Exibit 99.1
EXECUTION COPY
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (the "Agreement"), is made
and entered into as of August 3, 2007 (the "Effective Date"), by and among (i)
Xxxxxx Group Acquisitions, LLC and Xxxxxx Group Acquisitions, Inc. (jointly
"Xxxxxx"); (ii) Everlast Worldwide Inc. ("Everlast"); and (iii) Brands Holdings
Limited and EWI Acquisition, Inc. (jointly, "Brands").
RECITALS
A. On June 1, 2007, Xxxxxx and Everlast entered into an agreement and plan
of merger (the "Xxxxxx Merger Agreement").
B. On June 28, 2007, Everlast tendered payment to Xxxxxx of $3 million,
notified Xxxxxx that Everlast was terminating the Xxxxxx Merger Agreement, and
concurrently entered into an agreement and plan of merger with Brands (such
agreement, as amended by Everlast and Brands as of June 29, 2007, the "Brands
Merger Agreement").
C. On July 10, 2007, Xxxxxx commenced an action against Everlast in the
Delaware Court of Chancery, which was assigned Civil Action No. 3078-VCL (the
"Xxxxxx Action"). The complaint in the Xxxxxx Action alleges, among other
things, that Everlast did not effectively terminate the Xxxxxx Merger Agreement
and that the Brands Merger Agreement is not effective.
D. On July 20, 2007, Brands filed a Complaint in Intervention (the
"Intervention Complaint"). The Intervention Complaint seeks, among other things,
specific performance of the Brands Merger Agreement, and relief from a certain
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standstill agreement and payment of a certain termination fee in the event that
the Xxxxxx Action was successful.
E. On August 2, 2007, Xxxxxx, Everlast and Brands (collectively, "the
Parties") reached an agreement in principle to settle the Xxxxxx Action on the
terms set forth herein.
NOW, THEREFORE, for and in consideration of the above recitals, and the
covenants, promises, conditions and stipulations contained herein, the Parties
agree as follows:
SETTLEMENT CONSIDERATION
1. In consideration for the settlement and release of all Claims (as
defined below) released hereunder, the Parties agree that:
X. Xxxxxx shall cause the voluntary dismissal, with prejudice, of
the Xxxxxx Action within two (2) business days of the Effective Date of this
Agreement; PROVIDED THAT in the event of further litigation against Xxxxxx by
Everlast or Brands relating to the currently contemplated sale of Everlast as a
public company for matters not released hereunder (including, without
limitation, litigation in respect of conduct related to such sale of Everlast
after the Effective Date), none of Brands or Everlast would oppose the
reinstitution by Xxxxxx of that component of the Xxxxxx Action that relates
solely to relief in the form of money damages not to exceed $1,500,000 in the
event of a final determination that under the Xxxxxx Merger Agreement Xxxxxx was
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entitled to a "Termination Fee" (as defined in the Xxxxxx Merger Agreement) of
$4,500,000 and not $3,000,000.
B. Following the dismissal of the Xxxxxx Action referred to above,
Brands shall dismiss the Intervention Complaint with prejudice.
C. Everlast shall issue a press release in the form attached hereto
as Exhibit A within two (2) business days of the Effective Date of this
Agreement.
D. In the absence of any further litigation by Xxxxxx (or any of its
affiliates or associates), neither Everlast nor Brands shall, in the
"Shareholders Litigation" (as defined below), seek further discovery from Xxxxxx
or the "Xxxxxx Equity Investors" (as defined below), other than (i) the
completion of document production from Xxxxxx (including Xxxxxx'x outside
counsel (Proskauer Rose LLP) and financial advisor (X. Xxxxxx LLC)) previously
requested, (ii) the depositions of Xxxx Xxxxxx, Xxxxxxxx Xxxxxx and the proper
representative of Xxxxx Fargo Century, Inc. ("Xxxxx Fargo") and (iii) if
Everlast or Brands should seek to depose a proper representative of Xxxxx Fargo,
document requests and/or subpoenas directed to Xxxxx Fargo (PROVIDED THAT the
covenant in this sentence shall not apply to any Xxxxxx Equity Investor that is
or becomes a named plaintiff in any Shareholders Litigation). It is agreed and
acknowledged that, notwithstanding this Agreement, Everlast and Brands may ask
questions at depositions of any person in the event that other parties depose
Xxxxxx or the Xxxxxx Equity Investors; PROVIDED THAT neither Everlast nor Brands
will solicit, encourage or otherwise support or assist any other entity,
directly or indirectly, in initiating or pursuing such additional discovery. As
used herein, the term "Xxxxxx Equity Investors" means Seneca Capital Investments
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LLC; Xxxxxx Capital Investors; Crystal Capital Fund Management, LLC; Middlegate
Securities Ltd.; Boxing 2000 LLC; Ore Hill Fund, L.P.; Chase Commercial Corp.;
XX Xxxxxx Securities Inc.; Chase Capital; The Xxxxxx Group, LLC; Agent 99, Inc.
