ACG Cup Executive Presentation

MBA Investment Bankers, LLCJin Guo, Michael Bagnoli, Thomas Lee, Devisharan Mishra

Presentation to the board of:

Khakis ’R US

About Us:• MBA Investment Bankers LLC is a leading global financial

advisory and investment banking firm. We combine market expertise and analytical skills to help clients make sound decisions. Our specialties are in the areas of valuation, M&A and transactions, restructuring, alternative assets, disputes and taxation

• MBA iB has just over 1,500 employees who serve our clients from offices in North America, Europe and Asia.

Primary Services• Valuation• Investment Banking• Restructuring• Dispute Consulting

Core Values• Our clients’ interests always come first• Integrity and honesty are at the heart of our business• Our reputation is a valuable asset and we work hard to

keep it sterling

MBA Investment Bankers, LLC

# 1M&A Advisor

in transactions under $1

billion

# 1M&A Fairness

Opinion Advisor in US

CEO, Lee Wakeman

Current Standing Briefing

Valuation

Decision: Sell or not?

Alternative to Exiting Refinancing/Recapitalization Acquisition of “About Boots”

Summary Overview

Recommendation/Conclusion

Presentation Summary

Khakis ‘R Us is a publicly traded men’s casual retailer Strong balance sheet and operating performance 2013 Estimated financials:

• Revenue: $500 mm• EBITDA: $30 mm• Cash reserves: $20 mm• Debt outstanding: $50 mm

Quarterly Dividend of $0.03 per share, 1% dividend yield

Current Standing I

Languishing stock price (around $12 per share) Competitors are: much larger, growing faster, have higher

margins• Khakis’ stock has consistently traded at a lower multiple

than competitor’s CEO, Millie Pleater, is close to retirement and a successor

should be named soon to ensure the companies continued success

NYC Capital has entered a standing bid of $20 per share for Khakis with a 67% premium over current market share price

Current Standing II

Discounted Cash Flow

Projections & Assumptions

Sensitivity Analysis

Comparable Companies

Precedent Transaction

Valuation Summary

Valuation

Discounted Cash Flow Analysis

Sales Estimation Management believes sales could

climb in coming yearsDriven by economic recovery and the introduction of the South East line

Growth Trend In 2013 sales declined 4.6% In 2014 sales grow 5% and hold

constant at 6% for three years In 2018 sales growth tapers to 4%

Pa Afterward, in line with assumption of

3.0% perpetual economic growth

2011 2012 2013 2014 2015 2016 2017 2018 $-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%Growth Rate & Sales Pro-

jection

Sales Growth Rate

Exhibit 4


Profit Margin Management believes profit margin

could improve in coming years Mainly driven by increase in gross

margin due to the branding premium

Margin Trend Gross margin increases from 18.84%

in 2012 to over 22.50% in 2016 and holds constant

In the next five years, the operating expense stays around 17%

From 2014 to 2018, the CAGR of EBIT is 30.87%

2011 2012 2013 2014 2015 2016 2017 20180.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Margin Projection

Gross Margin EBIT MarginOperating Expense Ratio


Free Cash Flow Adjustment from EBIT to FCF

Tax payment (40%) Depreciation & amortization Capital expenditure Stock based compensation Change in net working capital (2.54% of Sales)

From 2014 to 2018, the CAGR of free cash flow is 21.62%

The reinvestment of cash flow stays constant

2011 2012 2013 2014 2015 2016 2017 2018

$(10,000)

$(5,000)

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

Free Cash Flow

Free Cash Flow Less: Capital Expenditures

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

Leverage Level (Debt/Equity)


Risk & Cost of Capital Market Risk Premium = MRP = 5.75% Risk Free Rate = Rf = 5.66% Debt = $50mm; Equity = $ 120mm Mean industry βUL = 1.32 Khakis’ βL = 1.65 1.32 * (1 + (1 - TC) * Debt / Equity ) re = 15.16% = 1.65 * MRP + Rf rd = 3.30% TC = 40.00% Weighted Averaged Cost of Capital

= 13.63% 15.16% * E/V + 3.30% * (1 – 40%)

7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0%

Industry Range of WACC


Valuation Range & Sensitivity Test DCF Model Summary

Terminal Value ( Growth @ 3%) 3.00%WACC 13.63%Present value of Cash Flow 48,814 Present value of Terminal Value 86,945

Enterprice Value

135,75

9

-Debt Value

(50,544

)+Cash 19,812

Equity Value

$105,0

27 Shares Outstanding (in thousands) 10,000

Fair Value Per Share

$10.50

Projected Growth Rate (2014-2018)

