Genesco Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
þ Definitive Proxy
Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§240.14a-12
GENESCO INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|
|
o |
Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
|
|
|
|
|
(1)
|
Title of each class of securities to which transaction applies:
|
|
|
|
|
(2)
|
Aggregate number of securities to which transaction applies:
|
|
|
|
|
(3)
|
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
|
|
|
|
|
(4)
|
Proposed maximum aggregate value of transaction:
|
|
|
þ |
Fee paid previously with preliminary materials.
|
$39,217.80
|
|
o |
Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
|
|
|
(1)
|
Amount Previously Paid:
|
|
|
|
|
(2)
|
Form, Schedule or Registration Statement No.:
|
GENESCO
INC.
Genesco Park, 1415 Murfreesboro
Road
Nashville, Tennessee 37217
August 13, 2007
Dear Shareholder:
On June 17, 2007, the board of directors of Genesco Inc.
(Genesco, we, us or
our) approved, and Genesco entered into, an
Agreement and Plan of Merger (the merger agreement)
with The Finish Line, Inc., an Indiana corporation (Finish
Line), and Headwind, Inc., a Tennessee corporation and
wholly-owned subsidiary of Finish Line (Merger Sub).
Under the terms of the merger agreement, Merger Sub will be
merged with and into Genesco, with Genesco continuing as the
surviving corporation (the merger). If the merger is
completed, the holders of our common stock will be entitled to
receive $54.50 in cash, without interest, for each share of
Genesco common stock owned by such holders.
You will be asked, at a special meeting of our shareholders to
be held on Monday, September 17, 2007, at 11:00 a.m., local
time, to vote on a proposal to approve the merger agreement so
that the merger can occur. After careful consideration, our
board of directors has approved and adopted the merger agreement
and determined that the merger and the merger agreement are
advisable, fair to, and in the best interests of Genesco and our
shareholders. Our board of directors unanimously recommends
that you vote FOR the approval of the merger
agreement.
You will also be asked to approve and adopt articles of
amendment (the charter amendment) to the restated
charter of Genesco, as amended, that would permit the redemption
of Genescos Employees Subordinated Convertible
Preferred Stock (the Employees Preferred)
after the completion of the merger at the price per share to be
paid to holders of Genesco common stock in the merger, at
Genescos option as the surviving corporation following the
merger. After careful consideration, our board of directors has
approved and adopted the charter amendment and determined that
the charter amendment is in the best interests of Genesco and
our shareholders. Our board of directors unanimously
recommends that you vote FOR the approval and
adoption of the charter amendment.
The holders of our preferred stock outstanding upon the
completion of the merger will not be entitled to any
consideration upon the completion of the merger pursuant to the
merger agreement. However, Finish Line has informed us that
it intends to redeem all outstanding preferred stock that has
not properly converted to common stock prior to the merger in
accordance with the redemption provisions of our charter,
including the Employees Preferred subject to the requisite
approval and filing of the proposed charter amendment.
The special meeting will be held at Genescos executive
offices, Genesco Park, 1415 Murfreesboro Road, Nashville,
Tennessee. Notice of the special meeting and the related proxy
statement are enclosed.
The accompanying proxy statement gives you detailed information
about the special meeting, the merger agreement and the related
transactions, including the merger, and the charter amendment
and includes a copy of the merger agreement attached thereto as
Annex A and a copy of the charter amendment attached
thereto as Annex B. The receipt of cash in exchange for
shares of Genesco common stock pursuant to the merger will
constitute a taxable transaction to U.S. persons for
U.S. federal income tax purposes. We encourage you to read
the proxy statement, the merger agreement and the charter
amendment carefully. You may also obtain additional information
about Genesco from documents filed with the Securities and
Exchange Commission.
Your vote is very important, regardless of the number of
shares you own. We cannot complete the merger unless holders
of a majority of the votes represented by the outstanding shares
of our common stock and our preferred stock, voting together as
a single group, vote to approve the merger agreement. The
failure of any shareholder to vote on the proposal to approve
the merger agreement will have the same effect as a vote against
the merger agreement. The approval and adoption of the charter
amendment requires that the votes cast in favor of the amendment
by holders of all Genesco capital stock voting together as a
single group, excluding Employees Preferred, exceed the
votes cast against the amendment by such holders and also
requires the separate affirmative approval of a majority of the
outstanding shares of Employees Preferred voting as a
group. The failure of any holder of Employees Preferred to
vote on the charter amendment proposal will have the same effect
as a vote against the charter amendment. The approval and
adoption of the charter amendment by Genescos shareholders
is not a condition to the closing of the merger.
Whether or not you plan to attend the special meeting, please
complete, date, sign and return, as promptly as possible, the
enclosed proxy in the accompanying reply envelope, or submit
your proxy by telephone or the Internet.
Our board of directors and management appreciate your continuing
support of Genesco, and we urge you to support the merger and
the charter amendment.
Sincerely,
Hal N. Pennington
Chairman and Chief Executive
Officer
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
The proxy statement is dated August 13, 2007, and is first
being mailed to shareholders on or about August 13, 2007.
GENESCO
INC.
Genesco Park, 1415 Murfreesboro
Road
Nashville, Tennessee 37217
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
To Be Held On September 17,
2007
Dear Shareholder:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
Genesco Inc., a Tennessee corporation (Genesco,
we, us or our), will be held
on Monday, September 17, 2007, at 11:00 a.m., local time,
at Genescos executive offices, located at Genesco Park,
1415 Murfreesboro Road, Nashville, Tennessee, for the following
purposes:
1. To consider and vote on a proposal to approve the
Agreement and Plan of Merger (the merger agreement),
dated as of June 17, 2007, by and among Genesco, The Finish
Line, Inc., an Indiana corporation (Finish Line),
and Headwind, Inc., a Tennessee corporation and a wholly-owned
subsidiary of Finish Line (Merger Sub), as the
merger agreement may be amended from time to time;
2. To approve and adopt articles of amendment (the
charter amendment) to the restated charter of
Genesco, as amended, permitting the redemption of Genescos
Employees Subordinated Convertible Preferred Stock (the
Employees Preferred) after the completion of
the merger at the price per share to be paid to holders of
Genesco common stock in the merger in cash, without interest, at
Genescos option as the surviving corporation following the
merger;
3. To approve the adjournment of the special meeting, if
necessary, to solicit additional proxies if there are
insufficient votes at the time of the meeting to approve the
merger agreement or the charter amendment; and
4. To transact such other business as may properly come
before the special meeting and any and all adjourned or
postponed sessions thereof.
This Notice of Special Meeting of Shareholders and the
related proxy statement shall serve to provide to holders of
preferred stock any and all notices of the merger required by
Genescos charter, including, but not limited to, any
notice required by Part I, Article Sixth,
Part C-I,
Section 4(g) and Part I, Article Sixth,
Part E, Section 5(f).
The record date for the determination of shareholders entitled
to notice of and to vote at the special meeting is
August 6, 2007. Accordingly, only shareholders of record as
of the close of business on that date will be entitled to notice
of and to vote at the special meeting or any adjournment or
postponement of the special meeting.
We urge you to read the accompanying proxy statement carefully
as it sets forth details of the proposed merger and other
important information related to the merger agreement and the
charter amendment.
Please note that space limitations may make it necessary to
limit attendance at the special meeting to shareholders. If you
attend, please note that you may be asked to present valid
picture identification. Street name holders will
need to bring a copy of a brokerage statement reflecting stock
ownership as of the record date. Cameras, recording devices and
other electronic devices will not be permitted at the special
meeting.
Under Tennessee law, holders of Genesco common stock will have
no dissenters rights in connection with the proposed
merger. However, dissenting holders of Genesco preferred stock
who comply with the provisions of Chapter 23 of the
Tennessee Business Corporation Act are entitled to dissent from
the merger and receive payment of the fair value of their shares
of Genesco preferred stock if the merger is consummated.
Additionally, dissenting holders of the Employees
Preferred who comply with the provisions of Chapter 23 of
the Tennessee Business Corporation Act are entitled to dissent
from the charter amendment and receive payment of the fair value
of their shares of Genesco preferred stock if the charter
amendment becomes effective. A copy of Chapter 23 of the
Tennessee Business Corporation Act is attached as Annex D
to the proxy statement. Please see the section entitled
Dissenters Rights in the proxy statement for a
summary of the procedures to be followed in asserting these
dissenters rights. A dissenting shareholder will be
entitled to payment only if written notice of intent to demand
payment is delivered to Genesco before the vote is taken and the
shareholder does not vote in favor of the merger agreement (or
the charter amendment, as applicable).
By Order of the Board of Directors,
Roger G. Sisson
Secretary
Nashville, Tennessee
August 13, 2007
YOUR VOTE IS IMPORTANT! WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS
PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY IN THE ACCOMPANYING
REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE
INTERNET.
TABLE OF
CONTENTS
|
|
|
|
|
1
|
|
|
1
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
7
|
|
|
11
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
14
|
|
|
14
|
|
|
14
|
|
|
14
|
|
|
16
|
|
|
16
|
|
|
17
|
|
|
17
|
|
|
17
|
|
|
18
|
|
|
18
|
|
|
26
|
|
|
28
|
|
|
35
|
|
|
38
|
|
|
38
|
|
|
40
|
|
|
40
|
|
|
40
|
|
|
43
|
|
|
48
|
|
|
50
|
|
|
51
|
|
|
51
|
|
|
51
|
|
|
52
|
|
|
52
|
|
|
52
|
|
|
52
|
|
|
53
|
|
|
53
|
|
|
53
|
|
|
54
|
i
|
|
|
|
|
56
|
|
|
59
|
|
|
59
|
|
|
61
|
|
|
62
|
|
|
63
|
|
|
64
|
|
|
65
|
|
|
66
|
|
|
66
|
|
|
67
|
|
|
68
|
|
|
70
|
|
|
72
|
|
|
73
|
|
|
73
|
|
|
75
|
|
|
76
|
|
|
76
|
|
|
76
|
|
|
76
|
|
|
76
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
ii
References to Genesco, we,
our or us in this proxy statement refer
to Genesco Inc. and its subsidiaries unless otherwise indicated
by context.
SUMMARY
TERM SHEET
This Summary Term Sheet, together with the Questions
and Answers About the Special Meeting beginning on
page 7, summarizes selected information in the proxy
statement and may not contain all the information important to
you. You should carefully read this entire proxy statement and
the other documents to which this proxy statement refers you for
a more complete understanding of the matters being considered at
the special meeting. In addition, this proxy statement
incorporates by reference important business and financial
information about Genesco. You may obtain the information
incorporated by reference into this proxy statement without
charge by following the instructions in Where You Can Find
More Information beginning on page 77.
The
Merger and the Merger Agreement
(Proposal No. 1)
|
|
|
|
|
The Parties to the Merger (see
page 13). Genesco, a Tennessee corporation,
is a leading retailer of branded footwear and licensed and
branded headwear and a wholesaler of branded footwear. The
Finish Line, Inc., an Indiana corporation (Finish
Line), together with its subsidiaries, is one of the
largest mall-based specialty retailers in the United States and
operates under the Finish Line, Man Alive, and Paiva brand
names. Headwind, Inc., a Tennessee corporation and a
wholly-owned subsidiary of Finish Line (Merger Sub),
was formed solely for the purpose of effecting the merger.
Merger Sub has not engaged in any business except in furtherance
of this purpose.
|
|
|
|
|
|
The Merger. You are being asked to vote to
approve an Agreement and Plan of Merger (the merger
agreement) pursuant to which Merger Sub will merge with
and into Genesco (the merger) on the terms and
subject to the conditions in the merger agreement. Genesco will
be the surviving corporation following the merger (the
surviving corporation) and will continue to do
business as Genesco following the merger. As a
result of the merger, Genesco will cease to be a publicly traded
company and will become a subsidiary of Finish Line. See
The Merger Agreement beginning on page 52.
|
|
|
|
|
|
Common Stock Merger Consideration. If the
merger is completed, holders of Genesco common stock will be
entitled to receive $54.50 in cash, without interest, for each
share of Genesco common stock they own. Holders of Genesco
common stock will not own shares in the surviving corporation.
See The Merger Agreement Common Stock Merger
Consideration beginning on page 52.
|
|
|
|
|
|
Treatment of Preferred Stock. The holders
of our preferred stock outstanding upon the completion of the
merger will not be entitled to any consideration upon the
completion of the merger pursuant to the merger agreement.
Each share of Genesco preferred stock issued and outstanding,
and not otherwise properly converted to common stock, if
applicable, immediately before the merger will remain
outstanding following the merger. Finish Line has informed us
that it intends to redeem all outstanding shares of redeemable
preferred stock following the completion of the merger in
accordance with our charter, and that they also intend to redeem
the outstanding Employees Subordinated Convertible
Preferred Stock (the Employees Preferred)
subject to the requisite approval and filing of the proposed
charter amendment (Proposal No. 2). See The
Merger Preferred Stock beginning on
page 38, for further discussion of the treatment and rights
of our preferred stock in connection with the merger, including
the current conversion ratios and redemption prices for our
outstanding preferred stock as applicable.
|
|
|
|
|
|
Treatment of Outstanding Options and Other Awards.
|
|
|
|
|
|
all outstanding options to acquire Genesco common stock under
Genescos equity incentive plans will become fully vested
and immediately exercisable upon completion of the merger, and
each option will be cancelled and converted into the right to
receive a cash payment equal to the number of shares of Genesco
common stock underlying the option multiplied by the amount by
which
|
1
|
|
|
|
|
$54.50 exceeds the option exercise price, without interest and
less any applicable withholding taxes; and
|
|
|
|
|
|
restrictions applicable to all shares of restricted stock will
lapse and those shares will be cancelled and converted into the
right to receive a cash payment equal to the number of
outstanding restricted shares multiplied by $54.50, without
interest and less any applicable withholding taxes.
|
See The Merger Agreement Treatment of Options
and Other Awards beginning on page 53.
|
|
|
|
|
Conditions to the Merger (see
page 59). The completion of the merger
depends on the satisfaction or waiver of a number of conditions,
including the following:
|
|
|
|
|
|
the merger agreement must have been approved by the affirmative
approval of the holders of a majority of the votes represented
by the outstanding shares of our common stock and our preferred
stock, voting together as a single group;
|
|
|
|
no statute, rule, executive order, regulation, order or
injunction which prevents or prohibits the merger shall be in
effect;
|
|
|
|
the waiting period (and any extension thereof) under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
HSR Act), and applicable foreign antitrust laws must
have expired or been terminated;
|
|
|
|
|
|
Genesco must not have experienced an uncured company material
adverse effect, as described under the caption The Merger
Agreement Conditions to the Merger beginning
on page 59;
|
|
|
|
|
|
the respective representations and warranties of Genesco, Finish
Line and Merger Sub in the merger agreement must be true and
correct as of the closing date subject to the qualifications
described under the caption The Merger
Agreement Conditions to the Merger beginning
on page 59; and
|
|
|
|
|
|
Genesco, Finish Line and Merger Sub must have performed and
complied in all material respects with all covenants and
agreements that each is required to perform or comply with under
the merger agreement.
|
|
|
|
|
|
No Solicitations of Other Offers (see
page 61).
|
|
|
|
|
|
The merger agreement provides that we are generally not
permitted to:
|
|
|
|
|
|
solicit, initiate, or knowingly encourage the submission of an
acquisition proposal for us or engage in any negotiations or
discussions with respect thereto, or otherwise participate,
engage or knowingly assist in, or knowingly facilitate, an
acquisition proposal; or
|
|
|
|
approve or recommend any acquisition proposal for us or adopt or
enter into any letter of intent, memorandum of understanding,
option agreement or other similar agreement with respect to any
acquisition proposal for us or withdraw or modify, in a manner
adverse to Finish Line or Merger Sub, the approval or
recommendation of our board of directors of the merger agreement
or the merger or publicly announce that it has resolved to take
that action or publicly propose to do any of the foregoing.
|
|
|
|
|
|
Notwithstanding these restrictions, under certain circumstances,
our board of directors may respond to an unsolicited proposal
for an alternative acquisition or terminate the merger agreement
and enter into an acquisition agreement with respect to a
superior proposal, so long as we comply with certain terms of
the merger agreement described under The Merger
Agreement Recommendation Withdrawal/Termination in
Connection with a Superior Proposal and Third Party Tender
Offers beginning on page 62.
|
2
|
|
|
|
|
Termination of the Merger Agreement (see
page 63).
|
The merger agreement may be terminated at any time prior to the
completion of the merger, whether before or after shareholder
approval has been obtained:
|
|
|
|
|
by mutual written consent of Genesco and Finish Line;
|
|
|
|
by either Genesco or Finish Line, if:
|
|
|
|
|
|
the merger is not consummated on or before December 31,
2007, except that this right to terminate will not be available
to any party whose action or failure to fulfill any obligation
under the merger agreement or failure to act in good faith has
been the principal cause of, or resulted in, the failure of the
merger to be consummated by that date;
|
|
|
|
a court of competent jurisdiction or other governmental entity
has issued a final, non-appealable order, decree or ruling or
taken any other action, or there exists any statute, rule or
regulation, in each case preventing or otherwise prohibiting the
completion of the merger or that otherwise has the effect of
making the merger illegal, and the party seeking to terminate
the merger agreement has used all reasonable efforts to prevent
the entry of and to remove the order, decree, ruling, action, or
statute, rule or regulation to the extent of its control or
influence; or
|
|
|
|
our shareholders fail to approve the merger agreement at a duly
held meeting; or
|
|
|
|
|
|
our board of directors withdraws or modifies, or publicly
proposes to withdraw or modify, in a manner adverse to Finish
Line or Merger Sub, the approval or recommendation of our board
of directors of the merger agreement or the merger or publicly
announces that it has resolved to take such action;
|
|
|
|
our board of directors recommends to our shareholders or
approves any other acquisition proposal;
|
|
|
|
our board of directors fails to include in this proxy statement
its recommendation that our shareholders approve the merger
agreement and the merger; or
|
|
|
|
there has been a breach of, or inaccuracy in, any
representation, warranty, covenant or agreement of Genesco under
the merger agreement which would result in the failure of
certain conditions to closing and where the breach or inaccuracy
is reasonably incapable of being cured, or is not cured, within
20 business days after Genesco receives written notice of the
breach or inaccuracy, and neither Finish Line nor Merger Sub is
in material breach of its representations, warranties, covenants
and obligations under the merger agreement so as to cause the
failure of certain conditions to closing; or
|
|
|
|
|
|
Genesco concurrently enters into a definitive agreement with
respect to a superior proposal, provided that we have paid, or
simultaneously with doing so, pay to Finish Line the termination
fee as described below; or
|
|
|
|
there has been a breach of, or inaccuracy in, any
representation, warranty, covenant or agreement of Finish Line
or Merger Sub under the merger agreement which would result in
the failure of certain conditions to closing and where the
breach or inaccuracy is reasonably incapable of being cured, or
is not cured, within 20 business days after Finish Line receives
written notice of the breach or inaccuracy and Genesco is not in
material breach of our representations, warranties, covenants
and obligations under the merger agreement so as to cause the
failure of certain conditions to closing.
|
|
|
|
|
|
Termination Fees (see page 64). If
the merger agreement is terminated under certain circumstances:
|
|
|
|
|
|
Genesco will be obligated to reimburse Finish Lines
reasonable, actual and documented
out-of-pocket
fees and expenses, up to a limit of $10 million; and
|
|
|
|
Genesco will be obligated to pay Finish Line a termination fee
of $46 million.
|
3
The
Charter Amendment (Proposal No. 2)
|
|
|
|
|
You are also being asked to approve and adopt articles of
amendment (the charter amendment) to the restated
charter of Genesco, as amended, permitting the redemption of the
Employees Preferred after the completion of the merger at
the price to be paid per share of Genesco common stock in the
merger in cash, or $54.50, without interest and net of any
unpaid amounts on such shares, at Genescos option as the
surviving corporation following the merger. The approval and
adoption of the charter amendment is not a condition to the
completion of the merger. See page 68 and the text of the
proposed charter amendment included as Annex B to this
proxy statement.
|
The
Special Meeting
See Questions and Answers About the Special Meeting
beginning on page 7 and The Special Meeting
beginning on page 14.
Other
Important Considerations
|
|
|
|
|
Board Recommendations. After careful
consideration, our board of directors unanimously approved and
adopted the charter amendment and the merger agreement and
determined that the merger agreement and the merger are
advisable, fair to and in the best interests of Genesco and our
shareholders, and unanimously recommend that our shareholders
vote FOR the approval of the merger agreement, as
the same may be amended from time to time, FOR the
approval and adoption of the charter amendment and
FOR the adjournment of the special meeting, if
necessary, to solicit additional proxies to approve the merger
agreement or the charter amendment. For a discussion of the
factors our board of directors considered in deciding to
recommend the approval of the merger agreement, see The
Merger Reasons for the Merger; Recommendation of Our
Board of Directors beginning on page 26.
|
|
|
|
|
|
Share Ownership of Directors and Executive
Officers. As of August 6, 2007, the record
date for the special meeting, the directors and executive
officers of Genesco held and were entitled to vote, in the
aggregate, 579,658 shares of Genesco common stock,
representing approximately 2.5% of the votes entitled to be cast
on the merger agreement proposal and the proposal to adjourn the
meeting and 2.5% of the votes entitled to be cast on the charter
amendment by the voting group comprised of holders of all
Genesco capital stock, except holders of Employees
Preferred. As of the record date, the directors and executive
officers held no shares of Genesco preferred stock. See
The Special Meeting Record Date; Voting
Rights; Quorum; Vote Required for Approval beginning on
page 14.
|
|
|
|
|
|
Interests of Genescos Directors and Executive Officers
in the Merger. In reaching its decision
concerning the merger agreement, our board of directors
consulted extensively with our management team and legal and
financial advisors. Certain senior members of management
generally participated in meetings of our board of directors,
including Hal N. Pennington, our chairman and chief executive
officer and Robert J. Dennis, our president and chief operating
officer, who are members of the board of directors. In
considering the recommendation of our board of directors with
respect to the merger, you should be aware that some of
Genescos directors and executive officers (including
Mr. Pennington and Mr. Dennis) who participated in
meetings of our board of directors have interests in the merger
that may be different from, or in addition to, the interests of
our shareholders generally. For example, the merger agreement
provides that, at the effective time of the merger, each option
to purchase shares of our common stock, including those options
held by our directors and executive officers, will accelerate
and become fully vested and will generally be cashed out in an
amount equal to the excess of $54.50 over the option exercise
price, and all shares of restricted stock, including those held
by our directors and executive officers, will become free of
restrictions and will be cashed out at $54.50 per share.
Our executive officers may be entitled to severance payments
under certain circumstances following the merger pursuant to
existing employment protection agreements with us. It is
currently anticipated that Mr. Pennington will not be
retained to continue his role as chairman and chief executive
officer of the surviving corporation following the merger or
otherwise in a formal capacity. These and other interests or
potential interests of our directors and executive officers are
more fully described under The
|
4
|
|
|
|
|
Merger Interests of Genescos Directors and
Executive Officers in the Merger beginning on
page 43. Our board of directors was aware of these
interests in making its decisions.
|
|
|
|
|
|
Opinion of Goldman, Sachs &
Co. Goldman, Sachs & Co. (Goldman
Sachs) rendered its oral opinion, which was subsequently
confirmed in writing, to our board of directors that, as of
June 17, 2007, and based upon and subject to the factors
and assumptions set forth in the opinion, the $54.50 per
share in cash to be received by the holders of the outstanding
shares of Genescos common stock pursuant to the merger
agreement was fair from a financial point of view to such
holders. The full text of the written opinion of Goldman Sachs,
dated June 17, 2007, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C to this proxy statement. Goldman Sachs provided its
opinion for the information and assistance of the board of
directors of Genesco in connection with its consideration of the
merger. Goldman Sachs opinion is not a recommendation as
to how any holder of Genescos common stock should vote
with respect to the merger. Pursuant to an engagement letter
dated April 20, 2007, between Genesco and Goldman Sachs,
Goldman Sachs is entitled to receive a transaction fee of 1.2%
of the aggregate consideration payable in the merger, or
approximately $18.5 million, minus an initial fee of
$250,000 that became payable upon execution of the engagement
letter, with one fourth of the transaction fee payable upon
execution of the merger agreement and the remainder of the
transaction fee payable upon the completion of the merger. See
The Merger Opinion of Goldman, Sachs &
Co. beginning on page 28 and the opinion of Goldman
Sachs reproduced in its entirety as Annex C.
|
|
|
|
|
|
Sources of Financing. In connection with the
merger, Finish Line will obtain the financing necessary to cause
the merger consideration to be paid out to Genescos
shareholders, to make any redemption payments made to holders of
issued and outstanding preferred stock of Genesco following the
merger, to refinance certain existing indebtedness of Genesco,
and to pay customary fees and expenses in connection with the
proposed merger, the financing arrangements and the related
transactions. Funding of the debt financing is subject to the
satisfaction of the conditions set forth in the commitment
letter pursuant to which the financing will be provided. Finish
Line has agreed to use its reasonable best efforts to arrange
the debt financing on the terms and conditions set forth in the
debt commitment letter. The following arrangements are in place
to provide, subject to the satisfaction of the conditions
provided in the commitment letter, the necessary financing for
the merger and related transactions, including the payment of
related transaction costs, charges, fees and expenses:
|
|
|
|
|
|
new senior secured credit facilities in the aggregate amount of
$1.14 billion, consisting of a $690.0 million senior
secured term loan and a $450.0 million senior secured
revolving credit facility;
|
|
|
|
$700.0 million aggregate principal amount of debt
securities or, in lieu thereof, a senior unsecured bridge loan
facility in the amount of $700.0 million; and
|
|
|
|
cash and cash equivalents of approximately $11.0 million
held by Finish Line and its subsidiaries.
|
See The Merger Financing of the Merger
beginning on page 40.
|
|
|
|
|
Regulatory Approvals (see
page 40). Under the HSR Act, and the rules
promulgated thereunder by the Federal Trade Commission (the
FTC), the merger may not be completed until
notification and report forms have been filed with the FTC and
the Antitrust Division of the Department of Justice (the
DOJ), and the applicable waiting period has expired
or has been terminated. Genesco and Finish Line each filed
notification and report forms under the HSR Act with the FTC and
the Antitrust Division of the DOJ on July 17, 2007. If
Genesco and Finish Line do not receive a request for additional
information, the waiting period will expire at 11:59 p.m.
on August 16, 2007, if not terminated earlier.
|
|
|
|
|
|
Tax Consequences. The merger will be a taxable
transaction for U.S. federal income tax purposes for
holders of Genesco common stock. Your receipt of cash in
exchange for your shares of Genesco common stock pursuant to the
merger generally will cause you to recognize gain or loss
measured by the difference, if any, between the cash you receive
pursuant to the merger (determined before the deduction of any
applicable withholding taxes) and your adjusted tax basis in
your shares of Genesco
|
5
|
|
|
|
|
common stock. If you are a
non-U.S. holder
(as defined below) of Genesco common stock, the merger generally
will not be a taxable transaction to you under U.S. federal
income tax law unless you have certain connections to the United
States. Under U.S. federal income tax law, you will be
subject to information reporting on cash received pursuant to
the merger unless an exemption applies. Backup withholding may
also apply with respect to cash you receive pursuant to the
merger, unless you provide proof of an applicable exemption or a
correct taxpayer identification number and otherwise comply with
the applicable requirements of the backup withholding rules. You
should consult your own tax advisor for a full understanding of
how the merger will affect your particular tax consequences,
including federal, state, local
and/or
foreign taxes and, if applicable, the tax consequences of the
receipt of cash in connection with the cancellation of your
options to purchase shares of Genesco common stock
and/or your
shares of restricted stock. See The Merger
Material U.S. Federal Income Tax Consequences of the Merger
to Our Shareholders beginning on page 48, which also
contains information regarding the potential tax consequences of
the merger or related transactions to our preferred shareholders.
|
|
|
|
|
|
Dissenters Rights. Under Tennessee law,
holders of Genesco common stock do not have dissenters
rights unless our common stock is delisted from the New York
Stock Exchange (the NYSE) and the Chicago Stock
Exchange (the CHX) prior to the completion of the
merger, which we do not currently anticipate. However, under
Tennessee law, holders of Genesco preferred stock who do not
vote in favor of approving the merger agreement will have the
right to be paid the fair value of their shares, if
the merger is completed, but only if they comply with all
requirements of Tennessee law, which are summarized in this
proxy statement. The right to dissent is subject to a number of
restrictions and technical requirements. Generally, in order to
exercise your dissenters rights, you must:
|
|
|
|
|
|
Not vote in favor of the merger agreement; and
|
|
|
|
Prior to the vote on the merger agreement, notify us in writing
of your intent to demand payment for your shares if the merger
is completed.
|
In addition, you must not convert your shares of preferred stock
into common stock prior to the merger.
A dissenting shareholder will be entitled to payment only if
written notice of intent to demand payment is properly delivered
to Genesco before the vote on the merger is taken and the
shareholder does not vote in favor of the merger. You will
not protect your dissenters rights by merely voting
against the merger agreement. Additionally, under Tennessee law,
holders of the Employees Preferred will have the right to
be paid the fair value of their shares with respect
to the charter amendment proposal if the charter amendment
becomes effective, but only if they comply with the analogous
procedures and requirements stated above with respect to the
merger agreement proposal; provided, however, that holders of
Employees Preferred will only be entitled to one payment
with respect to their shares. See Dissenters
Rights beginning on page 70 and the text of the
Tennessee dissenters rights statute reproduced in its
entirety as Annex D.
|
|
|
|
|
Market Price of Genescos Common Stock (see
page 72). The closing sale price of Genesco
common stock on the NYSE on June 15, 2007, the last trading
date before the date of the merger agreement, was $49.60 per
share or a premium of 9.9%. The $54.50 per share to be paid
for each share of Genesco common stock pursuant to the merger
represents a premium of 48.7% to the closing price reported by
the NYSE on March 9, 2007, the last trading day prior to
market speculation about potential interest by Foot Locker, Inc.
in an acquisition of Genesco, a premium of 37.7% to the average
closing price reported by the NYSE for the three months prior to
March 9, 2007, and a premium of 50.0% to the average
closing price reported by the NYSE for the one year prior to
March 9, 2007.
|
6
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING
The following questions and answers are intended to address
briefly some commonly asked questions regarding the special
meeting. These questions and answers do not address all
questions that may be important to you as a Genesco shareholder.
You should still carefully read the Summary Term
Sheet and the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement.
|
|
|
Q. |
|
When and where is the special meeting? |
|
|
|
A. |
|
The special meeting of shareholders of Genesco will be held on
Monday, September 17, 2007 at 11:00 a.m., local time, at
Genescos executive offices, Genesco Park, 1415
Murfreesboro Road, Nashville, Tennessee. |
|
|
|
Q. |
|
What matters will be voted on at the special meeting? |
|
A. |
|
You will be asked to consider and vote on the following
proposals: |
|
|
|
to approve the merger agreement, as the same may be
amended from time to time;
|
|
|
|
to approve and adopt the charter amendment
permitting the redemption of the Employees Preferred after
the completion of the merger at the price to be paid per share
of Genescos common stock in the merger, or $54.50, without
interest, at Genescos option as the surviving corporation
following the merger;
|
|
|
|
to approve the adjournment of the special meeting,
if necessary, to solicit additional proxies if there are
insufficient votes at the time of the meeting to approve the
merger agreement or the charter amendment; and
|
|
|
|
to transact such other business that may properly
come before the special meeting or any adjournment or
postponement of the special meeting.
|
|
Q. |
|
How does Genescos board of directors recommend that I
vote on the proposals? |
|
A. |
|
Our board of directors unanimously recommend that you vote: |
|
|
|
FOR the proposal to approve the merger
agreement, as the same may be amended from time to time;
|
|
|
|
FOR the approval and adoption of the
charter amendment; and
|
|
|
|
FOR the adjournment proposal.
|
|
Q. |
|
Who is entitled to vote at the special meeting? |
|
|
|
A. |
|
On August 6, 2007, the record date for determining who is
entitled to receive notice of and to vote at the special
meeting, the number of voting shares issued and outstanding and
the number of votes entitled to be cast were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes per
|
|
|
|
|
Class of Capital Stock
|
|
No. of Shares
|
|
|
Share
|
|
|
Total Votes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Serial Preferred
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1 ($2.30)
|
|
|
35,134
|
|
|
|
1
|
|
|
|
35,134
|
|
Series 3 ($4.75)
|
|
|
14,447
|
|
|
|
2
|
|
|
|
28,894
|
|
Series 4 ($4.75)
|
|
|
3,579
|
|
|
|
1
|
|
|
|
3,579
|
|
Subordinated Cumulative Preferred
Stock ($1.50)
|
|
|
30,017
|
|
|
|
1
|
|
|
|
30,017
|
|
Employees Preferred
|
|
|
59,989
|
|
|
|
1
|
|
|
|
59,989
|
|
Common Stock
|
|
|
22,788,798
|
|
|
|
1
|
|
|
|
22,788,798
|
|
|
|
|
|
|
The various classes of preferred stock and common stock will
vote together as a single group at the special meeting with
respect to all matters except the charter amendment. On the
charter amendment proposal, all classes of preferred stock,
except the Employees Preferred, will vote together with
the |
7
|
|
|
|
|
common stock and constitute one voting group, and the
Employees Preferred will constitute a second voting group
and will vote as a separate class. |
|
|
|
Please note that space limitations may make it necessary to
limit attendance at the special meeting to shareholders. If you
attend, please note that you may be asked to present valid
picture identification. Street name holders will
need to bring a copy of a brokerage statement reflecting stock
ownership as of the record date. Cameras, recording devices and
other electronic devices are not permitted at the special
meeting. |
|
Q. |
|
What vote is required for Genescos shareholders to
approve the merger agreement? |
|
A. |
|
An affirmative vote of the holders of a majority of the votes
represented by the outstanding shares of our common stock and
our preferred stock, voting together as a single group, is
required to approve the merger agreement. |
|
Q. |
|
What vote is required for Genescos shareholders to
approve and adopt the charter amendment? |
|
A. |
|
The approval and adoption of the charter amendment requires that
the votes cast in favor of the charter amendment by holders of
all Genesco capital stock voting together as a single group,
excluding the Employees Preferred, exceed the votes cast
against the amendment by such holders and also requires the
affirmative approval of a majority of the outstanding shares of
the Employees Preferred voting as a separate group. |
|
Q. |
|
What vote is required for Genescos shareholders to
approve the proposal to adjourn the special meeting, if
necessary, to solicit additional proxies to approve the merger
agreement or the charter amendment? |
|
A. |
|
The proposal to adjourn the special meeting, if necessary, to
solicit additional proxies to approve the merger agreement or
the charter amendment requires that the votes cast in favor of
adjournment exceed the votes cast against adjournment. |
|
Q. |
|
Who is soliciting my vote? |
|
A. |
|
This proxy solicitation is being made and paid for by us. We
have retained Georgeson Inc. to assist in the solicitation. We
will pay Georgeson Inc. approximately $20,000 plus
out-of-pocket
expenses for its assistance. Our directors, officers and
employees may also solicit proxies by mail,
e-mail,
telephone, facsimile or by other means of communication. These
individuals will not be paid additional remuneration for their
efforts. We will also request brokers and other fiduciaries to
forward proxy solicitation materials to the beneficial owners of
shares of Genesco capital stock that the brokers and fiduciaries
hold of record. We will reimburse them for their reasonable
out-of-pocket
expenses. |
|
Q. |
|
What do I need to do now? |
|
A. |
|
Even if you plan to attend the special meeting, after carefully
reading and considering the information contained in this proxy
statement, if you hold your shares in your own name as the
shareholder of record, please complete, sign, date and return
the enclosed proxy card; submit a proxy using the telephone
number printed on your proxy card; or submit a proxy using the
Internet proxy submission instructions printed on your proxy
card. You can also attend the special meeting and vote, or
change your prior vote, in person. Do NOT enclose or return
your common stock certificate(s) with your
proxy. If you hold your shares in street
name through a broker, bank or other nominee, then you
received this proxy statement from the nominee, along with the
nominees proxy card which includes voting instructions and
instructions on how to change your vote. |
|
Q. |
|
How do I vote? How can I revoke my vote? |
|
A. |
|
You may cause your shares to be voted by signing and dating each
proxy card you receive and returning it in the enclosed prepaid
envelope, or as described below if you hold your shares in
street name. If you return your signed proxy card,
but do not mark the boxes showing how you wish your shares to be
voted, your shares will be voted FOR the proposal to
approve the merger agreement, as the same may be |
8
|
|
|
|
|
amended from time to time, FOR the approval and
adoption of the charter amendment, and FOR the
adjournment proposal. You have the right to revoke your proxy at
any time before the vote taken at the special meeting by taking
the following steps: |
|
|
|
if you hold your shares in your name as a
shareholder of record, by notifying us in writing at Corporate
Secretary, Genesco Inc., 1415 Murfreesboro Road, Nashville,
Tennessee 37217;
|
|
|
|
if you hold your shares in your name as a
shareholder of record, by attending the special meeting and
voting in person (your attendance at the meeting will not, by
itself, revoke your proxy; you must vote in person at the
meeting);
|
|
|
|
|
|
if you hold your shares in your name as a
shareholder of record, by submitting a later-dated proxy card; or
|
|
|
|
|
|
if you have instructed a broker, bank or other
nominee to vote your shares, by following the directions
received from your broker, bank or other nominee to change those
instructions.
|
|
Q. |
|
Can I submit a proxy by telephone or electronically? |
|
A. |
|
If you hold your shares in your name as a shareholder of record,
you may submit a proxy by telephone or electronically through
the Internet by following the instructions included with your
proxy card. |
|
|
|
If your shares are held by your broker, bank or other nominee,
often referred to as held in street name, please
check your proxy card or contact your broker, bank or other
nominee to determine whether you will be able to provide voting
instructions by telephone or electronically. |
|
Q. |
|
What do I do if I receive more than one proxy or set of
voting instructions? |
|
A. |
|
If you hold shares both as a record holder and in street
name, or if your shares are otherwise registered
differently or you hold shares of more than one class or series
of our capital stock, you may receive more than one proxy
and/or set
of voting instructions relating to the special meeting. These
should each be returned separately in order to ensure that all
of your shares are voted. |
|
Q. |
|
How are votes counted? |
|
A. |
|
For the proposal to approve the merger agreement
(Proposal No. 1), you may vote FOR, AGAINST or
ABSTAIN. Abstentions will not be counted as votes cast or shares
voting on the proposal to approve the merger agreement, but will
count for the purpose of determining whether a quorum is
present. If you abstain, it will have the same effect as if you
vote against the approval of the merger agreement. In addition,
if your shares are held in the name of a broker, bank or other
nominee, your broker, bank or other nominee will not, under the
current NYSE rules, be entitled to vote your shares in the
absence of specific instructions. These non-voted shares,
commonly referred to as broker non-votes, will be
counted for purposes of determining a quorum, but will have the
same effect as a vote against the approval of the merger
agreement. |
|
|
|
For the proposal to approve and adopt the charter amendment
(Proposal No. 2), you may vote FOR, AGAINST or
ABSTAIN, and your vote will be counted as described below. |
|
|
|
With respect to the Employees Preferred,
abstentions will not be counted as votes cast or shares voting
on the proposal to approve the merger agreement, but will count
for the purpose of determining whether a quorum is present. If
you abstain, it will have the same effect as if you vote against
the charter amendment. In addition, if your shares are held in
the name of a broker, bank or other nominee, your broker, bank
or other nominee will not, under the current NYSE rules, be
entitled to vote your shares in the absence of specific
instructions. Broker non-votes will be counted for purposes of
determining a quorum, but will have the same effect as a vote
against the approval of the charter amendment.
|
|
|
|
With respect to votes cast by all other holders of
Genesco capital stock, abstentions will be counted for the
purpose of determining whether a quorum is present, but will
have no effect on the vote to approve and adopt the charter
amendment, which requires that the votes cast in favor of the
matter exceed the votes cast against the matter. If your shares
are held in the name of a broker, bank or other nominee, your
broker, bank or other nominee will not, under the current NYSE
rules, be entitled to vote your shares in the absence of
specific instructions. Broker non-votes will be counted for the
purpose of
|
9
|
|
|
|
|
determining whether a quorum is present, but will have no effect
on the vote to approve and adopt the charter amendment with
respect to votes cast by all holders of Genesco capital stock
other than holders of the Employees Preferred. |
|
|
|
For the proposal to adjourn the special meeting (Proposal
No. 3), if necessary, to solicit additional proxies to
approve the merger agreement or the charter amendment, you may
vote FOR, AGAINST or ABSTAIN. Abstentions and broker
non-votes will count for the purpose of determining whether a
quorum is present, but will have no effect on the vote to
adjourn the meeting, which requires that the votes cast in favor
of adjournment exceed the votes cast against such matter. If
your shares are held in the name of a broker, bank or other
nominee, your broker, bank or other nominee will be entitled to
vote your shares in the absence of specific instructions as this
matter is considered routine under the current NYSE rules. |
|
|
|
If you sign your proxy card without indicating your vote, your
shares will be voted FOR the approval of the merger
agreement, as the same may be amended from time to time,
FOR the approval and adoption of the charter
amendment, and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies, and in
accordance with the recommendations of our board of directors on
any other matters properly brought before the special meeting
for a vote. |
|
Q: |
|
Who will count the votes? |
|
A: |
|
Either our corporate secretary or designee of our corporate
secretary, or a representative of our transfer agent
Computershare Investor Services, LLC, will count the votes and
act as an inspector of election. Questions concerning stock
certificates or other matters pertaining to your shares may be
directed to Paul Amante at Computershare Investor Services, LLC
at
(781) 575-2879. |
|
Q. |
|
When is the merger expected to be completed? |
|
|
|
A. |
|
We are working toward completing the merger as soon as possible.