and Citibank, N.A., and the term "Shareholders Litigation" means (i) the
purported class-action complaints brought in the Delaware Court of Chancery (A)
on July 10, 2007, on behalf of Xxxxxxx X. Xxxxxxx and all others similarly
situated, which was assigned Civil Action No. 3077-VCL and (B) on July 24, 2007,
on behalf of Xxxxxxx Xxxxx and all others similarly situated, which was assigned
Civil Action No. 3119 and (ii) litigation brought by Everlast stockholders after
the Effective Date challenging any action by the Everlast Board of Directors in
regard to any proposal to acquire Everlast, or alleging any breach of fiduciary
duty by the Everlast Board of Directors in connection with its consideration (or
lack thereof) of such an acquisition proposal.
2. Each of the Parties, severally and not jointly, hereby represents and
warrants that it has full power and authority to execute and perform its
obligations under this Agreement which, when executed, will be binding upon it.
MUTUAL RELEASES; COVENANTS NOT TO XXX
3. XXXXXX RELEASE AND COVENANT NOT TO XXX:
(a) Xxxxxx (on its own behalf and on behalf of its directors, officers,
employees, advisors, agents and affiliates) hereby absolutely and
unconditionally releases and forever discharges, settles and relinquishes any
and all claims, demands, rights, actions or causes of action, liabilities,
damages, losses, obligations, judgments, suits, matters and issues of any kind
or nature whatsoever (collectively, "Claims"), whether known or unknown,
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suspected or unsuspected, disclosed or undisclosed, (i) that have been asserted
or could have been, as of the Effective Date, asserted against Everlast or
Brands, or any of their current or former directors, officers, employees,
advisors, agents or affiliates, under any legal system and in any jurisdiction
or forum whatsoever, for, upon, or by reason of any matter, cause, or thing
relating to or arising out of or in connection with the Xxxxxx Merger Agreement
and the Brands Merger Agreement (including, without limitation, those asserted
or capable of being asserted in the Xxxxxx Action and the Intervention
Complaint) and (ii) that relate to the valid, binding and enforceable nature of
the "Termination Fee" (as defined in the Brands Merger Agreement) and the
payments contemplated by Section 9.03(d) of the Brands Merger Agreement,
including the payment thereof to Brands, in the circumstances contemplated by
Section 9.03(b) of the Brands Merger Agreement (including in the event that
Xxxxxx makes an "Acquisition Proposal" (as defined in the Brands Merger
Agreement) that the Board of Directors of Everlast determines is a "Superior
Proposal" (as defined in the Brands Merger Agreement) in accordance with the
Brands Merger Agreement); PROVIDED THAT the foregoing (Y) does not and shall not
be deemed to include any Claims that arise out of this Agreement and (Z) does
not preclude Xxxxxx from bringing the claim for money damages not to exceed
$1,500,000 referred to in, and in accordance with, Section 1 A of this
Agreement. Xxxxxx (on its own behalf and on behalf of its directors, officers,
employees, advisors, agents and affiliates) hereby represents and warrants that
it has not assigned, transferred, subrogated, conveyed, or otherwise disposed of
any of the Claims released by this paragraph (a), or of any right thereunder,
and covenants and agrees that it will not do so hereafter.
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(b) Xxxxxx (on its own behalf and on behalf of its directors, officers,
employees, advisors, agents and affiliates) hereby covenants, represents and
warrants to Everlast and Brands that it will not file, initiate, or join and has
not filed, initiated or joined, any Claim directly or indirectly, on its own
behalf or on behalf of or with any other person or entity, against any of the
entities released in paragraph (a) relating to, arising out of, or in connection
with the Claims released under paragraph (a).