EBIT Margi

n

$10.50 3.50% 4.00% 4.50% 5.0% 6.00%

2.50% 2.60 2.61 2.61 2.61 2.61

3.00% 5.38 5.40 5.41 5.43 5.46

3.90% 10.39 10.42 10.46 $10.50 10.58

4.50% 13.72 13.78 13.83 13.89 14.00

5.00% 16.50 16.57 16.64 16.71 16.84

Comparable CompaniesInterpretation Industry average EV/Revenue is 0.7x

Khakis’ is only 0.3x The industrial average of EV/EBITDA is

8.6x Khakis is only 4.8x

Lower earnings in 2013 have lead to a High P/E Ratio for Khakis This indicates the market thinks the

decline in sales is temporary Reasons for Khakis lower EV multiples:

Smallest company Lower growth Smaller margins

Company 2 year Growth

rate

2012A 2013E

Enterprise Value

EBITDA Margin

EV/ Revenue

EV/ EBITD

A P/EComparable 4 7152.4 4.70% 6.70% 0.6x 9.5x 19.1

xComparable 9 5443.4 9.30% 8.30% 0.5x 5.7x 11.7

xComparable 1 4172.6 9.30% 6.00% 0.5x 8.5x 16.5

xComparable 5 4063.9 -11.40% 6.80% 0.5x 7.7x 22.0

xComparable 6 2318 12.70% 14.40% 1.5x 10.3x 17.0

xComparable 2 1783.1 6.60% 4.10% 0.3x 7.0x 17.3

xComparable 7 1672.3 15.10% 10.40% 0.8x 7.8x 15.5

xComparable 8 250.6 14.80% 6.90% 0.8x 11.7x 16.3

xComparable 3 217.5 4.50% 6.10% 0.5x 8.1x negKhakis 'R Us 143.1 -6.30% 5.30% 0.3x 4.8x 19.4

xExhibit 6

Comp 9 Comp 4 Comp 1 Comp 5 Comp 2 Comp 7 Comp 6 Khakis Comp 3 Comp 80

2000

4000

6000

8000

10000

1200011413.511153.9

8185 77136206.4

2071.3 1566558.354 441 312.8

Revenue

Comp 4 Comp 5 Comp 9 Comp 1 Comp 6 Comp 2 Comp 7 Comp 8 Khakis 'R Us

Comp 30.0

2,000.0

4,000.0

6,000.0

8,000.0 7,810.3

4,779.9 3,604.6 3,509.1

2,051.6 1,763.7 1,566.0

252.7 120.0 108.3

Market Cap.

Comp 4

Comp 9

Comp 1

Comp 5

Comp 6

Comp 2

Comp 7

Comp 8

Comp 3

Khakis 'R Us

0.0 1,000.0 2,000.0 3,000.0 4,000.0 5,000.0 6,000.0 7,000.0 8,000.0

Enterprise Value


Comp 7

Comp 8

Comp 6

Comp 1

Comp 9

Comp 2

Comp 4

Comp 3

Khakis 'R Us

Comp 5

(15.0%)

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0% 15.1% 14.8%

12.7% 9.3% 9.3%

6.6% 4.7% 4.5%

(6.3%)

(11.4%)

Sales Growth Rate

Comp 5 Khakis 'R Us

Comp 4 Comp 2 Comp 6 Comp 1 Comp 8 Comp 7 Comp 90.0x

5.0x

10.0x

15.0x

20.0x

25.0x 22.0x

19.4x 19.1x 17.3x 17.0x 16.5x 16.3x 15.5x

11.7x

P/E

Comp 8 Comp6 Comp4 Comp1 Comp3 Comp7 Comp5 Comp2 Comp9 Khakis 'R Us

0.0x2.0x4.0x6.0x8.0x

10.0x12.0x14.0x

11.7x10.3x 9.5x 8.6x 8.6x 7.8x 7.7x 7.1x

5.9x 5.1x

EV/EBITDA

Comp 6

Comp 7

Comp 8

Comp 4

Comp 5

Comp 3

Comp 1

Comp 9

Comp 2

Khakis 'R Us

0.0x 0.2x 0.4x 0.6x 0.8x 1.0x 1.2x 1.4x 1.6x 1.5x

0.8x 0.8x 0.6x

0.5x 0.5x 0.5x 0.5x 0.3x 0.3x

EV/Revenue


Comp 9 Comp 2 Comp 4 Comp 6 Comp 1 Comp 7 Comp 5 Khakis Comp 8 Comp 3-0.50.00.51.01.52.02.53.03.54.04.5 4.0

3.43.1

2.6

2.01.5 1.5

0.6 0.5

-0.1

EPS

EV/Revenue EV/EBITDA P/E$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$26.18