However, in order to complete the merger, we must obtain
shareholder approval and the other closing conditions set forth
in the merger agreement must be satisfied or waived. In
addition, Finish Line has advised Genesco that it currently
estimates that it will obtain the financing necessary to
consummate the merger pursuant to the terms of the commitment
letter during the third week of October 2007, but the expected
financing timeline could vary. Subject to the terms and
conditions of the merger agreement, Genesco expects the merger
to be consummated at that time. |
|
|
|
Q. |
|
Is the merger contingent upon the approval of the charter
amendment? |
|
A. |
|
No. The merger may be consummated even if the charter
amendment is not approved. Our board of directors recommends,
however, that your vote FOR the charter amendment
proposal (Proposal No. 2). |
|
Q. |
|
Should I send in my common stock certificates now? |
|
A. |
|
No. After the merger is completed, you will be sent a
letter of transmittal with detailed written instructions for
exchanging your Genesco common stock certificates for the merger
consideration. |
|
|
|
If your shares are held in street name by your
broker, bank or other nominee, you will receive instructions
from your broker, bank or other nominee as to how to effect the
surrender of your street name shares in exchange for
the merger consideration. Please do not send your
certificates in now. |
|
Q. |
|
How do I convert my shares of preferred stock into shares of
common stock? |
|
A. |
|
Except for the $1.50 Subordinated Cumulative Preferred Stock and
shares of Employees Preferred that are not fully paid,
each outstanding class and series of our preferred stock is
convertible into common stock at the holders option.
Generally, your right to convert your shares of preferred stock,
if applicable, may be exercised by surrendering the applicable
preferred stock certificates to our transfer agent,
Computershare Investor Services, LLC, for such purpose at 250
Royall Street, Canton MA 02021, attention: Corporate Actions,
Paul Amante, or to Genesco at its principal office at 1415
Murfreesboro Road, Nashville, Tennessee 37217, attention:
Corporate Secretary. Certificates surrendered for conversion
must be properly endorsed in blank or accompanied by proper
instruments of assignment. Questions regarding the conversion
process, including with respect to lost certificates and proper
assignment documentation, should be directed to Paul Amante at
Computershare Investor Services, LLC at
(781) 575-2879. |
10
|
|
|
Q. |
|
Does the Company recommend that I convert my preferred stock
prior to the merger? |
|
|
|
A. |
|
We are not making a recommendation as to whether you should
convert your preferred stock, if applicable. However, certain
considerations with respect to the preferred stock are set forth
for your reference under The Merger Preferred
Stock beginning on page 38. You should consult your
financial and tax advisors regarding your decision whether to
convert your shares of preferred stock in advance of the merger. |
|
|
|
Q. |
|
How can I obtain additional information about Genesco? |
|
|
|
A. |
|
We will provide a copy of our Annual Report to shareholders
and/or our
Annual Report on
Form 10-K
for the year ended February 3, 2007, excluding certain of
its exhibits, and other filings, including our reports on
Form 10-Q,
which have been filed with the Securities and Exchange
Commission (the SEC) without charge to any
shareholder who makes an oral or written request to the
Corporate Secretary, Genesco Inc., 1415 Murfreesboro Road,
Nashville, Tennessee 37217, telephone:
(615) 367-7000.
Our Annual Report on
Form 10-K
and other SEC filings also may be accessed on the Internet at
http://www.sec.gov
or on the Investor Relations page of Genescos website at
http://www.genesco.com.
Our website address is provided as an inactive textual reference
only. The information provided on our website is not part of
this proxy statement and is not incorporated by reference. For a
more detailed description of how to obtain additional
information about Genesco, please refer to Where You Can
Find More Information beginning on page 77. |
|
|
|
Q. |
|
Who can help answer my questions? |
|
A. |
|
If you need assistance in completing your proxy card or have
questions regarding the special meeting, please contact:
Georgeson Inc., 17 State Street, 10th Floor, New York, New
York 10004. Banks and brokers should call Georgeson at
(212) 440-9800.
All others should call Georgeson toll-free at
(866) 605-7510.
If your broker, bank or other nominee holds your shares, you can
also call your broker, bank or other nominee for additional
information. |
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement, and the documents to which we refer you in
this proxy statement, contain forward-looking statements based
on estimates and assumptions. Forward-looking statements include
information concerning possible or assumed future results of
operations of Genesco, the expected completion and timing of the
merger and other information relating to the merger. There are
forward-looking statements throughout this proxy statement,
including, without limitation, under the headings Summary
Term Sheet, The Merger, Charter
Amendment, Projected Financial Information,
and in statements containing the words believes,
plans, expects, anticipates,
intends, estimates or other similar
expressions. For each of these statements, we claim the
protection of the safe harbor for forward-looking statements
contained in Section 21E of the United States Securities
Exchange Act of 1934, as amended (the Exchange Act).
You should be aware that forward-looking statements involve
known and unknown risks and uncertainties. Although we believe
that the expectations reflected in these forward-looking
statements are reasonable, we cannot assure you that the actual
results or developments we anticipate will be realized, or even
if realized, that they will have the expected effects on our
business or operations. These forward-looking statements speak
only as of the date on which the statements were made and we
undertake no obligation to publicly update or revise any
forward-looking statements made in this proxy statement or
elsewhere as a result of new information, future events or
otherwise. In addition to other factors and matters contained or
incorporated in this document, we believe the following factors
could cause actual results to differ materially from those
discussed in the forward-looking statements:
|
|
|
|
|
the occurrence of any event, change or other circumstances that
could give rise to the termination of the merger agreement,
including a termination that under certain circumstances could
require us to pay Finish Line a $46 million termination fee
and up to $10 million for reasonable, actual and documented
out-of-pocket
expenses and fees;
|
11
|
|
|
|
|
the outcome of any legal proceedings that have been or may be
instituted against us and others relating to the merger
agreement;
|
|
|
|
the failure of the merger to close for any reason, including the
inability to complete the merger due to the failure to obtain
shareholder approval or the failure to satisfy other conditions
to the completion of the merger, or the failure of Finish Line
to obtain the necessary debt financing arrangements set forth in
the commitment letter received in connection with the merger,
and the risk that any failure of the merger to close may
adversely affect our business and the price of our common stock;
|
|
|
|
the potential adverse effect on our business, properties and
operations of any covenants (including negative operational
covanants) we agreed to in the merger agreement;
|
|
|
|
risks that the proposed transaction diverts managements
attention and disrupts current plans and operations, and
potential difficulties in employee retention as a result of the
merger;
|
|
|
|
the effect of the announcement of the merger and actions taken
in anticipation of the merger on our business relationships,
operating results and business generally;
|
|
|
|
the impact of the substantial indebtedness incurred to finance
the completion of the merger;
|
|
|
|
the amount of the costs, fees, expenses and charges related to
the merger and the actual terms of certain financings that will
be obtained for the merger; and
|
|
|
|
|
|
other risks detailed in our current filings with the SEC,
including our most recent filings on
Forms 8-K,
10-Q and
10-K. See
Where You Can Find More Information beginning on
page 77.
|
Many of the factors that will determine our future results are
beyond our ability to control or predict. In light of the
significant uncertainties inherent in the forward-looking
statements contained herein, readers should not place undue
reliance on forward-looking statements, which reflect our views
only as of the date of this proxy statement. We cannot guarantee
any future results, levels of activity, performance or
achievements. The statements made in this proxy statement
represent our views as of the date of this proxy statement, and
it should not be assumed that the statements made herein remain
accurate as of any future date. Moreover, we assume no
obligation to update forward-looking statements or update the
reasons that actual results could differ materially from those
anticipated in forward-looking statements, except as required by
law.
12
THE
PARTIES TO THE MERGER
Genesco
Genesco is a Tennessee corporation and is headquartered in
Nashville, Tennessee. Our principal offices are located at
Genesco Park, 1415 Murfreesboro Road, Nashville, Tennessee and
our telephone number is
(615) 367-7000.
Genesco is a leading retailer of branded footwear and licensed
and branded headwear and a wholesaler of branded footwear, with
net sales for its fiscal year ended February 3, 2007
(fiscal year 2007) of $1.5 billion. During
fiscal year 2007, Genesco operated five reportable business
segments (not including corporate): Journeys Group, comprised of
the Journeys, Journeys Kidz and Shi by Journeys retail footwear
chains, catalog and
e-commerce
operations; Underground Station Group, comprised of the
Underground Station and Jarman retail footwear chains and
e-commerce
operations; Hat World Group, comprised of the Hat World, Lids,
Hat Shack, Hat Zone, Head Quarters, Cap Connection and Lids Kids
retail headwear chains and
e-commerce
operations; Johnston & Murphy Group, comprised of
Johnston & Murphy retail operations, catalog and
e-commerce
operations and wholesale distribution; and Licensed Brands,
comprised primarily of
Dockers®
footwear, sourced and marketed under a license from Levi
Strauss & Company. Genesco also designs, sources,
markets and distributes footwear under its own
Johnston & Murphy brand and under the licensed
Dockers®
brand to over 1,000 retail accounts in the United States,
including a number of leading department, discount, and
specialty stores.
For a more detailed description of the business and properties
of Genesco, see our Annual Report on
Form 10-K
for fiscal year 2007, which is incorporated by reference herein,
or visit our website at www.genesco.com. Our website address is
provided as an inactive textual reference only. The information
provided on our website is not part of this proxy statement and
is not incorporated by reference. Genescos common stock is
listed on the NYSE (Symbol: GCO) and the CHX. See Where
You Can Find More Information beginning on page 77.
Finish
Line
The Finish Line, Inc. (which we refer to as Finish Line) is an
Indiana corporation and is headquartered in Indianapolis,
Indiana. Finish Lines principal offices are located at
3308 North Mitthoeffer Road, Indianapolis, Indiana 46235 and its
telephone number is
(317) 899-1022.
Finish Line operates under the Finish Line, Man Alive and Paiva
brand names and is one of the largest mall-based specialty
retailers in the United States. Finish Line currently operates
694 Finish Line stores in 47 states and online, 93 Man
Alive stores in 19 states and 15 Paiva stores in
10 states and online. Finish Lines common stock is
listed on the NASDAQ Global Select Market (Symbol: FINL).
For a more detailed description of the business and properties
of Finish Line, see its Annual Report on
Form 10-K
for its fiscal year ended March 3, 2007, or visit its
website at www.finishline.com. Finish Lines website is
provided as an inactive textual reference only. The information
set forth in the above-referenced Annual Report and the
information provided on Finish Lines website are not part
of this proxy statement and are not incorporated by reference.
Merger
Sub
Headwind, Inc. (which we refer to as Merger Sub) is a Tennessee
corporation that was formed solely for the purpose of completing
the proposed merger. Upon the completion of the proposed merger,
Merger Sub will cease to exist and Genesco will continue as the
surviving corporation. Merger Sub is wholly-owned by Finish Line
and has not engaged in any business except as contemplated by
the merger agreement. The principal office address of Merger Sub
is Headwind, Inc.,
c/o The
Finish Line, Inc., 3308 North Mitthoeffer Road, Indianapolis,
Indiana 46235 and its telephone number is
(317) 899-1022.
13
THE
SPECIAL MEETING
This proxy statement is furnished in connection with the
solicitation of proxies by our board of directors in connection
with the special meeting of our shareholders relating to the
merger and the charter amendment.
Date,
Time and Place of the Special Meeting
The special meeting is scheduled to be held as follows:
Date: Monday, September 17, 2007
Time: 11:00 a.m., local time
Place: Genesco Park, 1415 Murfreesboro Road,
Nashville, Tennessee
Proposals
to be Considered at the Special Meeting
At the special meeting, you will be asked to vote on a proposal
to approve the merger agreement, as the same may be amended from
time to time (Proposal No. 1). If our shareholders
fail to approve the merger agreement, the merger will not occur.
A copy of the merger agreement is attached as Annex A to
this proxy statement, and we encourage you to read it carefully
and in its entirety. At the special meeting, you will also be
asked to vote on the charter amendment
(Proposal No. 2). A copy of the charter amendment is
attached as Annex B to this proxy statement, and we
encourage you to read it carefully and in its entirety. You will
also be asked to approve the adjournment of the special meeting,
if necessary, to solicit additional proxies if there are
insufficient votes at the time of the meeting to approve the
merger agreement or the charter amendment
(Proposal No. 3).
Record
Date; Voting Rights; Quorum; Vote Required for
Approval
We have fixed the close of business on August 6, 2007 as
the record date for the special meeting, and only holders of
record of Genesco capital stock on the record date are entitled
to vote at the special meeting. On that date, the number of
voting shares outstanding and the number of votes entitled to be
cast were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes per
|
|
|
|
|
Class of Capital Stock
|
|
No. of Shares
|
|
|
Share
|
|
|
Total Votes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Serial Preferred
Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series 1 ($2.30)
|
|
|
35,134
|
|
|
|
1
|
|
|
|
35,134
|
|
Series 3 ($4.75)
|
|
|
14,447
|
|
|
|
2
|
|
|
|
28,894
|
|
Series 4 ($4.75)
|
|
|
3,579
|
|
|
|
1
|
|
|
|
3,579
|
|
Subordinated Cumulative Preferred
Stock ($1.50)
|
|
|
30,017
|
|
|
|
1
|
|
|
|
30,017
|
|
Employees Subordinated
Convertible Preferred Stock
|
|
|
59,989
|
|
|
|
1
|
|
|
|
59,989
|
|
Common Stock
|
|
|
22,788,798
|
|
|
|
1
|
|
|
|
22,788,798
|
|
The presence in person or representation by proxy of
shareholders entitled to cast a majority of the votes of all
issued and outstanding shares of Genesco capital stock entitled
to be voted shall constitute a quorum for the purpose of
considering each of the proposals except the charter amendment
proposal. A quorum for the charter amendment proposal requires
the presence in person or representation by proxy of
shareholders entitled to cast (1) a majority of the votes
of all issued and outstanding shares of Genesco capital stock,
except the Employees Preferred, entitled to be voted and
(2) a majority of the shares of all issued and outstanding
shares of the Employees Preferred entitled to vote. Shares
of Genesco capital stock represented at the special meeting but
not voted, including shares of Genesco capital stock for which
proxies have been received but for which shareholders have
abstained, will be treated as present at the special meeting for
purposes of determining the presence or absence of a quorum for
the transaction of all business. In the event that a quorum for
the proposal to approve the merger agreement is not present at
the special meeting, it is expected that the meeting will be
adjourned to solicit additional proxies; provided, however, that
in the event a quorum is present with respect to such proposal
and there are sufficient votes to approve the merger agreement
at the
14
date the special meeting is initially convened, the shareholders
will take final action at that meeting to approve the merger
agreement, regardless of whether the meeting is adjourned to a
later date solely for further consideration of the charter
amendment proposal.
If your shares are registered in your name or if you have stock
certificates, they will not be voted if you do not vote at the
meeting in person or as described below under
Submission and Revocation of Proxies. If
your shares are held in street name through a
nominee (such as a bank, broker or other nominee) and you do not
provide voting instructions to the nominee that holds your
shares, the nominee has the discretionary authority to vote your
unvoted shares on certain matters. A broker non-vote
arises when a broker, financial institution or other holder of
record that holds shares in street name does not receive
instructions from a beneficial owner and does not have the
discretionary authority to vote on a particular item. Under
current NYSE rules, brokers have discretionary authority to vote
on the proposal regarding adjournment. Under current NYSE rules,
brokers do not have discretionary authority to vote on the
proposal regarding the merger agreement or the proposal
regarding the charter amendment. We encourage you to provide
voting instructions to your bank, broker or other nominee. Doing
so will ensure that your shares will be voted in the manner you
desire.
Approval of the merger agreement
(Proposal No. 1) requires the affirmative vote of
the holders of a majority of the votes represented by the
outstanding shares of our common stock and our preferred stock,
voting together as a single group. For the proposal to approve
the merger agreement, you may vote FOR, AGAINST or ABSTAIN.
Abstentions and broker non-votes will not be counted as votes
cast or shares voting on the proposal to approve the merger
agreement, but will count for the purpose of determining whether
a quorum is present. Abstentions and broker non-votes will
have the same effect as a vote against the approval of the
merger agreement.
As of August 6, 2007, the record date, the directors and
executive officers of Genesco held and were entitled to vote, in
the aggregate, shares of Genesco common stock, representing
approximately 2.5% of the outstanding votes of Genesco capital
stock. As of the record date, the directors and executive
officers held no shares of Genesco preferred stock. If our
directors and executive officers vote their shares in favor of
approving the merger agreement, approximately 2.5% of the
outstanding votes of Genesco capital stock will have voted for
the proposal to approve the merger agreement. This means that
additional holders of approximately 10,893,548 votes, or
approximately 47.5%, of all votes entitled to be cast at the
special meeting would need to vote for the proposal to approve
the merger agreement in order for it to be approved.
For the proposal to approve and adopt the charter amendment
(Proposal No. 2), holders may vote FOR, AGAINST
or ABSTAIN. There are two separate voting groups:
|
|
|
|
|
Approval and adoption of the charter amendment requires the
affirmative approval of a majority of the outstanding shares of
the Employees Preferred entitled to vote on such matter.
Abstentions by holders of Employees Preferred and broker
non-votes will not be counted as votes cast or shares voting on
the proposal to approve the charter amendment, but will count
for the purpose of determining whether a quorum is present.
Abstentions and broker non-votes by holders of
Employees Preferred and broker non-votes will have the
same effect as a vote against the adoption and approval of the
charter amendment.
|
|
|
|
|
|
Approval and adoption of the charter amendment also requires
that the votes cast in favor of the matter by holders of all
Genesco capital stock, excluding the Employees Preferred,
exceed the votes cast against such matter. Abstentions and
broker non-votes will count for the purpose of determining
whether a quorum is present but do not count in the voting
results and have no effect on the result of this vote.
|
If our directors and executive officers vote their shares in
favor of the approval and adoption of the charter amendment,
approximately 2.5% of the outstanding votes of Genesco capital
stock, excluding the Employees Preferred, will have voted
for the proposal to approve and adopt the charter amendment.
This means that additional holders of approximately
10,863,554 votes, or approximately 47.5%, of all votes
entitled to be cast at the special meeting by this voting group
would need to vote for the proposal to approve and
15
adopt the charter amendment, in addition to the holders of a
majority of all votes entitled to be cast by the Employees
Preferred, in order for it to be approved and adopted.
The outcome of the vote with respect to the charter amendment
proposal will not impact the outcome of the vote with respect to
the merger agreement, and the approval of either proposal is
independent of, and not conditioned upon the approval of, the
other proposal. The charter amendment, however, will not take
effect unless the merger is consummated. The merger is not
contingent upon the approval of the charter amendment.
The proposal to adjourn the special meeting
(Proposal No. 3), if necessary, to solicit additional
proxies to approve the merger agreement or the charter amendment
requires that the votes cast in favor of the matter exceed the
votes cast against the matter. For the proposal to adjourn the
special meeting, if necessary, to solicit additional proxies,
you may vote FOR, AGAINST or ABSTAIN. Abstentions and
broker non-votes will count for the purpose of determining
whether a quorum is present but do not count in the voting
results and have no effect on the result of the vote on the
adjournment proposal.
Submission
and Revocation of Proxies
Shareholders of record may submit proxies by mail. Shareholders
who wish to submit a proxy by mail should mark, date, sign and
return the proxy card in the envelope furnished. If you hold
your shares in your name as a shareholder of record, you may
submit a proxy by telephone or electronically through the
Internet by following the instructions included with your proxy
card. Shareholders who hold shares beneficially through a
nominee (such as a bank or broker) may be able to submit a proxy
by mail, or by telephone or the Internet if those services are
offered by the nominee.
Proxies received at any time before the special meeting, and not
revoked or superseded before being voted, will be voted at the
special meeting. Where a specification is indicated by the
proxy, it will be voted in accordance with the specification. If
you sign your proxy card without indicating your vote, your
shares will be voted FOR the approval of the merger
agreement, as the same may be amended from time to time,
FOR the approval and adoption of the charter
amendment, and FOR the adjournment of the special
meeting, if necessary, to solicit additional proxies, and in
accordance with the recommendations of our board of directors on
any other matters properly brought before the special meeting
for a vote.
You have the right to revoke your proxy at any time before the
vote taken at the special meeting by taking the following
actions:
|
|
|
|
|
if you hold your shares in your name as a shareholder of record,
by notifying us in writing at Corporate Secretary, Genesco Inc.,
1415 Murfreesboro Road, Nashville, Tennessee 37217;
|
|
|
|
if you hold your shares in your name as a shareholder of record,
by attending the special meeting and voting in person (your
attendance at the meeting will not, by itself, revoke your
proxy; you must vote in person at the meeting);
|
|
|
|
if you hold your shares in your name as a shareholder of record,
by submitting a later-dated proxy card; or
|
|
|
|
if you have instructed a broker, bank or other nominee to vote
your shares, by following the directions received from your
broker, bank or other nominee to change those instructions.
|
Please do not send in your common stock certificates with
your proxy card. When the merger is completed, a separate
letter of transmittal will be mailed to holders of Genesco
common stock that will enable you to receive the merger
consideration in exchange for your stock certificates.
Rights of
Shareholders Who Object to the Merger Agreement or the Charter
Amendment Proposals
Holders of Genesco common stock are not entitled to
dissenters rights under Tennessee law in connection with
the merger unless our common stock is delisted from the NYSE and
the CHX prior to completion of the merger, which we do not
currently anticipate. However, holders of Genesco preferred
stock are entitled to dissenters rights under Tennessee
law in connection with the merger. Holders of the
16
Employees Preferred are also entitled to dissenters
rights under Tennessee law in connection with the charter
amendment. With respect to the holders of Genesco preferred
stock, Tennessee law permits you to dissent from the merger and
to have the fair value of your stock appraised by a court and
paid to you in cash. To do this, you must follow certain
procedures, including: (1) filing certain notices with us;
and (2) refraining from voting your shares in favor of the
merger. In addition, you must not convert your shares of
preferred stock into Genesco common stock before the merger. If
you properly dissent from the merger, your shares of Genesco
preferred stock cannot be converted into Genesco common stock
prior to the merger and will not be entitled to receive the
price per share to be paid to holders of Genesco common stock in
the merger. If you properly dissent from the merger, your shares
will not be redeemed by the surviving corporation following the
merger. Your only right will be to receive the appraised value
of your shares in cash. The procedures for holders of
Employees Preferred to dissent from the charter amendment
are substantially similar; provided, however, that holders of
Employees Preferred will in no event be entitled to more
than one payment with respect to their shares.
A dissenting shareholder will be entitled to payment only if
written notice of intent to demand payment is properly delivered
to Genesco before the vote on the merger agreement (or the
charter amendment, as applicable) is taken and the shareholder
does not vote in favor of the merger agreement (or the charter
amendment, as applicable). A holder of preferred stock will not
protect their dissenters rights by merely voting against
the merger agreement (or the charter amendment, as applicable).
Your failure to follow exactly the procedures specified under
Tennessee law will result in the loss of your dissenters
rights. See Dissenters Rights beginning on
page 70 and the text of the Tennessee dissenters
rights statute reproduced in its entirety as Annex D.
Solicitation
of Proxies
This proxy solicitation is being made and paid for by Genesco on
behalf of our board of directors. We have retained Georgeson
Inc. to assist in the solicitation. We will pay Georgeson Inc.
approximately $20,000 plus
out-of-pocket
expenses for their assistance. Our directors, officers and
employees may also solicit proxies by mail,
e-mail,
telephone, facsimile or other means of communication. These
individuals will not be paid additional remuneration for their
efforts. We will also request brokers and other fiduciaries to
forward proxy solicitation material to the beneficial owners of
shares of Genesco capital stock that the brokers and fiduciaries
hold of record. We will reimburse them for their reasonable
out-of-pocket
expenses. In addition, we will indemnify Georgeson Inc. against
any losses arising out of that firms proxy soliciting
services on our behalf.
Other
Business
We are not currently aware of any business to be acted upon at
the special meeting other than the matters discussed in this
proxy statement. Under our bylaws, business transacted at the
special meeting is limited to the purposes stated in the notice
of the special meeting, which is provided at the beginning of
this proxy statement. If other matters do properly come before
the special meeting, or at any adjournment or postponement of
the special meeting, we intend that shares of Genesco capital
stock represented by properly submitted proxies will be voted in
accordance with the recommendations of our board of directors.
Questions
and Additional Information
If you have more questions about the merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please call our proxy solicitor, Georgeson Inc., toll-free at
(888) 605-7510
(banks and brokerage firms call collect at
(212) 440-9800),
or contact Genesco in writing at our principal executive offices
at Corporate Secretary, Genesco Inc., 1415 Murfreesboro Road,
Nashville, Tennessee 37217, or by telephone at
(615) 367-7000.
17
THE
MERGER
This discussion of the merger is qualified by reference to
the merger agreement, which is attached to this proxy statement
as Annex A. You should read the entire merger agreement
carefully as it is the legal document that governs the
merger.
Background
of the Merger
On January 19, 2007, our chief executive officer, Hal
Pennington, received an unsolicited call from Matthew Serra, the
chief executive officer of Foot Locker, Inc. (Foot
Locker). During this conversation, Mr. Serra
indicated that Foot Locker was interested in pursuing a
negotiated acquisition of Genesco and that he believed Foot
Locker could potentially offer a purchase price of $48.00 to
$50.00 per share for our outstanding common stock, subject to
satisfactory due diligence. Mr. Pennington informed
Mr. Serra that Genesco was committed to its strategic plan
and that management believed in the value that could be created
for our shareholders by executing this plan.
During the week of January 22, 2007, Mr. Pennington
contacted each of our board members individually to advise them
of the call from Mr. Serra. During the week, one board
member received a call from an investment banker indicating that
a letter was being prepared by Foot Locker to send to our board
outlining a proposal, but we received no such letter.
On February 5, 2007, Mr. Pennington received another
call from Mr. Serra. Mr. Serra did not discuss a
specific proposal on this call and indicated that his purpose
was to follow up on his previous conversation of
January 19, 2007. Mr. Serra indicated again that Foot
Locker intended to pursue a negotiated acquisition of us on a
friendly basis. Mr. Pennington told Mr. Serra that his
views about such an acquisition had not changed since the prior
call. On February 8, 2007, our directors participated in a
telephone call conducted by Mr. Pennington for the purpose
of advising them of the February 5 call from Mr. Serra.
During the first several weeks of March 2007, various media
outlets began reporting on rumors and speculation about a
potential tender offer for the outstanding shares of Genesco by
Foot Locker. On March 19, 2007, our directors participated
in a telephone call conducted by Mr. Pennington for the
purpose of informing the board of the media reports and of
managements concerns regarding certain key employees who
were anxious about their job security in light of the Foot
Locker rumors and speculation. Mr. Pennington told the
board that management believed the concerns could be reduced if
change-in-control
severance agreements were provided for those key employees. He
explained that the proposed agreements would be substantially
similar to the existing agreements with our executive officers,
which are described under The Merger Interests
of Genescos Directors and Executive Officers in the
Merger, provided that these agreements would generally
provide for a severance payment equal to an amount calculated
for each such employee by multiplying one times the sum of the
employees base salary, annual bonus and certain employee
benefits amounts. It was the consensus of the board members on
the call that such agreements would not present a material
deterrent to any future acquisition of Genesco and that the
execution of such agreements was in the best interests of our
shareholders in order to encourage such employees to remain with
us during the existing period of uncertainty and in the event an
unsolicited takeover attempt was announced. Our board then acted
by unanimous written consent, effective March 22, 2007,
approving the
change-in-control
severance agreements for certain key employees.
As part of the ongoing evaluation of our business, our board and
senior management regularly evaluate our long-term strategic
alternatives and prospects for continued operations as an
independent company. This evaluation took on renewed emphasis in
light of the media speculation and our belief that Foot Locker
might make a hostile tender offer for the acquisition of Genesco
or otherwise attempt to elect its own slate of directors at our
annual meeting of shareholders on June 27, 2007.
Accordingly, in a telephone call on March 22, 2007, it was
the consensus of participating directors that management should
engage Goldman Sachs as our financial advisor to assist us in
preparing for any potential acquisition proposal, proxy contest,
or any other attempt to acquire control of Genesco. The board
also asked management to update the forecasts set forth in
managements annual five-year financial plan to facilitate
Goldman Sachs financial analysis and to assist the board
in evaluating any potential acquisition proposal.
18
On April 4, 2007, Mr. Pennington received a letter
setting forth a purportedly confidential proposal from Foot
Locker for the acquisition of all of the outstanding shares of
common stock of Genesco for $46.00 per share in cash.
Mr. Serra called Mr. Pennington immediately before
sending the letter, indicating that Foot Locker might be able to
go higher than the proposed price per share if
increased value could be demonstrated through a due diligence
process. The proposal set forth in the letter was not subject to
any financing condition but was subject to due diligence.
Mr. Pennington provided this letter to all of our directors.
On April 5, 2007, our directors participated in a telephone
call conducted by Mr. Pennington for the purpose of
discussing the Foot Locker letter. Representatives of Bass
Berry & Sims PLC (Bass Berry), our outside
corporate counsel, and Goldman Sachs participated on this call.
A representative of Bass Berry reviewed the boards
fiduciary duties in considering and responding to the proposal.
After discussing the proposal with their legal and financial
advisors, it was the consensus of the participating directors
that the proposal should be formally considered at a special
meeting of our board to be held on April 20, 2007. In
preparation for the April 20 board meeting, the board asked
Goldman Sachs to review managements most current financial
forecasts and consider our strategic alternatives to enhance
shareholder value, including the Foot Locker proposal.
Mr. Pennington delivered to Foot Locker on April 5,
2007 a letter confirming receipt of its proposal and indicating
that we would provide a response in due course.
On April 19, 2007, Mr. Serra sent a letter to
Mr. Pennington expressing his disappointment in the lack of
a substantive response to his April 4 letter and indicating that
Foot Locker was considering disclosing the April 4 and April 19
letters publicly before the market opened on April 20,
2007. Mr. Serra also stated in his letter that Foot Locker
would welcome the opportunity to conduct due diligence and might
be prepared to increase its offer if increased value could be
demonstrated. Lehman Brothers Inc. (Lehman
Brothers), the financial advisor for Foot Locker,
contacted Goldman Sachs that day to discuss the April 19 letter.
Goldman Sachs indicated to Lehman Brothers that our board was
meeting to consider the proposal on April 20, 2007 and that
it was our preference that Foot Locker not disclose the letters
until the board held its meeting and we could respond to
Mr. Serras April 4 letter. Lehman Brothers indicated
on that call that it could not commit that Foot Locker would
refrain from making the letters public. On the morning of
April 20, 2007, Foot Locker made the April 4 and April 19
letters public. On April 20, 2007, we issued a press
release announcing that we had received, and that our board
intended to consider with the assistance of Goldman Sachs, the
Foot Locker proposal set forth in the April 4 letter.
On April 20, 2007, Bob Dennis, our president and chief
operating officer, received a call from Alan Cohen, the chief
executive officer of Finish Line, regarding Finish Lines
potential interest in a business combination transaction.
Mr. Dennis referred Mr. Cohen to Goldman Sachs in case
Finish Line desired to pursue its interest further.
On April 20, 2007, our board met to consider the Foot
Locker proposal set forth in the April 4 letter. Representatives
of Bass Berry and Goldman Sachs attended the meeting, together
with certain members of management. At the meeting,
Mr. Pennington discussed the various media articles about a
potential acquisition proposal from Foot Locker since the April
5 board call. Mr. Pennington described the discussions
between Goldman Sachs and Lehman Brothers, which preceded the
public announcement by Foot Locker of its proposal. A
representative of Bass Berry reviewed with the board their
confidentiality obligations, stock trading limitations and our
no-comment and document retention policies, as well as their
fiduciary duties and responsibilities in the context of
considering the Foot Locker proposal. Management presented an
update of financial results for the first fiscal quarter to date
and a general business and operating plan update, together with
managements preliminary five-year financial forecasts.
This discussion included a detailed explanation of the process
thus far undertaken to update the forecasts and certain
operational and financial assumptions underlying the forecasts.
Management responded to questions regarding the risks and
opportunities that may impact managements forecasts and
assumptions and confirmed their belief that the financial
forecasts were reasonable financial projections based on
currently available information, and that these forecasts were
provided to Goldman Sachs for purposes of performing its
financial analysis. See The Merger Projected
Financial Information Initial Projections
beginning on page 36.
19
At the April 20 board meeting, representatives of Goldman Sachs
discussed with our board the retail merger and acquisition
market and reported on the discussions they had had with Lehman
Brothers in connection with the Foot Locker proposal. They also
reviewed with the board the calls they had received from parties
other than Foot Locker expressing potential interest in
acquiring us. Indications of interest had been received from six
private equity financial sponsors. Representatives of Goldman
Sachs then discussed their financial analysis of our strategic
alternatives. In addition to the Foot Locker and other sale
possibilities, these strategic alternatives included a leveraged
recapitalization, the sale of a material division or assets, the
acquisition of assets, and the execution of our current
strategic plan. Representatives of Goldman Sachs discussed the
benefits and issues relating to each of the strategic
alternatives. They then discussed the Foot Locker proposal in
detail, including the discussions with Lehman Brothers, as well
as the indications of interest which had been received from
other parties. The board and its financial and legal advisors
then discussed the possible contents of a response letter to,
and potential communication strategies with, Foot Locker and the
media, should our board determine to reject the Foot Locker
proposal as not in the best interests of our shareholders.
At the April 20 board meeting, the board also discussed the
strategic alternatives available to us and the next steps we
might take to explore further these strategic alternatives.
Among the next steps considered was the contacting of the third
parties who had indicated to us or to Goldman Sachs an interest
in pursuing a business combination transaction with us. The
board also evaluated Foot Lockers April 4 proposal in
light of the financial analyses of our other strategic
alternatives and in light of the current market price of our
common stock. The board determined that while it had confidence
in our long-term strategic plan and, accordingly, we were not
for sale, it was in the best interests of our shareholders to
engage in a feasibility process to gauge the potential interest
in a business combination transaction with us and to allow the
board to consider in light of that interest the strategic
alternatives available to us, including the alternative of
remaining an independent public company and executing our
long-term strategic plan. After the representatives of Goldman
Sachs were excused from the meeting, further discussion ensued
and the board unanimously voted to reject the Foot Locker
proposal as not in the best interests of our shareholders. The
board then discussed further the general nature of the response
letter to Foot Locker and our next steps, and determined to
instruct Goldman Sachs to contact the parties who had previously
contacted us or Goldman Sachs in order to determine their level
of interest in a business combination with us. The board also
approved the sharing of confidential information with such
parties, subject to the execution of customary confidentiality
and standstill agreements, and limited informational meetings
with management in order to facilitate this process. Bass Berry
noted at this time that management should not discuss personal
arrangements during these meetings or otherwise show favoritism
to any particular participant and advised that representatives
of Goldman Sachs should be present at these meetings.
On April 23, 2007, Mr. Pennington sent a letter to
Mr. Serra indicating that our board was aware of its
fiduciary duties to consider an acquisition proposal that fairly
values our company and that, after consulting with Goldman
Sachs, had unanimously rejected Foot Lockers April 4
proposal as not being in the best interests of our shareholders.
We also issued a press release announcing this response.
On April 23, 2007, UBS Securities LLC (UBS),
Finish Lines financial advisor, contacted Goldman Sachs to
discuss Finish Lines interest in pursuing a transaction
with us.
Beginning the week of April 23, 2007 and through
May 8, 2009, as directed by our board, Goldman Sachs
approached Finish Line and the six potential private equity
financial sponsors that had previously indicated a potential
interest in considering a transaction with us and provided
confidentiality and standstill agreements to each of these
potential purchasers. Following execution of confidentiality and
standstill agreements by four of the six potential financial
sponsor purchasers as well as Finish Line, pursuant to which
these parties were subject to a customary standstill
provision of at least 18 months in duration (during which
period these parties were required to refrain, unless
specifically requested by us in writing, from seeking to acquire
control of us, directly or indirectly, including by tender
offer, merger proposal, proxy contest or other attempts to
influence or control our board, management or the policies of
our company), informational presentations were made by senior
members of our management, with the participation of Goldman
Sachs, to
20
each of these potential purchasers. Non-public information
packages were also distributed to these parties in conjunction
with the management presentations.
On April 23, 2007 and April 25, 2007, Lehman Brothers
contacted Goldman Sachs and indicated Foot Lockers
continuing interest in acquiring us and their interest in
meeting with our senior management to discuss their interest.
Goldman Sachs indicated to Lehman Brothers that
Mr. Pennington would be willing to meet with Mr. Serra
solely for this purpose, accompanied by representatives of
Lehman Brothers and Goldman Sachs. A meeting was scheduled to
occur on May 4, 2007. On April 26, 2007, Lehman
Brothers indicated to Goldman Sachs that Foot Locker desired to
receive confidential information in connection with its due
diligence review and would be willing to execute a
confidentiality agreement as a condition to the receipt of this
information. Goldman Sachs indicated that any sharing of
confidential information would also be subject to the execution
by Foot Locker of a customary standstill agreement.
On May 2, 2007, our board held a regularly scheduled
meeting. Representatives of Goldman Sachs and Bass Berry
participated in this meeting, as well as certain members of
senior management. At this meeting, senior management reviewed
for the board our anticipated financial results for the first
quarter. In particular, management discussed the financial
performance of our Underground Station retail stores in detail
and described a potential plan to close or convert our worst
performing urban stores, primarily in our Underground Station
chain. Mr. Pennington then reviewed the management
presentations that had taken place to date in connection with
the boards instruction to explore the feasibility of the
sale alternative. Bass Berry reviewed the boards fiduciary
responsibilities in connection with its consideration of that
strategic alternative. Thereafter, representatives of Goldman
Sachs discussed their contacts with the interested potential
purchasers and possible next steps, including the coordination
of second round management presentations with interested
potential purchasers. Representatives of Goldman Sachs also
discussed other strategic alternatives available to us.
On May 4, 2007, Mr. Pennington met with
Mr. Serra, together with representatives of Goldman Sachs
and Lehman Brothers, to allow Mr. Serra to explain Foot
Lockers interest in acquiring us. No specific terms or
prices were discussed at this meeting. Mr. Serra discussed
his perception of strategic benefits flowing from Foot
Lockers proposed acquisition of Genesco.
Mr. Pennington agreed that an acquisition would afford
benefits to Foot Lockers shareholders, but noted that his
responsibilities as chief executive officer and a director of
Genesco were to Genescos shareholders. In that regard,
Mr. Pennington again advised Mr. Serra that our
management had confidence in our strategic plan and its
potential to deliver value to our shareholders. He stated that
he believed that our board understood its fiduciary duties and
would pursue the best interests of Genescos shareholders,
and that he would promptly report to the board regarding his
meeting with Mr. Serra.
On May 7, 2007, Finish Line executed a confidentiality and
standstill agreement with us as discussed above, which included
an 18 month standstill period as well as an agreement to
give Finish Line the benefit of any more favorable standstill
provisions agreed to by us with other strategic process
participants. On May 8, 2007, our senior management
conducted its initial management presentation for Finish Line.
Representatives of Goldman Sachs attended this meeting.
On May 9, 2007, our board met telephonically.
Representatives of Goldman Sachs and Bass Berry attended this
meeting, as well as certain members of senior management.
Management updated the board on the preliminary financial
results for the first quarter. Management also presented its
plan for closing certain of our worst-performing urban stores,
and the financial impact of this plan. Mr. Pennington and
Goldman Sachs then reviewed with the board the parties for which
management had made presentations and the initial feedback
received by Goldman Sachs following these meetings. In this
review, Mr. Pennington discussed his meeting with
Mr. Serra on May 4. Representatives of Goldman Sachs
indicated that they had heard nothing from Lehman Brothers on
behalf of Foot Locker since the May 4 meeting with
Mr. Serra. They also noted that one private equity
financial sponsor indicated that it was not interested in moving
forward in the process as result of that partys concern
about whether it was worth the time and expense to commit to
this process in light of Foot Lockers publicly expressed
interest, but that the three remaining private equity financial
sponsors stated that they would like to move forward and
indicated that their preliminary review of value was a per share
price in the range of $50.00 to $52.00. They also advised the
board that they had received from UBS, on behalf of Finish Line,
a positive response from Finish Line following the initial
management
21
presentation and its preliminary view of value in excess of
$51.00 per share and that UBS had expressed confidence in Finish
Lines ability to finance an all-cash transaction.
At the May 9 board meeting, the board discussed the level of
interest of each potential purchaser, including Foot Locker, and
the strategic alternatives available to us other than a sale
transaction. Representatives of Goldman Sachs discussed with the
board the strategic alternatives available to us, including
various stock repurchase plans and the sale of a material
division or assets. The board discussed the various strategic
alternatives, as well as the risks associated with each
alternative. After the representatives of Goldman Sachs left the
call, the board discussed the alternative of moving toward a
more definitive indication of interest with one or more of the
private equity financial sponsors and Finish Line and a
potential process for doing so. The board also expressed an
interest in further analysis of the recapitalization
alternatives. The board excused management from the meeting and
continued in executive session to discuss the matters presented
during the meeting. The board determined to ask management to
review for presentation at a future meeting its business plan
and financial forecasts in light of the recapitalization
alternatives to determine if the assumptions continued to be
reasonable and appropriate. After further discussion, the board
determined to continue to refine and to pursue all strategic
alternatives reasonably available to us and instructed Goldman
Sachs to contact Foot Locker regarding their signing a
confidentiality agreement containing a standstill provision on
the same terms as the one signed by Finish Line in order to
allow Foot Locker to perform its requested due diligence. In
addition, Goldman Sachs was instructed to contact the potential
purchasers with a continuing interest to allow them to conduct a
more detailed due diligence investigation, including second
meetings with management, in order to obtain more definitive
indications of interest.
