxxxxx at 000-000-0000.
This letter does not constitute an offer prohibited by the Standstill
Agreement, and does not create any binding agreement or commitment of any kind.
No binding obligation on the part of Drawbridge or Cardinal will be created
until the execution of definitive documentation with respect to a transaction.
The existence and terms of this letter and our Proposal are confidential and,
unless required by law (in the Company's proxy statement with respect to the
Inferior Sun Capital Transaction or otherwise), may not be disclosed publicly or
otherwise without our prior written consent.
Very truly yours,
DRAWBRIDGE SPECIAL OPPORTUNITIES
ADVISORS LLC
By /s/ Xxxxxxxxxxx Xxxxxxxx
----------------------------------
Name: Xxxxxxxxxxx Xxxxxxxx
Title: Chief Credit Officer
CARDINAL PARAGON, INC.
By /s/ Xxx X. Xxxxxx
----------------------------------
Name: Xxx X. Xxxxxx
Title: Chief Executive Officer