$22.18

$10.45

$31.72

$24.53

$11.82

Side by Side: Broad & Narrow Comparable

BroadNarrow

Price Range: $14.41 - $25.77


Comparable Transactions

2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 20135.00x

5.50x

6.00x

6.50x

7.00x

7.50x

8.00x

8.50x

9.00x

0.50x

0.55x

0.60x

0.65x

0.70x

0.75x

0.80x

0.85x

0.90x

Sector Multiple Trend TV/EBIT TV/RevenueTV/EBITDA TV/Revenue

Downward trend in multiples of Transaction Values EV/EBITDA decreases from 8.00x to 6.50x EV/Revenue decreases from 0.90x to 0.65x


The analysis: Transactions included are from (2012 – 2013)

The status of the men’s casual retail M&A market more accurately reflects today’s transaction climate

The averaged TV/Revenue is 0.69x The averaged TV/EBITDA is 8.6x

9 month Premium of 1.2: Khakis Implied EV/Revenue is 0.4x Khakis Implied EV/EBITDA is 6.1x

Date Guideline Transaction

Transaction

Transaction Value

Value RevenueEBITD

A(In millions of dollars)2013 Transaction 1 $150.0 0.65x 6.30x2012 Transaction 2 70.0 0.97x 7.20x2012 Transaction 3 555.0 0.50x 8.10x2012 Transaction 4 290.0 0.52x 5.40x2012 Transaction 5 106.0 0.81x 6.60x2011 Transaction 6 61.4 0.59x 9.30x2011 Transaction 7 262.9 0.37x 7.70x2011 Transaction 8 280.0 0.68x 7.20x2011 Transaction 9 28.5 0.57x 8.40x2010 Transaction 10 324.0 0.75x 5.40x2010 Transaction 11 355.0 1.45x 7.20x2010 Transaction 12 94.0 0.41x 12.90x2010 Transaction 13 335.4 0.68x 6.50x2010 Transaction 14 62.7 0.66x 6.00x2010 Transaction 15 746.2 1.25x 4.20x2009 Transaction 16 47.9 0.22x 11.80x2009 Transaction 17 155.0 1.41x 7.90x2009 Transaction 18 220.0 0.75x 6.40x2009 Transaction 19 118.7 0.99x 8.20x2012-2013 　　　　Average 0.69x 6.72x 75th Percentile 0.81x 7.20x

Median 0.65x 6.60x 25th Percentile 0.52x 6.30x

Median Average2012-2013

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

Valuation RangeTV/Revenue TV/EBITDA


Inferred Stock Price Range: $16.67 - $33.78

Comparison of Estimated Price with Competitors

Current Bid Price: $20.00Mkt. Price : $12.00

EV/Revenue:

EV/EBITDA:

P/E:

TV/Revenue:

TV/EBITDA:

Comparable Multiples

Discounted Cash Flow Analysis:

$- $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0

Control Premium in Previous M&A Deals

Domestic International Last 12 Months0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

Control Premium Comparison

Median Mean NYC's offer

Exit Opportunities Based on discounted cash flow, we value the company@

$10.50/share NYC Capital is offering $20. (90.47% premium on

$10.50/share, 67% premium on current trading price -$12/share)

NYC Capital

Pros: $20 per share is an attractive offer Best interest of shareholders

Cons: Khakis corporate culture is independent and hasn’t

previously considered a sale Consolidation measures could be taken by new controlling

entity, including: Employee cutbacks and production relocation

Deviation from prior company outlook

This is a good premium considering past M&A deals Involving other bidders can potentially decrease the price of

the bid

Suggestion on Including Other Bidders

Alternatives to Sell• Decision: Don’t Sell, Improve

• Fiduciary Duties: the management should inform the shareholders of the offer and gain majority’s approval

• Future Business Plan – the management should convince the market that growth & margins will improve to make the multiple comparative with others’

• Plans & Options • Acquisition of About Boots• Refinancing and Recapitalization

• Anti-takeover Measures• Flip-in Poison Pill: adding the poison pill provisions into the charter of the

company can tells NYC Capital or other potential bidders they may face difficulties

• Macaroni Defense: issuing a large number of bonds with the condition they must be redeemed at a high price if Khakis is taken over

Acquisition of About Boots with $50m DebtAbout Boots

• A Canadian small chain of shoes stores

• Estimated 2013 EBITDA $10 million

• Can be acquired for $50 million

Deal Analysis• Assume the company uses

debt to finance the deal• EV/EBITDA multiple from

3.6 times to 4.4 times• Achieve $40 million

synergy value from this transaction

$mm2014 EBITDA Multiples Equity Value

Khakis 35 4.0x 140+ About Boots 10 5.0x 50

- Cost -50+ Tax Shield Value 20

Total 45 3.6x 160Required Synergy

Value 40NYC's Offer 200

After Acquisition 45 4.4x 200

$120mm Debt Refinancing

• Refinancing will change the debt to market equity ratio from 37.5% to 206%

• Annual interest payment will increase from $4 mm to $13 mm, assuming an interest rate of 8%.