On May 10, 2007, Lehman Brothers called Goldman Sachs to
discuss the Foot Locker due diligence requests and the need for
a confidentiality and standstill agreement with Foot Locker. On
May 14, 2007, Lehman Brothers sent a due diligence request
list to Goldman Sachs on behalf of Foot Locker and Bass Berry
sent the form of confidentiality and standstill agreement to
counsel for Foot Locker. Representatives of Bass Berry and Foot
Lockers counsel discussed the terms of the confidentiality
and standstill agreement over the next several weeks. Lehman
Brothers also contacted Goldman Sachs periodically during this
period to express Foot Lockers continuing interest in
pursuing a transaction and to discuss the terms of the
confidentiality and standstill agreement. On May 14, 2007,
we opened an electronic data room for all potential purchasers
which had executed the confidentiality and standstill agreement.
On May 14, 2007, one of the three remaining interested
private equity financial sponsor groups withdrew from the
process over concern, similar to other potential private equity
financial sponsors that had withdrawn previously, about whether
it was worth the time and expense to commit further to this
process in light of Foot Lockers publicly expressed
interest. Beginning the week of May 21, 2007, senior
management conducted its second round of management
presentations for the two remaining interested private equity
financial sponsor groups as well as with Finish Line.
On May 18, 2007, another private financial sponsor executed
a confidentiality and standstill agreement for the purpose of
partnering, with our consent, with one of the financial sponsors
who previously met with management in an effort to facilitate
the likelihood of receiving a bid from this combined private
equity financial sponsor team, which we refer to as Party X.
On May 24, 2007, Mr. Serra sent a letter to
Mr. Pennington setting forth a proposal to acquire all of
the outstanding common stock of Genesco for $51.00 per share,
conditioned upon confirmatory due diligence and the acceptance
by us of the form of confidentiality and standstill agreement
attached to the letter. The form of confidentiality and
standstill agreement proposed by Foot Locker was significantly
different from the form Bass Berry previously provided to
Foot Lockers counsel and the form other potential
purchasers had executed, and included a limited standstill
provision of only three months. The standstill provision
contained in the agreements with all other potential purchasers
was broader and more restrictive in application and was
effective for a period of at least 18 months.
On May 29, 2007, our board met at the offices of Bass
Berry. Representatives of Goldman Sachs and Bass Berry attended
this meeting, as well as certain members of senior management.
Bass Berry discussed the boards fiduciary duties and
responsibilities, including those applicable to considering and
responding to the
22
May 24 Foot Locker proposal. Mr. Pennington described the
terms of Foot Lockers May 24 proposal and the recent
discussions between the respective financial and legal advisors
for Foot Locker and Genesco, including with respect to the
confidentiality and standstill agreement. Mr. Pennington
and representatives of Goldman Sachs then gave an overview of
the second round of diligence meetings senior management had
conducted over the prior two weeks in accordance with the
boards directive to further explore the feasibility of
sale alternatives. Representatives from Goldman Sachs then
reviewed their financial analysis of our strategic alternatives.
The board discussed with representatives of Goldman Sachs the
benefits and issues relating to each of the strategic
alternatives, which were generally the same as discussed at the
April 20 meeting. During this presentation, management reviewed
its revised financial projections, indicating that the revised
numbers reflected the most recent information available to
management. See The Merger Projected Financial
Information Updated Projections beginning on
page 37. The board discussed with representatives of
Goldman Sachs how a sale process could be structured in the
current context to maximize shareholder value should the board
choose to pursue the sale alternative. The Goldman Sachs
representatives were excused from the meeting and Bass Berry
summarized the boards fiduciary duties and
responsibilities in connection with its determination of how to
respond to the May 24 Foot Locker proposal, as well as in
connection with its consideration of whether to undertake a
formal sale process. After this discussion, the board
unanimously determined to instruct Goldman Sachs and Bass Berry,
with the assistance of management as appropriate, to help us
refine and pursue all available strategic alternatives to
maximize shareholder value, including the possible sale of our
company. It was also determined that, in order to help ensure a
fair and level playing field for all process participants and in
light of the potential chilling effect on the process should
Foot Locker be allowed to participate without a standstill,
Goldman Sachs and Bass Berry were instructed to encourage Foot
Locker to participate in the process but that participation was
contingent on Foot Lockers agreement to accept the form of
confidentiality and standstill agreement that other potential
purchasers had executed, subject to reasonably acceptable
modifications of the previously executed forms of
confidentiality and standstill agreement (including the
boards agreement to reduce the requested standstill period
from 18 months to six months). Additionally, in light of
our agreement to give Finish Line the benefit of any more
favorable standstill provisions agreed to by us with other
strategic process participants, Finish Lines standstill
agreement would need to be waived if Foot Locker did not have a
standstill, which would remove a critical aspect of our
boards ability to control the process and create
uncertainty as to whether either of these strategic participants
would put their best offer forward as part of the sale process.
Goldman Sachs was also instructed to continue to assess and
refine, with managements assistance, our other strategic
alternatives so that the board would be fully prepared and
informed when and if it was presented with a definitive
transaction for approval. The board also discussed with its
advisors and management the making of a public announcement
regarding the May 24 Foot Locker proposal. Bass Berry advised
the board that the next steps would include the distribution of
a draft definitive contract for each potential purchaser to
respond to and indicated that any negotiated contract would be
subject to board approval.
On May 30, 2007, our board met telephonically.
Representatives of Goldman Sachs and Bass Berry attended this
meeting, as well as certain members of senior management. The
primary purpose of the meeting was for the board to consider
whether to accept or reject Foot Lockers May 24 proposal
to acquire us for $51.00 per share in cash so that we could
fully communicate the boards position with respect to the
May 24 Foot Locker proposal, both to the public and to Foot
Locker. Bass Berry updated the board on the status of the
negotiations regarding the confidentiality and standstill
agreement with Foot Locker, indicating that Foot Locker was
still not willing to sign the confidentiality and standstill
agreement in the form presented, and as proposed to be modified,
by us. Bass Berry summarized the modifications from the form
executed by other potential purchasers which had been proposed
to Foot Locker, including the reduced standstill period.
Representatives of Goldman Sachs then discussed the May 24 Foot
Locker proposal that Goldman Sachs had previously reviewed with
the board and the fact that the board had, at its meeting the
prior day, authorized a process to pursue strategic
alternatives, including a possible sale of our company, as well
as the possibility that this process would lead to a transaction
proposal offering a higher price to our shareholders. Goldman
Sachs responded to questions during this discussion.
Mr. Pennington then reviewed drafts of a proposed press
release and a letter to Mr. Serra regarding the
boards decision to reject the May 24 proposal should the
board so determine in light of the process authorized at the May
29 board meeting. After responding to questions,
23
Goldman Sachs updated the board on discussions with the
remaining process participants, which at that point included
Party X and Finish Line, and the next steps which would be taken
in this process. Goldman Sachs noted that Finish Line had shown
the most interest among the two remaining participants and that
Finish Line had indicated that it believed it would be in a
position to finalize a proposal within two weeks and was willing
to use its best efforts to work with us to meet that timeline.
After discussion, the board unanimously determined, after
consultation with representatives of Goldman Sachs, to reject
the May 24 Foot Locker proposal as not in the best interests of
our shareholders, and to instruct management to carry out the
communication plans discussed earlier in the meeting.
On May 31, 2007, we issued a press release, concurrent with
our first quarter earnings release, announcing our receipt of
the May 24 Foot Locker proposal, indicating our rejection of the
proposal as not in the best interests of our shareholders and
announcing the boards determination to explore, with the
assistance of Goldman Sachs, strategic alternatives to maximize
shareholder value, including a possible sale of Genesco. Later
that day, Foot Locker publicly announced it was no longer
pursuing its May 24 proposal. Also on that day, upon the request
of Finish Line through UBS, Bass Berry sent an initial form of
merger agreement to Gibson Dunn & Crutcher LLP,
outside corporate counsel for Finish Line.
From the period from June 5, 2007 through June 16,
2007, the respective advisors of Genesco and Finish Line
negotiated the terms of the proposed merger agreement as well as
the related debt financing commitment letter. Finish Line was
also given access during this period to additional documents
upon its request and was allowed to meet telephonically with
members of our management for purposes of completing their due
diligence. Party X was also given additional documents during
this period. Documents provided to all parties were generally
made available in the electronic data room.
On June 11, 2007, Finish Line verbally conveyed through UBS
a definitive proposal at $54.00 per share of our common stock in
cash and indicated that a financing commitment letter from UBS
Loan Finance LLC and UBS Securities LLC was finalized in all
material respects. See The Merger Financing of
the Merger beginning on page 40. Over the course of
the next two days, the representatives of the parties continued
to negotiate the terms of the merger agreement, including the
price and whether we should reimburse Finish Line for its
expenses in addition to the
break-up fee
in the event the merger agreement is terminated under certain
circumstances, the company material adverse effect
definition and a related termination right, required consents as
a condition to closing, the knowledge definition and
certain negative operational covenants during the pre-closing
period, among other terms, as well as the debt financing
commitment letter. On June 13, 2007, Finish Line indicated
its best and final offer of $54.50 per share in cash, which
increase in price was expressly subject to our agreement to
Finish Lines expense reimbursement proposal, and indicated
that it was substantially done with its due diligence and
prepared to execute a definitive merger agreement.
We and our representatives continued to work with Finish Line to
finalize the merger agreement and the debt financing commitment
letter over the course of the next two days, which were in
substantially final form, subject to the respective board
approvals, the night of June 15, 2007. Party X had not
provided a definitive proposal or indicated any significant
continuing interest through this point and therefore we did not
request that Party X submit a final bid for our boards
consideration at the meeting to consider the Finish Line
proposal.
On June 15, 2007, Messrs. Pennington and Dennis had
preliminary general discussions with Alan Cohen, Finish
Lines chief executive officer, regarding potential roles
with the combined company, but no specific arrangements or terms
were proposed or accepted.
On June 16, 2007, our board met telephonically for the
primary purpose of receiving an update regarding the results of
the Companys review of its strategic alternatives,
including the acquisition proposal from Finish Line.
Representatives of Goldman Sachs and Bass Berry attended this
meeting, as well as certain members of senior management. A
representative of Bass Berry reviewed with the board their
applicable fiduciary duties and responsibilities in the context
of the present situation. Representatives of Goldman Sachs
reviewed the process that we had engaged in to assess our
strategic alternatives following Foot Lockers initial
proposal on April 4, 2007, including the contacts made with
potential buyers of Genesco and their related due diligence
efforts. They indicated that Finish Line was the party in the
process that displayed the strongest interest in pursuing a
transaction and that among the other initial interested parties
only Party X remained potentially
24
interested but that this party was not as actively engaged.
Representatives of Goldman Sachs confirmed that they had not
received any additional indication of interest from Foot Locker
following Foot Lockers public withdrawal of its May 24
proposal. The board discussed with representatives of Goldman
Sachs and Bass Berry the scope and reasonableness of the process
conducted by us. The representatives of Goldman Sachs noted that
the process was conducted following the public disclosure of the
Foot Locker proposal and that Goldman Sachs had contacted all
parties who had expressed interest in pursuing a transaction
with us. Bass Berry then provided an overview of the terms of
the proposed Finish Line merger agreement, and the related
proposed debt financing commitment, drafts of which had been
previously provided to the board together with a detailed
summary prepared by Bass Berry. Members of the board asked
questions regarding the foregoing, including with respect to the
fiduciary out provision, the
break-up fee
and expense reimbursement provisions, financing conditions,
solvency and other matters. Bass Berry indicated that Finish
Line would not agree to a transaction without the proposed
break-up fee
equal to 3.1% of the equity value (or $46 million) together
with an agreement to reimburse up to $10 million in
documented reasonable expenses of Finish Line in the event the
agreement were to be terminated under certain circumstances.
Bass Berry indicated that the expense reimbursement provision
was negotiated extensively and that Finish Lines agreement
to raise its offer to $54.50 was conditioned on our accepting
the expense reimbursement provision. Bass Berry indicated its
belief that the terms of the transaction were reasonable under
the circumstances in order to attract a proposal which was in
the best interests of the shareholders and reflected a
reasonable course of action under the circumstances to secure
the highest price reasonably available.
On June 17, 2007, our board met at the offices of Bass
Berry for the primary purpose of considering the Finish Line
proposal. Representatives of Goldman Sachs and Bass Berry
attended this meeting, as well as certain members of senior
management. Following confirmation of the Finish Line board
approval of the proposed transaction and their receipt of the
executed financing commitment letter, a representative of Bass
Berry reviewed with the board their applicable fiduciary duties
and responsibilities. Representatives of Goldman Sachs then
presented their financial analysis with respect to us, the
proposed merger and certain other available alternatives for
enhancing shareholder value. See The Merger
Opinion of Goldman, Sachs & Co. beginning
on page 28 for a description of the presentation of Goldman
Sachs. The board considered the $54.50 per share proposal by
Finish Line compared to the potential stock price appreciation
assumed (based on managements assumptions as to future
financial performance) with respect to our other available
alternatives for enhancing shareholder value (and the execution
and other risks associated with each alternative), including a
leveraged recapitalization
and/or the
sale of a material division or assets of the company. Management
stated that that they did not believe there was an actionable or
otherwise reasonably available company or asset for us to
acquire that would create the value associated with the Finish
Line proposal.
Bass Berry then reviewed in detail the proposed terms of the
merger agreement, including the provisions relating to the
payment of termination fees and expense reimbursement, the
disclosure schedules to the merger agreement, and the debt
financing commitment. Following further discussion, the board
requested that Goldman Sachs provide its view regarding the
fairness from a financial point of view of the $54.50 per share
in cash to be received by holders of our common stock pursuant
to the proposed merger agreement. Representatives of Goldman
Sachs then rendered an oral opinion, subsequently confirmed by
delivery of a written opinion dated June 17, 2007, that, as
of that date, and subject to the matters and assumptions set
forth in the opinion, the $54.50 per share in cash to be
received by the holders of outstanding shares of our common
stock pursuant to the merger agreement was fair, from a
financial point of view, to such holders. The full text of the
written opinion of Goldman Sachs, which sets forth the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken in connection with such
opinion, is attached as Annex C to this proxy statement.
The representatives of Goldman Sachs were then excused from the
meeting and Mr. Pennington presented the views of
management regarding the proposed transaction, concluding with
managements recommendation that the Finish Line proposal
be approved. Mr. Pennington then provided the board a
current business and financial update. Questions were asked
regarding Mr. Penningtons recommendation and the
basis for such recommendation, including as to the viability of
other strategic alternatives available to us. At this point, the
25
representatives of management and the non-independent members of
the board were excused from the meeting so the independent
members of the board could discuss the proposed transaction in
executive session. The remaining directors discussed the
transaction, the recommendation of management and the
presentation by representatives of Goldman Sachs. Management,
the non-independent board members and the representatives of
Goldman Sachs were then invited to rejoin the meeting. After
discussion, the board unanimously adopted and approved the
merger agreement and the transactions contemplated by the merger
agreement, and unanimously determined that the merger agreement
and the transactions contemplated by the merger agreement are
advisable and in the best interests of the Company and its
shareholders and are fair to our shareholders. Our board further
directed management to include in this proxy statement their
recommendation that our shareholders vote for the approval of
the merger agreement and the consummation of the merger.
The merger agreement was executed by the parties on
June 17, 2007, following our board meeting. Before the open
of the stock market on June 18, 2007, we issued a joint
press release with Finish Line announcing the transaction.
Reasons
for the Merger; Recommendation of Our Board of
Directors
In reaching its decision to approve the merger agreement and to
recommend that our shareholders approve the merger agreement,
our board of directors consulted with management, our financial
advisor, Goldman Sachs, and our outside corporate legal counsel,
Bass Berry. Our board of directors considered a number of
factors, including, without limitation, the following
potentially positive factors in support of the merger:
|
|
|
|
|
its belief that the merger was more favorable to our
shareholders than any other alternative reasonably available to
us and our shareholders. The board of directors considered
possible alternatives to the sale of our company, including
continuing to operate on a stand-alone basis, pursuing potential
acquisitions, engaging in a leveraged recapitalization
(including additional share repurchases)
and/or
divesting a division or other significant assets, and the risks
(including execution risks) and uncertain returns associated
with these alternatives, each of which the board of directors
determined not to pursue when compared to the opportunity of our
shareholders to realize the merger consideration in cash in
connection with the merger;
|
|
|
|
the historical market prices of the Genesco common stock, and
the fact that the $54.50 per share to be paid for each share of
Genesco common stock pursuant to the merger represents: a
premium of 48.7% to the closing price reported by the NYSE on
March 9, 2007, the last trading day prior to market
speculation about Foot Lockers potential interest in
acquiring Genesco, a premium of 37.7% to the average closing
price reported by the NYSE for the three months prior to
March 9, 2007, and a premium of 50.0% to the average
closing price reported by the NYSE for the one year prior to
March 9, 2007;
|
|
|
|
the public awareness of the Foot Locker proposal and our
strategic alternative review process which it believed allowed
all parties with legitimate interest in pursuing a combination
transaction with us to contact Goldman Sachs or us regarding
such interest, and the sale process we conducted with the
assistance of Goldman Sachs and Bass Berry, which involved
engaging in discussions with approximately seven parties that
had expressed interest in considering a transaction with us, and
that the final price proposed by Finish Line as a result of this
sale process was the highest price that we had received for the
acquisition of our company, and represented an increase of $3.50
(or approximately 6.9%) per share over the final conditional
Foot Locker proposal prior to Foot Lockers public
withdrawal of such proposal;
|
|
|
|
its belief that the cash consideration of $54.50 per share was
likely the most favorable financial terms that could be obtained
from Finish Line, and that further negotiation could have caused
Finish Line to abandon the transaction;
|
|
|
|
the financial presentation of Goldman Sachs described below
under The Merger Opinion of Goldman,
Sachs & Co., and its opinion, dated
June 17, 2007, to our board of directors, to the effect
|
26
|
|
|
|
|
that, as of June 17, 2007 and based upon and subject to the
factors and assumptions set forth in the opinion, the $54.50 per
share in cash to be received by the holders of outstanding
shares of our common stock pursuant to the merger agreement was
fair, from a financial point of view, to such holders (see
The Merger Opinion of Goldman,
Sachs & Co. and Annex C to this proxy
statement); and
|
|
|
|
|
|
the terms of the merger agreement, including without limitation:
|
|
|
|
|
a.
|
the absence of a financing condition to the consummation of the
merger, the limited number and nature of the conditions to the
obligations of Finish Line and Merger Sub to consummate the
merger, and the limited risk of non-satisfaction of the
conditions, including that for purposes of the merger agreement
a company material adverse effect for Genesco does
not include events, circumstances, developments or changes
resulting from the numerous circumstances or events as described
under The Merger Agreement Representations and
Warranties;
|
|
|
b.
|
the ability of our board of directors, under certain
circumstances, to change its recommendation that our
shareholders vote in favor of the approval of the merger
agreement;
|
|
|
c.
|
the provisions of the merger agreement that allow us, under
certain circumstances, to furnish information to and conduct
negotiations with respect to certain proposals by third parties,
and, upon the payment to Finish Line of a termination fee of
$46 million and reimbursement of up to $10 million of
Finish Lines out-of-pocket expenses and fees, to terminate
the merger agreement to accept a third party proposal;
|
|
|
|
|
d.
|
the conclusion of the board of directors that both the
$46 million termination fee (and the circumstances when the
fee is payable) and the requirement to reimburse Finish Line for
certain expenses, up to a limit of $10 million, in the
event that the merger agreement is terminated as a result of
certain circumstances (see The Merger
Agreement Termination Fees), were reasonable
in light of the benefits of the merger, the additional $.50 per
share in purchase price we were able to obtain in connection
with the negotiation of the expense reimbursement provision, the
sale process conducted by Genesco with the assistance of Goldman
Sachs, the conditioning by Finish Line of their proposal on our
acceptance of these provisions, and commercial practice; and
|
|
|
|
|
e.
|
the favorable debt commitment letter obtained by Finish Line,
including the absence of market outs, and Finish
Lines obligation under the merger agreement to use
reasonable best efforts to arrange and consummate the debt
financing.
|
The board of directors also considered and balanced against the
potentially positive factors the following potentially negative
factors concerning the merger:
|
|
|
|
|
the risk that the merger might not be completed;
|
|
|
|
the fact that our shareholders will not participate in any
future earnings or growth of Genesco or the combined company
following the merger and will not benefit from any future
appreciation in value of Genesco or the combined company
following the merger;
|
|
|
|
the restrictions on our ability to solicit or engage in
discussions or negotiations with a third party regarding other
proposals and the requirement that Genesco pay Finish Line a
$46 million termination fee and up to $10 million in
expenses in order for the board of directors to accept a third
party proposal;
|
|
|
|
the merger consideration consists of cash, and gains will
therefore be taxable to our holders of our common stock for
U.S. federal income tax purposes;
|
|
|
|
the risk of diverting management focus and resources from other
strategic opportunities and from operational matters while
working to implement the merger, and the possibility of employee
disruption and attrition associated with the pending merger;
|
27
|
|
|
|
|
if the merger is not completed, the potential adverse effect of
the public announcement of the merger on our business, including
our significant customers, suppliers, vendors and other key
relationships, our ability to attract and retain key personnel
and our overall competitive position; and
|
|
|
|
the fact that the holders of our common stock do not have any
appraisal rights under Tennessee law.
|
During its consideration of the transaction with Finish Line,
our board of directors was also aware that some of our directors
and executive officers may have interests in the merger that may
be different than or in addition to those of our shareholders
generally, described under The Merger
Interests of Directors and Executive Officers in the
Merger.
After taking into account all of the factors set forth above, as
well as others, the board of directors determined that the
potentially positive factors outweighed the potentially negative
factors and that the merger agreement and the merger are
advisable and fair and in the best interests of Genesco and our
shareholders. Our board of directors has unanimously approved
the merger agreement and the merger and recommends that our
shareholders vote FOR the approval of the merger
agreement at the special meeting.
This discussion of the information and factors considered and
given weight by our board of directors is not intended to be
exhaustive but is believed to address the material information
and factors considered by our board of directors. In view of the
number and variety of these factors, our board of directors did
not find it practicable to make specific assessments of, or
otherwise assign relative weights to, the specific factors and
analyses considered in reaching its determination. The
determination to approve the merger agreement and the
transactions contemplated thereby, including the merger, was
made after consideration of all of the factors and analyses as a
whole. In addition, individual members of our board of directors
may have given different weights to different factors.
Opinion
of Goldman, Sachs & Co.
Goldman Sachs rendered its oral opinion, which was subsequently
confirmed in writing, to our board of directors that, as of
June 17, 2007, and based upon and subject to the factors
and assumptions set forth in the opinion, the $54.50 per share
in cash to be received by the holders of the outstanding shares
of Genesco common stock pursuant to the merger agreement was
fair, from a financial point of view, to such holders.
The full text of the written opinion of Goldman Sachs, dated
June 17, 2007, which sets forth the assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C to this proxy statement. Goldman Sachs provided its
opinion for the information and assistance of the board of
directors of Genesco in connection with its consideration of the
merger. Goldman Sachs opinion is not a recommendation as
to how any holder of our common stock should vote with respect
to the merger.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
|
|
|
|
|
the merger agreement;
|
|
|
|
annual reports to shareholders and Annual Reports on
Form 10-K
of Genesco for the five fiscal years ended February 3, 2007;
|
|
|
|
certain interim reports to shareholders and Quarterly Reports on
Form 10-Q
of Genesco;
|
|
|
|
certain other communications from Genesco to its shareholders;
and
|
|
|
|
certain internal financial analyses and forecasts for Genesco
prepared by its management.
|
Goldman Sachs also held discussions with members of our senior
management regarding their assessment of our past and current
business operations, financial condition, and future prospects.
In addition, Goldman Sachs reviewed the reported price and
trading activity for our common stock, compared certain
financial and stock market information for Genesco with similar
information for certain other companies, the securities of
28
which are publicly traded, reviewed the financial terms of
certain recent business combinations in the footwear, apparel,
and retail industries specifically and in other industries
generally and performed such other studies and analyses, and
considered such other factors, as it considered appropriate.
Goldman Sachs relied upon and assumed, without assuming any
responsibility for independent verification, the accuracy and
completeness of all of the financial, accounting, legal, tax and
other information provided to, discussed with or reviewed by it.
Goldman Sachs assumed that the internal financial analyses and
forecasts for Genesco prepared by our management were reasonably
prepared on a basis reflecting the best currently available
estimates and judgments of our management. In addition, Goldman
Sachs did not make an independent evaluation or appraisal of the
assets and liabilities (including any contingent, derivative or
off-balance-sheet assets and liabilities) of Genesco or any of
our subsidiaries, nor was any evaluation or appraisal of the
assets or liabilities of Genesco or any of our subsidiaries
furnished to Goldman Sachs. Goldman Sachs did not express any
opinion as to the impact of the transaction on the solvency or
viability of Genesco or Finish Line or the ability of Genesco or
Finish Line to pay its obligations when they come due. Goldman
Sachs opinion does not address the underlying business
decision of Genesco to engage in the transaction or the relative
merits of the transaction as compared to any alternative
business strategies that might be available to Genesco. Goldman
Sachs opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information
made available to it as of, the date of the opinion, or
June 17, 2007.
The following is a summary of the material financial analyses
delivered by Goldman Sachs to our board of directors in
connection with rendering the opinion described above. The
following summary, however, does not purport to be a complete
description of the financial analyses performed by Goldman
Sachs, nor does the order of analyses described represent
relative importance or weight given to those analyses by Goldman
Sachs. Some of the summaries of the financial analyses include
information presented in tabular format. The tables must be read
together with the full text of each summary and are alone not a
complete description of Goldman Sachs financial analyses.
Except as otherwise noted, the following quantitative
information, to the extent that it is based on market data, is
based on market data as it existed on or before June 17,
2007 and is not necessarily indicative of current market
conditions.
Historical
Stock Trading Analysis
Goldman Sachs reviewed the historical trading prices for Genesco
common stock for the period December 8, 2006 through
June 15, 2007 and the period March 8, 2002 to
June 15, 2007.
In addition, Goldman Sachs analyzed the consideration to be
received by the holders of the Companys common stock
pursuant to the merger agreement in relation to the market price
of our common stock on June 15, 2007, the last trading day
prior to announcement of the transaction, March 9, 2007,
the last trading day prior to market speculation that Genesco
may be acquired by Foot Locker following a March 8, 2007
Foot Locker conference call during which management of Foot
Locker discussed a desire to grow through acquisitions; and the
three-month and one-year average closing market prices of our
common stock as of March 9, 2007 as well as the 52-week
high and low closing prices of our common stock as of
March 9, 2007. For purposes of its analysis, Goldman Sachs
referred to the closing price per share of our common stock of
$36.66 on March 9, 2007 as the undisturbed
price.
This analysis indicated that the price per share to be paid to
our common shareholders pursuant to the merger agreement
represented:
|
|
|
|
|
a premium of 9.9% based on the close of business market price of
$49.60 per share on June 15, 2007;
|
|
|
|
a premium of 48.7% based on the undisturbed close of business
market price of $36.66 per share on March 9, 2007;
|
|
|
|
a premium of 37.7% based on the three month average market price
as of March 9, 2007 of $39.59 per share;
|
|
|
|
a premium of 50.0% based on the one year average market price
per share as of March 9, 2007 of $36.33 per share;
|
29
|
|
|
|
|
a premium of 24.7% based on the latest 52-week high market price
as of March 9, 2007 of $43.72 per share; and
|
|
|
|
a premium of 113.7% based on the latest 52-week low market price
as of March 9, 2007 of $25.50 per share.
|
Selected
Companies Analysis
Goldman Sachs reviewed and compared certain financial
information for Genesco to corresponding financial information,
ratios and public market multiples for the following publicly
traded corporations in the footwear and teen retailing
industries:
|
|
|
Footwear Retailers
|
|
Teen Retailers
|
|
Brown Shoe
Company, Inc.
|
|
Abercrombie
& Fitch Co.
|
DSW
Inc.
|
|
Aéropostale,
Inc.
|
The Finish
Line, Inc.
|
|
American
Eagle Outfitters, Inc.
|
Foot
Locker, Inc.
|
|
The
Buckle, Inc.
|
Payless
Shoesource, Inc.
|
|
Hot Topic,
Inc.
|
Shoe
Carnival, Inc.
|
|
Pacific
Sunwear of California, Inc.
|
|
|
Tween
Brands, Inc.
|
|
|
Urban
Outfitters, Inc.
|
|
|
The Wet
Seal, Inc.
|
Based on information it obtained from publicly available filings
and median estimates provided by Institutional Brokerage
Estimate System (a data service that compiles estimates issued
by securities analysts, referred to as IBES) for Genesco and
each of the Footwear Retailers and Teen Retailers listed above,
Goldman Sachs calculated and compared:
|
|
|
|
|
the ratio of enterprise value (calculated as equity value plus
net debt) to last twelve months (LTM) earnings before interest,
taxes, depreciation and amortization (EBITDA) as of
June 15, 2007 and, in the case of Genesco, based upon the
average closing price per share of Genesco common stock for the
three month period ended March 9, 2007; and
|
|
|
|
the ratio of price per share to IBES median estimated fiscal
year end earnings per share, or one-year forward P/E multiple,
as of June 15, 2007 and, in the case of Genesco, based upon
the average closing price per share of Genesco common stock for
the three month period ended March 9, 2007.
|
30
The multiples were calculated based on market prices without
application of any transaction premium. The following table
presents the results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
Enterprise
|
|
|
|
|
|
|
Value/LTM EBITDA
|
|
|
1 yr. Forward P/E
|
|
|
Footwear Retailers
|
|
|
|
|
|
|
|
|
Brown Shoe Company, Inc.
|
|
|
8.0
|
x
|
|
|
16.3
|
x
|
DSW Inc.
|
|
|
10.6
|
x
|
|
|
21.2
|
x
|
The Finish Line, Inc.
|
|
|
5.6
|
x
|
|
|
25.0
|
x
|
Foot Locker, Inc.
|
|
|
6.0
|
x
|
|
|
17.4
|
x
|
Payless Shoesource, Inc. (1)
|
|
|
8.1
|
x
|
|
|
19.8
|
x
|
Shoe Carnival, Inc.
|
|
|
8.1
|
x
|
|
|
15.3
|
x
|
Teen Retailers
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch
Co.
|
|
|
8.3
|
x
|
|
|
14.9
|
x
|
Aéropostale, Inc.
|
|
|
10.1
|
x
|
|
|
18.1
|
x
|
American Eagle Outfitters,
Inc.
|
|
|
7.5
|
x
|
|
|
13.3
|
x
|
The Buckle, Inc.
|
|
|
11.5
|
x
|
|
|
19.0
|
x
|
Hot Topic, Inc.
|
|
|
7.3
|
x
|
|
|
26.7
|
x
|
Pacific Sunwear of California,
Inc.
|
|
|
13.9
|
x
|
|
|
23.7
|
x
|
Tween Brands, Inc.
|
|
|
9.4
|
x
|
|
|
18.9
|
x
|
Urban Outfitters, Inc.
|
|
|
NM
|
|
|
|
27.6
|
x
|
The Wet Seal, Inc.
|
|
|
NM
|
|
|
|
14.5
|
x
|
Footwear Retailer
Median
|
|
|
8.0
|
x
|
|
|
18.6
|
x
|
Teen Retailer Median
|
|
|
9.4
|
x
|
|
|
18.9
|
x
|
Genesco as of March 9,
2007
|
|
|
7.1
|
x
|
|
|
14.5
|
x
|
Genesco (based on $54.50 per
share)
|
|
|
9.7
|
x
|
|
|
20.0
|
x
|
|
|
|
(1) |
|
Payless is not pro forma for its pending acquisition of The
Stride Rite Corporation. |
Present
Value of Future Stock Price Analysis
Goldman Sachs performed an illustrative analysis of the present
value of the future share price of Genesco, which is designed to
provide an indication of the present value of a theoretical
future value of a companys equity as a function of the
companys estimated future earnings and its assumed price
to future earnings per share multiple. For this analysis,
Goldman Sachs used the financial projections for Genesco
prepared by Genescos management. See The
Merger Projected Financial Information
beginning on page 35. Goldman Sachs first calculated
implied per share values for Genesco common stock for the fiscal
years
2008-2012 by
applying price to forward earnings per share multiples ranging
from 13.0x to 16.0x (based on Genescos historical price to
future earnings per share multiples) to estimates prepared by
Genesco management of fiscal years
2008-2012
earnings per share. Goldman Sachs then calculated present values
of the implied per share future equity values for Genesco common
stock in 2008 to 2012 discounted to June 17, 2007, using a
discount rate of 14.0%, reflecting Genescos theoretical
cost of equity capital. The determination of cost of equity
capital took into account overall market and industry conditions
and company specific factors. Applying multiples of 13.0x, 14.5x
and 16.0x to estimated earnings per share for each year in this
period, this analysis resulted in a range of implied present
value of $35.77 to $52.85 per share of Genesco common stock.
Discounted
Cash Flow Analysis
Goldman Sachs performed an illustrative discounted cash flow
analysis to determine a range of implied present value per share
of Genesco common stock. All cash flows were discounted to
February 4, 2007, and
31
terminal values were based upon EBITDA multiples of estimated
fiscal year 2012 EBITDA. Goldman Sachs used discount rates
ranging from 9.0% to 12.0%, reflecting estimates of the weighted
average cost of capital of Genesco, financial forecasts for
Genesco prepared by its management and terminal EBITDA multiples
ranging from 6.0x to 7.5x based on historical EBITDA multiples
for Genesco. The determination of weighted average cost of
capital took into account overall market and industry conditions
and company specific factors. This analysis resulted in a range
of implied present value of $45.43 to $62.75 per share of
Genesco common stock.
Using the same set of projections, Goldman Sachs also performed
a sensitivity analysis to analyze the effect of increases or
decreases in annual sales growth and EBITDA margin from 2007 to
2012. The analysis utilized (i) a range of EBITDA margin in
2012 of 11.5% to 13.5%, (ii) a range of compounded annual
sales growth rates of 9.6% to 13.6% for fiscal years 2007 to
2012 and (iii) a terminal EBITDA multiple of 6.75x and
discount rate of 10.0%. The compounded annual sales growth rates
of 9.6% to 13.6% for fiscal years 2007 to 2012 represent a range
of −2.0% to 2.0% change in the annual sales growth
assumption of the financial projections provided by the
management of Genesco. The range of fiscal 2012 EBITDA margin of
11.5% to 13.5% represented a range of −1.0% to 1.0% change
in the fiscal 2012 EBITDA margin estimates provided by the
management of Genesco. This resulted in a range of implied
present value of $45.93 to $64.75 per share of Genesco common
stock.
Selected
Transactions Analysis
Goldman Sachs reviewed publicly available information for the
following announced merger or acquisition transactions in the
U.S. involving companies in the retail and footwear
industries. While none of the companies participating in the
selected transactions are directly comparable to Genesco, the
companies participating in the selected transactions are
companies with operations that, for the purposes of analysis,
may be considered similar to certain operations of Genesco.
Goldman Sachs calculated and compared the enterprise values as a
multiple of the target companys publicly reported latest
twelve months EBITDA prior to announcement of the applicable
transaction. For purposes of this analysis, the enterprise value
was calculated by adding the announced transaction price for the
equity of the target company to the book value of the target
companys net debt based on public information available
prior to the announcement of the applicable transaction. The
following tables set forth the transactions reviewed (listed by
acquirer/target and month and year announced) and the enterprise
value multiple of LTM EBITDA for each and the results of the
analysis.
|
|
|
|
|
|
|
Enterprise Value
|
|
|
|
Multiple of
|
|
|
|
LTM EBITDA
|
|
|
Payless
ShoeSource, Inc./The Stride Rite Corporation (May 2007)
|
|
|
10.9
|
x
|
PPR
S.A./Puma AG (April 2007)
|
|
|
12.1
|
x
|
Apollo
Management, L.P./Claires Stores, Inc. (March 2007)
|
|
|
9.4
|
x
|
Berkshire
Hathaway Inc./Russell Corporation (April 2006)
|
|
|
7.2
|
x
|
Leonard
Green & Partners, L.P./The Sports Authority, Inc.
(January 2006)
|
|
|
7.5
|
x
|
Bain
Capital Partners, LLC/Burlington Coat Factory Warehouse
Corporation (January 2006)
|
|
|
6.7
|
x
|
Apax
Partners/Tommy Hilfiger Corporation (December 2005)
|
|
|
7.1
|
x
|
Prentice
Capital Management, LP, GMM Capital LLC/Goodys Family
Clothing, Inc. (October 2005)
|
|
|
9.8
|
x
|
The Stride
Rite Corporation/Saucony, Inc. (June 2005)
|
|
|
8.1
|
x
|
adidas-Salomon
AG/Reebok International Ltd. (August 2005)
|
|
|
11.0
|
x
|
TPG
Advisers III, Inc., TPG Advisers IV, Inc., Warburg
Pincus & Co., Warburg Pincus LLC, Warburg Pincus
Partners LLC/The Neiman Marcus Group, Inc. (May 2005)
|
|
|
10.3
|
x
|
Carters
Inc./OshKosh BGosh, Inc. (May 2005)
|
|
|
9.4
|
x
|
32
|
|
|
|
|
|
|
Enterprise Value
|
|
|
|
Multiple of
|
|
|
|
LTM EBITDA
|
|
|
Federated
Department Stores, Inc./The May Department Stores Company
(February 2005)
|
|
|
8.6
|
x
|
Jones
Apparel Group, Inc./Barneys New York, Inc. (November 2004)
|
|
|
7.7
|
x
|
Sun
Capital Partners, Inc., Cerberus Capital Management, L.P.,
Lubert-Adler/Klaff and Partners, L.P./Target Corporation,
Mervyns (July 2004)
|
|
|
5.8
|
x
|
Jones
Apparel Group, Inc./Maxwell Shoe Company Inc. (June 2004)
|
|
|
8.1
|
x
|
The May
Department Stores Company/Marshall Fields (June 2004)
|
|
|
13.5
|
x
|
VF
Corporation/Vans, Inc. (April 2004)
|
|
|
15.2
|
x
|
Genesco/Hat
World Corporation (February 2004)
|
|
|
7.4
|
x
|
Nike,
Inc./Converse Inc. (September 2003)
|
|
|
9.5
|
x
|
VF
Corporation/Nautica Enterprises, Inc. (July 2003)
|
|
|
6.3
|
x
|
Enterprise
Value Multiple of LTM EBITDA
|
|
|
|
|
High
|
|
|
15.2
|
x
|
Mean
|
|
|
9.0
|
x
|
Median
|
|
|
8.3
|
x
|
Low
|
|
|
5.8
|
x
|
Goldman Sachs noted that the $54.50 per share of our common
stock to be paid in the merger implies a 9.7x multiple of
Genescos LTM EBITDA.
Recapitalization
Analysis
Goldman Sachs analyzed certain illustrative recapitalization
transactions involving Genesco and the theoretical value that
our shareholders could receive in such transactions. In the
first illustrative transaction, Genesco used $200 million
of new debt financings to repurchase common stock on
February 3, 2007 and used cash generated by Genesco to
repurchase common stock on an ongoing basis in excess of a
minimum cash balance established by management of Genesco of
approximately $30 million per year based on management
projections. The theoretical post-repurchase trading value of
our shares was based upon estimated price to earnings ratios of
13.0x to 16.0x (based on Genescos historical price to
future earnings per share multiples) and projections for Genesco
provided by our management after giving effect to the use of
excess cash and the additional leverage. Goldman Sachs then
calculated the implied per share future equity values for our
common stock from fiscal 2008 to fiscal 2012, and then
discounted those values to June 17, 2007 using a discount
rate of 14%. This analysis resulted in a range of implied
present value of $36.93 to $55.90 per share of our common stock.
In the second illustrative recapitalization, the analysis
assumed that Genesco used $400 million of new debt
financings to repurchase common stock on February 3, 2007
and used cash generated by Genesco to repurchase common stock on
an ongoing basis in excess of a minimum cash balance established
by management of Genesco of approximately $30 million per year
based on management projections. The theoretical post-repurchase
trading value of our shares was based upon estimated price to
earnings ratios of 13.0x to 16.0x (based on Genescos
historical price to future earnings per share multiples) and
projections for Genesco provided by our management after giving
effect to the use of excess cash and the additional leverage.
Goldman Sachs then calculated the implied per share future
equity values for our common stock from fiscal 2008 to fiscal
2012, and then discounted those values to June 17, 2007
using a discount rate of 14%. This analysis resulted in a range
of implied present value of $37.12 to $59.68 per share of our
common stock.
