[LETTERHEAD OF PETER J. SOLOMON COMPANY LIMITED]
July 29, 1999
Special Committee of the Board of Directors
Concord Fabrics Inc.
1359 Broadway
New York, NY 10018
Ladies and Gentlemen:
You have asked us to advise you with respect to the fairness to the
shareholders of Concord Fabrics Inc. (the "Company") other than Concord Merger
Corp. ("Merger Corp.") and its affiliates from a financial point of view of the
consideration proposed to be paid by Merger Corp. pursuant to the terms of the
Agreement and Plan of Merger (the "Agreement"), draft of July 28, 1999, between
the Company and Merger Corp.
We understand that Merger Corp. has been formed by an investor group that
includes Alvin Weinstein, the Chairman of the Company, Earl Kramer, the
President of the Company, David Weinstein, the President of the Company's
Concord House Division, and other members of the Weinstein family (the "Investor
Group") and has made an offer to purchase all of the Class A and Class B common
shares (the "Common Shares") and common share equivalents of the Company not
owned by Merger Corp., the members of the Investor Group and their affiliates
for a price of $7.875 per share (the "Transaction"). We understand that,
pursuant to the Agreement, Merger Corp. will commence a tender offer for the
outstanding Common Shares not owned by Merger Corp. and its affiliates and, upon
completion thereof, intends to merge itself with and into the Company. We
further understand that Merger Corp. and the Investor Group currently own
approximately 63% of the outstanding Common Shares.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by the
management of the Company;
(iii) reviewed certain financial projections of the Company prepared
by the management of the Company;
(iv) discussed the past and current operations, financial condition
and prospects of the Company with management of the Company;
(v) reviewed the reported prices and trading activity of the Common
Shares;
(vi) compared the financial performance and condition of the Company
and the liquidity of the Common Shares with that of certain other
comparable publicly-traded companies;
(vii) reviewed publicly available information regarding the
financial terms of certain transactions deemed comparable, in whole or in
part, to the Transaction;
(viii) participated in certain discussions among representatives of
the Company and Merger Corp.;
(ix) reviewed the Agreement, draft of July 28, 1999 (and we have
assumed that the final form thereof will not vary in any regard that is
material to our analysis); and
(x) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
information reviewed by us for the purpose of this opinion and we have not
assumed any responsibility for independent verification of such information.
With respect to the financial projections, we have assumed, with your
permission, that the financial projections were reasonably prepared on a basis
which reflects the best currently available estimates and judgements of the
future financial performance of the Company. We have not conducted a physical
inspection of the facilities or properties of the Company. We have not assumed
any responsibility for any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such valuation
or appraisal. For purposes of rendering this opinion, we have assumed and relied
upon, in all respects material to our analysis, the following: that the
representations and warranties of each party contained in the Agreement are true
and correct; that each party will perform all of the covenants and agreements
required to be performed by it and that all of the conditions to the Transaction
will be satisfied without waiver thereof. We have assumed, with your permission,
for purposes of this opinion that the proposed consummation of the Transaction
as set forth in the Agreement complies in all material respects with all
statutory, common and other applicable law. We have also assumed that all
material governmental, regulatory and other consents and approvals will be
obtained and that in the course of obtaining any of the foregoing, as
contemplated by the Agreement, no restrictions or conditions will be imposed or
waivers made that would have any material effect on the Transaction. We have
relied as to all legal matters on advice of counsel to the Special Committee of
the Board of Directors of the Company (the "Special Committee"). Our opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to us as of, July 29, 1999.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the sale or other business
combination transaction involving the Company or any of its assets. The Company
represented to us that it had not received any expressions of interest or offers
from any party with respect to any such transaction. Further, the members of the
Investor Group represented to us that they would not entertain or accept any
offers from any party to purchase their Common Shares. Our opinion is predicated
on these bases.
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We have acted as financial advisor to the Special Committee in connection
with the Transaction and will receive a fee from the Company for our services, a
portion of which is payable upon the delivery of this opinion.
This letter is provided solely for the information of the Special
Committee and is not expressed on behalf of and is not intended to confer rights
or remedies upon any other entity or persons, and may not be used for any other
purpose without our prior written consent (except that this letter may be
included in its entirety in any filings made with respect to the Transaction
with the Securities and Exchange Commission). This letter does not constitute a
recommendation to any holder of Common Shares as to whether or not such holder
should tender shares or how any such holder should vote on the Transaction.
Based on, and subject to, the foregoing, we are of the opinion that on the
date hereof, the consideration to be received by the shareholders of the Company
other than Merger Corp. and its affiliates in connection with the Transaction is
fair from a financial point of view to the shareholders of the Company other
than Merger Corp. and its affiliates.
Very truly yours,
PETER J. SOLOMON COMPANY LIMITED
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