• If the earnings goes as the projected, interest coverage ratio will decrease from 5.80 to 1.78

• The refinancing plan is very risky and can potentially cause financial distress based on the company’s current financial performance

2014 2015 2016 2017 20180

5000100001500020000250003000035000

Earnings

Earnings without refinanceEarnings with refinance

In current standing, Khakis’ mkt. share price is $12.00

Combining all the valuation methods, we estimate the share price range to be between $10.50 and $12.16 The current price falls within our projected range

Focus needs to be on increasing the profitability of South East as decrease in the profitability will hamper the over all performance of Khakis’

Strategic change in management needed

The proposal of UAB to refinance recapitalize with $120mm Unsustainable with high financial risk

All things considered, the $20.00 offer by NYC Capital is extremely competitive Even with the acquisition of the Canadian, “About Boots” , it will be

difficult to beat this price

Selling the company is in the best interest of shareholders at this junction

Summary

DisclaimerThese materials have been prepared by MBA Investment Bankers LLC (including any affiliates “MBA Investment Bankers”) for the MBA Investment Bankers client or potential client to whom such materials are directly addressed and delivered (the “Company”) in connection with an actual or potential mandate or engagement and may not be used or relied upon for any purpose other than as specifically contemplated by a written agreement with MBA Investment Bankers. These materials are based on information provided by or on behalf of the Company and/or other potential transaction participants, from public sources or otherwise reviewed by MBA Investment Bankers. MBA Investment Bankers assumes no responsibility for independent investigation or verification of such information and has relied on such information being complete and accurate in all respects. To the extent such information includes estimates and forecasts of future financial performance (including estimates of potential cost savings and synergies) prepared by or reviewed with the managements of the Company and/or other potential transaction participants or obtained from public sources, MBA Investment Bankers has assumed that such estimates and forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of such managements (or, with respect to estimates and forecasts obtained from public sources, represent reasonable estimates). No representation or warranty, express or implied, is made as to the accuracy or completeness of such information and nothing contained herein is, or shall be relied upon as, a representation, whether as to the past, the present or the future. These materials were designed for use by specific persons familiar with the business and affairs of the Company and are being furnished and should be considered only in connection with other information, oral or written, being provided by MBA Investment Bankers in connection herewith. These materials are not intended to provide the sole basis for evaluating, and should not be considered a recommendation with respect to, any transaction or other matter. Prior to entering into any transaction the Company should determine, without reliance on MBA Investment Bankers, the economic risks and merits as well as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting this presentation, the Company acknowledges that (a) MBA Investment Bankers is not in the business of providing (and the Company is not relying on MBA Investment Bankers for) legal, tax or accounting advice, (b) there may be legal, tax or accounting risks associated with any transaction, (c) the Company should receive (and rely on) separate and qualified legal, tax and accounting advice and (d) the Company should apprise senior management as to such legal, tax and accounting advice (and any risks associated with any transaction) and MBA Investment Bankers’ disclaimer as to these matters. MBA Investment Bankers does not provide tax advice. Accordingly, any statements contained herein as to tax matters were neither written nor intended by MBA Investment Bankers to be used and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on such taxpayer. Any discussion of tax matters in these materials may have been written in connection with the “promotion” or “marketing” of any transaction contemplated hereby. Accordingly, any taxpayer should seek advice based on such taxpayer’s particular circumstances from an independent tax advisor. These materials do notconstitute an offer or solicitation to sell or purchase any securities and are not a commitment by MBA Investment Bankers to provide or arrange any financing for any transaction or to purchase any security in connection there with MBA Investment Bankers is not acting in any other capacity as a fiduciary to the Company. MBA Investment Bankers assumes no obligation to update or otherwise revise these materials. These materials have not been prepared with a view toward public disclosure under state or federal securities laws or otherwise, are intended for the benefit and use of the Company, and may not be reproduced, disseminated, quoted, summarized or referred to, in whole or in part, without the prior written consent of MBA Investment Bankers. These materials may not reflect information known to other professionals in other business areas of MBA Investment Bankers. MBA Investment Bankers is a full service securities firm providing investment banking and other services and products to a wide range of corporations and individuals, domestically and offshore from which conflicting interests or duties may arise. In the ordinary course of these activities, MBA Investment Bankers may at any time hold long or short positions, and may trade or otherwise effect transactions, for their own account or the accounts of customers, in debt or equity securities or loans of the Company, potential counterparties, or any other company that may be involved in a transaction. MBA Investment Bankers is required to obtain, verify and record certain information that identifies each entity that enters into a formal business relationship with it, which information includes the complete name and address and taxpayer ID number. MBA Investment Bankers may also request corporate formation documents, or other forms of identification, to verify information provided.

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ACG Cup Executive Presentation