In the third illustrative recapitalization, the analysis assumed
that Genesco used the after-tax proceeds of a sale of the
business and assets of our Johnston & Murphy operating
division (the Johnston & Murphy
33
Group) and $150 million in new debt financings to
repurchase common stock on February 3, 2007 and used cash
generated by Genesco to repurchase common stock on an ongoing
basis in excess of a minimum cash balance established by
management of Genesco of approximately $30 million per year
based on management projections. The theoretical post-repurchase
trading value of our shares was based upon estimated price to
earnings ratios of 13.0x to 16.0x (based on Genescos
historical price to future earnings per share multiples) and
projections for Genesco provided by our management after giving
effect to the sale of Johnston & Murphy Group, use of
excess cash and the additional leverage. Goldman Sachs then
calculated the implied per share future equity values for our
common stock from fiscal 2008 to fiscal 2012, and then
discounted those values to June 17, 2007 using a discount
rate of 14%. This analysis resulted in a range of implied
present value of $36.65 to $56.49 per share of our common stock.
In the fourth illustrative recapitalization, the analysis
assumed that Genesco used the after-tax proceeds of a sale of
Johnston & Murphy Group and $350 million in new
debt financings to repurchase common stock on February 3,
2007 and used cash generated by Genesco to repurchase common
stock on an ongoing basis in excess of a minimum cash balance
established by management of Genesco of approximately $30
million per year based on management projections. The
theoretical post-repurchase trading value of our shares was
based upon estimated price to earnings ratios of 13.0x to 16.0x
(based on Genescos historical price to future earnings per
share multiples) and projections for Genesco provided by our
management after giving effect to the sale of
Johnston & Murphy Group, use of excess cash and the
additional leverage. Goldman Sachs then calculated the implied
per share future equity values for our common stock from fiscal
2008 to fiscal 2012, and then discounted those values to
June 17, 2007 using a discount rate of 14%. This analysis
resulted in a range of implied present value of $36.91 to $60.97
per share of our common stock.
Leveraged
Buyout Analysis
Goldman Sachs performed an illustrative analysis of the range of
the price per share of our common stock that an acquirer would
theoretically pay if Genesco were acquired in a leveraged buyout
transaction that closed as of February 4, 2007 and resold
by such acquirer in 2012 at an EBITDA multiple of 6.75x.
Assuming, among other things, (i) a sponsor targeted equity
return of 20.0%, (ii) a range of EBITDA margin in 2012 of
11.5% to 13.5%, and (iii) a range of compounded annual
sales growth rates of 9.6% to 13.6% for fiscal years 2007 to
2012, the analysis resulted in a range of implied values of
$42.52 to $54.98 per share of our common stock.
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Goldman Sachs opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all the analyses and did not attribute any particular weight to
any factor or analysis considered by it. Rather, Goldman Sachs
made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all the analyses. No company or transaction used in
the above analyses as a comparison is directly comparable to
Genesco, its various businesses or the merger.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs providing its opinion to the board of directors as to the
fairness from a financial point of view of the $54.50 per share
in cash to be received by the holders of the outstanding shares
of Genesco common stock pursuant to the merger agreement. These
analyses do not purport to be appraisals nor do they necessarily
reflect the prices at which businesses or securities actually
may be sold. Analyses based upon forecasts of future results are
not necessarily indicative of actual future results, which may
be significantly more or less favorable than suggested by these
analyses. Because these analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond
the control of the parties or their respective advisors, none of
Genesco, Goldman Sachs or any other person assumes
responsibility if future results are materially different from
those forecast.
As described above, Goldman Sachs opinion to our board of
directors was one of many factors taken into consideration by
our board in making its determination to approve the merger
agreement. The foregoing summary does not purport to be a
complete description of the analyses performed by Goldman Sachs
in
34
connection with the opinion and is qualified in its entirety by
reference to the written opinion of Goldman Sachs attached as
Annex C.
The merger consideration was determined through
arms-length negotiations between Genesco and Finish Line
and was approved by our board of directors. Goldman Sachs
provided advice to Genesco during these negotiations. Goldman
Sachs did not, however, recommend any specific amount of
consideration to Genesco or our board of directors or that any
specific amount of consideration constituted the only
appropriate consideration for the merger.
Goldman Sachs and its affiliates, as part of their investment
banking business, are continually engaged in performing
financial analyses with respect to businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and other transactions as well as for estate,
corporate and other purposes. Goldman Sachs has acted as
financial advisor to Genesco in connection with, and has
participated in certain of the negotiations leading to, the
merger. Except in connection with this transaction, Goldman
Sachs has not provided any material investment banking services
to Genesco or Finish Line for which it has received fees in the
past three years. Goldman Sachs may provide investment banking
services to Genesco and Finish Line in the future. In connection
with any such investment banking services Goldman Sachs may
receive compensation.
Goldman Sachs is a full service securities firm engaged, either
directly or through its affiliates, in securities trading,
investment management, financial planning and benefits
counseling, risk management, hedging, financing and brokerage
activities for both companies and individuals. In the ordinary
course of these activities, Goldman Sachs and its affiliates may
provide such services to Genesco, Finish Line and their
respective affiliates, may actively trade the debt and equity
securities (or related derivative securities) of Genesco, Finish
Line and their respective affiliates for their own account and
for the accounts of their customers and may at any time hold
long and short positions of such securities.
Genesco selected Goldman Sachs as its financial advisor because
it is an internationally recognized investment banking firm that
has substantial experience in transactions similar to the
merger. Pursuant to a letter agreement, dated April 20,
2007, Genesco engaged Goldman Sachs to act as its financial
advisor to assist our Board of Directors in their analysis and
consideration of our strategic alternatives, including the
alternative represented by the proposal made by Foot Locker and
a possible merger or sale of all or a portion of Genesco.
Pursuant to the terms of this letter agreement, Goldman Sachs is
entitled to receive a transaction fee of 1.2% of the aggregate
consideration payable in the merger, or approximately
$18.5 million, minus an initial fee of $250,000 that became
payable upon execution of the engagement letter, with one fourth
of the transaction fee payable upon execution of the merger
agreement and the remainder of the transaction fee payable upon
completion of the merger. Genesco has also agreed to reimburse
Goldman Sachs for its reasonable expenses, including
attorneys fees and disbursements, and to indemnify Goldman
Sachs against various liabilities, including certain liabilities
under the federal securities laws.
Projected
Financial Information
Genescos senior management does not as a matter of course
make public projections as to future performance or earnings
beyond the current fiscal year and is especially wary of making
projections for extended earnings periods due to the
unpredictability of the underlying assumptions and estimates.
However, senior management did provide financial forecasts to
potential acquirers in connection with their consideration of a
possible transaction with Genesco. These projections were also
provided to our board of directors and to Goldman Sachs, our
financial advisor. We have included a subset of these
projections in this proxy statement to give our shareholders
access to certain nonpublic information deemed material by our
board of directors for purposes of considering and evaluating
the merger. The inclusion of these projections should not be
regarded as an indication that management, our board of
directors, Goldman Sachs, Finish Line or any other recipient of
this information considered, or now considers, these projections
to be a reliable prediction of future results, and they should
not be relied on as such. In addition, as we have only included
a subset of the projections in
35
this proxy statement, you are cautioned not to rely on this
information as complete in making a decision whether to vote in
favor of the merger agreement.
Genesco believes the assumptions Genescos management used
as a basis for the projections were reasonable at the time the
projections were prepared, given the information Genescos
management had at the time. However, the projections do not take
into account any circumstances or events occurring after the
date they were prepared and you should not assume that the
projections will continue to be accurate or reflective of
Genescos managements view at the time you consider
whether to vote for the merger agreement. Genesco advised the
recipients of the projections that its internal financial
forecasts, upon which the projections were based, are subjective
in many respects and thus susceptible to various
interpretations. The projections reflect numerous estimates and
assumptions with respect to industry performance, general
business, economic, regulatory, market and financial conditions
and other matters, including assumed effective interest rates
and effective tax rates consistent with Genescos
historical levels, all of which are difficult to predict and
many of which are beyond Genescos control. The projections
are also subject to significant uncertainties in connection with
changes to Genescos business and its financial condition
and results of operation, including the factors described under
Special Note Regarding Forward-Looking Statements
beginning on page 11. In addition, the projections reflect
projected information regarding Genesco as a stand-alone
company, without regard to the Finish Line and do not take into
account any of the transactions contemplated by the merger
agreement, including the merger and related financing, which may
cause actual results to materially differ as well. As a result,
there can be no assurance that the projected results will be
realized or that actual results will not be significantly higher
or lower than those contained in the projections; it is expected
that there will be differences between actual and projected
results. Since the projections cover multiple years, such
information by its nature becomes less reliable with each
successive year.
The financial projections were prepared for internal use and for
our board of directors, to assist potential acquirers of Genesco
with their due diligence investigations of Genesco and for use
by Goldman Sachs in its financial analysis and not with a view
toward public disclosure or toward complying with United States
generally accepted accounting principles, the published
guidelines of the SEC regarding projections or the guidelines
established by the American Institute of Certified Public
Accountants for preparation and presentation of prospective
financial information. Genescos independent registered
public accounting firm has not examined or compiled any of the
financial projections, expressed any conclusion or provided any
form of assurance with respect to the financial projections and,
accordingly, assumes no responsibility for them.
Additionally, since the date of the projections described below,
Genesco has made publicly available its actual results of
operations for the quarter ended May 5, 2007 (the
Form 10-Q).
You should review the
Form 10-Q,
which is incorporated into this proxy statement by this
reference, to obtain this information. Readers of this proxy
statement are cautioned not to place undue reliance on the
specific portions of the financial projections set forth below.
No one has made or makes any representation to any person
regarding the validity, reasonableness, accuracy or completeness
of the information included in these projections or the ultimate
performance of Genesco compared to such information.
For the foregoing reasons, as well as the bases and assumptions
on which the financial projections were compiled, the inclusion
of specific portions of the financial projections in this proxy
statement should not be regarded as an indication that such
projections will be an accurate prediction of future events, and
they should not be relied on as such. Except as required by
applicable securities laws, Genesco does not intend to update,
or otherwise revise the financial projections or the specific
portions presented to reflect circumstances existing after the
date when made or to reflect the occurrence of future events,
even in the event that any or all of the assumptions are shown
to be in error.
Initial Projections. In order to facilitate
the board of directors review of the Foot Locker proposal
at its meeting on April 20, 2007, senior management
presented a five-year financial forecast to the Companys
board of directors at that meeting (the Initial
Projections). The Initial Projections were based on the
latest operating results available to management. Management
advised the board of directors that the Initial Projections were
preliminary and that management was still in the process of
updating the five-year forecasts. Management also furnished the
Initial Projections to Goldman Sachs and these projections were
used by
36
Goldman Sachs in preparing certain preliminary financial
analyses discussed with our board of directors at its meeting on
April 20, 2007. However, Goldman Sachs did not rely upon
the Initial Projections in preparing its analyses in connection
with rendering its opinion with respect to the fairness, from a
financial point of view, of the consideration to be received by
holders of Genesco common stock in the merger. See The
Merger Background of the Merger beginning on
page 18. A summary of the Initial Projections is set forth
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Projections
|
|
|
|
2008E
|
|
|
2009E
|
|
|
2010E
|
|
|
2011E
|
|
|
2012E
|
|
|
|
(Dollars in millions)
|
|
|
Net Stores
|
|
|
2,239
|
|
|
|
2,471
|
|
|
|
2,730
|
|
|
|
2,989
|
|
|
|
3,249
|
|
Sales
|
|
$
|
1,605
|
|
|
$
|
1,818
|
|
|
$
|
2,053
|
|
|
$
|
2,299
|
|
|
$
|
2,565
|
|
EBIT (per plan)(1)
|
|
$
|
131
|
|
|
$
|
157
|
|
|
$
|
185
|
|
|
$
|
213
|
|
|
$
|
243
|
|
EBIT (adjusted)(2)
|
|
$
|
133
|
|
|
$
|
159
|
|
|
$
|
187
|
|
|
$
|
216
|
|
|
$
|
245
|
|
EPS(3)
|
|
$
|
2.81
|
|
|
$
|
3.41
|
|
|
$
|
4.09
|
|
|
$
|
4.86
|
|
|
$
|
5.65
|
|
|
|
|
(1) |
|
Prepared by management for its financial forecast update
presented at April 20, 2007 meeting of board of directors. |
|
(2) |
|
The EBIT forecast per plan was adjusted to exclude certain fixed
asset store impairment charges. |
|
|
|
(3) |
|
Assumes repurchases of common stock at the beginning of the
fourth quarter each year (for fiscal years 2009E to 2012E) on an
ongoing basis with projected excess cash. |
Updated Projections. Following the
April 20, 2007 meeting of our board of directors, senior
management continued to refine its financial forecasts based on
the latest operating results and plans available to management.
A summary of the updated projections resulting from this
process, which we refer to as the Updated
Projections is set forth below. The Updated Projections
were provided to Finish Line. The Updated Projections were also
provided to Goldman Sachs for use in preparing certain financial
analyses discussed with our board of directors at its meeting on
May 29, 2007 and in its presentation to the board of
directors on June 17, 2007. The primary differences between
the Initial Projections and the Updated Projections relate to
the fact that actual results for the first fiscal quarter of
2007 were lower than managements earlier expectations and
the Companys plan to close or convert up to 57
underperforming stores, primarily in the Underground Station
Group, which plan had not been finalized at the time of the
April 20 meeting of our board of directors. See The
Merger Background of the Merger beginning on
page 18.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Updated Projections
|
|
|
|
2008E
|
|
|
2009E
|
|
|
2010E
|
|
|
2011E
|
|
|
2012E
|
|
|
|
(Dollars in millions)
|
|
|
Net Stores
|
|
|
2,215
|
|
|
|
2,416
|
|
|
|
2,675
|
|
|
|
2,937
|
|
|
|
3,197
|
|
Sales
|
|
$
|
1,587
|
|
|
$
|
1,786
|
|
|
$
|
2,018
|
|
|
$
|
2,267
|
|
|
$
|
2,529
|
|
EBIT (adjusted)(1)
|
|
$
|
130
|
|
|
$
|
159
|
|
|
$
|
187
|
|
|
$
|
215
|
|
|
$
|
243
|
|
EPS(2)
|
|
$
|
2.75
|
|
|
$
|
3.42
|
|
|
$
|
4.07
|
|
|
$
|
4.89
|
|
|
$
|
5.58
|
|
|
|
|
(1) |
|
EBIT was adjusted to exclude certain fixed asset store
impairment charges and all other projected store closing charges
(primarily lease termination costs), including impairments
relating to stores included in the Companys plan to close
or convert up to 57 underperforming stores, primarily in the
Underground Station Group. Management did not present unadjusted
revised EBIT forecasts at the June 17 meeting of our board of
directors. |
|
|
|
(2) |
|
Calculated after giving effect to adjustments to EBIT described
in footnote (1) above for fiscal years 2008E and 2009E. Assumes
repurchases of common stock at the beginning of the fourth
quarter each year (for fiscal years 2009E to 2012E) on an
ongoing basis with projected excess cash. |
For purposes of rendering its opinion with respect to the
fairness, from a financial point of view, of the consideration
to be received by holders of Genesco common stock in the merger,
Goldman Sachs assumed that the projections prepared by
management were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of Genesco
management. Goldman Sachs did not assist management in the
37
development of any financial projections. In addition, Goldman
Sachs did not make an independent evaluation or appraisal of the
assets and liabilities (including any contingent, derivative or
off-balance-sheet assets and liabilities) of Genesco or any of
its subsidiaries, and, Goldman Sachs was not furnished with any
evaluation or appraisal of the assets or liabilities of Genesco
or any of its subsidiaries. See The Merger
Opinion of Goldman, Sachs & Co. beginning on
page 28.
Common
Stock, Options and Restricted Stock Consideration
At the effective time of the merger, Merger Sub will be merged
with and into Genesco. In connection with the merger:
|
|
|
|
|
each share of Genesco common stock issued and outstanding
immediately prior to the effective time of the merger (other
than shares held in our treasury or owned by Finish Line or
Merger Sub) will automatically be cancelled and converted into
the right to receive $54.50 in cash, without interest;
|
|
|
|
all unvested stock options will vest and all unexercised options
will be cancelled and converted into the right to receive a cash
payment equal to the number of outstanding options multiplied by
the amount by which $54.50 exceeds the option exercise
price; and
|
|
|
|
restrictions applicable to all shares of restricted stock will
lapse and those shares will be cancelled and converted into the
right to receive a cash payment equal to the number of
outstanding restricted shares multiplied by $54.50.
|
Preferred
Stock
The holders of our preferred stock outstanding upon the
completion of the merger will not be entitled to any
consideration upon the completion of the merger pursuant to the
merger agreement. Each share of Genesco preferred stock
issued and outstanding, and not otherwise properly converted to
common stock, if applicable, immediately before the merger will
remain outstanding following the merger. Finish Line has
informed us that it intends to redeem all outstanding shares of
redeemable preferred stock following the completion of the
merger in accordance with our charter, and that they also intend
to redeem the outstanding Employees Preferred subject to
the requisite approval and filing of the proposed charter
amendment (Proposal No. 2). Set forth below for your
convenience is a brief discussion of the options available to
holders of each class and series of preferred stock in respect
of the potential merger. We are not making a recommendation as
to whether you should convert your preferred stock, if
applicable. You should consult your financial and tax advisors
regarding your decision whether to convert your shares of
preferred stock in advance of the merger.
Subordinated Serial Preferred Stock, Series 1 (the
$2.30 Series 1). The outstanding
shares of $2.30 Series 1 are both convertible into Genesco
common stock by the holder and redeemable by Genesco. Finish
Line has informed Genesco that it intends to cause the surviving
corporation to call the $2.30 Series 1 shares for
redemption following the completion of the merger. Holders who
do not convert before the redemption date will receive the
redemption consideration of $40.00, plus any accrued and unpaid
dividends as of such date. If holders exercise their right to
convert into Genesco common stock prior to the closing of the
merger, each share of $2.30 Series 1 will convert into
5/6ths of a
share of Genesco common stock (which effectively means
approximately $45.42 per share assuming a conversion based on
the price per share to be paid to holders of Genesco common
stock in the merger). Upon conversion, fractional shares of
common stock will be cashed out based upon the closing price of
Genesco common stock on the NYSE on the conversion date and this
may affect the total consideration received as a result of the
conversion and merger. If holders exercise their right to
convert into merger consideration following the closing of the
merger but before the second business day preceding the
redemption date, each share of $2.30 Series 1 will convert
into approximately $45.42 in cash.
Subordinated Serial Preferred Stock, Series 3
(the $4.75 Series 3). The
outstanding shares of $4.75 Series 3 are both convertible
into Genesco common stock by the holder and redeemable by
Genesco. Finish Line has informed Genesco that it intends to
cause the surviving corporation to call the $4.75
Series 3 shares
38
for redemption following the completion of the merger. If
holders do not convert before the redemption date, they will
receive the redemption consideration of $100.00, plus any
accrued and unpaid dividends as of such date. If holders
exercise their right to convert into Genesco common stock prior
to the closing of the merger, each share of $4.75 Series 3
will convert into 2.10526 shares of Genesco common stock
(which effectively means approximately $114.74 per share
assuming a conversion based on the price per share to be paid to
holders of Genesco common stock in the merger). Upon conversion,
fractional shares of common stock will be cashed out based upon
the closing price of Genesco common stock on the NYSE on the
conversion date and this may affect the total consideration
received as a result of the conversion and the merger. If
holders exercise their right to convert into merger
consideration following the closing of the merger but before the
second business day preceding the redemption date, each share of
$4.75 Series 3 will convert into approximately $114.74 in
cash.
Subordinated Serial Preferred Stock, Series 4 (the
$4.75 Series 4). The outstanding
shares of $4.75 Series 4 are both convertible into Genesco
common stock by the holder and redeemable by Genesco. Finish
Line has informed Genesco that it intends to cause the surviving
corporation to call the $4.75 Series 4 shares for
redemption following the completion of the merger. If holders do
not convert before the redemption date, they will receive the
redemption consideration of $100.00, plus any accrued and unpaid
dividends as of such date. If holders exercise their right to
convert into Genesco common stock prior to the closing of the
merger, each share of $4.75 Series 4 will convert into
1.5151 shares of Genesco common stock (which effectively
means approximately $82.57 per share assuming a conversion based
on the price per share to be paid to holders of Genesco common
stock in the merger). Upon conversion, fractional shares of
common stock will be cashed out based upon the closing price of
Genesco common stock on the NYSE on the conversion date and this
may affect the total consideration received as a result of the
conversion and the merger. If holders exercise their right to
convert into merger consideration following the closing of the
merger but before the second business day preceding the
redemption date, each share of $4.75 Series 4 will convert
into approximately $82.57 in cash.
Subordinated Cumulative Preferred Stock (the $1.50
Subordinated Cumulative Preferred
Stock). The outstanding shares of $1.50
Subordinated Cumulative Preferred Stock are redeemable by
Genesco but are not convertible into common stock by the holder.
Finish Line has informed Genesco that it intends to cause the
surviving corporation to call the $1.50 Subordinated Cumulative
Preferred Stock shares for redemption following the completion
of the merger, such redemption to be effective on the next
quarterly dividend payment date following the merger in
accordance with Genescos charter. On the redemption date
holders will receive $30.00 per share of $1.50 Subordinated
Cumulative Preferred Stock redeemed, plus any accrued and unpaid
dividends as of such date.
Employees Subordinated Convertible Preferred
Stock. The outstanding shares of Employees
Preferred are not currently redeemable but are convertible (if
fully paid) into either Genesco common stock or $1.50
Subordinated Cumulative Preferred Stock by the holder. If
holders exercise their right to convert into Genesco common
stock prior to the closing of the merger, each share of
Employees Preferred will convert into one share of Genesco
common stock (which effectively means $54.50 per share assuming
a conversion based on the price per share to be paid to holders
of Genesco common stock in the merger). If holders exercise
their right to convert into merger consideration following the
closing of the merger but before the redemption date, each share
of Employees Preferred will convert into $54.50 in cash.
Genescos board of directors has also agreed, pursuant to
the merger agreement, to recommend to our shareholders the
approval of the proposed charter amendment (Proposal No. 2)
to allow for the redemption by Genesco of the Employees
Preferred after the completion of the merger at the price to be
paid per share of Genesco common stock in connection with the
merger, or $54.50 per share, without interest and net of any
unpaid amounts on such shares. Finish Line has informed Genesco
that it intends cause the surviving corporation to call the
Employees Preferred shares for redemption following the
completion of the merger if the charter amendment is adopted and
approved by the requisite votes at the special meeting.
The approval of Genescos shareholders of the charter
amendment is not a condition to the closing of the merger for
any party.
39
Delisting
and Deregistration of Genesco Capital Stock
If the merger is completed, Genesco common stock (including the
associated preferred share purchase rights) and the Genesco
Subordinated Serial Preferred Stock, Series 1 will be
delisted from the NYSE and CHX and deregistered under the
Exchange Act, as applicable. Genesco will no longer file
periodic reports with the SEC on account of these classes and
series. Genesco anticipates that it will be required to continue
to file periodic reports with the SEC on account of the
Employees Preferred unless the charter amendment is
approved and adopted and the Employees Preferred is
redeemed or until the number of holders of the Employees
Preferred otherwise drops below 300.
Regulatory
Approvals
Under the HSR Act and the rules promulgated thereunder by the
FTC, the merger cannot be completed until Genesco and Finish
Line each file a notification and report form under the HSR Act
and the applicable waiting period has expired or been
terminated. Genesco and Finish Line each filed notification and
report forms under the HSR Act with the FTC and the Antitrust
Division of the DOJ on July 17, 2007. If Genesco and Finish
Line do not receive a request for additional information, the
waiting period will expire at 11:59 p.m. on August 16,
2007, if not terminated earlier. At any time before or after
completion of the merger, notwithstanding any termination of the
waiting period under the HSR Act, the Antitrust Division or the
FTC could take action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking
to enjoin the completion of the merger or seeking divestiture of
substantial assets of Genesco or Finish Line. At any time before
or after the completion of the merger, and notwithstanding any
termination of the waiting period under the HSR Act, any state
could take action under the antitrust laws as it deems necessary
or desirable in the public interest. Such action could include
seeking to enjoin the completion of the merger or seeking
divestiture of substantial assets of Genesco or Finish Line.
Private parties may also seek to take legal action under the
antitrust laws under certain circumstances.
While there can be no assurance that the merger will not be
challenged by a governmental authority or private party on
antitrust grounds, Genesco believes that the merger can be
effected in compliance with federal, state and foreign antitrust
laws. The term antitrust laws means the Sherman Act,
as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal,
state and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws that are
designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of
trade.
Financing
of the Merger
In connection with the merger, Finish Line will obtain the
financing necessary to cause the merger consideration to be paid
out to Genescos shareholders, to make any redemption
payments made to holders of issued and outstanding preferred
stock of Genesco following the merger, to refinance certain
existing indebtedness of Genesco, and to pay customary fees and
expenses in connection with the proposed merger, the financing
arrangements and the related transactions. Funding of the debt
financing is subject to the satisfaction of the conditions set
forth in the commitment letter pursuant to which the financing
will be provided. Finish Line has agreed to use its reasonable
best efforts to arrange the debt financing on the terms and
conditions set forth in the debt commitment letter. The
following arrangements are in place to provide, subject to the
satisfaction of the conditions provided in the commitment
letter, the necessary financing for the merger and related
transactions, including the payment of related transaction
costs, charges, fees and expenses:
|
|
|
|
|
new senior secured credit facilities in the aggregate amount of
$1.14 billion, consisting of a $690.0 million senior
secured term loan and a $450.0 million senior secured
revolving credit facility. No more than $250.0 million of
the revolving credit facility may be drawn at the closing;
|
|
|
|
$700.0 million aggregate principal amount of debt securities or,
in lieu thereof, a senior unsecured bridge loan facility in the
amount of $700.0 million; and
|
|
|
|
cash and cash equivalents of approximately $11.0 million
held by Finish Line and its subsidiaries at closing.
|
40
Debt
Financing
Debt
Commitment Letter
Finish Line has received a fully executed debt commitment letter
(the commitment letter) dated as of June 17,
2007, from UBS Loan Finance LLC (UBS) and UBS
Securities LLC (UBSS). Finish Line has advised
Genesco that it currently estimates that it will obtain the
financing necessary to consummate the merger pursuant to the
terms of the commitment letter during the third week of October
2007, but the expected financing timeline could vary. Pursuant
to the commitment letter, subject to the conditions set forth
therein:
|
|
|
|
|
UBS has committed to provide to Finish Line up to
$1.14 billion of senior secured credit facilities, for the
purpose of financing the merger, repaying certain existing
indebtedness of Finish Line, Genesco and their subsidiaries,
paying fees and expenses incurred in connection with the merger
and providing ongoing working capital requirements of Finish
Line and its subsidiaries (including Genesco following the
merger).
|
|
|
|
Finish Line is expected to issue and sell up to $700.0 million
in aggregate principal amount of debt securities. If the
offering of debt securities by Finish Line is not completed
substantially concurrently with the merger, UBS has committed to
provide to Finish Line up to $700.0 million of a senior
unsecured bridge facility, for the purpose of financing the
merger, repaying or refinancing certain existing indebtedness of
Finish Line, Genesco and their subsidiaries, paying fees and
expenses incurred in connection with the merger and providing
ongoing working capital and for other general corporate purposes
of Finish Line and its subsidiaries.
|
The debt commitments expire on December 31, 2007. The
documentation governing the senior secured credit facilities and
the bridge loan facility has not been finalized and,
accordingly, the actual terms of such facilities may differ from
those described in this proxy statement.
Pursuant to the merger agreement, Finish Line is obligated to
use its reasonable best efforts to obtain the debt financing set
forth in the debt commitment letter at or prior to the closing
of the merger. In the event that any portion of the debt
financing becomes unavailable on the terms contemplated in the
commitment letter, Finish Line must use its reasonable best
efforts to arrange alternative financing from alternative
sources on terms not materially less favorable to Finish Line in
the aggregate (as determined in the good faith reasonable
judgment of Finish Line).
Conditions
Precedent to the Debt Commitments
The availability of the senior secured credit facilities and the
bridge loan facility is subject to, among other things, there
not having occurred since June 17, 2007 any change or
condition that would constitute a company material adverse
effect (as defined in the merger agreement), the accuracy in all
material respects at the closing date of specified
representations of Genesco in the merger agreement, completion
of the merger in accordance with the merger agreement in form
and substance satisfactory to UBS and the negotiation, and
execution and delivery of definitive documentation.
Senior
Secured Credit Facilities
General
The borrower under the senior secured credit facilities will be
Finish Line and will be guaranteed by each existing and future
direct or indirect domestic subsidiary of Finish Line, including
the surviving corporation. The senior secured credit facilities
will consist of a $690.0 million senior secured term loan
facility with a term of seven years and a $450.0 million
senior secured revolving credit facility with a term of five
years. The revolving credit facility will include provisions for
the issuance of letters of credit and swingline loans.
UBSS will act as the sole advisor, arranger and book running
manager for the senior secured credit facilities. UBS AG,
Stamford Branch (UBS AG) will be the sole
administrative agent for the senior credit facilities, UBS AG
will be the sole collateral agent for the senior secured term
loan facility and UBS AG and a financial institution to be
designated by UBSS will be the co-collateral agents for the
senior secured revolving credit facility.
41
The senior secured revolving credit facility will be an
asset-based credit facility with extensions of credit thereunder
to be subject to limitations based upon specified percentages of
eligible receivables and eligible inventory of Finish Line.
Interest
Rate and Fees
Loans under the senior secured credit facilities are expected to
bear interest, at Finish Lines option, at (1) a rate
equal to the London Interbank Offered Rate (LIBOR),
plus an applicable margin or (2) a rate equal to the higher
of (a) the prime rate of UBS and (b) the federal funds
effective rate plus 0.50%, plus an applicable margin. After the
delivery by Finish Line to the administrative agent of financial
statements for the fiscal quarter ending at least six months
following the closing date, the applicable margins for
borrowings under the revolving credit facility may be increased
or decreased subject to a pricing grid based on excess
availability under the senior secured revolving credit facility.
To the extent the corporate credit is rated less than B2 (with a
stable outlook) by Moodys or less than B (with a stable
outlook) by S&P as of the closing date, the interest
margins for borrowings under the term loan facility will be
increased by 25 bps.
In addition, Finish Line will pay commitment fees to the lenders
under the revolving credit facility in respect of the unutilized
commitments thereunder. The commitment fee rate is 0.25% per
annum. Finish Line must also pay customary letter of credit
commissions and fees under the revolving credit facility.
Prepayments
and Amortization
Finish Line will be permitted to make voluntary prepayments upon
prior notice, without premium or penalty (other than LIBOR
breakage costs, if applicable). Finish Line will be required to
make mandatory prepayments of term loans consisting of
(1) net cash proceeds of Finish Line and its subsidiaries
received in respect of non-ordinary course asset sales (subject
to reinvestment rights and other exceptions), (2) net cash
proceeds of Finish Line and its subsidiaries received in respect
of issuances of debt or preferred stock (other than permitted
debt or preferred stock), (3) net cash proceeds of Finish
Line and its subsidiaries received in respect of casualty and
condemnation events (subject to reinvestment rights) and
(4) a percentage of the excess cash flow (to be defined in
a manner to be agreed) of Finish Line and its subsidiaries.
Finish Line will also be required to make mandatory prepayments
of the revolving loans based on levels of excess availability
under the senior secured revolving credit facility. The term
loan will amortize in equal quarterly installments in aggregate
annual amounts equal to 1% of the original principal amount of
the term loan, with the balance payable at the final maturity
date.
Guarantors
All obligations under the senior secured credit facilities will
be unconditionally guaranteed by each existing and future direct
or indirect domestic subsidiary of Finish Line, including
Genesco and its subsidiaries.
Security
The obligations of Finish Line and the guarantors under the
senior secured credit facilities will be secured, subject to
permitted liens and other
agreed-upon
exceptions, and subject to intercreditor arrangements between
the revolving credit facility lenders and the term loan facility
lenders, by security interests in and liens on (1) all
accounts receivable, inventory and deposit accounts of Finish
Line and each guarantor and all proceeds thereof, (2) all
the capital stock of the surviving corporation and of each of
the directly and indirectly owned subsidiaries of Finish Line
and each guarantor of such facilities (limited, in the case of
foreign subsidiaries, to 65% of the capital stock of first-tier
foreign subsidiaries) and (3) substantially all other
tangible and intangible assets of Finish Line, Genesco and each
other guarantor.
Other
Terms
The senior secured credit facilities will contain customary
representations and warranties and customary affirmative and
negative covenants (applicable to Finish Line and its
subsidiaries), including, among other things, restrictions on
indebtedness, liens, fundamental changes, investments and
acquisitions, sales of assets,
42
sale leasebacks, mergers and consolidations, dividends and other
distributions, redemptions, prepayments of certain subordinated
indebtedness, an excess availability requirement and a minimum
fixed charge coverage ratio. The senior secured credit
facilities will also include customary events of default,
including a change of control to be defined.
Debt
Securities
Finish Line is expected to issue and sell up to
$700.0 million in aggregate principal amount of debt
securities. The debt securities will not be registered under the
Securities Act and may not be offered in the United States
absent registration or an applicable exemption from registration
requirements. Finish Line is expected to offer the debt
securities to qualified institutional buyers, as
defined in Rule 144A under the Securities Act of 1933, as
amended (the Securities Act), and to
non-U.S. persons
outside the United States in compliance with Regulation S
under the Securities Act. The commitment letter, which is
described above under Financing of the Merger
Debt Financing provides for a new $700.0 million
senior bridge facility that will be available in the event that
the contemplated offering of debt securities does not take place
at the time the merger is completed.
Bridge
Loan Facility
UBS has committed to provide up to $700.0 million in loans
to Finish Line under a senior bridge loan facility. The bridge
loan facility will be guaranteed by each guarantor of the senior
secured credit facilities on a senior unsecured basis.
If the bridge loan is not paid in full on or before the first
anniversary of the closing date, the bridge loan will
automatically convert into a senior term loan maturing on the
eighth anniversary of the closing date. Holders of such term
loan may choose to exchange such loan for senior exchange notes
maturing on the eighth anniversary of the closing date with an
equal principal amount and may fix the interest rate on any such
exchange notes. Holders of such term loans may also fix the
interest rate. Finish Line would be required to register any
exchange notes for public sale under a registration statement in
compliance with applicable securities laws.
The bridge loan facility will bear interest at a floating rate
equal to LIBOR plus an initial margin depending on the rating of
the bridge loan facility and the lease-adjusted leverage ratio.
The margin will increase over time in three-month intervals
following an initial six-month period, and will be subject to an
annual yield cap.
The bridge loan facility will contain covenants that are
expected to be generally similar to the covenants in the senior
secured facility, with adjustments as may be agreed between
Finish Line and the bridge facility lenders.
With respect to the term loans and exchange notes (other than
fixed rate term loans and exchange notes), Finish Line will be
permitted to make voluntary prepayments upon prior notice, at
par plus accrued and unpaid interest and other than LIBOR
breakage costs, if applicable. With respect to the term loans
and exchange notes bearing interest at fixed rates, limited
redemption options are available prior to the third anniversary
of the closing date. Thereafter, such fixed rate exchange notes
and term loans shall be redeemable at Finish Lines option
at a premium coupon based on the date of redemption.
Finish Line will be required to prepay the bridge loan facility
and to redeem or offer to purchase the exchange notes under
certain circumstances, including upon certain incurrence of debt
and non-ordinary course asset sales, issuance of debt or equity
or with net proceeds from casualty or condemnation events.
UBSS will act as sole lead arranger and sole book running
manager for the bridge loan facility and UBS AG will act as the
sole administrative agent for the bridge loan facility.
Interests
of Genescos Directors and Executive Officers in the
Merger
In considering the recommendations of the board of directors,
Genescos shareholders should be aware that certain of
Genescos directors and executive officers have interests
in the transaction that may be different
43
from, and/or
in addition to, the interests of Genescos shareholders
generally. Our board of directors was aware of these potential
conflicts of interest in reaching its decision to approve the
merger agreement and to recommend that our shareholders vote in
favor of approving the merger agreement. Except as set forth
below, our directors and officers have, to our knowledge, no
material interest that differs from your interests generally.
Treatment
of Equity Awards
Upon the completion of the merger, all of our equity
compensation awards (including awards held by directors and
executive officers) will be subject to the treatment described
under The Merger Agreement Treatment of
Options and Other Awards beginning on page 53. All of
the related cash payments will be subject to applicable
withholding taxes.
The table below sets forth, as of June 30, 2007 for each of
our directors and executive officers (before any deduction for
applicable withholding taxes): the aggregate number of stock
options held by each director and executive officer, including
those that will vest upon the completion of the merger; the cash
payment that will be made in respect of the foregoing stock
options upon the completion of the merger (based on the exercise
price of the options); the aggregate number of restricted shares
held by each director and executive officer that have
restrictions that will lapse upon completion of the merger; and
the aggregate cash payment that will be made in respect of the
foregoing restricted shares upon the completion of the merger.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
Restricted Shares
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
Cash
|
|
Name
|
|
Number
|
|
|
Payment
|
|
|
Number
|
|
|
Payment
|
|
|
Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Beard
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
$
|
181,703
|
|
Leonard L. Berry
|
|
|
16,000
|
|
|
$
|
528,520
|
|
|
|
4,663
|
|
|
$
|
254,134
|
|
William F. Blaufuss, Jr.
|
|
|
|
|
|
|
|
|
|
|
5,262
|
|
|
$
|
286,779
|
|
James S. Bradford
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
$
|
181,703
|
|
Robert V. Dale
|
|
|
12,000
|
|
|
$
|
365,280
|
|
|
|
4,663
|
|
|
$
|
254,134
|
|
Matthew C. Diamond
|
|
|
|
|
|
|
|
|
|
|
5,235
|
|
|
$
|
285,308
|
|
Marty G. Dickens
|
|
|
|
|
|
|
|
|
|
|
6,406
|
|
|
$
|
349,127
|
|
Ben T. Harris
|
|
|
|
|
|
|
|
|
|
|
2,649
|
|
|
$
|
144,371
|
|
Kathleen Mason
|
|
|
16,000
|
|
|
$
|
528,520
|
|
|
|
5,672
|
|
|
$
|
309,124
|
|
William A. Williamson
|
|
|
16,000
|
|
|
$
|
528,520
|
|
|
|
6,477
|
|
|
$
|
352,997
|
|
Hal N. Pennington(1)
|
|
|
308,653
|
|
|
$
|
10,236,154
|
|
|
|
74,675
|
|
|
$
|
4,069,788
|
|
Robert J. Dennis(2)
|
|
|
98,036
|
|
|
$
|
2,731,827
|
|
|
|
44,447
|
|
|
$
|
2,422,362
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James S. Gulmi
|
|
|
118,084
|
|
|
$
|
4,150,305
|
|
|
|
22,955
|
|
|
$
|
1,251,048
|
|
Jonathan D. Caplan
|
|
|
83,320
|
|
|
$
|
2,751,321
|
|
|
|
18,967
|
|
|
$
|
1,033,702
|
|
James C. Estepa
|
|
|
46,743
|
|
|
$
|
1,298,958
|
|
|
|
39,155
|
|
|
$
|
2,133,948
|
|
Kenneth J. Kocher
|
|
|
25,287
|
|
|
$
|
664,774
|
|
|
|
10,494
|
|
|
$
|
571,923
|
|
John W. Clinard
|
|
|
39,034
|
|
|
$
|
1,196,888
|
|
|
|
13,455
|
|
|
$
|
733,298
|
|
Roger G. Sisson
|
|
|
78,301
|
|
|
$
|
2,642,752
|
|
|
|
15,290
|
|
|
$
|
833,305
|
|
Mimi Eckel Vaughn
|
|
|
50,183
|
|
|
$
|
1,605,735
|
|
|
|
13,070
|
|
|
$
|
712,315
|
|
Matthew N. Johnson
|
|
|
5,610
|
|
|
$
|
171,388
|
|
|
|
1,503
|
|
|
$
|
81,914
|
|
Paul D. Williams
|
|
|
7,925
|
|
|
$
|
248,762
|
|
|
|
1,582
|
|
|
$
|
86,219
|
|
|
|
|
(1) |
|
Mr. Pennington also serves as the chief executive officer
of Genesco. |
|
(2) |
|
Mr. Dennis also serves as the president and chief operating
officer of Genesco. |
Change
in Control Severance and Retention Arrangements
Each of the executive officers has an employment protection
agreement that will become effective upon shareholder approval
of the merger agreement (the effective time of the
employment protection agreement)
44
and has a term ending on the third anniversary of the effective
time of the employment protection agreement unless the executive
is earlier terminated in accordance with the agreement or
retires. These agreements have the following provisions, which
may or will be triggered following the completion of the merger,
as applicable:
|
|
|
|
|
During the term of the employment protection agreement:
|
|
|
|
|
|
The executive shall have the position, authority and
responsibilities commensurate with the highest held, exercised
and assigned during the
90-day
period prior to the effective time of the employment protection
agreement.
|
|
|
|
|
|
The executive shall receive compensation in an amount not less
than that which the executive was receiving immediately prior to
the effective time of the employment protection agreement.
|
|
|
|
|
|
The executive shall be eligible to participate during each
fiscal year in a bonus or incentive compensation plan with terms
at least as favorable as the plan in effect immediately prior to
the effective time of the employment protection agreement and
with a target and maximum award potential at least equal to such
plan.
|
|
|
|
|
|
The executive is also entitled to participate in incentive and
savings plans, retirement programs, and benefit plans, to
receive reimbursement of expenses, vacation, and fringe
benefits, office support and staff, all generally at least equal
to the most favorable provided in the
90-day
period immediately preceding the effective time of the
employment protection agreement.
|
|
|
|
|
|
If the executives employment is terminated by death or
disability during the term of the agreement, the executive is
entitled to receive all accrued obligations of Genesco to such
executive, including such executives salary, any deferred
compensation, all amounts owing to the executive under any
applicable employee benefit plan, and a bonus equal to the
average of the two most recent annual bonuses received by the
executive, prorated for the number of days in the current fiscal
year that the executive was employed.
|
|
|
|
|
|
If the executive is terminated for cause or voluntarily
terminates his employment during the term of the agreement, he
is entitled to receive the same compensation payable in case of
termination by death or disability, except that the prorated
bonus would not be payable.
|
|
|
|
If the executives employment is actually or constructively
terminated by Genesco without cause during the term of the
agreement, the executive will be entitled to receive:
|
|
|
|
|
|
his base salary through the termination date and any other
accrued obligations;
|
|
|
|
a lump-sum severance allowance (the Severance
Payment) equal to the multiple specified below times
(i) the executives annual base salary, plus
(ii) the average of the executives two most recent
annual bonuses, plus (iii) the present value of the annual
cost to Genesco of obtaining coverage equivalent to the coverage
provided by Genesco prior to the merger under any welfare
benefit plans (including medical, dental, disability, group life
and accidental death insurance), subject to a right to elect
continuation of certain welfare benefits instead, plus
(iv) the annualized value of certain fringe benefits
provided to the executive prior to the merger; and
|
|
|
|
|
|
Executive Officer
|
|
Multiple
|
|
|
Hal N. Pennington
|
|
|
3
|
|
Robert J. Dennis
|
|
|
2
|
|
James S. Gulmi
|
|
|
2
|
|
James C. Estepa
|
|
|
2
|
|
Jonathan D. Caplan
|
|
|
2
|
|
Kenneth J. Kocher
|
|
|
2
|
|
John W. Clinard
|
|
|
2
|
|
Roger G. Sisson
|
|
|
2
|
|
Mimi Eckel Vaughn
|
|
|
2
|
|
Matthew N. Johnson
|
|
|
1
|
|
Paul D. Williams
|
|
|
1
|
|
45
|
|
|
|
|
reimbursement for any excise tax owed thereon and for taxes
payable by reason of the reimbursement.
|
The executive officers are also entitled to certain payments
under the general severance plan, however, amounts payable under
the employment protection agreements are to be reduced by any
amount received under the general severance plan.