4. EVERLAST AND BRANDS RELEASES AND COVENANTS NOT TO XXX:
(a) Each of Everlast and Brands hereby severally (but each on its own
behalf and on behalf of its respective directors, officers, employees, advisors,
agents and affiliates) absolutely and unconditionally releases and forever
discharges, settles and relinquishes any and all Claims, whether known or
unknown, suspected or unsuspected, disclosed or undisclosed, that have been
asserted or could have been, as of the Effective Date, asserted against Xxxxxx,
or any of Xxxxxx'x current or former directors, officers, employees, advisors,
agents or affiliates under any legal system and in any jurisdiction or forum
whatsoever, for, upon, or by reason of any matter, cause, or thing relating to
or arising out of or in connection with the Xxxxxx Merger Agreement and the
Brands Merger Agreement (including, without limitation, those asserted or
capable of being asserted in the Xxxxxx Action and the Intervention Complaint);
PROVIDED THAT the foregoing does not and shall not be deemed to include any
Claims that arise out of this Agreement. Each of Everlast and Brands severally
(but each on its own behalf and on behalf of its respective directors, officers,
employees, advisors, agents and affiliates) hereby represents and warrants that
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it has not assigned, transferred, subrogated, conveyed, or otherwise disposed of
any of the Claims released by this paragraph (a), or of any right thereunder,
and covenants and agrees that it will not do so hereafter.
(b) Each of Everlast and Brands severally (but each on its own behalf and
on behalf of its respective directors, officers, employees, advisors, agents and
affiliates) hereby covenants, represents and warrants to Xxxxxx that it will not
file, initiate, or join and has not filed, initiated or joined, any Claim
directly or indirectly, on its own behalf or on behalf of or with any other
person or entity, against any of the persons and entities released in paragraph
(a) relating to, arising out of, or in connection with the Claims released under
paragraph (a).
5. Each Party hereby agrees to indemnify, defend, and hold harmless each
other Party for, from, and against any and all losses, liabilities, damages and
expenses (including reasonable legal fees and expenses and expenses related to
enforcement of this Agreement) to the extent arising from, relating to or
otherwise in respect of: (a) any actual or attempted assignment, transfer,
subrogation, conveyance or other disposition by such Party of any Claim released
hereby; (b) in the case of Xxxxxx as an indemnifying Party under this paragraph
5, any actual or attempted filing or initiation by Xxxxxx of any Claim referred
to in paragraph 3(b) and in the case of either Everlast or Brands as an
indemnifying Party under this paragraph 5 (which indemnification obligations
shall be several and not joint, for the avoidance of doubt), any actual or
attempted filing or initiation by Everlast or Brands (as the case may be) of any
Claim referred to in paragraph 4(b); or (c) any other breach of any provision of
this Agreement by such Party.
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6. None of the existence of this Agreement or the contents thereof, or of
any negotiations, discussions, statements or proceedings in connection with the
Agreement shall be deemed or constitute a presumption, concession or admission
by any Party of any fault, liability or wrongdoing or lack of any fault,
liability or wrongdoing as to any facts or claims (whether civil, criminal or
administrative). The existence of the Agreement, or its contents, or of any
negotiations, statements or proceedings in connection therewith, shall not be
offered or admitted in evidence or referred to, interpreted, construed, invoked,
or otherwise used by any person for any purpose in any action, litigation or
proceeding (whether civil, criminal or administrative), except as may be
necessary to enforce the terms of this Agreement.
NO WAIVER
7. Any failure by any Party to insist upon the strict performance by any
other Party of any of the provisions of this Agreement shall not be deemed a
waiver of any of the provisions hereof, and such Party, notwithstanding such
failure, shall have the right thereafter to insist upon the strict performance
of any and all of the provisions of this Agreement to be performed by such other
Party.
8. No waiver, express or implied, by any Party of any breach or default by
any other Party in the performance by the other Party of its obligations under
this Agreement shall be deemed or construed to be a waiver of any other breach,
whether prior, subsequent, or contemporaneous, under this Agreement.
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SUCCESSORS AND ASSIGNS
9. This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective agents, executors, heirs, successors and permitted
assigns; PROVIDED THAT this Agreement and the rights and obligations hereunder
shall not be assignable or transferable by any Party without the prior written
consent of the other Parties.