The following table shows the amount of the Severance Payment
payable to each of the executive officers, based on compensation
and benefit levels in effect on June 30, 2007 and assuming
the merger is completed on December 31, 2007, and the
executives employment terminates effective
December 31, 2007 under circumstances that entitle him to
the maximum potential Severance Payment immediately thereafter.
The table also shows the estimated value of tax reimbursement
expected to be due under Section 4999 of the Internal
Revenue Code and the employment protection agreement in respect
of these severance payments together with the other payments
indicated above, including those with respect to the accelerated
outstanding equity awards upon the completion of the merger.
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Severance Payment
|
|
|
Tax Reimbursement
|
|
|
Hal N. Pennington
|
|
$
|
5,578,694
|
|
|
$
|
1,980,133
|
|
Robert J. Dennis
|
|
$
|
2,377,440
|
|
|
|
|
|
James S. Gulmi
|
|
$
|
1,363,239
|
|
|
|
|
|
James C. Estepa
|
|
$
|
2,544,713
|
|
|
|
|
|
Jonathan D. Caplan
|
|
$
|
1,732,662
|
|
|
$
|
478,865
|
|
Kenneth J. Kocher
|
|
$
|
804,446
|
|
|
|
|
|
John W. Clinard
|
|
$
|
849,537
|
|
|
|
|
|
Roger G. Sisson
|
|
$
|
893,175
|
|
|
|
|
|
Mimi Eckel Vaughn
|
|
$
|
859,409
|
|
|
$
|
310,693
|
|
Matthew N. Johnson
|
|
$
|
240,132
|
|
|
|
|
|
Paul D. Williams
|
|
$
|
260,554
|
|
|
|
|
|
It is currently anticipated that Mr. Pennington will not be
retained to continue his role as chairman and chief executive
officer of the surviving corporation following the merger or
otherwise in a formal capacity. The Severance Payments will be
made at the closing of the merger for Mr. Pennington and
any other executive who is not retained by Finish Line following
the completion of the merger.
New
Management Arrangements
As of the date of this proxy statement, no member of our senior
management has entered into any amendments or modifications to
existing employment agreements or arrangements with us in
connection with the merger. Finish Line has informed us that it
currently intends to retain certain members of our existing
senior management team with the surviving corporation after the
merger is completed. Certain members of senior management are
currently engaged in discussions with representatives of Finish
Line regarding revised terms of employment that would become
effective at or after the closing of the merger. As of the date
of this proxy statement, except with respect to Mr. Dennis,
whose anticipated terms of employment by Finish Line are
summarized below, no member of our senior management has entered
into any agreement, arrangement or understanding with Finish
Line, Merger Sub or their affiliates regarding employment with
the surviving corporation. Although we believe certain other
members of our management team are likely to enter into new
arrangements with Finish Line, Merger Sub or their affiliates
regarding employment with the surviving corporation, these
matters are subject to further negotiations and discussion and
no terms or conditions have been finalized. The new arrangements
are currently expected to be entered into at or prior to the
completion of the merger. In addition, it is possible that one
or more of our executive officers could be invited to join the
board of directors of the surviving corporation
and/or
Finish Line following the merger.
Robert J. Dennis, our current president and chief operating
officer, is currently expected to serve as the new president of
Finish Line following the consummation of the merger. On
July 23, 2007, subsequent to the
46
execution of the merger agreement, Mr. Dennis and Finish
Line entered into a letter agreement pursuant to which the
parties confirmed that if the merger closes Mr. Dennis will
enter into a mutually satisfactory definitive employment
agreement with Finish Line at the closing of the merger that
will replace and supersede his current employment protection
agreement with Genesco and will contain certain terms and
conditions, as described briefly below.
The initial term of Mr. Denniss employment will be
three years, subject to certain automatic extension periods.
Mr. Dennis will have a base salary of $600,000 and will
also be eligible to earn incentive bonuses pursuant to Finish
Lines bonus program. Mr. Denniss employment
agreement will contain a perpetual confidentiality covenant as
well as non-competition and non-solicitation covenants triggered
by termination under certain circumstances.
If Mr. Denniss employment terminates due to death or
disability, he will be entitled to receive (i) any base
salary earned through the date of termination, (ii) any
earned but unpaid portion of his bonus for the fiscal year
preceding the year of termination, (iii) reimbursement of
any unreimbursed business expenses properly incurred by
Mr. Dennis, and (iv) such employee benefits, if any,
as to which Mr. Dennis may be entitled under the Finish
Lines employee benefit plans (the payments and benefits
described in (i) through (iv) being his accrued
rights). If Mr. Denniss employment is
terminated by Finish Line without cause or by
Mr. Dennis for good reason (as such terms are
defined in the letter agreement) during the initial three-year
term of employment, Mr. Dennis will be entitled to
(i) his accrued rights and (ii) subject to the
execution of a general release of claims in favor of Finish Line
and its affiliates, an amount equal to two times (x) his
annual base salary, (y) the average of his two most recent
annual bonuses paid (omitting from the average any year for
which no bonus is paid) and (z) the present value of the
annual cost to the Finish Line of obtaining insurance coverage
equivalent to the coverage provided by the Finish Line for
Mr. Dennis under any welfare benefit plans plus the
annualized value of fringe benefits provided to him (plus any
tax reimbursement payments associated therewith). If
Mr. Denniss employment is terminated by the Finish
Line without cause or by Mr. Dennis for
good reason at any time following the initial
three-year term of employment, Mr. Dennis will be entitled
to (i) his accrued rights, and (ii) subject to the
execution of a general release of claims in favor of Finish Line
and its affiliates, continued medical benefits for one year
following termination and an amount equal to the sum of
(x) his annual base salary and (y) a pro-rata portion
of any annual bonus he would have received for the year of
termination based upon the Finish Lines actual results for
the year of termination (with such proration based on the number
of days during the year of termination that he was employed by
the Finish Line), payable to Mr. Dennis when the annual
bonus would have been otherwise payable. Notwithstanding the
above, in the event Mr. Denniss employment is
terminated by the Finish Line without cause or by
Mr. Dennis for good reason (in each case within
90 days prior to or 2 years following a subsequent
change in control of Finish Line (to be defined in
the employment agreement)) Mr. Dennis would be entitled to
the following instead of what is described above: (i) his
accrued rights, (ii) subject to the execution of a general
release of claims on behalf of Finish Line and its affiliates,
an amount equal to the sum of (x) 2.5 times the sum of
(a) his annual base salary, (b) his target annual
bonus for the year of termination, and (c) the value of any
other bonus he could have earned during the year of termination
pursuant to the Finish Lines then existing bonus programs,
and (y) continued provision of group health benefits for
two years. Additionally, Mr. Dennis will be entitled to
accelerated vesting of all unvested equity awards immediately
upon the occurrence of a change in control, whether or not a
termination of employment occurs. In the event Mr. Dennis
terminates his employment without good reason within
the 30-day
period that begins on the first anniversary of a change in
control, Mr. Dennis will be entitled to (i) his
accrued rights and (ii) subject to the execution of a
general release of claims on behalf of Finish Line and its
affiliates, a lump sum severance payment equal to one times his
existing base salary. In the event of the termination of
Mr. Denniss employment by Finish Line for cause or by
Mr. Dennis without good reason, he will only be entitled to
his accrued rights (as defined above). Additionally, the Finish
Line will provide Mr. Dennis with full golden parachute
excise tax
gross-up,
but only if the benefits to be paid to Mr. Dennis exceed
110% of the Section 280G safe harbor limit.
Mr. Dennis will receive a stock option award for
175,000 shares of Finish Lines common stock with an
exercise price equal to the fair market value of Finish
Lines common stock on the grant date (expected to be
47
the date Mr. Dennis commences employment with the Company
upon the consummation of the merger), vesting in equal annual
installments over three years from the grant date. Additionally,
on such date Mr. Dennis will also receive a restricted
stock award for 75,000 shares of Finish Lines common
stock, which shares will cliff vest three years from the grant
date.
Benefit
Arrangements with Surviving Corporation
The commitments by Finish Line with respect to benefit
arrangements are described below under The Merger
Agreement Employee Benefits beginning on page
65.
Indemnification
and Insurance
See The Merger Agreement Indemnification and
Insurance beginning on page 66.
Material
U.S. Federal Income Tax Consequences of the Merger to Our
Shareholders
The following is a summary of certain material U.S. federal
income tax consequences of the merger to holders of Genesco
common stock whose shares of Genesco common stock are converted
into the right to receive cash pursuant to the merger. This
summary does not purport to consider all aspects of
U.S. federal income taxation that might be relevant to our
shareholders. For purposes of this discussion, we use the term
U.S. holder to mean a beneficial owner of
shares of Genesco common stock that is, for U.S. federal
income tax purposes:
|
|
|
|
|
a citizen or resident of the United States;
|
|
|
|
a corporation created or organized under the laws of the United
States or any of its political subdivisions;
|
|
|
|
a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury regulations to be treated as
a U.S. person; or
|
|
|
|
an estate that is subject to U.S. federal income tax on its
income regardless of its source.
|
A
non-U.S. holder
is a person (other than a partnership) that is not a
U.S. holder.
If a partnership holds Genesco common stock, the tax treatment
of a partner will generally depend on the status of the partner
and the activities of the partnership. A partner of a
partnership holding Genesco common stock should consult its tax
advisor.
This discussion is based on current law, which is subject to
change, possibly with retroactive effect. It applies only to
holders that are beneficial owners who hold shares of Genesco
common stock as capital assets, and may not apply to shares of
Genesco common stock received in connection with the exercise of
employee stock options or otherwise as compensation, holders who
hold an equity interest, directly or indirectly, in Finish Line
or the surviving corporation after the merger, or to certain
types of beneficial owners who may be subject to special rules
(such as insurance companies, banks, tax-exempt organizations,
financial institutions, broker-dealers, partnerships,
S corporations or other pass-through entities, mutual
funds, traders in securities who elect the mark-to-market method
of accounting, holders subject to the alternative minimum tax,
shareholders that have a functional currency other than the
U.S. dollar, or holders who hold Genesco common stock as
part of a hedge, straddle or a constructive sale or conversion
transaction). This discussion does not address the receipt of
cash in connection with the cancellation of shares of restricted
stock or options to purchase shares of Genesco common stock, or
any other matters relating to equity compensation or benefit
plans. This discussion also does not address any aspect of
state, local or foreign tax laws.
U.S.
Holders
The exchange of shares of Genesco common stock for cash pursuant
to the merger will be a taxable transaction to U.S. holders
for U.S. federal income tax purposes. In general, a
U.S. holder whose shares of Genesco common stock are
converted into the right to receive cash pursuant to the merger
will recognize
48
capital gain or loss for U.S. federal income tax purposes
equal to the difference, if any, between the amount of cash
received in exchange for the shares (determined before the
deduction of any applicable withholding taxes) and the
U.S. holders adjusted tax basis in the shares. Gain
or loss will be determined separately for each block of shares
(i.e., shares acquired at the same cost in a single
transaction). The gain or loss generally will be long-term
capital gain or loss provided that a U.S. holders
holding period for the shares is more than 12 months at the
time of the completion of the merger. Long-term capital gains of
individuals are eligible for reduced rates of taxation. There
are limitations on the deductibility of capital losses.
U.S. holders who claim a loss that exceeds certain
thresholds may be required to file a disclosure statement with
the Internal Revenue Service.
Backup withholding of tax (currently at a rate of 28%) may apply
to cash payments to which a non-corporate U.S. holder is
entitled under the merger agreement, unless the holder or other
payee (i) is an entity that is exempt from backup
withholding (generally including corporations, tax-exempt
organizations and certain qualified nominees) and, when
required, provides appropriate documentation to that effect,
(ii) provides a taxpayer identification number (social
security number, in the case of individuals, or employer
identification number, in the case of other shareholders),
certifies that the number is correct and that the holder has not
been notified by the Internal Revenue Service that it is subject
to backup withholding due to underreporting of interest or
dividends, and otherwise complies with applicable requirements
of the backup withholding rules. Each U.S. holder should
complete and sign the Substitute
Form W-9
included as part of the letter of transmittal and return it to
the paying agent in order to provide the information and
certification necessary to avoid backup withholding, unless an
exemption applies and is established in a manner satisfactory to
the paying agent.
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules will be allowable as
a refund or a credit against a U.S. holders
U.S. federal income tax liability provided the required
information is timely furnished to the Internal Revenue Service.
Cash received pursuant to the merger will also be subject to
information reporting under certain circumstances unless an
exemption applies.
Special
Considerations of Holders of Preferred Stock
As discussed above in The Merger Preferred
Stock beginning on page 38, holders of preferred
stock are not directly affected by the merger. Any holder of
preferred stock who converts a share of preferred stock into
Genesco common stock pursuant to the terms of the preferred
stock prior to the merger should generally be treated as any
other holder of Genesco common stock with respect to the
converted shares, and the material U.S. federal income tax
consequences to the exchange of the common stock for the right
to receive cash in the merger generally should be as set forth
above. Holders of preferred stock who exercise their right to
convert their preferred stock into the merger consideration
following the closing of the merger should generally recognize
gain or loss for U.S. federal income tax purposes in a
similar manner as if they had converted their preferred stock
into common stock and exchanged their common stock for the right
to receive cash in the merger.
Holders of preferred stock whose preferred stock is redeemed by
Finish Line following the merger (as described above in
the Merger Preferred Stock), should
generally recognize gain or loss for U.S. federal income
tax purposes in an amount equal to the difference, if any,
between the amount of cash received (including amounts otherwise
paid on behalf of the holder) in exchange for the shares
(determined before the deduction of any applicable withholding
taxes) and the holders adjusted tax basis in the shares.
In the event that the charter amendment is not approved and
adopted, and a holder of Employees Preferred converts a
portion but not all of the shares of the Employees
Preferred owned by such holder into merger consideration after
the consummation of the merger, the tax consequences to the
holder may be different than those described above. Holders
of all outstanding classes and series of preferred stock should
consult their own tax advisors.
49
Non-U.S.
Holders
Any gain realized on the receipt of cash pursuant to the merger
by a
non-U.S. holder
generally will not be subject to U.S. federal income tax
unless:
|
|
|
|
|
the gain is effectively connected with a trade or business of
the
non-U.S. holder
in the United States (and, if required by an applicable income
tax treaty, is attributable to a U.S. permanent
establishment of the
non-U.S. holder);
|
|
|
|
the
non-U.S. holder
is an individual who is present in the United States for
183 days or more in the taxable year of that disposition,
and certain other conditions are met; or
|
|
|
|
Genesco is or has been a United States real property
holding corporation for U.S. federal income tax
purposes and the
non-U.S. holder
owned more than 5% of Genescos common stock at any time
during the five years preceding the merger.
|
An individual
non-U.S. holder
described in the first bullet point immediately above will be
subject to tax on the net gain derived from the merger under
regular graduated U.S. federal income tax rates. An
individual
non-U.S. holder
described in the second bullet point immediately above will be
subject to a flat 30% tax on the gain derived from the merger,
which may be offset by U.S. source capital losses, even
though the individual is not considered a resident of the United
States. If a
non-U.S. holder
that is a foreign corporation falls under the first bullet point
immediately above, it will be subject to tax on its net gain in
the same manner as if it were a U.S. person as defined
under the Code and, in addition, may be subject to the branch
profits tax equal to 30% of its effectively connected earnings
and profits or at such lower rate as may be specified by an
applicable income tax treaty.
A
non-U.S. holder
will be subject to substantial limitations on its ability to
claim a loss as a result of the merger.
Non-U.S. holders
who claim a loss that exceeds certain thresholds may be required
to file a disclosure statement with the Internal Revenue
Service.
Non-U.S. holders
should consult their own tax advisors regarding the tax
consequences of the merger.
Genesco believes that it is not and has not been a United
States real property holding corporation for
U.S. federal income tax purposes.
Backup withholding (currently at a rate of 28%) may apply to the
cash received by a non-corporate shareholder pursuant to the
merger, unless the shareholder or other payee certifies under
penalty of perjury that it is a
non-U.S. holder
in the manner described in the letter of transmittal (and the
payor does not have actual knowledge or reason to know that the
beneficial owner is a U.S. person as defined under the
Code) or otherwise establishes an exemption in a manner
satisfactory to the paying agent. Backup withholding is not an
additional tax and any amounts withheld under the backup
withholding rules may be refunded or credited against a
non-U.S. holders
U.S. federal income tax liability, if any, provided that
such
non-U.S. holder
furnishes the required information to the Internal Revenue
Service in a timely manner. Cash received in the merger will
also be subject to information reporting, unless an exemption
applies.
The U.S. federal income tax consequences set forth above
are not intended to constitute a complete description of all tax
consequences relating to the merger. Because individual
circumstances may differ, each holder should consult the
holders tax advisor regarding the applicability of the
rules discussed above to the holder and the particular tax
effects to the shareholder of the merger in light of the
holders particular circumstances, including the
application of state, local and foreign tax laws, and, if
applicable, the tax consequences of the receipt of cash in
connection with the cancellation of restricted shares or options
to purchase shares of Genesco common stock, including the
transactions described in this proxy statement relating to our
other equity compensation and benefit plans.
Certain
Relationships Between Finish Line and Genesco
There are no material relationships between Finish Line and
Merger Sub or any of their respective affiliates, on the one
hand, and Genesco or any of our affiliates, on the other hand,
other than in respect of the merger agreement.
50
Litigation
Related to the Merger
We are aware of one asserted class action lawsuit related to the
proposed merger filed against us. On April 24, 2007, a
purported class action lawsuit styled Maxine Phillips, on
Behalf of Herself and All Others Similarly Situated v.
Genesco, Inc., Hal N. Pennington, James S. Beard, Leonard L.
Berry, William F. Blaufuss, Jr., James W. Bradford, Robert
V. Dale, Matthew C. Diamond, Marty G. Dickens, Ben T. Harris,
Kathleen Mason, William A Williamson, Jr., and Robert J.
Dennis, was filed in the Chancery Court for the State of
Tennessee, Twentieth Judicial District of Nashville (Case
No. 07-905-III).
The complaint alleges, among other things, that the individual
defendants (officers and directors of Genesco) refused to
properly consider an initial offer made by Foot Locker to
purchase Genesco. Plaintiff asserts that, instead of attempting
to negotiate with Foot Locker to obtain the highest price
reasonably available for Genesco and its shareholders, the
individual defendants initially refused to respond to the offer,
and subsequently rejected the offer without allowing for the
possibility of further negotiations or solicitation of a higher
purchase price from Foot Locker or other potential buyers. The
complaint seeks an order certifying a class, a declaration that
the defendants have breached their fiduciary and other duties,
and an order requiring the defendants to implement a procedure
or process to obtain the highest possible price for shareholders
including, but not limited to, reasonable negotiations with Foot
Locker. Plaintiff also seeks her costs and attorneys fees.
The individual defendants and Genesco have not yet filed an
answer to the complaint. Following the execution of the merger
agreement with Finish Line, plaintiffs counsel indicated,
and continues to indicate, that plaintiff intends to file an
amended complaint alleging breach of fiduciary duties by the
individual defendants in connection with the board of
directors approval of the merger agreement and the
disclosures made in this proxy statement and seeking injunctive
relief.
Amendment
to Rights Agreement
Immediately prior to the execution of the merger agreement, the
Amended and Restated Rights Agreement, dated August 28,
2000, between Genesco and Computershare Trust Company,
N.A., as successor to First Chicago Trust Company of New
York (the Rights Agreement), was amended to render
the shareholder rights inapplicable to both the merger agreement
and the completion of transactions contemplated under the merger
agreement.
Fees and
Expenses of the Merger
We estimate that we will incur, and will be responsible for
paying, transaction-related fees and expenses, consisting
primarily of financial, legal, accounting and tax advisory fees,
SEC filing fees and other related charges, totaling
approximately $22.3 million. This amount includes the
following estimated fees and expenses:
|
|
|
|
|
|
|
Amount to
|
|
Description
|
|
be Paid
|
|
|
SEC filing fee
|
|
$
|
39,219
|
|
Printing, proxy solicitation and
mailing expenses
|
|
|
110,000
|
|
Financial, legal, accounting and
tax advisory fees and expenses
|
|
|
22,000,000
|
|
Miscellaneous expenses
|
|
|
125,000
|
|
|
|
|
|
|
Total
|
|
$
|
22,274,219
|
|
|
|
|
|
|
51
THE
MERGER AGREEMENT
(PROPOSAL NO. 1)
This section of the proxy statement describes the material
provisions of the merger agreement but does not purport to
describe all of the terms of the merger agreement. The following
summary is qualified in its entirety by reference to the
complete text of the merger agreement, which is attached as
Annex A to this proxy statement and incorporated into this
proxy statement by reference. We urge you to read the full text
of the merger agreement because it is the legal document that
governs the merger. It is not intended to provide you with any
other factual information about us. Such information can be
found elsewhere in this proxy statement and in the public
filings we make with the SEC, as described in the section
entitled Where You Can Find More Information
below.
The
Merger
The merger agreement provides for the merger of Merger Sub with
and into Genesco upon the terms, and subject to the conditions,
of the merger agreement. The merger will be effective at the
time the articles of merger are filed with the Secretary of
State of the State of Tennessee (or at a later time, if agreed
upon by the parties and specified in the articles of merger). We
expect to complete the merger as promptly as practicable after
meeting the conditions precedent to the merger, including but
not limited to that our shareholders approve the merger
agreement.
As the surviving corporation, Genesco will continue to exist
following the merger. Upon completion of the merger, the
directors of Merger Sub will be the initial directors of the
surviving corporation and the officers of Genesco will be the
initial officers of the surviving corporation. All officers of
the surviving corporation will hold their positions until their
successors are duly elected and qualified or until the earlier
of their resignation or removal.
Genesco or Finish Line may terminate the merger agreement prior
to the completion of the merger in some circumstances, whether
before or after the approval of the merger agreement by
shareholders. Additional details on termination of the merger
agreement are described in Termination of the
Merger Agreement.
Common
Stock Merger Consideration
Each share of Genesco common stock issued and outstanding
immediately before the merger will automatically be cancelled
and will cease to exist and will be converted into the right to
receive $54.50 in cash, without interest and less any applicable
withholding taxes, other than:
|
|
|
|
|
shares held in treasury or owned by Finish Line or Merger Sub
immediately prior to the merger that will be cancelled; and
|
|
|
|
shares held by subsidiaries of Finish Line (other than Merger
Sub) or Genesco, which will remain outstanding after completion
of the merger.
|
After the merger is effective, each holder of a certificate
representing shares of Genesco common stock will no longer have
any rights with respect to such shares, except for the right to
receive the merger consideration.
Preferred
Stock Treatment
The holders of our preferred stock outstanding upon the
completion of the merger will not be entitled to any
consideration upon the completion of the merger pursuant to the
merger agreement. Each share of Genesco preferred stock issued
and outstanding, and not otherwise properly converted to common
stock if applicable, immediately before the merger will remain
outstanding following the merger. Finish Line has informed us
that it intends to redeem all outstanding shares of redeemable
preferred stock following the completion of the merger in
accordance with our charter, and that it also intends to redeem
the outstanding Employees Preferred subject to the
requisite approval and filing of the proposed charter amendment
52
(Proposal No. 2). See The Merger
Preferred Stock beginning on page 38, for further
discussion of the treatment and rights of Genesco preferred
stock in connection with the merger.
Treatment
of Options and Other Awards
Upon the completion of the merger, all outstanding options to
acquire Genesco common stock under our equity incentive plans
will become fully vested and immediately exercisable, and each
option not exercised prior to the merger will be cancelled and
converted into the right to receive a cash payment equal to the
number of shares of Genesco common stock underlying the option
multiplied by the amount by which $54.50 exceeds the exercise
price for each share of Genesco common stock underlying the
option, without interest and less any applicable withholding
taxes. Additionally, restrictions applicable to all shares of
restricted stock will, in connection with the merger, lapse and
those shares will be cancelled and converted into the right to
receive a cash payment equal to the number of outstanding
restricted shares, multiplied by $54.50, without interest and
less any applicable withholding taxes.
The effect of the merger upon our employee stock purchase plan
and certain other employee benefit plans is described below
under Employee Benefits beginning on
page 65.
Treatment
of Convertible Debentures
The 4.125% Convertible Subordinated Debentures due 2023
(the Convertible Debentures) issued by us and under
that certain indenture dated as of June 24, 2003, between
us and The Bank of New York (the Indenture), and
outstanding immediately prior to the effective time of the
merger, by virtue of the merger and the terms of the Indenture
and a supplemental indenture required to be entered into upon
the merger under the terms of the Indenture (the
Supplemental Indenture), will not be convertible at
or after the effective time of the merger into shares of our
common stock, and following the effective time of the merger,
the Convertible Debentures will be convertible, pursuant to the
terms of the Indenture and the Supplemental Indenture, into cash
in an amount equal to the product of (i) $54.50 (the per
share price to be paid for Genescos common stock in the
merger) and (ii) the number of shares of our common stock
into which the Convertible Debentures could have been converted
as of the effective time of the merger, including fractional
shares. Finish Line has agreed pursuant to the merger agreement
that it shall, and shall cause the surviving corporation to, at
all times from and after the effective time of the merger
maintain sufficient funds to satisfy its obligations to holders
of Convertible Debentures upon the conversion thereof as
described above.
Payment
for the Shares
Before the merger, Finish Line will designate a paying agent
reasonably acceptable to us to make payment of the merger
consideration as described above. At or prior to the effective
time of the merger, Finish Line will deposit, or cause to be
deposited, in trust with the paying agent the funds necessary to
pay the merger consideration to the applicable shareholders.
Upon the completion of the merger and the settlement of any
transfers that occurred prior to the effective time, we will
close our common stock ledger. After that time, there will be no
further transfer of shares of Genesco common stock.
As soon as reasonably practicable after the completion of the
merger, the surviving corporation will send, or cause the paying
agent to send, to all common stock holders a form of letter of
transmittal and instructions advising how to surrender their
common stock certificates in exchange for the merger
consideration. The paying agent will pay common stock holders
their merger consideration after they have (1) surrendered
their common stock certificates to the paying agent and
(2) provided to the paying agent their signed letter of
transmittal and any other items specified by the letter of
transmittal. Interest will not be paid or accrue in respect of
the merger consideration. The surviving corporation will reduce
the amount of any merger consideration paid to common stock
holders by any applicable withholding taxes. YOU SHOULD NOT
FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A
LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
53
If any cash deposited with the paying agent is not claimed
within one year following the effective time of the merger, the
cash will be returned to the surviving corporation upon demand
subject to any applicable unclaimed property laws. Any unclaimed
amounts remaining immediately prior to when the amounts would
escheat to or become property of any governmental authority will
be returned to the surviving corporation free and clear of any
prior claims or interest thereto.
If the paying agent is to pay some or all of your merger
consideration to a person other than you, as the registered
owner of a common stock certificate, you must have your
certificates properly endorsed or otherwise in proper form for
transfer, and you must pay any transfer or other taxes payable
by reason of the transfer or establish to Finish Lines
satisfaction that the taxes have been paid or are not required
to be paid.
The transmittal instructions will tell you what to do if you
have lost your certificate, or if it has been stolen or
destroyed. You will have to provide an affidavit to that fact
and, if required by the surviving corporation, post a bond in an
amount that the surviving corporation reasonably directs as
indemnity against any claim that may be made against it in
respect of the certificate.
Representations
and Warranties
The merger agreement contains representations and warranties
made by us to Finish Line and Merger Sub and representations and
warranties made by Finish Line and Merger Sub to us. The
assertions embodied in those representations and warranties were
made solely for purposes of the merger agreement and may be
subject to important qualifications and limitations agreed by
the parties in connection with negotiating its terms (including
exceptions described in the confidential disclosure schedules to
the merger agreement). Moreover, some of those representations
and warranties may not be accurate or complete as of any
particular date because they are subject to a contractual
standard of materiality or material adverse effect different
from that generally applicable to public disclosures to
shareholders or used for the purpose of allocating risk between
the parties to the merger agreement rather than establishing
matters of fact. For the foregoing reasons, you should not rely
on the representations and warranties contained in the merger
agreement as statements of factual information.
In the merger agreement, Genesco, Finish Line and Merger Sub
each made representations and warranties relating to, among
other things:
|
|
|
|
|
corporate organization and existence;
|
|
|
|
corporate power and authority to enter into and perform its
obligations under, and enforceability of, the merger agreement;
|
|
|
|
required regulatory filings and consents and approvals of
governmental entities;
|
|
|
|
the absence of conflicts with or defaults under organizational
documents, other contracts and applicable laws and judgments;
|
|
|
|
litigation;
|
|
|
|
brokers fees; and
|
|
|
|
information supplied for inclusion in this proxy statement.
|
In the merger agreement, Finish Line and Merger Sub also each
made representations and warranties relating to solvency, the
availability of the funds necessary to perform its obligations
under the merger agreement, and the operations of Finish Line
and Merger Sub.
Genesco also made representations and warranties relating to,
among other things:
|
|
|
|
|
capital structure;
|
|
|
|
subsidiaries;
|
|
|
|
documents filed with the SEC;
|
54
|
|
|
|
|
undisclosed liabilities;
|
|
|
|
absence of certain changes or events since February 3, 2007;
|
|
|
|
compliance with applicable laws;
|
|
|
|
contracts and other agreements;
|
|
|
|
intellectual property matters;
|
|
|
|
real and leased property matters;
|
|
|
|
insurance matters;
|
|
|
|
tax matters;
|
|
|
|
compliance with the Employee Retirement Income Security Act of
1974, as amended, and other employee benefit matters;
|
|
|
|
labor matters;
|
|
|
|
environmental matters;
|
|
|
|
the absence of any breach of organizational documents, material
contracts and applicable laws as a result of the execution,
delivery and performance of the merger agreement;
|
|
|
|
board of directors approval of the merger agreement and the
transactions contemplated thereby, including the merger, and
board of directors recommendation to our shareholders to approve
the merger agreement and the transactions contemplated thereby,
including the merger;
|
|
|
|
state takeover statutes and our rights plan;
|
|
|
|
the required votes of our shareholders in connection with the
merger agreement;
|
|
|
|
our suppliers and vendors;
|
|
|
|
our inventory;
|
|
|
|
the receipt of a fairness opinion from our financial
advisor; and
|
|
|
|
affiliate transactions.
|
Many of Genescos representations and warranties are
qualified by a material adverse effect standard. For purposes of
the merger agreement, material adverse effect on
Genesco (a Company Material Adverse Effect), is
defined to mean:
|
|
|
|
|
any event, circumstance, change or effect that, individually or
in the aggregate, is materially adverse to the business,
condition (financial or otherwise), assets, liabilities or
results of operations of Genesco and Genescos
subsidiaries, taken as a whole; provided, however, that none of
the following shall constitute, or shall be considered in
determining whether there has occurred, and no event,
circumstance, change or effect resulting from or arising out of
any of the following shall constitute, a material adverse
effect on Genesco:
|
|
|
|
|
|
the announcement of the execution of the merger agreement or the
pendency of completion of the merger (including the threatened
or actual impact on relationships of Genesco and Genescos
subsidiaries with customers, vendors, suppliers, distributors,
landlords or employees (including the threatened or actual
termination, suspension, modification or reduction of such
relationships));
|
|
|
|
changes in the national or world economy or financial markets as
a whole or changes in general economic conditions that affect
the industries in which Genesco and Genescos subsidiaries
conduct their business, so long as such changes or conditions do
not adversely affect Genesco and Genescos subsidiaries,
taken as a whole, in a materially disproportionate manner
relative to other similarly situated participants in the
industries or markets in which they operate;
|
55
|
|
|
|
|
any change in applicable law, rule or regulation or generally
accepted accounting principles or interpretation thereof after
the date of the merger agreement, so long as the changes do not
adversely affect Genesco and Genescos subsidiaries, taken
as a whole, in a materially disproportionate manner relative to
other similarly situated participants in the industries or
markets in which they operate;
|
|
|
|
the failure, in and of itself, of Genesco to meet any published
or internally prepared estimates of revenues, earnings or other
financial projections, performance measures or operating
statistics; provided, however, that the facts and circumstances
underlying any such failure may, except as provided in any of
the other provisions of this definition of material adverse
effect, be considered in determining whether a material adverse
effect has occurred);
|
|
|
|
a decline in the price, or a change in the trading volume, of
Genesco common stock on the NYSE or the CHX;
|
|
|
|
compliance with the terms of, and taking any action required by,
the merger agreement, or taking or not taking any actions at the
request of, or with the consent of, Finish Line; and
|
|
|
|
acts or omissions of Finish Line or Merger Sub after the date of
the merger agreement (other than acts or omissions specifically
contemplated by the merger agreement).
|
Conduct
of Business Pending the Merger
We have agreed in the merger agreement that, until the
completion of the merger (or the termination of the merger
agreement), except as expressly contemplated by the merger
agreement or consented to in writing by Finish Line (which
consent shall not be unreasonably withheld, conditioned or
delayed) or required by applicable law, we and each of our
subsidiaries will:
|
|
|
|
|
conduct our businesses in the ordinary course on a basis
consistent with past practice;
|
|
|
|
use reasonable best efforts, on a basis consistent with past
practices, to:
|
|
|
|
|
|
preserve intact our business organizations, keeping available
the services of our current officers, employees and consultants,
and preserve our relationships with customers, suppliers, and
others having significant business relations with us;
|
|
|
|
advertise, promote, and market Genescos products;
|
|
|
|
keep our material properties substantially intact, preserve our
goodwill and business, and maintain all physical properties in
good repair and condition;
|
|
|
|
perform and comply in all material respects with the terms of
our material contracts; and
|
|
|
|
maintain, and comply in all material respects with, all
governmental approvals or requirements necessary for the
operation of Genescos business or the holding of any
interest in any of Genescos properties;
|
|
|
|
|
|
use reasonable best efforts to keep in effect material insurance
policies in coverage amounts substantially similar to those in
effect as of the date of the merger agreement; and
|
|
|
|
deliver or cause of be timely delivered to (1) the holders
of the Companys 4.125% Convertible Subordinated
Debentures due 2023, issued by the Company and under that
certain indenture dated as of June 24, 2003, between the
Company and The Bank of New York and (2) holders of the
Companys preferred stock, all notices required pursuant to
the terms of the indenture and the Companys charter and
bylaws in connection with the merger.
|
We have also agreed that, until the completion of the merger,
except as expressly contemplated or permitted by the merger
agreement or consented to in writing by Finish Line (which
consent shall not be unreasonably withheld, conditioned or
delayed), we will not, and will not permit any of our
subsidiaries to:
|
|
|
|
|
change the compensation payable to any officer, employee, agent
or consultant or enter into or amend any employment, change in
control, bonus, severance, termination, retention or other
agreement or
|
56
|
|
|
|
|
arrangement with any officer, employee, agent or consultant of
Genesco or Genescos subsidiaries, or adopt or increase the
benefits (including fringe benefits), severance or termination
pay under, any employee benefit plan or agreement or otherwise,
except as required by law or in accordance with existing
agreements or employee benefit plans and in the case of
compensation for officers (other than executive officers),
employees, agents or consultants, in the ordinary course of
business consistent with past practice, and other than any
separation, retention or incentive agreement entered into after
the date of the merger agreement with any non-executive officer
of Genesco or any of Genescos subsidiaries pursuant to
which the aggregate benefits (to the extent additional to
existing benefits of a similar nature) do not exceed $250,000 in
the aggregate or $25,000 for any person individually, provided
Genesco provides Finish Line at least two (2) business days
prior written notice;
|
|
|
|
|
|
make any prohibited loans or advances to any of its officers,
employees, agents or consultants, or make any material change in
our existing borrowing or lending arrangements for or on behalf
of any persons pursuant to a plan or otherwise; subject to
certain exceptions for newly hired employees and for employees
in the context of promotions based on job performance or
workplace requirements;
|
|
|
|
subject to certain specified exceptions, split, combine or
reclassify any of our capital stock or make any change in the
number of shares of our capital stock authorized, issued or
outstanding or grant, sell or otherwise issue or authorize the
issuance of any share of capital stock, any other voting
security or any security convertible into, or any option,
warrant or other right to purchase (including any equity-based
award), or convert any obligation into, shares of our capital
stock or any other voting security, declare, set aside, make or
pay any dividend or other distribution with respect to any
shares of our capital stock, sell or transfer any shares of our
capital stock, or acquire, redeem or otherwise repurchase any
shares of our capital stock or any rights, warrants or options
to purchase any of our capital stock, or any securities
convertible into or exchangeable for any such shares;
|
|
|
|
amend, or otherwise alter or modify in any respect, the charter
or bylaws of Genesco or any Genesco subsidiary;
|
|
|
|
except as provided in Genescos financial budget and plans
previously made available to Finish Line, sell or transfer or
mortgage, pledge, lease, license, terminate any lease or
license, or otherwise dispose of or encumber any tangible or
intangible asset or related assets with a value in excess of
$3,000,000, other than sales and non-exclusive licenses of
products and services of Genesco and Genescos subsidiaries
in the ordinary course of business consistent with past practice;
|
|
|
|
except as provided in Genescos financial budget and plans
previously made available to Finish Line, authorize any single
capital expenditure or a series of related expenditures in
excess of $3,000,000;
|
|
|
|
except as may be required as a result of a change in law or
generally accepted accounting principles (GAAP) (or
any interpretation thereof), change any of the accounting
practices or principles used by Genesco or any of Genescos
subsidiaries;
|
|
|
|
except as provided in Genescos financial budget and plans
previously made available to Finish Line, write up, write down
or write off the book value of any material assets of Genesco
and material Genesco subsidiaries, other than in the ordinary
course of business and consistent with past practice or as may
be required by GAAP or the Financial Accounting Standards Board;
|
|
|
|
settle or compromise any pending or threatened suit, action or
claim which:
|
|
|
|
|
|
is material to Genesco and Genescos subsidiaries taken as
a whole;
|
|
|
|
requires payment to or by Genesco or any of Genescos
subsidiaries (exclusive of attorneys fees, including
success fees) in excess of $3,000,000;
|
|
|
|
involves restrictions on the business activities of Genesco that
would be material to Genesco and Genescos subsidiaries
taken as a whole; or
|
|
|
|
would involve the issuance of Genesco securities;
|
57
|
|
|
|
|
adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, or recapitalization of Genesco or any of
Genescos subsidiaries (other than the merger agreement and
the merger);
|
|
|
|
except as required by law or contracts in existence on the date
of the merger agreement (subject to certain specified
exceptions), establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any current or former
directors, officers or employees of Genesco or any of
Genescos subsidiaries, pay any discretionary bonuses to
any director, officer employee of Genesco or any of
Genescos subsidiaries, except for the exercise of
discretionary elements under compensation, employment or other
benefit plans or arrangements existing as of the date of the
merger agreement, or change in any material respect the manner
in which contributions to any plan or arrangement are made or
the basis on which contributions are determined;
|
|
|
|
except in each case as required by applicable law or treasury
regulation, make, revoke or change any material tax election,
file any amended tax return with respect to any material tax,
settle or compromise any material federal, state, local or
foreign tax liability, surrender any right to claim a material
tax refund, waive any statute of limitations in respect of a
material amount of taxes, agree to an extension of time with
respect to an assessment or deficiency for a material amount of
taxes or change any annual tax accounting period;
|
|
|
|
purposefully and knowingly take any action that would result in
any representation or warranty of Genesco becoming untrue in any
material respect at the closing of the transactions contemplated
by the merger agreement, to the extent such breach would
reasonably be expected to cause any closing condition not to be
satisfied;
|
|
|
|
enter into any new line of business other than the development
and testing of concepts reasonably related to the current
businesses of Genesco and Genescos subsidiaries, or
discontinue any significant and material line of business;
|
|
|
|
acquire (by merger, consolidation, acquisition of stock or
assets, joint venture or otherwise or through a direct or
indirect ownership interest or investment) any person or
division thereof, except that Genesco can engage in such
acquisition having a transaction price less than $3,000,000
without obtaining Finish Lines prior consent;
|
|
|
|
incur, assume or prepay any indebtedness for borrowed money for
any indebtedness in an aggregate amount in excess of $3,000,000,
except to refund or refinance commercial paper or in the
ordinary course of business (including for purposes of funding
working capital in the ordinary course of business) consistent
with past practice;
|
|
|
|
incur, assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for
any indebtedness for borrowed money of any other person in an
aggregate amount in excess of $3,000,000, except the incurrence
of, guarantee with respect to or provision of credit support
for, indebtedness of Genesco or any of Genescos
subsidiaries for borrowed money under Genescos or
Genescos subsidiaries existing credit facilities in
the ordinary course of business;
|
|
|
|
make any loans, advances or capital contributions to, or
investments in, any other person, except in the ordinary course
of business consistent with past practice;
|
|
|
|
pledge or otherwise encumber shares of capital stock or other
voting securities of any of Genescos subsidiaries, other
than permitted liens (as defined in the merger agreement);
|
|
|
|
mortgage or pledge any of its material assets, tangible or
intangible, or create any lien thereupon (other than permitted
liens or liens arising under and created by contracts without
any breach thereof or under the merger agreement or default
thereunder or under the merger agreement);
|
58
|
|
|
|
|
enter into any material contract other than in the ordinary
course of business consistent with past practice to the extent
such contract would be material to Genesco and Genescos
subsidiaries, taken as a whole;
|
|
|
|
voluntarily terminate or modify in any material adverse respect
any material contract;
|
|
|
|
enter into material supply agreements with suppliers, except in
the ordinary course of business consistent with past practice;
|
|
|
|
enter into any foreign exchange contract or other hedging
contract except in the ordinary course of business consistent
with past practice; or
|
|
|
|
obligate itself to do any of the above actions.
|
Notwithstanding the foregoing, nothing contained in the merger
agreement shall give Finish Line, directly or indirectly, the
right to control or direct Genescos or Genescos
subsidiaries operations prior to the effective time of the
merger; prior to the effective time of the merger, each of
Genesco and Finish Line shall exercise, consistent with the
terms and conditions of the merger agreement, complete control
and supervision over its and its subsidiaries respective
operations; and no consent of Finish Line shall be required with
respect to any matter set forth above or elsewhere in the merger
agreement to the extent the requirement of such consent would be
inconsistent with applicable law.
Efforts
to Complete the Merger
Upon the terms and subject to the conditions set forth in the
merger agreement, each of the parties to the merger agreement
has agreed to use its reasonable efforts to take, or cause to be
taken, all actions, to file, or cause to be filed, all
documents, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective the merger,
including: (1) the taking of all acts necessary to satisfy
the conditions necessary for the completion of the merger;
(2) the obtaining of all necessary actions or non-actions,
expirations of all necessary waiting periods, waivers, consents,
clearances, approvals, orders and authorizations from
governmental entities and any other third parties; (3) the
defending of any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging the
merger agreement or the completion of the merger; and
(4) the execution or delivery of any additional instruments
necessary to consummate the merger.
Finish Line has agreed to use its reasonable best efforts to
arrange the debt financing to fund the proposed merger and
related transactions contemplated by the debt financing
commitment executed in connection with the merger agreement and
to cause its financing sources to fund the financing required to
consummate the proposed merger. Genesco has agreed to cooperate
in connection with the financing. See The
Merger Financing of the Merger for a
description of the financing arranged by Finish Line to fund the
proposed merger and related transactions.
In the event any portion of the debt financing becomes
unavailable, Finish Line has also agreed to use its reasonable
best efforts to arrange to obtain alternative financing on terms
and conditions not materially less favorable to Finish Line in
the aggregate (as determined in Finish Lines good faith
reasonable judgment) than those contemplated by the debt
financing commitments as promptly as practicable following the
occurrence of the event, but no later than the closing.
Conditions
to the Merger
Conditions to Each Partys
Obligations. Each partys obligation to
complete the merger is subject to the satisfaction or waiver of
the following conditions:
|
|
|
|
|
the merger agreement must have been approved by the affirmative
vote of the holders of a majority of the votes represented by
the outstanding shares of our common stock and our preferred
stock, voting together as a single group;
|
59
|
|
|
|
|
no statute, rule, executive order or regulation shall have been
enacted, issued, entered or promulgated by any governmental
entity which prohibits the completion of the merger, and there
shall be no order or preliminary or permanent injunction of a
court of competent jurisdiction, including any temporary
restraining order, in effect preventing or prohibiting the
merger; and
|
|
|
|
any applicable waiting period (and any extension thereof) under
the HSR Act or any other applicable foreign competition or
merger control laws shall have been terminated or shall have
expired, and approvals under all applicable foreign competition
or merger control laws shall have been obtained or expired, as
the case may be.
|
Conditions to Finish Lines and Merger Subs
Obligations. The obligations of Finish Line and
Merger Sub to complete the merger are subject to the
satisfaction or waiver of the following additional conditions:
|
|
|
|
|
the representations and warranties made by us in the merger
agreement (with certain exceptions) must be true and correct as
of the closing date as if made at and as of that time (without
regard to materiality qualifiers), except to the extent that the
representations and warranties expressly relate to an earlier
date, and except where the failure of the representations and
warranties to be true and correct, individually or in the
aggregate, has not had, individually or in the aggregate, a
Company Material Adverse Effect on Genesco;
|
|
|
|
we must have performed and complied in all material respects
with all material covenants and agreements we are required by
the merger agreement to perform or comply with on or prior to
the closing date;
|
|
|
|
we must deliver to Finish Line at closing a certificate with
respect to the satisfaction of the foregoing conditions relating
to representations, warranties, obligations, covenants and
agreements; and
|
|
|
|
there shall not have occurred a Company Material Adverse Effect
with respect to Genesco and Genescos subsidiaries,
considered as a whole, that has not been cured.
|
Conditions to Genescos Obligations. Our
obligation to complete the merger is subject to the satisfaction
or waiver of the following further conditions:
|
|
|
|
|
the representations and warranties of Finish Line and Merger Sub
must be true and correct, as of the closing date (without regard
to materiality qualifiers), except to the extent that the
representations and warranties expressly relate to an earlier
date, and except where the failure of the representations and
warranties to be true and correct would not reasonably be
expected to prevent or materially impede the timely completion
of the merger;
|
|
|
|
Finish Line and Merger Sub must have performed and complied in
all material respects with all covenants and agreements they are
required by the merger agreement to perform or comply with on or
prior to the closing date; and
|
|
|
|
Finish Line and Merger Sub must each deliver to Genesco at
closing a certificate with respect to the satisfaction of the
foregoing conditions relating to representations, warranties,
obligations, covenants and agreements.
|
If a failure to satisfy one of these conditions to the merger is
not considered by our board of directors to be material to our
shareholders, our board of directors may waive compliance with
that condition. Our board of directors is not aware of any
condition to the merger that cannot be satisfied. After the
merger agreement has been approved by our shareholders, among
other limitations, the merger consideration cannot be changed
and the merger agreement cannot be altered in a manner adverse
to our shareholders without re-submitting the revisions to our
shareholders for their approval.
60
No
Solicitations of Other Offers
The merger agreement provides that neither we nor our
representatives (as defined in the merger agreement) will
directly or indirectly:
|
|
|
|
|
solicit, initiate or knowingly encourage or take any other
action to knowingly facilitate the submission of an acquisition
proposal (defined below);
|
|
|
|
enter into any letter of intent, memorandum of understanding,
agreement, option agreement or any agreement or arrangement with
respect to any acquisition proposal;
|
|
|
|
enter into, continue, participate, engage or knowingly assist in
any manner in contracts, negotiations or discussions with, or
provide any non-public information or data to, any person (other
than Finish Line, Merger Sub or any of their respective
affiliates or representatives) relating to any acquisition
proposal, or grant any waiver, amendment or release under any
standstill; or
|
|
|
|
take any action to
|
|
|
|
|
|
other than as contemplated by the merger agreement in connection
with the merger, render the rights issued pursuant to the terms
of the Rights Agreement inapplicable to an acquisition proposal
or the transactions contemplated thereby, exempt or exclude any
person from the definition of an acquiring person (as defined in
the Rights Agreement) under the terms of the Rights Agreement or
allow Genescos rights to expire prior to their expiration
date; or
|
|
|
|
otherwise amend the Rights Agreement.
|
However, Genesco may (and may authorize and permit its
representatives to) at any time prior to the approval of the
merger agreement by its shareholders, in response to an
unsolicited takeover proposal (defined below) that is made after
the date of the merger agreement and that is a superior proposal
(defined below), if its board of directors determines in good
faith (after receiving advice of outside counsel) that doing so
would be in the best interests of Genesco and Genescos
shareholders and that the failure to take that action is or
would be inconsistent with its board of directors
fiduciary duties to our shareholders under applicable law and
after giving Finish Line oral and written notice (including the
material terms of the inquiry, offer, proposal or request, and,
in the case of written materials provided to Genesco, copies or
written summaries of the written materials) within 48 hours
after receiving the proposal:
|
|
|
|
|
furnish information concerning, and provide access to, our
business, properties, employees and assets pursuant to a
confidentiality agreement with terms and conditions no less
favorable in any material respect to us than the terms of its
confidentiality agreement with Finish Line, provided that the
information must be provided to Finish Line prior to or
substantially concurrent with the time of its provision to the
third party to the extent not previously made available to
Finish Line; and
|
|
|
|
participate, engage or assist in any manner in negotiations and
discussions with the party making a takeover proposal regarding
the takeover proposal.
|
In addition, we have agreed that, except as described below
under Recommendation Withdrawal/Termination in
Connection with a Superior Proposal and Third Party Tender
Offers, neither our board of directors nor any of its
committees will:
|
|
|
|
|
withdraw or modify, or publicly propose to withdraw or modify,
in a manner adverse to Finish Line or Merger Sub, the approval
or recommendation of our board of directors of the merger
agreement or the merger or publicly announce that it has
resolved to take the action;
|
|
|
|
approve, recommend or adopt or publicly propose to approve,
recommend or adopt any acquisition proposal; or
|
|
|
|
approve, recommend, adopt or allow Genesco to enter into any
letter of intent, memorandum of understanding, option agreement
or similar arrangement with respect to any acquisition proposal.
|
61
For purposes of these restrictions, an acquisition
proposal means any transaction or proposed transaction or
series of related transactions involving:
|
|
|
|
|
any direct or indirect acquisition or purchase by any person or
group (as defined in Section 13(d) of the
Exchange Act) of a 20% interest or more in either the total
outstanding shares of equity or voting securities of Genesco or
any Genesco subsidiary whose business constitutes 25% or more of
the net revenues, net income or assets (based on fair market
value) of Genesco and Genescos subsidiaries, taken as a
whole, (a Company Subsidiary), or the total
outstanding shares of equity securities of Genesco or a Company
Subsidiary;
|
|
|
|
any tender offer or exchange offer that if consummated would
result in any person or group beneficially owning 20% or more of
the total outstanding shares of equity or voting securities of
Genesco or the total outstanding shares of any class of equity
securities of Genesco or any Company Subsidiary;
|
|
|
|
any sale or disposition of consolidated assets of Genesco or any
Company Subsidiary to any person or group for consideration
equal to 15% or more of the aggregate fair market value of all
of the outstanding shares of Genesco common stock; or
|
|
|
|
any consolidation, merger, business combination,
recapitalization, liquidation, dissolution or similar
transaction with respect to Genesco or any Company Subsidiary.
|
For purposes of these restrictions, a takeover
proposal means any acquisition proposal or inquiry (other
than the transactions contemplated by the merger agreement) that
is reasonably likely to lead to an acquisition proposal that:
|
|
|
|
|
provides for any person or group to acquire, directly or
indirectly, a majority of the issued and outstanding shares of
Genesco common stock (or a majority of the voting securities of
any surviving corporation in a merger or consolidation with
Genesco); or
|
|
|
|
provides for the acquisition of all or substantially all of the
consolidated assets of Genesco.
|
For purposes of these restrictions, a superior
proposal means any takeover proposal:
|
|
|
|
|
that is unsolicited, and which our board of directors determines
in good faith, after consultation with our financial advisor and
outside counsel, is a takeover proposal that is more favorable,
from a financial point of view to our shareholders, taking into
account all of the terms and conditions of the proposal, than
the merger agreement (including any binding written and complete
proposal to amend the terms of the merger agreement);
|
|
|
|
for which financing, to the extent required, is, or is
reasonably likely to be, committed on terms and conditions that
our board of directors determines, after consultation with our
financial advisor, are reasonably likely to result in
disbursement sufficient for the completion of the transactions
contemplated by the takeover proposal; and
|
|
|
|
for which, in the good faith opinion of our board of directors
(or any committee thereof authorized to act in such capacity),
after consultation with outside legal counsel, providing
information or access or participating, engaging or assisting in
the negotiations or discussions is or would be in the best
interests of Genesco and our shareholders and that the failure
to take the action is or would be inconsistent with our board of
directors fiduciary duties to our shareholders under
applicable law.
|
Recommendation
Withdrawal/Termination in Connection with a Superior Proposal
and Third Party Tender Offers
Our board of directors may also, at any time prior to the
approval of the merger agreement by our shareholders, withdraw
or modify, or publicly propose to withdraw or modify, in a
manner adverse to Finish Line, the approval or recommendation of
our board of directors of the merger agreement or the merger or
announce that it has resolved to take that action or terminate
the merger agreement and enter into a definitive agreement with
respect to a superior proposal if our board of directors
concludes in good faith (after
62
consultation with our financial advisor and outside legal
counsel) that failure to do so would be inconsistent with its
obligations to comply with its fiduciary duties under applicable
law, and only after (i) we give written notice to Finish
Line and Merger Sub at least three business days in advance of
such action of the superior proposal and the material terms and
conditions of the superior proposal, and (ii) we pay to
Finish Line the termination fees and expenses described in
Termination Fees beginning on
page 64.
Nothing described above limits our ability to take and disclose
a position recommending rejection with respect to any tender or
exchange offer by a third party pursuant to
Rules 14d-9
and 14e-2(a)
promulgated under the Exchange Act, or from making any similar
disclosure to our shareholders with respect to any takeover
proposal, if in any such case Genescos board of directors
determines in good faith (after consultation with its outside
legal counsel) that it is required to do so under applicable law.
Termination
of the Merger Agreement
The merger agreement may be terminated at any time prior to the
completion of the merger, whether before or after our
shareholders have approved the merger agreement:
|
|
|
|
|
by mutual written consent of Genesco and Finish Line;
|
|
|
|
by either Genesco or Finish Line, if:
|
|
|
|
|
|
the merger has not been consummated by December 31, 2007,
except that this right to terminate will not be available to any
party whose action or failure to fulfill any obligation under
the merger agreement or failure to act in good faith has been
the principal cause of, or resulted in, the failure of the
merger to be consummated by that date;
|
|
|
|
a court of competent jurisdiction or other governmental entity
has issued a final, non-appealable order, decree or ruling or
taken any other action, or there exists any statute, rule or
regulation, in each case preventing or otherwise prohibiting the
completion of the merger or that otherwise has the effect of
making the merger illegal and the party seeking to terminate the
merger agreement has used all reasonable efforts to prevent the
entry of and to remove the order, decree, ruling, action, or
statute, rule or regulation to the extent of its control or
influence; or
|
|
|
|
Genescos shareholders fail to approve the merger agreement
at a duly held meeting; or
|
|
|
|
|
|
Genescos board of directors withdraws or modifies, or
publicly proposes to withdraw or modify, in a manner adverse to
Finish Line, the approval or recommendation of Genescos
board of directors of the merger agreement or the merger or
publicly announces that it has resolved to take that action;
|
|
|
|
Genescos board of directors recommends to its shareholders
or approves any alternative acquisition proposal;
|
|
|
|
Genescos board of directors fails to include in this proxy
statement its recommendation that Genescos shareholders
approve the merger agreement; or
|
|
|
|
there has been a breach of, or inaccuracy in, any
representation, warranty, covenant or agreement of Genesco under
the merger agreement which would result in the failure of
certain conditions to closing and where the breach or inaccuracy
is reasonably incapable of being cured, or is not cured, within
20 business days after Genesco receives written notice of the
breach or inaccuracy and neither Finish Line nor Merger Sub is
in material breach of its representations, warranties, covenants
and obligations under the merger agreement so as to cause the
failure of certain conditions to closing; or
|
|
|
|
|
|
Genesco concurrently enters into a definitive agreement with
respect to a superior proposal, provided that Genesco has paid,
or simultaneously with doing so, pays to Finish Line the
termination fees and expenses as described below; or
|
63
|
|
|
|
|
there has been a breach of, or inaccuracy in, any
representation, warranty, covenant or agreement of Finish Line
or Merger Sub under the merger agreement which would result in
the failure of certain conditions to closing and where the
breach or inaccuracy is reasonably incapable of being cured, or
is not cured, within 20 business days after Finish Line receives
written notice of the breach or inaccuracy and Genesco is not in
material breach of our representations, warranties, covenants
and obligations under the merger agreement so as to cause the
failure of certain conditions to closing.
|
Termination
Fees
Genesco has agreed to pay Finish Line a termination fee of
$46 million and reimburse Finish Lines reasonable,
actual and documented out-of-pocket expenses and fees (including
reasonable attorneys fees), up to a limit of
$10 million, if:
|
|
|
|
|
Finish Line terminates the merger agreement because
Genescos board of directors withdraws or modifies, or
publicly proposes to withdraw or modify, in a manner adverse to
Finish Line, the approval or recommendation of Genescos
board of directors of the merger agreement or the merger or
publicly announces that it has resolved to take that action;
|
|
|
|
Finish Line terminates the merger agreement because
Genescos board of directors recommends to our shareholders
or approves any alternative acquisition proposal;
|
|
|
|
Finish Line terminates the merger agreement because
Genescos board of directors fails to include in this proxy
statement its recommendation that Genescos shareholders
approve the merger agreement;
|
|
|
|
Genesco terminates the merger agreement because Genesco has
entered into a definitive agreement with respect to a superior
proposal and at least three (3) business days have passed
since the last notice was given by Genesco to Finish Line of
such proposal; or
|
|
|
|
(i) Finish Line terminates the merger agreement because
Genesco has breached a representation, warranty, covenant or
agreement such that the closing conditions would not be
satisfied, the breach has not been cured within the specified
time, and Finish Line is not also in material breach of its
obligations, or (ii) Finish Line terminates the merger
agreement because Genescos shareholders fail to approve
the merger agreement at a duly held meeting, and in any such
case:
|
|
|
|
|
|
prior to termination, an acquisition proposal is publicly
announced; and
|
|
|
|
within 12 months after the termination, Genesco enters into
a definitive agreement with respect to such acquisition proposal
(the required payment being the tail fee payment).
|
Solely for purposes of determining whether a tail fee payment is
payable by us, an acquisition proposal is generally:
|
|
|
|
|
any direct or indirect acquisition or purchase by any person or
group (as defined in Section 13(d) of the
Exchange Act) of a 75% interest or more in either the total
outstanding shares of equity or voting securities of Genesco or
any Genesco subsidiary whose business constitutes 25% or more of
the net revenues, net income or assets (based on fair market
value) of Genesco and Genescos subsidiaries, taken as a
whole (a Company Subsidiary), or the total
outstanding shares of equity securities of Genesco or a Company
Subsidiary;
|
|
|
|
any tender offer or exchange offer that if consummated would
result in any person or group beneficially owning 75% or more of
the total outstanding shares of equity or voting securities of
Genesco or the total outstanding shares of any class of equity
securities of Genesco or any Company Subsidiary;
|
|
|
|
any sale or disposition of consolidated assets of Genesco or any
Company Subsidiary to any person or group for consideration
equal to 75% or more of the aggregate fair market value of all
of the outstanding shares of Genesco common stock; or
|
64
|
|
|
|
|
any consolidation, merger, business combination,
recapitalization, liquidation, dissolution or similar
transaction with respect to Genesco or any Company Subsidiary,
|
Genesco has agreed to pay Finish Line a termination fee of
$46 million if Genesco or Finish Line terminates the merger
agreement because the merger has not been consummated by
December 31, 2007, and:
|
|
|
|
|
prior to termination, an acquisition proposal is publicly
announced; and
|
|
|
|
within 12 months after the termination, Genesco enters into
a definitive agreement with respect to such acquisition proposal
(in each case defined as described above with respect to the
tail fee payment).
|
Genesco has also agreed to reimburse Finish Lines
reasonable, actual and documented out-of-pocket expenses and
fees (including reasonable attorneys fees), up to a limit
of $10 million, if Genesco or Finish Line terminates the
merger agreement because Genescos shareholders fail to
approve the merger agreement at a duly held meeting.
Employee
Benefits
The surviving corporation has agreed to pay to each employee who
continues as an employee of Genesco and its subsidiaries, as the
surviving corporation, during the benefits continuation period
(one year from the date the articles of merger are filed with
the Secretary of State of the State of Tennessee) salary, wages,
cash incentive opportunities, severance, medical benefits and
other welfare benefit plans programs and arrangements (with the
exception of any equity compensation programs or defined benefit
plans) which are at least comparable in the aggregate to those
provided by us prior to the closing of the merger; provided,
that with respect to continuing employees who are subject to
employment agreements or change in control agreements that have
not been superseded by agreements with Finish Line, the
surviving corporation shall expressly assume such agreements,
and fulfill all obligations under such agreements. During the
benefits continuation period, the surviving corporation has
agreed to pay, subject to the terms and conditions as it shall
establish and the terms of applicable employment agreements, any
continuing employee whose employment is involuntarily terminated
without cause by Finish Line, the surviving corporation or any
of their subsidiaries an amount of severance pay in cash equal
to the amount of cash severance pay that would have been payable
to the continuing employee under the terms of the severance
policy applicable to the continuing employee immediately prior
to the date of the merger agreement or, if applicable, the
continuing employees employment agreement.
The merger agreement also provides that the surviving
corporation shall:
|
|
|
|
|
waive any applicable pre-existing condition exclusions and
waiting periods with respect to participation and coverage
requirements in any replacement or successor welfare benefit
plan of the surviving corporation that a continuing employee is
eligible to participate in following the effective time of the
merger to the extent the exclusions or waiting periods were
inapplicable to, or had been satisfied by, the continuing
employee immediately prior to the effective time of the merger
under the relevant plan in which the continuing employee
participated;
|
|
|
|
|
|
provide each continuing employee with credit for any co-payments
and deductibles paid prior to the effective time (to the extent
such credit would have been given under an analogous plan
sponsored by us prior to the effective time of the merger
agreement) in satisfying any applicable deductible or
out-of-pocket requirements; and
|
|
|
|
|
|
to the extent that any continuing employee is allowed to
participate in any employee benefit plan of Finish Line, the
surviving corporation or any of their subsidiaries following the
effective time of the merger, cause the plan to recognize the
service of the continuing employee with Genesco and our
subsidiaries prior to the effective time of the merger for
purposes of eligibility to participate, vesting and benefit
accrual (but not for benefit accrual under any defined benefit,
retiree welfare or similar plan) to the extent of the service;
provided, however, that the crediting of service shall not
operate to duplicate any benefit or the funding of any the
benefit.
|
65
Under the merger agreement, we are also required to terminate
our Amended and Restated Genesco Employee Stock Purchase Plan
dated August 24, 2005 (the ESPP) (including all
offering periods in progress), immediately prior to the
effective time of the merger agreement (or another date prior to
the effective time of the merger agreement designated by us for
administrative convenience) and ensure that there are no
outstanding rights of participants under the ESPP following its
termination as of the effective time of the merger (or such
other date designated by us). With respect to persons
participating in the ESPP on the date on which the offering
period under the ESPP ceases and the ESPP terminates (and who
have not withdrawn from or otherwise ceased participation in the
ESPP prior to that date), if any, all salary amounts withheld on
behalf of such participants as of the effective time of the
merger agreement (or earlier date designated by us, as described
in the previous sentence) will be deemed to have been used to
purchase Genesco common stock under the terms of the ESPP, using
the effective time of the merger agreement (or such other date
designated by us) as the last date of the applicable offering
period under the ESPP, and converted into the right to receive,
effectively, a cash payment equal to (i) the number of
shares deemed purchased under the ESPP multiplied by $54.50,
plus (ii) any salary deferrals which remain due to the
limitations under the ESPP regarding the purchase of fractional
shares.
Employees
Preferred Tender Offer
The merger agreement provides that Finish Line may commence a
tender offer and consent solicitation with respect to the
Employees Preferred. In the event that Finish Line chooses
to commence such tender offer and consent solicitation (and no
assurances are given as to whether it will or will not commence
such tender offer or consent solicitation), Genesco has agreed
to provide all reasonable cooperation reasonably requested by
Finish Line. Additionally, the merger agreement provides that
any such tender offer and consent solicitation shall provide, as
conditions, (i) the prior or simultaneous consummation of
the merger and (ii) that the holders of Employees
Preferred grant their proxies in favor of (A) the merger
agreement, (B) the transactions contemplated by the merger
agreement including the merger, and (C) the proposed
amendment to Genescos charter (Proposal No. 2) to
allow for the redemption by Genesco of the Employees
Preferred after the completion of the merger at the price to be
paid per share of Genesco common stock in connection with the
merger, or $54.50 per share, without interest and net of any
unpaid amounts on such shares. Any such tender offer would be
made pursuant to an offer to purchase and consent solicitation
statement and related letters of transmittal or similar
ancillary agreements prepared by Finish Line, all of which are
required to be in a form that is reasonably satisfactory to
Genesco and in material compliance with applicable laws.
Neither the making of nor completion of such tender offer, nor
the approval of Genescos shareholders of the charter
amendment, is a condition to the closing of the merger for any
party. This proxy statement is not intended to constitute a
recommendation about whether a holder of Employees
Preferred should tender their shares in connection with any such
tender offer by Finish Line should Finish Line choose to
commence such tender offer.
Indemnification
and Insurance
The merger agreement provides that the charter
and/or
bylaws of the surviving corporation shall contain provisions
with respect to indemnification not less favorable than those
set forth in our charter and bylaws as of the date the merger
agreement was signed, and the provisions may not be amended,
repealed or otherwise modified for a period of six years from
the effective time of the merger in any manner that would
adversely affect the rights under those provisions of
individuals who at, or prior to, the effective time of the
merger were directors or officers of Genesco.
In addition, the merger agreement provides that Genesco shall,
for a period of six years after the effective time of the
merger, to the fullest extent permitted and not otherwise
prohibited under applicable law or under our charter, bylaws or
any applicable indemnification agreements, and regardless of
whether the merger becomes effective, indemnify, defend and hold
harmless, and, after the effective time of the merger, the
surviving corporation shall, and Finish Line shall cause the
surviving corporation to, to the extent indemnified as of the
date of the merger agreement by Genesco pursuant to
Genescos charter, bylaws
and/or
indemnification agreements in effect on the date hereof or under
applicable law, indemnify, defend and hold
66
harmless each present and former director or officer of Genesco
or any of Genescos subsidiaries against any costs or
expenses (including attorneys fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in
settlement in connection with any action, whether civil,
criminal, administrative or investigative, arising out of or
pertaining to (x) the fact that the person is or was an
officer, director, employee, agent or other fiduciary of Genesco
or any of Genescos subsidiaries prior to the effective
time of the merger or (y) the merger agreement or with
respect to the transactions contemplated by the merger
agreement, whether in any case asserted or arising before or
after the effective time of the merger. The surviving
corporation has agreed to, and Finish Line has agreed to cause
the surviving corporation to, advance to the party his or her
legal expenses within 20 days after receipt by the
surviving corporation of a written request for such advance
(including the cost of any investigation and preparation
incurred in connection therewith); provided that any person to
whom expenses are advanced provides an undertaking, to the
extent then required by the Tennessee Business Corporation Act
(the TBCA), to repay the advances if it is finally
judicially determined that the person is not entitled to
indemnification.
The merger agreement also provides that Finish Line shall, and
Finish Line shall cause the surviving corporation to, honor and
fulfill in all respects the obligations of Genesco pursuant to
indemnification agreements with Genescos directors,
officers, employees or agents existing at or prior to the
effective time of the merger to the fullest extent permitted by
applicable law or under the relevant charter or bylaws.
The merger agreement further provides that the surviving
corporation shall obtain a tail insurance policy
from an insurance carrier with the same or better credit rating
as Genescos current insurance carrier with respect to
directors and officers liability insurance that
provides coverage for the six years following the effective time
of the merger at least comparable in amount and scope to the
coverage provided under Genescos directors and officers
insurance policy in effect as of the effective time of the
merger for the individuals who are or were directors and
officers of Genesco for claims arising from facts or events
occurring prior to the effective time of the merger. If Genesco
is unable to obtain the tail insurance policies, for
an amount equal to or less than 200% of the current annual
premiums paid by Genesco, Genesco shall be entitled to obtain as
much comparable tail insurance as possible for an
amount equal to that specified amount.
Amendment,
Extension and Waiver
The parties may amend the merger agreement at any time;
provided, however, that after Genescos shareholders
approve the merger agreement, there shall be no amendment that
by law requires further approval by Genescos shareholders
without such approval having been obtained. All amendments to
the merger agreement must be in writing signed by us, Finish
Line and Merger Sub.
At any time before the completion of the merger, each of the
parties to the merger agreement may, by written instrument:
|
|
|
|
|
extend the time for the performance of any of the obligations or
other acts of the other parties thereto; or
|
|
|
|
waive compliance with any of the agreements or conditions
contained in the merger agreement.
|
Our board of directors unanimously recommends that you vote
FOR the approval of the merger agreement.
67
CHARTER
AMENDMENT
(PROPOSAL NO. 2)
On June 17, 2007, as required pursuant to the merger
agreement, our board of directors approved and adopted, and
recommended that Genescos shareholders approve and adopt,
the charter amendment. Our board of directors believes that it
is in the best interest of Genesco and its shareholders to amend
Genescos charter as proposed. If Genescos
shareholders approve this proposal, the charter amendment will
become effective upon the filing of articles of amendment with
the Secretary of State of the state of Tennessee, which filing
is expected to take place as soon as reasonably practicable
after the effective time of the merger. However, we will not
file the charter amendment in the event the merger is not
completed. The following discussion of the proposed charter
amendment is qualified in its entirety by reference to the full
text of the charter amendment set forth on Annex B.
The proposed charter amendment will provide Genesco with the
ability to redeem all of the outstanding Employees
Preferred in cash at the price per share to be paid to holders
of Genesco common stock in the merger (without interest or
dividends), or $54.50, subject to, and following the completion
of, the merger. This redemption would include shares that are
not fully paid, but the amount outstanding and payable on such
shares would be withheld from the redemption price for such
shares and applied to the unpaid balance on such shares.
Currently, fully paid Employees Preferred shares are
convertible at the option of the holder into one share of
Genesco common stock or one share of Genesco Subordinated
Cumulative Preferred Stock. Shares that are not fully paid are
not currently convertible. Each of our other outstanding classes
and series of preferred stock are currently redeemable by
Genesco in accordance with our existing charter. If the charter
amendment is adopted and approved, the Employees Preferred
would also be subject to redemption at the option of Genesco, as
the surviving corporation, subject to, and following, the
effective time of the merger. Finish Line informed us that it
intends to cause the surviving corporation to redeem all
outstanding preferred stock that has not properly converted to
common stock prior to the merger. The charter amendment does not
provide for any other conditions that must be met before the
Employees Preferred can be redeemed by Genesco, other than
the notice and procedural requirements described below.
The proposed notice and procedural provisions for the redemption
of the Employees Preferred are substantially similar to
those of the other outstanding classes and series of preferred
stock, with the exception that the charter amendment does not
allow for Genesco to redeem less than all of the outstanding
shares of Employees Preferred. Notice is required to be
mailed and published 30 to 60 days prior to the date fixed
for redemption. Following this redemption date, unless Genesco
is in default in the payment of the redemption price, the shares
called for redemption will cease to be outstanding and the
holders of Employees Preferred will cease to be
shareholders with respect to the Employees Preferred and
will have no interest or claim against Genesco other than to
receive the redemption price on the redemption date, without
interest or dividends, upon surrender of their stock
certificates with any necessary endorsement. The charter
amendment also provides for the establishment of a trust, if
desired, to pay the redemption obligations of Genesco, subject
to certain conditions.
We are recommending that you approve and adopt the proposed
charter amendment because we agreed to do so in connection with
our negotiation of the merger agreement. Approving and adopting
the charter amendment will permit Finish Line to deregister the
Employees Preferred under Section 12(g) of the
Exchange Act and to maintain a streamlined capital structure
following the completion of the merger. We believe the potential
benefits of the proposed charter amendment also include, among
others, the following:
|
|
|
|
|
outstanding shares of Employees Preferred will be
redeemable by the surviving corporation following the closing
for the same per share consideration, or $54.50 in cash, that
will be received by the holders of our common stock in
connection with the merger;
|
|
|
|
the amendment provides the holders of approximately
8,900 shares of Employees Preferred, which are not
fully paid and are therefore not convertible into common stock,
with the right to receive consideration in connection with the
merger by providing for the repayment of any unpaid balances on
their shares out of the redemption payment received in
connection with such shares; and
|
68
|
|
|
|
|
deregistration of the Employees Preferred under
Section 12(g) of the Exchange Act upon the redemption of
such shares following the approval and adoption of the charter
amendment and the consummation of the merger.
|
Our board of directors unanimously recommends that you vote
FOR the approval and adoption of the charter
amendment.
69
DISSENTERS
RIGHTS
Under Tennessee law, if you are a holder of Genesco
preferred stock and do not vote in favor of the merger agreement
you have the right to seek an appraisal of the fair value of
your Genesco preferred stock and to receive a cash payment of
such fair value. Genesco shareholders electing to exercise
dissenters rights must comply with the provisions of
Chapter 23 of the TBCA in order to perfect their rights.
Genesco will require strict compliance with the statutory
procedures. A copy of Chapter 23 of the TBCA is attached as
Annex D to this proxy statement. Under Tennessee law,
holders of Genesco common stock do not have dissenters
rights unless our common stock is delisted from the NYSE and the
CHX prior to completion of the merger.
The following is intended as a brief summary of the material
provisions of the Tennessee statutory procedures required to be
followed by a shareholder in order to dissent from the merger
and perfect the shareholders appraisal rights. This
summary, however, is not a complete statement of all applicable
requirements and is qualified in its entirety by reference to
Chapter 23 of the TBCA, the full text of which appears as
Annex D to this proxy statement.
Holders of Genesco preferred stock who do not want to accept the
merger consideration, who do not vote in favor of (or who
abstain from voting on) the merger agreement, and who perfect
their dissenters rights by complying with the provisions
of Chapter 23 of the TBCA, will have the right to receive
cash payment for the fair value of their preferred
stock.
In order to be eligible to exercise the right to dissent, a
shareholder must file with Genesco a written objection to the
merger, stating that the shareholder intends to dissent if the
merger is effected. Such statement must be filed before the vote
is taken at the special meeting, and it must be addressed as
follows: Corporate Secretary, Genesco Inc., 1415 Murfreesboro
Road, Nashville, Tennessee 37217. It is not necessary for a
dissenting shareholder to vote against the merger agreement to
preserve dissenters rights; however, such rights will be
lost if the shareholder votes in favor of the merger agreement.
If the merger agreement is approved, Genesco will deliver a
written notice to dissenting shareholders no later than ten days
after approval of the merger agreement, unless the merger
agreement is terminated and abandoned. The notice will set forth
where the dissenting shareholders payment demands must be
sent and where and when stock certificates must be deposited.
The notice will also supply a form for dissenting shareholders
to use in demanding payment. A dissenting shareholder must
deliver his payment demand to Genesco no later than the date set
forth in such notice, which date may not be fewer than one nor
more than two months after the written notice is delivered.
Merely abstaining from or voting against the merger will not
satisfy the two requirements that the shareholder
(i) object in writing to the merger and (ii) file a
written demand for payment within such two-month period. Failure
of a shareholder to take the required action during the
two-month period binds such shareholder to the terms of the
merger and precludes exercise of dissenters rights.
Within the two-month period, a dissenting shareholder must
submit the shareholders stock certificates representing
the shareholders shares of Genesco preferred stock to
Genesco in accordance with the terms of notice of Genesco. As
soon as practicable after the merger is effected, or upon
receipt of a dissenting shareholders payment demand,
whichever is later, Genesco shall pay each dissenting
shareholder the fair value of the shareholders shares,
plus accrued interest.
If a dissenting shareholder believes that the amount paid by
Genesco is less than the fair value of the shares or that
interest due was incorrectly calculated, the dissenting
shareholder must, within one month after Genesco has made
payment to the dissenting shareholder, demand payment of the
shareholders estimate of the fair value. If a demand for
payment remains unsettled, Genesco must commence a suit in a
court having equity jurisdiction located in Davidson County,
Tennessee, within two months after receiving the dissenting
shareholders payment demand. All dissenting shareholders
will be made a party to the proceeding and will be served with a
copy of the petition. The court shall determine the dissenting
shareholders right to receive payment or the fair value of
his shares or both. The costs and expenses of such proceedings
shall be assessed against Genesco unless the court shall find
the actions of a dissenting shareholder who is party to the suit
to
70
be arbitrary, vexatious or not in good faith. If Genesco fails
to bring such a suit within such time, it shall pay each
dissenting shareholder whose demand remains unsettled the amount
demanded.
Section 48-23-101
of the TBCA provides that the fair value of a
dissenters shares shall be determined immediately before
the effectuation of the merger, excluding any appreciation
or depreciation of shares in anticipation of the corporate
action. The value so determined could be more or less than
the redemption value of the Genesco preferred stock or the
merger consideration that would be received if the Genesco
preferred stock were converted into common stock before the
merger or converted into the merger consideration after the
merger.
Any holder of Genesco preferred stock contemplating the exercise
of dissenters rights should carefully review
Chapter 23 of the TBCA, a copy of which is attached to this
proxy statement as Annex D. A shareholder who fails to
comply with all requirements of such Chapter 23 will
forfeit such holders dissenters rights and,
following the completion of the merger, will likely have their
Genesco preferred stock redeemed by Genesco, as the surviving
corporation. See The Merger Preferred
Stock beginning on page 38.
A dissenting shareholder must not convert the shareholders
Genesco preferred stock into common stock before the merger or
into the merger consideration after the merger. Conversion of a
dissenting shareholders Genesco preferred stock into
common stock before the merger or into the merger consideration
after the merger will result in the loss of the
shareholders dissenters rights, and the shareholder
will be entitled only to the merger consideration.
Under Tennessee law, holders of the Employees Preferred
who do not vote in favor of the approval and adoption of the
charter amendment will also have the right to dissent, if the
amendment becomes effective, subject to substantially similar
requirements and procedures to those described above; provided,
however, that holders of Employees Preferred will in no
event be entitled to more than one payment with respect to their
shares.
In view of the complexity of Chapter 23, holders of
Genesco preferred stock who may wish to pursue dissenters
rights should consult their legal advisors. The above summary is
qualified in its entirety by reference to Chapter 23 of the
TBCA, a copy of which is reprinted in full as Annex D to
this proxy statement.
71
MARKET
PRICE OF GENESCOS COMMON STOCK
Genescos common stock is listed on the NYSE (Symbol: GCO)
and the CHX. The following table sets forth for the periods
indicated the high and low sales prices of the common stock on
the NYSE during the calendar period indicated:
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
FISCAL YEAR ENDED JANUARY 28, 2006
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
31.50
|
|
|
$
|
25.16
|
|
Second Quarter
|
|
|
41.10
|
|
|
|
25.80
|
|
Third Quarter
|
|
|
40.27
|
|
|
|
33.41
|
|
Fourth Quarter
|
|
|
42.89
|
|
|
|
35.61
|
|
FISCAL YEAR ENDED FEBRUARY 3, 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
42.60
|
|
|
$
|
37.33
|
|
Second Quarter
|
|
|
43.72
|
|
|
|
25.50
|
|
Third Quarter
|
|
|
38.73
|
|
|
|
26.05
|
|
Fourth Quarter
|
|
|
42.15
|
|
|
|
35.46
|
|
FISCAL YEAR ENDED FEBRUARY 2, 2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
51.30
|
|
|
$
|
34.57
|
|
Second Quarter
|
|
|
54.15
|
|
|
|
47.09
|
|
The closing sale price of Genesco common stock on the NYSE on
June 15, 2007, the last trading day prior to the
announcement of the merger, was $49.60 per share. The $54.50 per
share to be paid for each share of Genesco common stock pursuant
to the merger represents a premium of 48.7% to the closing price
reported by the NYSE on March 9, 2007, the last trading day
prior to market speculation about potential interest by Foot
Locker, Inc. in an acquisition of Genesco, a premium of 37.7% to
the average closing price reported by the NYSE for the three
months prior to March 9, 2007, and a premium of 50.0% to
the average closing price reported by the NYSE for the one year
prior to March 9, 2007. On August 6, 2007, the most
recent practicable date before this proxy statement was printed,
the closing price for Genesco common stock as reported by the
NYSE was $46.56 per share. You are encouraged to obtain current
market quotations for Genesco common stock in connection with
voting your shares.