GOVERNING LAW
10. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to Delaware's conflicts of law
rules. Any dispute arising out of this Agreement or action to enforce this
Agreement shall be litigated in and only in the Court of Chancery of the State
of Delaware exclusive of any other court except that, if the Court of Chancery
does not have subject matter jurisdiction over any such dispute or aspect
thereof, it shall be litigated in the Superior Court of the State of Delaware
or, if there is jurisdiction and proper venue, the United States District Court
for the District of Delaware, unless those Courts decline to exercise
jurisdiction.
ENTIRE AGREEMENT; AMENDMENT
11. This Agreement constitutes the entire agreement between the Parties
with respect to the subject matter hereof, and it may be modified or amended
only by a writing signed by the signatories hereto.
COUNTERPARTS
12. This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement. This Agreement shall
become effective when counterparts have been signed by each of the Parties.
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13. Signed signature pages of this Agreement may be delivered by
telecopier or e-mail, which will constitute complete delivery without any
necessity for delivery of originally signed signature pages in order for this to
constitute a binding agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the undersigned Parties have duly executed this
Agreement as of the Effective Date.
EVERLAST WORLDWIDE INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
BRANDS HOLDINGS LIMITED
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Head of Brands
EWI ACQUISITION, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Vice President
XXXXXX GROUP ACQUISITIONS, LLC
By: The Xxxxxx Group LLC, its manager
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Title:
XXXXXX GROUP ACQUSITIONS, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
Title:
[SIGNATURE PAGE]
EXHIBIT A
(Form of Press Release)
Everlast Worldwide, Inc. (Nasdaq: EVST - News) announced today that that it has
entered into a settlement agreement with Xxxxxx Group Acquisitions, LLC and
Xxxxxx Group Acquisitions, Inc. The settlement provides for the dismissal, with
prejudice, of Xxxxxx'x lawsuit against Everlast, which sought to block
Everlast's pending merger agreement to be acquired by Brands Holdings Limited.
Pursuant to the terms of the settlement, among other things, Everlast has agreed
to limit the discovery it may take from Xxxxxx in connection with certain
stockholder litigation, and Everlast agreed to publicly reaffirm its board's
commitment to comply with its fiduciary responsibilities, as set forth below.
Pursuant to the terms of the merger agreement, the Board of Directors of
Everlast remains free to consider unsolicited acquisition proposals.
Additionally, as Everlast has previously disclosed, there is no agreement
between Everlast and Xxxxxx that would prohibit Xxxxxx from commencing a
non-coercive tender offer for Everlast's shares. The Everlast Board has been and
remains committed to obtaining the best transaction reasonably available to its
stockholders, as it is required to under Delaware law. In the event that any
entity (including Xxxxxx) makes an unsolicited acquisition proposal or commences
a non-coercive tender offer for Everlast's shares, the Everlast Board will, as
it has done in the past, comply with its fiduciary duties under Delaware law in
evaluating and responding to any such proposal or tender offer.
About Everlast Worldwide Inc.
Everlast Worldwide Inc. is a leading designer, manufacturer and marketer of
boxing and fitness related sporting goods equipment under the well-recognized
Everlast brand name and a worldwide licensor of the Everlast brand for apparel,
footwear, sporting goods equipment and other active lifestyle products and
accessories. Since 1910, Everlast has been the preeminent brand in the world of
boxing and among the most recognized brands in the overall sporting goods and
apparel industries. In order to capitalize on the rich heritage and authenticity
of the Everlast brand, the company has extended the Everlast brand outside of
the boxing ring into complementary product categories. Our strategy is to
continue to leverage the unique qualities represented by the Everlast
brand--Strength, Dedication, Individuality and Authenticity -- to become a
leading global athletic brand and a necessary part of the lives of consumers who
train, compete and live an active lifestyle.
Statements made in this Press Release that are estimates of past or future
performance are based on a number of factors, some of which are outside of the
Company's control. Statements made in this Press Release that state the
intentions, beliefs, expectations or predictions of Everlast Worldwide, Inc. and
its management for the future are forward-looking statements. It is important to
note that actual results could differ materially from those projected in such
forward-looking statements. Information concerning factors that could cause
actual results to differ materially from those in forward-looking statements is
contained from time to time in filings of Everlast Worldwide with the U.S.
Securities and Exchange Commission. Copies of these filings may be obtained by
contacting Everlast Worldwide or the SEC.