Genesco has not paid cash dividends in respect of its common
stock since 1973. Genescos ability to pay cash dividends
in respect of its common stock is subject to various
restrictions, including that we are currently restricted by the
merger agreement from paying cash dividends on our common stock.
72
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal
Shareholders
The following table sets forth, as of the dates indicated below,
the ownership of the entities which, according to the most
recent SEC filings and amendments thereto, as applicable, own
beneficially more than 5% of Genescos common stock and the
entities which, according to Genescos stock transfer
records, own more than 5% of any of the other outstanding
classes and series of our preferred stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of
|
|
Name and Address of Beneficial Owner
|
|
Class of Stock
|
|
No. of Shares
|
|
|
Class (1)
|
|
|
FMR Corp. (2)
|
|
Common
|
|
|
2,914,826
|
|
|
|
12.8
|
%
|
Edward C. Johnson 3d
82 Devonshire Street
Boston, Massachusetts 02109
|
|
|
|
|
|
|
|
|
|
|
A group consisting of Octavian
Master Fund, L.P. (3)
|
|
Common
|
|
|
1,450,000
|
|
|
|
6.4
|
%
|
Octavian Special Master Fund,
L.P.
Octavian Global Partners, LLC
Octavian Management, LLC
Octavian Advisors, LP
Octavian Asset Management, LLC
Greg Racz
Richard Hurowitz
650 Madison Avenue, 26th Floor
New York, NY 10022
|
|
|
|
|
|
|
|
|
|
|
Citadel Limited Partnership (4)
|
|
|
|
|
|
|
|
|
|
|
Citadel Investment Group,
L.L.C.
|
|
Common
|
|
|
1,435,654
|
|
|
|
6.3
|
%
|
Kenneth Griffin
Citadel Equity Fund Ltd.
Citadel Derivatives Group LLC
131 S. Dearborn Street, 32nd Floor
Chicago, Illinois 60603
|
|
|
|
|
|
|
|
|
|
|
A group consisting of Barclays
Global Investors, NA (5)(6)
|
|
Common
|
|
|
1,137,451
|
|
|
|
5.0
|
%
|
Barclays Global Fund Advisors,
Barclays Global Investors, Ltd.,
Barclays Global Investors Japan Trust and Banking
Company Limited,
Barclays Global Investors Japan Limited
|
|
|
|
|
|
|
|
|
|
|
Michael A. Roth and Brian J. Stark
(7)
|
|
Common
|
|
|
1,347,500
|
|
|
|
5.9
|
%
|
3600 South Lake Drive,
St. Francis, Wisconsin 53235
|
|
|
|
|
|
|
|
|
|
|
Hazel Grossman
|
|
Subordinated
|
|
|
1,074
|
|
|
|
7.4
|
%
|
355 Blackstone Boulevard, Apt. 552
|
|
Serial
|
|
|
|
|
|
|
|
|
Providence, Rhode Island 02906
|
|
Preferred, Series 3
|
|
|
|
|
|
|
|
|
Barbara F. Grossman
|
|
Subordinated
|
|
|
1,048
|
|
|
|
7.3
|
%
|
4903 Pieta Ct.
|
|
Serial
|
|
|
|
|
|
|
|
|
Las Vegas, Nevada 89135
|
|
Preferred, Series 3
|
|
|
|
|
|
|
|
|
James H. Cheek, Jr
|
|
Subordinated
|
|
|
2,413
|
|
|
|
8.0
|
%
|
11 Burton Hills Boulevard, Apt. 407
|
|
Cumulative
|
|
|
|
|
|
|
|
|
Nashville, Tennessee 37215
|
|
Preferred
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Percentages are calculated based on 22,788,798 shares of
common stock, 14,447 shares of Subordinated Serial
Preferred, Series 3 and 30,017 shares of Subordinated
Cumulative Preferred outstanding as of August 6, 2007. |
73
|
|
|
(2) |
|
Number of shares from Schedule 13G filed on
February 14, 2007, reporting sole voting power with respect
to 103,800 shares and sole investment power with respect to
2,914,826 shares. |
|
|
|
(3) |
|
Number of shares from Schedule 13G filed on August 6,
2007, reporting that Octavian Master Fund, L.P. and Octavian
Special Master Fund, L.P. beneficially own with sole voting and
dispositive power 64,000 and 1,386,000 shares of common
stock, respectively; and Octavian Global Partners, LLC, Octavian
Management, LLC, Octavian Advisors, LP, Octavian Asset
Management, LLC, Mr. Greg Racz and Mr. Richard
Hurowitz may be deemed to own with sole voting and dispositive
power 1,450,000 shares of common stock. |
|
|
|
(4) |
|
Number of shares from Schedule 13G filed on
February 13, 2007, reporting sole voting and investment
power with respect to 1,435,654 shares. |
|
|
|
(5) |
|
Barclays Global Investors, N.A. and Barclays Global
Fund Advisors, 45 Fremont Street, San Francisco,
California 94105; Barclays Global Investors, Ltd., Murray House,
1 Royal Mint Court, London EC3N 4HH; Barclays Global Investors
Japan Trust and Banking Company Limited and Barclays Global
Investors Japan Limited, Ebisu Prime Square Tower 8th Floor,
1-1-39 Hiroo Shibuya-Ku, Tokyo
1550-0012
Japan. |
|
|
|
(6) |
|
Number of shares from Schedule 13G filed on
January 23, 2007, reporting that Barclays Global Investors,
NA may be deemed to own with sole voting and dispositive power
376,744 and 458,009 shares of common stock, respectively;
Barclays Global Fund Advisors may be deemed to own with
sole voting and dispositive power 665,130 shares of common
stock; and Barclays Global Investors, Ltd. may be deemed to own
with sole voting and dispositive power 14,312 shares of
common stock. |
|
|
|
(7) |
|
Number of shares from Schedule 13G filed on June 14,
2007, reporting shared voting and investment power with respect
to 1,347,500 shares. |
74
Security
Ownership of Directors and Management
The following table sets forth information as of August 6,
2007, regarding the beneficial ownership of Genescos
common stock by each of Genescos current directors, the
persons named in Genescos summary compensation table in
Genescos annual meeting proxy statement filed with the SEC
on May 18, 2007 and the current directors and executive
officers as a group. None of such persons owns any equity
securities of Genesco other than common stock. Percentages
reflected in the table are based on 22,788,798 shares of
Genesco common stock outstanding on August 6, 2007.
|
|
|
|
|
Name (1)
|
|
No. of Shares (2)(3)
|
|
|
James S. Beard
|
|
|
3,334
|
|
Leonard L. Berry
|
|
|
27,572
|
|
William F. Blaufuss, Jr.
|
|
|
5,262
|
|
James S. Bradford
|
|
|
3,334
|
|
Robert V. Dale
|
|
|
21,436
|
|
Robert J. Dennis
|
|
|
103,798
|
|
Matthew C. Diamond
|
|
|
10,285
|
|
Marty G. Dickens
|
|
|
6,906
|
|
Ben T. Harris
|
|
|
58,921
|
|
Kathleen Mason
|
|
|
41,030
|
|
Hal N. Pennington
|
|
|
301,529
|
|
William A. Williamson, Jr.
|
|
|
71,995
|
|
Jonathan D. Caplan
|
|
|
77,250
|
|
James C. Estepa
|
|
|
42,623
|
|
James S. Gulmi
|
|
|
214,191
|
|
Current Directors and Executive
Officers as a Group (21 Persons)
|
|
|
1,173,213
|
(4)
|
|
|
|
(1) |
|
The address of our directors, nominees and executive officers is
c/o Genesco
Inc., 1415 Murfreesboro Road, Nashville, Tennessee 37217. |
|
|
|
(2) |
|
Each director, director nominee and officer owns less than 1% of
the outstanding shares of the Companys common stock,
except for Mr. Pennington, who owns 1.3%. |
|
|
|
(3) |
|
Unless otherwise noted, the indicated owner has sole voting
power and investment power. Includes shares that may be
purchased within 60 days of August 6, 2007 upon the
exercise of options granted under the Companys common
stock option plans, as follows: Mr. Pennington
208,578; Mr. Caplan 57,214;
Mr. Dennis 52,063; Mr. Estepa
1,644; Mr. Gulmi 94,163;
Mr. Dale 12,000; Ms. Mason and
Messrs. Berry and Williamson 16,000 each;
current executive officers and directors as a group
593,555. |
|
|
|
(4) |
|
Constitutes approximately 5.1% of the outstanding shares of the
Companys common stock. |
75
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The consolidated financial statements of Genesco and our
managements assessment of the effectiveness of internal
control over financial reporting included in the Annual Report
on
Form 10-K
for the year ended February 3, 2007, incorporated by
reference in this proxy statement, have been audited by
Ernst & Young LLP, an independent registered public
accounting firm, as stated in their reports appearing in the
Annual Report on
Form 10-K.
ADJOURNMENT
OF THE SPECIAL MEETING
(PROPOSAL NO. 3)
We may ask our shareholders to vote on a proposal to adjourn the
special meeting, if necessary, to solicit additional proxies if
there are insufficient votes at the time of the meeting to
approve the merger agreement or the charter amendment. We
currently do not intend to propose adjournment at our special
meeting with respect to Proposal No. 1 if there are
sufficient votes to approve the merger agreement at the date the
special meeting is initially convened and the shareholders will
take final action at that meeting to approve the merger
agreement, regardless of whether or not we adjourn the special
meeting to solicit additional proxies to approve and adopt the
charter amendment (Proposal No. 2). If the proposal to
adjourn our special meeting for the purpose of soliciting
additional proxies for either Proposal No. 1 or
Proposal No. 2, or both proposals if necessary, is
submitted to our shareholders for approval, the approval
requires that the votes cast in favor of adjournment exceed the
votes cast against adjournment.
Our board of directors recommends that you vote
FOR the adjournment of the special meeting, if
necessary, to solicit additional proxies to approve the merger
agreement or the charter amendment.
OTHER
MATTERS
Other
Matters for Action at the Special Meeting
As of the date of this proxy statement, our board of directors
knows of no matters that will be presented for consideration at
the special meeting other than as described in this proxy
statement.
Future
Shareholder Proposals
If the merger is consummated and we are able to deregister the
Employees Preferred under the Exchange Act, we will not
have public shareholders and there will be no public
participation in any future meeting of shareholders. However, if
the merger is not completed or we are not able to deregister the
Employees Preferred under the Exchange Act, we anticipate
that we will hold a 2008 annual meeting of shareholders.
Proposals of shareholders intended for inclusion in the proxy
material for the 2008 annual meeting of shareholders must be
received at Genescos offices at Genesco Park, 1415
Murfreesboro Road, Nashville, Tennessee 37217, attention of the
secretary, no later than January 18, 2008. In addition,
Genescos Bylaws contain an advance notice provision
requiring that, if a shareholders proposal is to be
brought before and considered at the next annual meeting of
shareholders, such shareholder must provide timely written
notice thereof to the secretary of Genesco. In order to be
timely, the notice must be delivered to or mailed to the
secretary of Genesco and received at the principal executive
offices of Genesco not less than sixty days nor more than ninety
days prior to the meeting (or, if less than seventy days
notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice must be so received not
later than the close of business on the tenth day following the
day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made). In the event that a
shareholder proposal intended to be presented for action at the
next annual meeting is not received timely, then the persons
designated as proxies in the proxies solicited by the board of
directors in connection with the annual meeting will be
permitted to use their discretionary voting authority with
respect to the proposal, whether or not the proposal is
discussed in the proxy statement for the annual meeting.
76
WHERE YOU
CAN FIND MORE INFORMATION
Genesco and Finish Line file annual, quarterly and current
reports, proxy statements and other information with the SEC.
You may read and copy any document Genesco or Finish Line files
at the SECs public reference room located at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference room.
Genescos and Finish Lines SEC filings are also
available to the public at the SECs website at
http://www.sec.gov;
provided that the information provided in Finish Lines SEC
filings (or available on Finish Lines website) is not part
of this proxy statement and is not incorporated by reference.
You also may obtain free copies of the documents Genesco files
with the SEC by going to the Investors Relations
section of our website at www.genesco.com. Our website address
is provided as an inactive textual reference only. The
information provided on our website is not part of this proxy
statement, and therefore is not incorporated by reference.
Statements contained in this proxy statement, or in any document
incorporated in this proxy statement by reference regarding the
contents of any contract or other document, are not necessarily
complete and each statement is qualified in its entirety by
reference to that contract or other document filed as an exhibit
with the SEC. The SEC allows us to incorporate by
reference into this proxy statement documents we file with
the SEC. This means that we can disclose important information
to you by referring you to those documents. The information
incorporated by reference is considered to be a part of this
proxy statement, and later information that we file with the SEC
will update and supersede that information. We incorporate by
reference the documents listed below and any documents filed by
us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this proxy statement and before
the date of the special meeting:
|
|
|
Genesco Filings:
|
|
Periods
|
|
Annual Report on
Form 10-K
|
|
Year ended February 3, 2007
|
Proxy Statement on Form 14A
|
|
May 18, 2007
|
Quarterly Reports on
Form 10-Q
|
|
Quarter ended May 5, 2007
|
Current Reports on
Form 8-K
|
|
Filed February 22, 2007, March 7,
2007, March 12, 2007, April 23, 2007, May 17, 2007, May 31,
2007, June 18, 2007, and July 27, 2007
|
Notwithstanding the foregoing, information furnished under
Items 2.02 and 7.01 of any Current Report on
Form 8-K,
including the related exhibits, is not incorporated by reference
in this proxy statement.
You may request a copy of the documents incorporated by
reference into this proxy statement, excluding certain exhibits,
by writing to or telephoning us. Requests for documents should
be directed to the Corporate Secretary, Genesco Inc., 1415
Murfreesboro Road, Nashville, Tennessee 37217. If you would like
to request documents from us, please do so at least five
business days before the date of the special meeting in order to
receive timely delivery of those documents prior to the special
meeting.
While the information provided in Finish Lines SEC filings
is not part of this proxy statement and is not incorporated by
reference, the following are the most recent Finish Line SEC
filings for your reference:
|
|
|
Finish Line Filings:
|
|
Periods
|
|
Annual Report on
Form 10-K
|
|
Year ended March 3, 2007
|
Proxy Statement on Form 14A
|
|
June 19, 2007
|
Quarterly Reports on
Form 10-Q
|
|
Quarter ended June 2, 2007
|
Current Reports on
Form 8-K
|
|
Filed June 18, 2007,
July 16, 2007, and July 23, 2007
|
Requests for copies of Finish Line documents should be directed
to The Finish Line, Inc., 3308 North Mitthoeffer Road,
Indianapolis, Indiana 46235; Attention: Corporate Secretary.
77
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A
PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM
WHOM IT IS UNLAWFUL TO MAKE A PROXY SOLICITATION IN THAT
JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE
YOUR SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM
WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT
IS DATED AUGUST 13, 2007. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY
STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
78
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE FINISH LINE, INC.,
HEADWIND, INC.
AND
GENESCO INC.
DATED AS OF JUNE 17, 2007
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
Section 1. The Merger
|
|
|
A-1
|
|
|
Section 1
|
.1
|
|
The Merger; Effects of the Merger
|
|
|
A-1
|
|
|
Section 1
|
.2
|
|
Closing
|
|
|
A-2
|
|
|
Section 1
|
.3
|
|
Effective Time
|
|
|
A-2
|
|
|
Section 1
|
.4
|
|
Directors and Officers of the
Surviving Corporation
|
|
|
A-2
|
|
Section 2. Conversion of Securities
|
|
|
A-2
|
|
|
Section 2
|
.1
|
|
Conversion of Securities
|
|
|
A-2
|
|
|
Section 2
|
.2
|
|
Dissenting Shares
|
|
|
A-3
|
|
|
Section 2
|
.3
|
|
Company Options, Restricted Shares
and ESPP
|
|
|
A-3
|
|
|
Section 2
|
.4
|
|
Exchange of Certificates and
Book-Entry Shares
|
|
|
A-5
|
|
|
Section 2
|
.5
|
|
Withholding
|
|
|
A-6
|
|
|
Section 2
|
.6
|
|
Transfer Taxes
|
|
|
A-6
|
|
Section 3. Representations and
Warranties of Company
|
|
|
A-6
|
|
|
Section 3
|
.1
|
|
Organization and Qualification
|
|
|
A-6
|
|
|
Section 3
|
.2
|
|
Authority
|
|
|
A-7
|
|
|
Section 3
|
.3
|
|
Capitalization
|
|
|
A-7
|
|
|
Section 3
|
.4
|
|
Company Subsidiaries
|
|
|
A-9
|
|
|
Section 3
|
.5
|
|
SEC Filings; Financial Statements;
Undisclosed Liabilities
|
|
|
A-9
|
|
|
Section 3
|
.6
|
|
Absence of Certain Changes or
Events
|
|
|
A-10
|
|
|
Section 3
|
.7
|
|
Compliance with Laws
|
|
|
A-10
|
|
|
Section 3
|
.8
|
|
Claims, Actions and Proceedings
|
|
|
A-11
|
|
|
Section 3
|
.9
|
|
Contracts and Other Agreements
|
|
|
A-11
|
|
|
Section 3
|
.10
|
|
Intellectual Property
|
|
|
A-12
|
|
|
Section 3
|
.11
|
|
Property
|
|
|
A-13
|
|
|
Section 3
|
.12
|
|
Insurance
|
|
|
A-14
|
|
|
Section 3
|
.13
|
|
Tax Matters
|
|
|
A-14
|
|
|
Section 3
|
.14
|
|
Employee Benefit Plans
|
|
|
A-16
|
|
|
Section 3
|
.15
|
|
Labor Matters
|
|
|
A-18
|
|
|
Section 3
|
.16
|
|
Environmental Matters
|
|
|
A-18
|
|
|
Section 3
|
.17
|
|
No Breach
|
|
|
A-19
|
|
|
Section 3
|
.18
|
|
Board Approvals; Anti-Takeover;
Vote Required
|
|
|
A-20
|
|
|
Section 3
|
.19
|
|
Financial Advisor
|
|
|
A-20
|
|
|
Section 3
|
.20
|
|
Information in the Proxy Statement
|
|
|
A-21
|
|
|
Section 3
|
.21
|
|
Affiliate Transactions
|
|
|
A-21
|
|
|
Section 3
|
.22
|
|
Suppliers and Vendors
|
|
|
A-21
|
|
|
Section 3
|
.23
|
|
Inventory
|
|
|
A-21
|
|
|
Section 3
|
.24
|
|
No Other Representations or
Warranties; Investigation by Parent
|
|
|
A-21
|
|
Section 4. Representations and
Warranties of Parent
|
|
|
A-22
|
|
|
Section 4
|
.1
|
|
Organization
|
|
|
A-22
|
|
|
Section 4
|
.2
|
|
Authority to Execute and Perform
Agreement
|
|
|
A-22
|
|
|
Section 4
|
.3
|
|
No Conflict; Required Filings and
Consents
|
|
|
A-22
|
|
|
Section 4
|
.4
|
|
Information in the Proxy Statement
|
|
|
A-23
|
|
|
Section 4
|
.5
|
|
Litigation
|
|
|
A-23
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 4
|
.6
|
|
Financing
|
|
|
A-23
|
|
|
Section 4
|
.7
|
|
Parent and Merger Sub
|
|
|
A-24
|
|
|
Section 4
|
.8
|
|
Brokers
|
|
|
A-24
|
|
|
Section 4
|
.9
|
|
Solvency
|
|
|
A-24
|
|
|
Section 4
|
.10
|
|
No Other Representations or
Warranties
|
|
|
A-25
|
|
Section 5. Conduct of Business
Pending the Merger; No Solicitation; Employee Matters
|
|
|
A-25
|
|
|
Section 5
|
.1
|
|
Conduct of Business
|
|
|
A-25
|
|
|
Section 5
|
.2
|
|
No Solicitation
|
|
|
A-28
|
|
|
Section 5
|
.3
|
|
Employee Matters
|
|
|
A-31
|
|
|
Section 5
|
.4
|
|
Employee Preferred Stock Tender
Offer
|
|
|
A-32
|
|
Section 6. Additional Agreements
|
|
|
A-32
|
|
|
Section 6
|
.1
|
|
Proxy Statement
|
|
|
A-32
|
|
|
Section 6
|
.2
|
|
Company Shareholders Meeting
|
|
|
A-33
|
|
|
Section 6
|
.3
|
|
Access to Information,
Confidentiality
|
|
|
A-33
|
|
|
Section 6
|
.4
|
|
Regulatory Filings; Reasonable
Efforts
|
|
|
A-34
|
|
|
Section 6
|
.5
|
|
Directors and Officers
Indemnification and Insurance
|
|
|
A-35
|
|
|
Section 6
|
.6
|
|
Director Resignations
|
|
|
A-37
|
|
|
Section 6
|
.7
|
|
Conduct of Business of Parent and
Merger Sub Pending the Merger
|
|
|
A-37
|
|
|
Section 6
|
.8
|
|
Financing
|
|
|
A-37
|
|
|
Section 6
|
.9
|
|
Public Disclosure
|
|
|
A-38
|
|
|
Section 6
|
.10
|
|
Notification of Certain Matters
|
|
|
A-38
|
|
|
Section 6
|
.11
|
|
Non-USRPHC Certificate
|
|
|
A-38
|
|
Section 7. Conditions Precedent to
the Obligation of the Parties to Consummate the Merger
|
|
|
A-39
|
|
|
Section 7
|
.1
|
|
Conditions to Obligations of Each
Party to Effect the Merger
|
|
|
A-39
|
|
|
Section 7
|
.2
|
|
Additional Conditions to the
Obligations of Parent and Merger Sub
|
|
|
A-39
|
|
|
Section 7
|
.3
|
|
Additional Conditions to the
Obligations of the Company
|
|
|
A-39
|
|
Section 8. Termination, Amendment
and Waiver
|
|
|
A-40
|
|
|
Section 8
|
.1
|
|
Termination
|
|
|
A-40
|
|
|
Section 8
|
.2
|
|
Effect of Termination
|
|
|
A-41
|
|
|
Section 8
|
.3
|
|
Fees and Expenses
|
|
|
A-42
|
|
|
Section 8
|
.4
|
|
Amendment
|
|
|
A-42
|
|
|
Section 8
|
.5
|
|
Waiver
|
|
|
A-42
|
|
Section 9. Miscellaneous
|
|
|
A-42
|
|
|
Section 9
|
.1
|
|
Entire Agreement
|
|
|
A-42
|
|
|
Section 9
|
.2
|
|
No Survival
|
|
|
A-43
|
|
|
Section 9
|
.3
|
|
Parent Guarantee
|
|
|
A-43
|
|
|
Section 9
|
.4
|
|
Notices
|
|
|
A-43
|
|
|
Section 9
|
.5
|
|
Binding Effect; No Assignment; No
Third-Party Beneficiaries
|
|
|
A-43
|
|
|
Section 9
|
.6
|
|
Severability
|
|
|
A-44
|
|
|
Section 9
|
.7
|
|
Governing Law
|
|
|
A-44
|
|
|
Section 9
|
.8
|
|
Submission to Jurisdiction; Waiver
|
|
|
A-44
|
|
A-ii
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 9
|
.9
|
|
Specific Enforcement
|
|
|
A-44
|
|
|
Section 9
|
.10
|
|
Interpretation
|
|
|
A-44
|
|
|
Section 9
|
.11
|
|
No Waiver of Rights
|
|
|
A-45
|
|
|
Section 9
|
.12
|
|
Counterparts; Facsimile Signatures
|
|
|
A-45
|
|
Index of Defined Terms
|
|
|
Annex A
|
|
|
|
|
|
|
Exhibits:
|
|
|
|
|
Exhibit A Bylaws of
Surviving Corporation
|
|
|
|
|
A-iii
AGREEMENT
AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the
Agreement), dated as of June 17, 2007, is by
and among The Finish Line, Inc. (Parent), an Indiana
corporation, Headwind, Inc. (Merger Sub), a
newly-formed Tennessee corporation and a direct wholly-owned
subsidiary of Parent, and Genesco Inc. (the
Company), a Tennessee corporation.
WHEREAS, the Board of Directors of the Company (the
Company Board of Directors) has (i) determined
that it is in the best interests of the Company and the
shareholders of the Company, and has approved and declared it
advisable for the Company, to enter into this Agreement with
Parent and Merger Sub providing for the merger of Merger Sub
with and into the Company in accordance with the Tennessee
Business Corporation Act (the TBCA), upon the terms
and subject to the conditions set forth herein, and
(ii) resolved to recommend adoption of this Agreement by
the shareholders of the Company;
WHEREAS, the Boards of Directors of Parent and Merger Sub
have each approved and declared it advisable to enter into this
Agreement providing for the Merger in accordance with the
Indiana Business Corporation Law and the TBCA, upon the terms
and conditions set forth herein;
WHEREAS, as a condition and material inducement to the
Companys willingness to enter into this Agreement, Parent
and the Lender have delivered to the Company the Commitment
Letter with respect to the Financing; and
WHEREAS, the Company, Parent and Merger Sub desire to
make certain representations, warranties, covenants and
agreements in connection with the Merger and the other
transactions contemplated hereby and also to prescribe various
conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants, agreements, representations and warranties
herein contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
Section 1. The
Merger.
Section 1.1 The
Merger; Effects of the Merger.
(a) At the Effective Time, upon the terms and subject to
the conditions of this Agreement, and in accordance with the
TBCA and other applicable Tennessee law, the Company and Merger
Sub shall consummate a merger (the Merger) pursuant
to which Merger Sub shall be merged with and into the Company,
and the Company shall continue as the surviving corporation of
the Merger (sometimes hereinafter referred to as, the
Surviving Corporation).
(b) The Merger shall have the effects set forth in the
Articles of Merger and in the applicable provisions of the TBCA
and this Agreement. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time:
(i) Merger Sub shall be merged with and into the Company,
and the separate corporate existence of Merger Sub shall
thereupon cease; (ii) the Surviving Corporation shall
continue to be governed by the laws of the State of Tennessee;
(iii) the corporate existence of the Surviving Corporation
with all its property, rights, privileges, immunities, powers
and franchises shall continue unaffected by the Merger; and
(iv) all the property, rights, privileges, immunities,
powers and franchises of the Company and Merger Sub shall be
vested in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
(c) The charter of the Company in effect at the Effective
Time shall be the charter of the Surviving Corporation until
thereafter changed or amended as provided therein, by the TBCA
or pursuant to any amendment approved by the shareholders of the
Company at the Company Shareholders Meeting, consistent with the
obligations set forth in Section 6.5.
(d) The bylaws of Merger Sub, as in effect immediately
prior to the Effective Time and substantially in the form
attached hereto as Exhibit A, shall be the bylaws of
the Surviving Corporation, except as to the name
A-1
of the Surviving Corporation, until thereafter amended as
provided by the TBCA, the charter of the Surviving Corporation
and such bylaws, consistent with the obligations set forth in
Section 6.5.
Section 1.2 Closing. The
closing of the Merger (the Closing) will take place
at 11:00 a.m. (New York time) on a date to be specified by
the parties, such date to be no later than the second business
day after satisfaction or waiver of all of the conditions set
forth in Section 7 capable of satisfaction prior to the
Closing (it being understood that the occurrence of the Closing
shall remain subject to the satisfaction or waiver of the
conditions that by their terms are to be satisfied at Closing),
at the offices of Bass, Berry & Sims PLC, 315
Deaderick Street, Suite 2700, Nashville, Tennessee 37238,
unless another time, date
and/or place
is agreed to in writing by the parties hereto. The date on which
the Closing occurs is referred to in this Agreement as the
Closing Date.
Section 1.3 Effective
Time. At the Closing, Parent, Merger Sub and
the Company shall cause the Merger to be consummated by
executing and filing articles of merger (the Articles of
Merger) with the Secretary of State of the State of
Tennessee as provided in the TBCA. The Merger shall become
effective at the time and date on which the Articles of Merger
have been duly filed with the Secretary of State of the State of
Tennessee or such later time and date as is specified in the
Articles of Merger, such time referred to herein as the
Effective Time. Parent, Merger Sub and the Company
shall make all other filings or recordings required under the
TBCA or other applicable Tennessee law in connection with the
Merger.
Section 1.4 Directors
and Officers of the Surviving
Corporation. The directors of Merger Sub
immediately prior to the Effective Time shall, from and after
the Effective Time, be the directors of the Surviving
Corporation, and the officers of the Company immediately prior
to the Effective Time shall, from and after the Effective Time,
be the officers of the Surviving Corporation, in each case until
their respective successors shall have been duly elected,
designated or qualified, or until their earlier death,
resignation or removal in accordance with the Surviving
Corporations charter and bylaws.
Section 2. Conversion
of Securities.
Section 2.1 Conversion
of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of the
Company, Merger Sub or the holders of any shares of outstanding
common stock of the Company, par value $1.00 per share
(Company Common Stock), or the other securities
described below:
(a) Conversion of Shares of Company Common Stock.
Each issued and outstanding share of Company Common Stock (other
than shares of Company Common Stock to be cancelled in
accordance with Section 2.1(d)), together with the
associated Company Rights, shall be cancelled and converted into
the right to receive $54.50 in cash, without interest (the
Per Share Price), payable to the holder thereof (the
Merger Consideration), upon the surrender in
accordance with Section 2.4 of the certificate that
formerly evidenced such shares, or as otherwise specified for
Book-Entry Shares. From and after the Effective Time, all such
shares of Company Common Stock, including the associated Company
Rights, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each
holder of Book-Entry Shares or a certificate representing any
such shares of Company Common Stock, including the associated
Company Rights, shall cease to have any rights with respect
thereto, except the right, subject to Section 2.4 and
Section 2.5, to receive the applicable Merger Consideration
therefor.
(b) Merger Sub Common Stock. Each issued and
outstanding share of common stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into,
be exchanged for and become 1,000,000 validly issued, fully paid
and nonassessable shares of common stock of the Surviving
Corporation. From and after the Effective Time, all certificates
representing the common stock of Merger Sub shall be deemed for
all purposes to represent the number of shares of common stock
of the Surviving Corporation into which they were converted in
accordance with the immediately preceding sentence.
(c) Preferred Stock. Each issued and outstanding
share of Company Preferred Stock outstanding immediately prior
to the Effective Time, including those subject to a Company
redemption notice with a redemption date after the Effective
Time, shall remain issued and outstanding with the same
designation, rights, privileges and preferences as set forth in
the Surviving Corporations charter.
A-2
(d) Cancellation of Company and Parent-Owned Stock.
All shares of Company Common Stock and Company Preferred Stock
that are owned by the Company or any Company Subsidiary as
treasury stock and any shares of Company Common Stock owned by
Parent or Merger Sub immediately prior to the Effective Time
shall automatically be cancelled and retired and shall cease to
exist, and no consideration shall be delivered in exchange
therefor.
(e) Adjustments. So long as such transaction is
otherwise permitted pursuant to the terms of this Agreement, the
Per Share Price shall be appropriately adjusted for any stock
dividend (other than the payment or accrual of regular quarterly
cash dividends), stock split, recapitalization, reclassification
or like transaction affecting the Company Common Stock after the
date hereof and prior to the Effective Time.
(f) Convertible Debentures. The
4.125% Convertible Subordinated Debentures due 2023 (the
Convertible Debentures) issued by the Company and
under that certain indenture dated as of June 24, 2003,
between the Company and The Bank of New York (the
Indenture), and outstanding immediately prior to the
Effective Time, by virtue of the Merger and the terms of the
Indenture and a supplemental indenture required to be entered
into upon the Merger under the terms of the Indenture (the
Supplemental Indenture), will not be convertible at
or after the Effective Time into shares of Company Common Stock,
and following the Effective Time, the Convertible Debentures
will be convertible, pursuant to the terms of the Indenture and
the Supplemental Indenture, into cash in an amount equal to the
product of (i) the Per Share Price times (ii) the
number of shares of Company Common Stock into which the
Convertible Debentures could have been converted as of the
Effective Time, including fractional shares. Parent shall, and
shall cause the Surviving Corporation to, at all times from and
after the Effective Time maintain sufficient funds to satisfy
its obligations to holders of Convertible Debentures upon the
conversion thereof as described in this Section 2.1(f).
Section 2.2 Dissenting
Shares.
(a) Notwithstanding anything in this Agreement to the
contrary, shares of Company Preferred Stock that are issued and
outstanding immediately prior to the Effective Time and which
are held by holders of shares of Company Preferred Stock who are
entitled to demand and who have properly demanded and perfected
their rights to be paid the fair value of such
shares in accordance with Title 48, Chapter 23 of the
TBCA (the Dissenting Shares) shall be entitled to
only such rights, if any, as are granted by Title 48,
Chapter 23 of the TBCA; provided, however, that if any such
holder shall fail to perfect or shall effectively waive,
withdraw or lose such holders rights under Title 48,
Chapter 23 of the TBCA, such holders shares of
Company Preferred Stock shall thereupon cease to be Dissenting
Shares.
(b) The Company shall give Parent (i) prompt notice of
any appraisal demands received by the Company, withdrawals
thereof and any other instruments served pursuant to the
applicable section of the TBCA and received by the Company and
(ii) the opportunity to participate in all negotiations and
proceedings with respect to the exercise of appraisal rights
under the TBCA. The Company shall not, except with the prior
written consent of Parent or as otherwise required by applicable
Law, make any payment with respect to or settle or offer to
settle any such demands.
(c) Dissenters rights under the TBCA are not
available to the holders of Company Common Stock for the
transactions contemplated by this Agreement.
Section 2.3 Company
Options, Restricted Shares and ESPP. Except
to the extent otherwise agreed in writing by the Company and
Parent prior to the Effective Time:
(a) The Company shall take all action necessary to ensure
that, (i) immediately prior to the Effective Time, each
outstanding option to acquire shares of Company Common Stock
(Company Options) granted under the Companys
Amended and Restated 1996 Stock Incentive Plan and 2005 Equity
Incentive Plan (collectively, the Equity Incentive
Plans), shall become fully vested and exercisable (without
regard to whether the Company Options are then vested or
exercisable), (ii) at the Effective Time, all Company
Options not theretofore exercised shall be cancelled and, in
exchange therefor, converted into the right to receive a cash
payment from the Surviving Corporation in an amount equal to the
product of (x) the excess, if any, of the Per Share Price
over the exercise price of each such Company
A-3
Option and (y) the number of shares of Company Common Stock
subject to such option to the extent not previously exercised
(such payment, if any, to be net of applicable Taxes withheld
pursuant to Section 2.5), and (iii) after the
Effective Time, any such cancelled Company Option shall no
longer be exercisable by the former holder thereof, but shall
only entitle such holder to the payment described in
subsection (ii) without interest.
(b) The Company shall take all action necessary to ensure
that, (i) immediately prior to the Effective Time, each
share of Company Common Stock granted subject to vesting or
other lapse restrictions pursuant to any Equity Incentive Plan
(collectively, Restricted Shares) which is
outstanding immediately prior to the Effective Time shall vest
and become free of such restrictions (without regard to whether
the Restricted Shares are then vested or the applicable
restrictions have then lapsed) and (ii) at the Effective
Time, the holder thereof shall be entitled to receive the Per
Share Price with respect to each such Restricted Share, less any
applicable Taxes withheld pursuant to Section 2.5.
(c) The Company shall take all action necessary to ensure
that, (i) the Companys Amended and Restated Employee
Stock Purchase Plan (the ESPP and, together with the
Equity Incentive Plans, the Equity Plans) is, and
that all offering periods in progress under the ESPP are,
terminated immediately prior to the Effective Time (or another
date prior to the Effective Time date designated by the Company
for administrative convenience), (ii) with respect to
persons participating in the ESPP on the date on which the
offering periods cease and the ESPP terminates (and who have not
withdrawn from or otherwise ceased participation in the ESPP
prior to such date), accumulated contributions will be deemed to
have been applied on such date to the purchase of Company Common
Stock in accordance with the ESPPs terms (treating the
date of termination as the last day of the relevant offering
period), and each such share of Company Common Stock will be
deemed to have been cancelled and converted into the right to
receive the Merger Consideration, such that, as of the Effective
Time, on a net basis, each participant shall be entitled to
receive, without interest and less any applicable Taxes withheld
pursuant to Section 2.5, (A) a refund by the Company
of all deferrals made to the ESPP by the participant during the
applicable existing salary deferral periods, to the extent such
deferrals have not been applied to the purchase of Company
Common Stock in accordance with the ESPPs terms, and
(B) an amount in cash equal to the excess of (1) the
product of (x) the number of shares of Company Common Stock
that the participant is deemed to have acquired pursuant to the
terms of the ESPP and (y) the Per Share Price, over
(2) the aggregate amount of the participants purchase
price deemed to have been paid in connection with the deemed
purchase, and (iii) there are no outstanding rights of
participants under the ESPP following the Effective Time. The
aggregate amount specified in Sections 2.3(a), (b) and
(c) with respect to the Company Options, Restricted Shares
and Options pursuant to the ESPP (ESPP
Options) is referred to herein as the Cash Out
Amount.
(d) The Company shall take all action necessary to ensure
that, as of the Effective Time, the Equity Plans shall terminate
and that no person shall have any right under the Equity Plans,
except as set forth herein.
(e) At or promptly after the Effective Time, the Surviving
Corporation shall, and Parent shall cause the Surviving
Corporation to, deliver the applicable Cash Out Amount to the
holders of Company Options, Restricted Shares and ESPP Options,
without interest and less any applicable withholding Taxes. If
for any reason the Surviving Corporation does not have adequate
freely available and unrestricted cash to pay the aggregate Cash
Out Amount, (i) Parent shall promptly fund the Surviving
Corporation with additional cash sufficient to make all required
payments to the holders of Company Options, Restricted Shares
and ESPP Options in respect of the Cash Out Amount and
(ii) Parent and the Surviving Corporation shall in any
event be liable for payment thereof. Parent shall, and shall
cause the Surviving Corporation to, at all times from and after
the Effective Time maintain sufficient funds to satisfy its
obligations to holders of Company Options, Restricted Shares and
ESPP Options in respect of the Cash Out Amount pursuant to this
Section 2.3.
A-4
Section 2.4 Exchange
of Certificates and Book-Entry Shares.
(a) Paying Agent. Prior to the Effective Time,
Parent shall designate a bank or trust company reasonably
acceptable to Company to act as paying agent for the holders of
shares of Company Common Stock, including associated Company
Rights, in connection with the Merger (the Paying
Agent) and to receive the funds to which holders of shares
of Company Common Stock will become entitled pursuant to
Section 2.1. At or prior to the Effective Time, Parent
shall provide, or shall cause to be provided, to the Paying
Agent cash necessary to pay for the shares of Company Common
Stock to be converted into the right to receive the Merger
Consideration (such cash being hereinafter referred to as the
Exchange Fund). If for any reason the Exchange Fund
is inadequate to pay the amounts to which holders of shares of
Company Common Stock shall be entitled under Section 2.1,
Parent shall, or shall cause the Surviving Corporation to,
promptly deposit additional cash with the Paying Agent
sufficient to make all payments of Merger Consideration, and
Parent and the Surviving Corporation shall in any event be
liable for payment thereof.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Surviving Corporation
shall cause to be mailed to each (i) record holder, as of
the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time
represented shares of the Company Common Stock (the
Certificates) or (ii) holder, as of the
Effective Time, of shares of Company Common Stock represented by
book-entry (Book-Entry Shares), a form of letter of
transmittal (which shall be in customary form and shall specify
that delivery shall be effected, and risk of loss and title to
the Certificates held by such person shall pass, only, subject
to Section 2.4(c), upon delivery of the Certificates to the
Paying Agent)
and/or
instructions for use in effecting the surrender of the
Certificates or Book-Entry Shares for payment of the Merger
Consideration therefor. Upon surrender to the Paying Agent of a
Certificate or Book-Entry Shares for cancellation, together with
such letter of transmittal, duly completed and validly executed
in accordance with the instructions thereto,
and/or such
other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate or Book-Entry
Shares shall be entitled to receive in exchange therefor the
Merger Consideration for each share formerly represented by such
Certificate or Book-Entry Shares, as applicable, and such
Certificate or applicable book-entry shall then be canceled. No
interest shall be paid or accrued for the benefit of holders of
the Certificates or Book-Entry Shares on the Merger
Consideration payable in respect of the Certificates or
Book-Entry Shares.
Until surrendered for cancellation as contemplated by this
Section 2.4(b), each Certificate and each Book-Entry Share
shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the
applicable Merger Consideration as contemplated by this
Section 2.
(c) Lost Certificates. If any Certificate has been
lost, stolen, defaced or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate
to be lost, stolen, defaced or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in
such amount as the Surviving Corporation may reasonably direct
as indemnity against any claim that may be made against it or
Parent with respect to such Certificate, the Paying Agent shall
issue in exchange for such lost, stolen or destroyed Certificate
the applicable Merger Consideration with respect thereto without
interest.
(d) Transfer Books; No Further Ownership Rights in
Shares of Company Common Stock. At the Effective Time, the
stock transfer books of the Company with respect to the Company
Common Stock will be closed and thereafter there will be no
further registration of transfers of shares of Company Common
Stock on the records of the Company. From and after the
Effective Time, the holders of Book-Entry Shares and the holders
of Certificates evidencing ownership of shares of Company Common
Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Company
Common Stock, except as otherwise provided for herein or by
applicable Law. If, after the Effective Time, Certificates or
Book-Entry Shares are presented to the Surviving Corporation for
any reason, they shall be cancelled against delivery of the
Merger Consideration as provided in this Section 2 without
interest.
(e) Termination of Exchange Fund. At any time
following the date that is one year after the Effective Time,
the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any funds (including any interest
received with respect thereto) made available to the Paying
Agent and not disbursed (or for which disbursement is pending
subject only to the Paying Agents routine administrative
procedures) to
A-5
holders of Certificates or Book-Entry Shares, and thereafter
such holders shall be entitled to look only to the Surviving
Corporation (subject to abandoned property, escheat or similar
Laws) only as general creditors thereof with respect to the
Merger Consideration payable upon due surrender of their
Certificates or Book-Entry Shares, without any interest thereon.
(f) No Liability. None of Parent, the Surviving
Corporation or the Paying Agent shall be liable to any holder of
a Certificate or a Book-Entry Share for Merger Consideration
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
Section 2.5 Withholding. Each
of Parent, Company and the Surviving Corporation is entitled to
deduct and withhold, or cause the Paying Agent to deduct and
withhold, from any amounts payable or otherwise deliverable
pursuant to this Agreement to any holder or former holder of
shares of Company Common Stock (including Restricted Shares),
Company Options or ESPP Options such amounts as are required to
be deducted or withheld therefrom under the Internal Revenue
Code of 1986, as amended (the Code), or any
provision of state, local or foreign Tax Law or under any other
applicable legal requirement. To the extent such amounts are so
deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the person
to whom such amounts would otherwise have been paid.
Section 2.6 Transfer
Taxes. If payment of the Merger Consideration
payable to a holder of shares of Company Common Stock pursuant
to the Merger is to be made to a person other than the person in
whose name the surrendered Certificate or Book-Entry Share is
registered, it shall be a condition of payment that the
Certificate or Book-Entry Share so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and
that the person requesting such payment shall have paid all
transfer and other Taxes required by reason of the payment of
the Merger Consideration to a person other than the registered
holder of the Certificate or Book-Entry Share surrendered (or
shall have established to the reasonable satisfaction of Parent
that such Tax either has been paid or is not applicable).
Section 3. Representations
and Warranties of Company. Except (i) as
set forth in the disclosure schedule delivered by the Company to
Parent on the date hereof (the Company Disclosure
Schedule) or (ii) as disclosed in reasonable detail
in any form, report, schedule, registration, statement,
certification or other document filed with, or furnished to, the
SEC prior to the date hereof, the Company hereby makes the
representations and warranties set forth in this Section 3
to Parent and Merger Sub. The section numbers of the Company
Disclosure Schedule are numbered to correspond to the section
numbers of this Agreement to which they refer. Any information
set forth in one section of the Company Disclosure Schedule will
be deemed to apply to each other section or subsection of this
Agreement to which its relevance is reasonably apparent.
Section 3.1 Organization
and Qualification.
(a) Each of the Company and each subsidiary of the Company
(all such Company subsidiaries being, collectively, the
Company Subsidiaries) is a corporation or other
legal entity duly organized, validly existing and in good
standing (with respect to jurisdictions that recognize the
concept of good standing) under the federal, state, local or
foreign laws, statutes, regulations, rules, ordinances,
judgments, decrees, orders, writs and injunctions (collectively,
Laws) of any court or any nation, government, state
or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, government (Governmental
Entity) of its jurisdiction of organization and has the
requisite corporate or similar power and authority to own, lease
and operate its properties and assets it purports to own and to
carry on its business as now being conducted, except as has not
had, individually or in the aggregate, a Company Material
Adverse Effect. The Company and each Company Subsidiary is
qualified or otherwise authorized to transact business as a
foreign corporation or other organization in all jurisdictions
where the nature of their business or the ownership, leasing or
operation of their properties make such qualification or
authorization necessary, except for jurisdictions in which the
failure to be so qualified or authorized has not had,
individually or in the aggregate, a Company Material Adverse
Effect. Company Material Adverse Effect shall mean
any event, circumstance, change or effect that, individually or
in the aggregate, is materially adverse to the business,
condition (financial or otherwise), assets, liabilities or
results of operations of the Company and the Company
Subsidiaries, taken as a whole; provided, however, that none
A-6
of the following shall constitute, or shall be considered in
determining whether there has occurred, and no event,
circumstance, change or effect resulting from or arising out of
any of the following shall constitute, a Company Material
Adverse Effect: (A) the announcement of the execution of
this Agreement or the pendency of consummation of the Merger
(including the threatened or actual impact on relationships of
the Company and the Company Subsidiaries with customers,
vendors, suppliers, distributors, landlords or employees
(including the threatened or actual termination, suspension,
modification or reduction of such relationships));
(B) changes in the national or world economy or financial
markets as a whole or changes in general economic conditions
that affect the industries in which the Company and the Company
Subsidiaries conduct their business, so long as such changes or
conditions do not adversely affect the Company and the Company
Subsidiaries, taken as a whole, in a materially disproportionate
manner relative to other similarly situated participants in the
industries or markets in which they operate; (C) any change
in applicable Law, rule or regulation or GAAP or interpretation
thereof after the date hereof, so long as such changes do not
adversely affect the Company and the Company Subsidiaries, taken
as a whole, in a materially disproportionate manner relative to
other similarly situated participants in the industries or
markets in which they operate; (D) the failure, in and of
itself, of the Company to meet any published or internally
prepared estimates of revenues, earnings or other financial
projections, performance measures or operating statistics;
provided, however, that the facts and circumstances underlying
any such failure may, except as may be provided in subsection
(A), (B), (C), (E), (F) and (G) of this definition, be
considered in determining whether a Company Material Adverse
Effect has occurred; (E) a decline in the price, or a
change in the trading volume, of the Company Common Stock on the
New York Stock Exchange (NYSE) or the Chicago Stock
Exchange (CHX); (F) compliance with the terms
of, and taking any action required by, this Agreement, or taking
or not taking any actions at the request of, or with the consent
of, Parent; and (G) acts or omissions of Parent or Merger
Sub after the date of this Agreement (other than actions or
omissions specifically contemplated by this Agreement).
(b) The Company has made available to Parent true, correct
and complete copies of the charter and bylaws, or other
organizational documents, of the Company and each Company
Subsidiary set forth in Section 3.4(a) of the Company
Disclosure Schedule as presently in effect. The Company is not
in violation of its charter or bylaws. The Company Subsidiaries
are not in violation of their respective articles of
organization, charter, bylaws or other organizational documents.
Section 3.2 Authority. The
Company has all necessary corporate power and authority to enter
into, execute and deliver this Agreement and each instrument
required hereby to be executed and delivered by it at the
Closing and, subject in the case of consummation of the Merger
to the adoption of this Agreement by the requisite holders of
Company Common Stock and the Company Preferred Stock, to perform
its obligations hereunder and thereunder and consummate the
Merger and the other transactions contemplated hereby. The
execution, delivery and performance of this Agreement and each
instrument required hereby to be executed and delivered at the
Closing by the Company and the consummation by the Company of
the Merger and the other transactions contemplated hereby have
been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to
consummate the Merger and the other transactions contemplated
hereby (other than approval of this Agreement by the requisite
holders of Company Common Stock and the Company Preferred Stock
and the filing with the Secretary of State of the State of
Tennessee of the Articles of Merger as required by the TBCA).
This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due authorization, execution
and delivery hereof by Parent and Merger Sub, constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except to the
extent that enforcement of the rights and remedies created
hereby is subject to bankruptcy, insolvency, reorganization,
moratorium and other similar Laws of general application
affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
Section 3.3 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 80,000,000 shares of Company Common Stock, of
which, as of June 2, 2007, 22,773,767 shares
(including an aggregate of 400,994 Restricted Shares
A-7
for which the restrictions have not lapsed) were issued and
outstanding, net of any shares held in the treasury of the
Company, and (ii) 13,503,315 shares of Company
preferred stock (collectively, Company Preferred
Stock), of which, as of June 2, 2007,
147,896 shares were issued and outstanding and no shares
were held in the treasury of the Company. Section 3.3(a) of
the Company Disclosure Schedule sets forth, as of June 2,
2007, the classes and series and number of authorized shares of
each class and series of Company Preferred Stock, the number of
issued and outstanding shares of each class and series of
Company Preferred Stock, and, as of June 2, 2007, the per
share redemption amount and conversion ratio of each class and
series of issued and outstanding Company Preferred Stock. Except
as set forth in Section 3.3(a) of the Company Disclosure
Schedule, all of the issued and outstanding shares of Company
Common Stock and Company Preferred Stock are duly authorized,
validly issued, fully paid and nonassessable, and, other than
Company Rights, were issued free of any preemptive (or similar)
rights. Except as set forth in Section 3.3(a) of the
Company Disclosure Schedule, as of the date of this Agreement,
the Company has no pending redemption notices in connection with
any shares of the Company Preferred Stock.
(b) As of June 2, 2007, there is $86,250,000 in
aggregate principal amount of Convertible Debentures outstanding
(excluding those Convertible Debentures that are held by the
Company). As of June 2, 2007, each $1,000 in aggregate
principal amount of Convertible Debentures is entitled to be
converted to 45.2080 shares of Company Common Stock.
(c) As of June 2, 2007, the Company has reserved
2,153,361 shares of Company Common Stock for issuance
pursuant to all of the Equity Incentive Plans, of which Company
Options to purchase 1,147,916 shares of Company Common
Stock were outstanding as of June 2, 2007, and
394,199 shares remain available for grant as of such date.
The maximum remaining number of shares of Company Common Stock
authorized for purchase under the ESPP, as of June 2, 2007,
is 333,722 shares. All shares of Company Common Stock
reserved for issuance as specified above, upon issuance on the
terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly
issued, fully paid and nonassessable and, other than Company
Rights, will not be issued subject to any preemptive (or
similar) rights. To the extent any Company Options were
exercised after June 2, 2007 and before the date of this
Agreement, the Company has received the exercise price (or other
applicable consideration) for such exercised Company Options in
accordance with the terms of such Company Options.
(d) At the Effective Time, there will not be any shares of
Company Common Stock, Company Preferred Stock or Restricted
Shares issued and outstanding, except for (i) shares of
Company Common Stock, Company Preferred Stock and Restricted
Shares indicated in Section 3.3(a) as issued and
outstanding as of June 2, 2007, (ii) shares of Company
Common Stock issued after June 2, 2007 upon the exercise of
Company Options or ESPP Options outstanding as of June 2,
2007 and (iii) shares of Company Common Stock issued after
June 2, 2007 upon the conversion of any shares of Company
Preferred Stock or any of the Convertible Debentures that were
issued and outstanding as of June 2, 2007. Except as set
forth on Section 3.3(d) of the Company Disclosure Schedule,
since June 2, 2007, (x) no Company Options or
Restricted Shares have been issued and (y) there has been
no change in the conversion ratios of any of the Company
Preferred Stock or the Convertible Debentures.
(e) No registration rights involving the Company Common
Stock will survive consummation of the Merger.
(f) There are not authorized or outstanding any
subscriptions, options, conversion or exchange rights, warrants,
calls, repurchase or redemption agreements, or other agreements,
instruments, contracts, claims or commitments of any nature
whatsoever obligating the Company or any Company Subsidiary to
issue, transfer, deliver, sell, repurchase or redeem, or cause
to be issued, transferred, delivered, sold, repurchased or
redeemed, additional shares of the Company Common Stock or other
securities of the Company or to make payments with respect to
the value of any of the foregoing or obligating the Company to
grant, extend or enter into any such agreement or commitment,
other than (i) Company Options and ESPP Options outstanding
on June 2, 2007, (ii) the rights (the Company
Rights) issued pursuant to the Amended and Restated Rights
Agreement, dated as of August 28, 2000 (the Company
Rights Agreement), between the Company and Computershare
Trust Company, N.A. as successor to First Chicago
Trust Company of New York, as rights
A-8
agent, in respect of which no Distribution Date (as defined in
the Company Rights Agreement) has occurred, (iii) the
Convertible Debentures outstanding on June 2, 2007, and
(iv) Company Preferred Stock outstanding on June 2,
2007 having the rights, privileges and preferences as set forth
in the Companys charter. There are no stockholder
agreements, voting trusts, proxies or other agreements or
instruments with respect to the voting of the capital stock of
the Company to which the Company or any of its officers or
directors are a party and, to the knowledge of the Company, no
other party is a party to any stockholder agreements, voting
trusts, proxies or other agreements or instruments with respect
to the voting of the capital stock of the Company.
(g) The Company has no outstanding bonds, debentures, notes
or other indebtedness that have the right to vote (or which is
convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders may vote,
other than the Convertible Debentures.
(h) The Company Common Stock, Employees Subordinated
Convertible Preferred Stock, Subordinated Serial Preferred
Stock, Series 1 and the Company Rights constitute the only
classes of securities of the Company registered under the
Securities Exchange Act of 1934, as amended (together with the
rules and regulations promulgated thereunder, the Exchange
Act).
Section 3.4 Company
Subsidiaries.
(a) Section 3.4(a) of the Company Disclosure Schedule
sets forth a complete list of the names and jurisdictions of
organization of each Company Subsidiary. All issued and
outstanding shares or other equity interests of each Company
Subsidiary have been duly authorized, validly issued, are fully
paid and nonassessable and are owned directly or indirectly by
the Company free and clear of any pledges, charges, liens,
encumbrances, restrictions on the transfer, voting or dividend
rights, rights of first offer or first refusal, security
interests or adverse rights or claims of any nature whatsoever
(Liens), except for (i) Liens for current taxes
and assessments not yet past due or that are being contested in
good faith, (ii) Liens imposed by applicable Law that would
not, individually or in the aggregate, have a Company Material
Adverse Effect, or (iii) Liens imposed or granted pursuant
to or in connection with the Companys existing credit
facilities or other indebtedness. None of the Company
Subsidiaries owns any shares of Company Common Stock.
(b) There are not any authorized or outstanding
subscriptions, options, conversion or exchange rights, warrants,
calls, repurchase or redemption agreements, or other agreements,
claims, contracts or commitments of any nature whatsoever
obligating any Company Subsidiary to issue, transfer, deliver,
sell, register, repurchase or redeem, or cause to be issued,
transferred, delivered, sold, repurchased or redeemed,
additional shares of the capital stock or other securities of
the Company Subsidiary or to make payments with respect to the
value of any foregoing or obligating the Company Subsidiary to
grant, extend or enter into any such agreement.
Section 3.5 SEC
Filings; Financial Statements; Undisclosed Liabilities.
(a) The Company has filed all forms, reports,
registrations, statements, certifications and other documents
required to be filed by it with, or furnished by the Company to,
the United States Securities and Exchange Commission (the
SEC) for all periods beginning on or after
January 31, 2004 (the Company SEC Reports). The
Company SEC Reports were prepared in accordance with the
applicable requirements of the Exchange Act and the Securities
Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the Securities Act), and did
not, as of their respective dates, contain any untrue statement
of a material fact or omit to state a material fact required to
be stated or incorporated by reference therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. As of the date of this
Agreement, there are no outstanding or unresolved comments in
comment letters received from the SEC. As of the date hereof, to
the Companys knowledge, none of the Company SEC Reports is
the subject of ongoing SEC review. No Company Subsidiary is
required to file any form, report, registration, statement or
other document with the SEC.
(b) The consolidated financial statements contained in the
Company SEC Reports (including the related notes, where
applicable) (the Financial Statements)
(i) present fairly, in all material respects, the
consolidated financial condition and results of operations and
cash flows and statements of shareholders equity of the Company
and its consolidated subsidiaries as of and for the periods
presented therein (subject, in the
A-9
case of unaudited quarterly financial statements, to normal
year-end adjustments and, with respect to pro forma financial
statements, to the qualifications stated therein),
(ii) have been prepared in all material respects in
accordance with United States generally accepted accounting
principles (GAAP) applied on a consistent basis
throughout the periods involved, except as otherwise indicated
therein or, in the case of the unaudited quarterly financial
statements as permitted by
Form 10-Q,
and (iii) when filed complied as to form in all material
respects with the rules and regulations of the SEC with respect
thereto. Since February 3, 2007, there has been no material
change in the Companys accounting methods or principles
that would be required to be disclosed in the Companys
financial statements in accordance with GAAP, except as
described in the notes to such financial statements. Except as
would not be material to the Company and its Subsidiaries, taken
as a whole, (i) management of the Company has implemented
and maintains disclosure controls and procedures (as defined in
Rule 13a-15(e)
of the Exchange Act) to ensure that material information
relating to the Company, including the consolidated Company
Subsidiaries, is made known to the chief executive officer and
the chief financial officer of the Company by others within
those entities, and (ii) the Companys principal
executive officer and principal financial officer have
disclosed, based on their most recent evaluation of internal
control over financial reporting, to the Companys auditors
and the audit committee of the Company Board of Directors (or
persons performing the equivalent functions): (A) all
significant deficiencies and material weaknesses within their
knowledge in the design or operation of internal control over
financial reporting which are reasonably likely to adversely
affect the Companys ability to record, process, summarize
and report financial information; and (B) any fraud that
involves management or other employees who have a significant
role in the Companys internal control over financial
reporting. The Companys principal executive officer and
principal financial officer have made, with respect to the
Company SEC Reports, all certifications required by the
Sarbanes-Oxley Act of 2002 and any related rules and regulations
promulgated by the SEC. As of the date hereof, the Company has
not identified any material weaknesses in the design or
operation of the internal controls over financial reporting
except as disclosed in the Company SEC Reports filed prior to
the date hereof. As of the date hereof, neither the Company nor
any of the Company Subsidiaries has outstanding, or has arranged
any outstanding, extensions of credit to directors
or executive officers of the Company or any Company Subsidiaries
within the meaning of Section 402 of the Sarbanes-Oxley Act
of 2002.
(c) Neither the Company nor any Company Subsidiary has any
liabilities, whether accrued, absolute, contingent or otherwise,
other than liabilities and obligations (i) reflected or
reserved against on the Financial Statements in accordance with
GAAP or reasonably apparent from the notes or managements
discussion and analysis related thereto, (ii) incurred in
connection with the transactions contemplated herein or since
the date of the most recently audited Financial Statements in
the ordinary course of business consistent with past practice,
(iii) discharged or paid prior to the date of this
Agreement, or (iv) that are not, individually or in the
aggregate, material to the Company and the Company Subsidiaries,
taken as a whole.
Section 3.6 Absence
of Certain Changes or Events. Since
February 3, 2007 through the date hereof, except as
specifically contemplated by this Agreement or set forth on
Section 3.6 of the Company Disclosure Schedule,
(i) there have not been any changes, events or
circumstances of which the Company has knowledge that have had,
individually or in the aggregate, a Company Material Adverse
Effect, and (ii) the Company and each Company Subsidiary
has conducted its respective business in the ordinary course of
business, except for such actions as have not had, individually
or in the aggregate, a Company Material Adverse Effect.
Section 3.7 Compliance
with Laws.
(a) The Company and the Company Subsidiaries have obtained
each federal, state, county, local or foreign governmental
consent, license, permit, registration, order, grant or other
authorization of a Governmental Entity that is required for the
operation of the business of the Company or any of the Company
Subsidiaries or the holding of any interest in any of its
properties (collectively referred to herein as, the
Permits), except where the failure to have, or the
suspension or cancellation of, any Permit has not had,
individually or in the aggregate, a Company Material Adverse
Effect. Except as has not had, individually or in the aggregate,
a Company Material Adverse Effect, (i) all of such Permits
are valid and in full force and effect and neither the Company
nor any Company Subsidiary has violated the terms of such
Permits, and (ii) no proceeding is pending or, to the
knowledge of the Company, threatened in writing to revoke,
suspend, cancel, terminate, or adversely modify any Permit.
A-10
(b) Except as has not had, individually or in the
aggregate, a Company Material Adverse Effect, the Company and
the Company Subsidiaries are in compliance with, are not in
default or violation of, and have not, to the knowledge of the
Company, received any notice of non-compliance, default or
violation with respect to, any Laws applicable to the business
of the Company and the Company Subsidiaries or to which any of
its or their properties are bound.
(c) Neither the Company nor any Company Subsidiary is a
party to, or has a legally binding commitment to enter into, any
joint venture, off balance sheet partnership or any similar
contract (including any contract or arrangement relating to any
transaction or relationship between or among the Company or the
Company Subsidiary, on the one hand, and any unconsolidated
affiliate, including any structured finance, special purpose or
limited purpose entity or person, on the other hand or any
off balance sheet arrangements (as defined in
Item 303(a) of
Regulation S-K
under the Exchange Act)), where the purpose or intended effect
of such contract or arrangement is to avoid disclosure of any
material transaction involving, or material liabilities of, the
Company or any Company Subsidiary in the Companys
published financial statements or other Company SEC Reports.
Section 3.8 Claims,
Actions and Proceedings. There are no
outstanding orders, writs, judgments, injunctions, decrees or
other requirements of any court or arbitrator against the
Company, any Company Subsidiary or any of their respective
securities, assets or properties that would have, individually
or in the aggregate, a Company Material Adverse Effect. There
are no actions, suits, claims, investigations, arbitrations,
legal or administrative proceedings (collectively,
Actions) or any governmental investigations or
inquiries pending or, to the knowledge of the Company,
threatened, against the Company, the Company Subsidiaries or any
of their respective securities, assets or properties, except as
would not have, individually or in the aggregate, a Company
Material Adverse Effect and other than Actions challenging this
Agreement or the transactions contemplated hereby, or seeking to
prohibit the Merger or transactions contemplated hereby. As of
the date hereof, there are no Actions pending or, to knowledge
of the Company, overtly threatened, against the Company or any
Company Subsidiary challenging this Agreement or the
transactions contemplated hereby, or seeking to prohibit the
Merger.
Section 3.9 Contracts
and Other Agreements.
(a) Except for this Agreement, or as set forth in
Section 3.9(a) of the Company Disclosure Schedule or in the
exhibit lists of any form, report, schedule, registration,
statement, certification or other document filed with, or
furnished to, the SEC, neither the Company nor any Company
Subsidiary is a party to or bound by any note, bond, mortgage,
indenture, contract, agreement, lease, license, Permit or other
instrument or obligation (each, a Contract):
(i) that would be required to be filed by the Company as a
material contract pursuant to Item 601(b)(10)
of
Regulation S-K
under the Securities Act or disclosed on
Form 8-K;
(ii) that would obligate the Company or any Company
Subsidiary to file a registration statement under the Securities
Act, which filing has not yet been made; (iii) that relates
to indebtedness for borrowed money, guarantees of indebtedness
for borrowed money, lines of credit (whether or not drawn),
letters of credit, capitalized lease or surety bonds that
(x) have an outstanding principal amount in excess of
$3,000,000 in the aggregate or (y) impose any Lien on any
shares of the Company Common Stock, Company Preferred Stock or
Restricted Shares; (iv) that involves acquisition or
disposition, directly or indirectly, of assets of the Company or
any other Person for aggregate consideration in excess of
$3,000,000 and that involves continuing or contingent
obligations of the Company or the Company Subsidiaries that are
material to the Company and the Company Subsidiaries taken as a
whole or is not yet consummated; (v) that involves
acquisition or disposition, directly or indirectly (by merger or
otherwise), of capital stock or other voting securities or
equity interests of the Company or any other Person for
aggregate consideration in excess of $3,000,000 that involves
continuing or contingent obligations of the Company or the
Company Subsidiaries that are material to the Company and the
Company Subsidiaries taken as a whole or is not yet consummated;
(vi) under which the Company or any Company Subsidiary has
advanced or loaned any funds in excess of $3,000,000 or has
guaranteed any obligations of another person in excess of
$3,000,000, other than extensions of credit to customers or
vendors in the ordinary course of business consistent with past
practice; (vii) that relates to any single or series of
related capital expenditures by the Company or any Company
Subsidiary in excess of $3,000,000 (other than purchase orders
for the purchase of inventory or real property leases);
(viii) to which the Company or any
A-11
Company Subsidiary is a party constituting a general or limited
partnership, a limited liability company or a joint venture
(whether limited liability or other organizational form) or
material alliance or similar arrangement that is material to the
business of the Company and the Company Subsidiaries, taken as a
whole; and (ix) except as set forth on Section 3.14 of
the Company Disclosure Schedule, that relates to the issuance,
offering, voting or pledge of any shares of the Company Common
Stock, Company Preferred Stock or Restricted Shares. Each such
Contract described in clauses (i) through (ix) of this
Section 3.9(a) is referred to herein as a Material
Contract.
(b) Except as has not had, individually or in the
aggregate, a Company Material Adverse Effect, each of the
Material Contracts is in full force and effect and is valid and
binding on the Company and each Company Subsidiary that is a
party thereto and, to the knowledge of the Company, each other
party thereto, enforceable against such parties in accordance
with their terms, except to the extent that enforcement of the
rights and remedies created thereby is subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws of
general application affecting the rights and remedies of
creditors and to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity
or at law).
(c) Except as has not had, individually or in the
aggregate, a Company Material Adverse Effect, (i) neither
the Company nor any Company Subsidiary has breached, is in
default under, or has received written notice of any breach of
or default under, any Material Contract, and no event has
occurred that with the lapse of time or the giving of notice or
both would constitute a default thereunder by the Company or any
Company Subsidiary, and (ii) to the Companys
knowledge, no other party to any Material Contract to which the
Company or any Company Subsidiary is a party is in breach or
violation of, or default under, such Material Contract. A
complete and correct copy, subject to redaction if required
pursuant to the terms thereof or if required by applicable Law,
of each Material Contract has previously been made available by
the Company to Parent or filed by the Company with the SEC.
Section 3.10 Intellectual
Property.
(a) Intellectual Property means all
intellectual property rights arising from or associated with the
following, whether protected, created, or arising under the laws
of the United States or of any other jurisdiction:
(i) trade names, trademarks and service marks (registered
and unregistered), logos, designs and other indicia of origin,
domain names and other Internet addresses or identifiers, trade
dress and similar rights, and applications (including intent to
use applications) to register any of the foregoing
(collectively, Trademarks); (ii) patents and
patent applications, including continuation, divisional,
continuation-in-part,
reexamination and reissue patent applications, and any patents
issuing therefrom (collectively, Patents);
(iii) works of authorship (whether published or
unpublished), copyrights and registrations and applications
therefor (collectively, Copyrights);
(iv) know-how, inventions, discoveries, improvements,
concepts, ideas, methods, processes, designs, plans, schematics,
technical data, specifications, research and development
information, technology and product roadmaps, compilations,
databases, and other proprietary or confidential information,
including customer lists, excluding any Patents or Copyrights
that may cover or protect any of the foregoing (collectively,
Trade Secrets); (v) software, computer
programs, algorithms, and related documentation; and
(vi) moral rights, publicity rights, and any other
proprietary, intellectual or industrial property rights of any
kind or nature.
(b) Section 3.10(b) of the Company Disclosure Schedule
sets forth a complete and accurate list of all registered
Trademarks, Patents, and Copyrights, including any pending
applications to register any of the foregoing, owned (in whole
or in part) by or exclusively licensed to the Company,
identifying for each whether it is owned by or exclusively
licensed to the Company, and in each case currently used or held
for use and material to the operations of the Company
(collectively, Company Registered IP). Either the
Company or a Company Subsidiary owns, or is licensed or
otherwise possesses adequate rights to use, all Intellectual
Property, and all applications and registrations, used or held
for use in their respective businesses as currently conducted.
Except as set forth on Section 3.10(c) of the Company
Disclosure Schedule, the Company has not received any written
notice or claim challenging the Companys ownership of any
of the Intellectual Property owned (in whole or in part) by the
Company. The Company has not received any written notice or
claim challenging the validity or enforceability of any of the
Company Registered IP. As of the date of this
A-12
Agreement, all necessary filing fees, maintenance fees, license
fees annuities and similar fees due in connection with the
Company Registered IP have been paid.
(c) To the knowledge of the Company, as of the date of this
Agreement, the development, manufacture, sale, distribution and
other commercial exploitations of products or services by or on
behalf of the Company or any of the Company Subsidiaries has not
(except as to matters that have been fixed, resolved or settled)
or does not infringe, misappropriate, or otherwise violate any
intellectual property rights of any person that would be
expected to result in liability that is material to the Company
and the Company Subsidiaries taken as a whole, and, to the
knowledge of the Company, there are no claims pending or
threatened in writing, by any person alleging such infringement
or misappropriation. Except as set forth on Section 3.10(c)
of the Company Disclosure Schedule, neither the Company nor any
of the Company Subsidiaries has made any claim of a violation,
misappropriation or infringement by others of its rights to or
in connection with the material Intellectual Property of the
Company or any of the Company Subsidiaries and, to the knowledge
of the Company, no person is infringing, misappropriating or
otherwise violating any material Intellectual Property of the
Company or any of the Company Subsidiaries.
(d) The Company has taken commercially reasonable actions
to protect the security of its software, systems and networks,
to protect its rights in its Intellectual Property and to
maintain the confidentiality of all information that constitutes
or constituted a Trade Secret of the Company. Except as set
forth on Section 3.10(d) of the Company Disclosure
Schedule, and except as had not had a Company Material Adverse
Effect, all current and former employees, consultants and
contractors of the Company who developed or created any material
Intellectual Property for, on behalf of, the Company have
executed and delivered proprietary information, confidentiality
and invention assignment agreements substantially in the
Companys standard form.
(e) The Intellectual Property owned by or licensed to the
Company constitutes all of the Intellectual Property rights
necessary for the conduct of the business as currently conducted
in all material respects. To the knowledge of the Company, no
loss or expiration of any of the material Intellectual Property
used by the Company or the Company Subsidiaries in the conduct
of the business, as presently conducted, is threatened or
pending.
Section 3.11 Property. Except
as has not, individually or in the aggregate, had a Company
Material Adverse Effect, the Company or a Company Subsidiary
owns and has good and valid title to all of its owned real
property and good title to all of its personal property and has
valid leasehold interests in all of its leased properties,
sufficient to conduct their respective businesses as currently
conducted, free and clear of all Liens (other than
(i) Liens for current taxes and assessments not yet past
due or being contested in good faith, (ii) inchoate Liens
for construction in progress, (iii) mechanics,
materialmens, workmens, repairmens,
warehousemens and carriers Liens arising in the
ordinary course of business of the Company or such Company
Subsidiary consistent with past practice for sums not yet
delinquent or being contested in good faith by appropriate
proceedings, (iv) Liens imposed or granted pursuant to or
in connection with the Companys existing credit facilities
or other indebtedness, and (v) all Liens and other
imperfections of title (including matters of record) and
encumbrances that do not materially interfere individually or in
the aggregate with the conduct of the business of the Company
and the Company Subsidiaries, taken as a whole, materially
detract from the value or use of the real property or have,
individually or in the aggregate, a Company Material Adverse
Effect (collectively, Permitted Liens)), assuming
the timely discharge of all obligations owing under or related
to the owned real property, the personal property and the leased
property. Except in each case as has not, individually or in the
aggregate, had a Company Material Adverse Effect, all leases
under which the Company or any of the Company Subsidiaries lease
any real or personal property (each a Lease and,
collectively, the Leases) are valid and in full
force and effect against the Company or any of the Company
Subsidiaries and, to the Companys knowledge, the
counterparties thereto, in accordance with their respective
terms (except to the extent that enforcement of the rights and
remedies under the Leases are subject to bankruptcy, insolvency,
reorganization, moratorium and other similar Laws of general
application affecting the rights and remedies of creditors and
to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law)), and there is not, under any of such Leases, any existing
default by the Company or any Company Subsidiaries which, with
notice or lapse of time or both, would
A-13
become a default by the Company or any of the Company
Subsidiaries. Section 3.11 of the Company Disclosure
Schedule sets forth a correct and complete list, as of the date
indicated on such schedule, of all of the Leases under which the
Company or any Company Subsidiary leases any real property used
for commercial purposes.
Section 3.12 Insurance. Except
as has not had, individually or in the aggregate, a Company
Material Adverse Effect, (a) the Company and the Company
Subsidiaries maintain insurance in such amounts and against such
risks as is (i) customary in relation to the business,
assets and liabilities of the Company and the Company
Subsidiaries, and (ii) sufficient to comply with applicable
Law, (b) all policies or binders of material fire,
liability, product liability, workers compensation,
vehicular, directors and officers and other material
insurance held by or on behalf of the Company and the Company
Subsidiaries (collectively, the Company Insurance
Policies) are (i) except for policies that have
expired under their terms, in full force and effect and, to the
knowledge of the Company, valid and enforceable in accordance
with their terms and (ii) all premiums due thereon have
been paid in full, (c) neither the Company nor any Company
Subsidiary is in breach or default with respect to any provision
contained in any such policy or binder and (d) neither the
Company nor any Company Subsidiary has (i) received notice
of actual or threatened modification or termination of any
material Company Insurance Policy, or (ii) received notice
of cancellation or non-renewal of any such Company Insurance
Policy, other than in connection with ordinary renewals.
Section 3.12 of the Company Disclosure Schedule contains a
complete and accurate list of all material Company Insurance
Policies.
Section 3.13 Tax
Matters.
(a) For purposes of this Agreement, the term
Tax (and, with correlative meaning,
Taxes and Taxable) means all United
States federal, state and local, and all foreign, income,
profits, franchise, gross receipts, payroll, transfer, sales,
employment, social security, unemployment insurance,
workers compensation, use, property, excise, value added,
ad valorem, estimated, stamp, alternative or add-on minimum,
recapture, environmental, capital gain, withholding taxes, any
other taxes, and any fees, assessments, liabilities, levies,
charges, duties, tariffs, impositions or assessments in the
nature of taxes, together with all interest, penalties, fines
and additions imposed on or with respect to such amounts,
whether disputed or not, including any liability for taxes of a
predecessor entity. Tax Return (and, with
correlative meaning, Tax Returns) means any return,
declaration, report, claim for refund or information return or
similar statement filed or required to be filed with any taxing
authority or any other Governmental Entity in connection with
Taxes, including any attachments thereto and any amendments
thereof.
(b) Except as has not had a Company Material Adverse Effect
or as set forth in Section 3.13(b) of the Company
Disclosure Schedule:
(i) All Tax Returns required to be filed by or with respect
to the Company and the Company Subsidiaries have been filed or
will be filed with the appropriate Tax authority within the time
and in the manner prescribed by Law. All such Tax Returns of the
Company and all Company Subsidiaries are true, correct and
complete in all respects, and all Taxes owed by the Company or
the Company Subsidiaries, whether or not shown on any Tax
Return, have been timely paid to the appropriate Tax authority
or fully reserved for on the Financial Statements in accordance
with GAAP. No claim (which has not been settled and paid or
accrued) has ever been made in writing by any Tax authority in
any jurisdiction in which any of the Company or the Company
Subsidiaries does not file a Tax Return that any of the Company
or the Company Subsidiaries is or may be subject to taxation by
that jurisdiction. No adjustment relating to any Tax Return of
the Company or any Company Subsidiary have been proposed in
writing by any Tax authority (insofar as such adjustment relates
to the activities or income of the Company or any Company
Subsidiary).
(ii) There are no Liens with respect to Taxes upon any of
the assets or properties of the Company or the Company
Subsidiaries, other than with respect to Taxes not yet due and
payable.
(iii) No audit, assessment, examination, dispute,
investigation or judicial or administrative proceeding is
currently pending with respect to any Tax Return or Taxes of the
Company or any of the Company Subsidiaries with respect to which
the Company or a Company Subsidiary has been notified in
A-14
writing. No deficiency for any Taxes has been proposed or
assessed in writing against the Company or any of the Company
Subsidiaries, which deficiency has not been paid or accrued in
full. All Tax deficiencies determined as a result of any past
completed audit with respect to Taxes of the Company and the
Company Subsidiaries have been paid.
(iv) There are no outstanding requests, agreements, waivers
or arrangements extending the statutory period of limitation
applicable to any claim for, or the period for the collection or
assessment of, Taxes due from or with respect to the Company or
the Company Subsidiaries for any taxable period. No power of
attorney granted by or with respect to the Company or the
Company Subsidiaries relating to Taxes is currently in force.
(v) With respect to any period ending on or before the date
of the latest balance sheet included in the Financial Statements
for which Tax Returns have not yet been filed, or for which
material Taxes are not yet due or owing, the Company and the
Company Subsidiaries have, in accordance with and to the extent
required by GAAP, made accruals for such Taxes in their
Financial Statements.
(vi) All withholding and payroll Tax requirements required
to be complied with by the Company and the Company Subsidiaries
(including requirements to deduct, withhold and pay over amounts
to any Governmental Entity and to comply with associated
reporting and record keeping requirements) have been satisfied
or accrued.
(vii) Neither the Company nor any Company Subsidiary has
any liability for the Taxes of any other person (other than the
Company and the Company Subsidiaries) under Treasury
Regulation 1.1502-6
(or any similar provision of state, local or foreign Law) by
contract or as a transferee or successor, by contract, or
otherwise. No person has any right to any payment from the
Company or any Company Subsidiary with respect to any Tax
refunds received or due to be received by the Company or any
Company Subsidiary.
(viii) The Company has delivered or made available to
Parent complete copies of all Tax Returns of the Company with
respect to 2004 and 2005.
(ix) Neither the Company nor any Company Subsidiary has
participated in a listed transaction within the
meaning of Section 6707A(c)(2) of the Code.
(x) Neither the Company nor any Company Subsidiary is a
party to any material joint venture, partnership, or other
arrangement that the parties treat as a partnership for federal
or applicable state, local or foreign Tax purposes.
(xi) Except as disclosed in its Tax Returns, neither the
Company nor any Company Subsidiary (x) has received
approval to make or agreed to a change in any accounting method
or has any written application pending with any Tax authority
requesting permission for any such change, (y) has agreed
to or is required to make any adjustment under Section 481
of the Code that will require an adjustment to taxable income
for any period following the Closing Date, or (z) has
received written notification that the Internal Revenue Service
is proposing any adjustment under Section 481 of the Code.
(xii) Neither the Company nor any Company Subsidiary has
been a distributing corporation or a
controlled corporation (within the meaning of
Section 355(a)(1)(A) of the Code) (x) in a transaction
occurring within the past five years or (y) in a
distribution which could otherwise constitute part of a
plan or series of related transactions
(within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(xiii) Neither the Company nor any Company Subsidiary is
party to or bound by any active and material closing agreement
pursuant to Section 7121 of the Code (or any similar
provision of state, local or foreign Law) or offer in compromise
with any Tax authority.
(xiv) Neither the Company nor any of the Company
Subsidiaries is a party to any indemnification, allocation,
sharing or similar agreement, with respect to Taxes that would
give rise to a payment or indemnification obligation.
A-15
(xv) Neither Company nor any Company Subsidiaries is, nor
has been at any time during the
5-year
period ending with the Closing Date, a United States Real
Property Holding Corporation within the meaning of
Section 897(c)(2) of the Code.
(xvi) Neither Company nor any of its Subsidiaries is, or
has been, a member of an affiliated group (within the meaning of
Section 1504(a) of the Code) filing a consolidated federal
income Tax Return (other than a group the common parent of which
was Company).
(xvii) Neither Company nor any Company Subsidiaries
(u) has participated in or cooperated with an international
boycott within the meaning of Section 999 of the Code,
(v) has an unrecaptured overall foreign loss within the
meaning of Section 904(f) of the Code, (w) will be
required to include any amounts in income in the taxable year
that includes the Closing Date pursuant to Section 951 of
the Code, (x) has had the amount of its Subpart F income
limited in any year pursuant to Section 952(c)(1)(a) of the
Code, (y) has been a passive foreign investment company
within the meaning of Section 1297 of the Code, or
(z) has had any dual consolidated losses within the meaning
of Section 1504 of the Code or has entered into any
agreement with any Tax authority regarding the use or
availability of such losses.
(xviii) (i) All returns, declarations, and reports
required to be filed by the Company or any Company Subsidiary
pursuant to any applicable abandoned property, escheat or
similar Law have been filed with the appropriate Governmental
Entity within the time and in the manner prescribed by Law and
(ii) the Company and all Company Subsidiaries have properly
delivered to a public official or Governmental Entity all
amounts so required to be delivered pursuant to any applicable
abandoned property, escheat or similar Law within the time and
in the manner prescribed by Law.
Section 3.14 Employee
Benefit Plans.
(a) With respect to each pension, savings, profit sharing,
retirement, deferred compensation, employment, welfare, fringe
benefit, insurance, short and long term disability, medical,
death benefit, incentive, bonus, stock, other equity-based,
vacation pay, severance pay, cafeteria plan and other plan,
program and arrangement for the benefit of any current or former
employee, director or consultant of the Company or any Company
Subsidiary (collectively, the Company Employees), or
their beneficiaries, including each employee benefit
plan (as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
(ERISA)) that is not a Foreign Plan, and that is
sponsored or maintained by Company
and/or by
one or more Company Subsidiaries or to which the Company
and/or one
or more Company Subsidiaries has any present or future liability
(each, a Plan), the Company has delivered or made
available (or will make available) to Parent current, accurate
and complete copies of each of the following together with, when
applicable, all amendments: (i) the Plan, or, if the Plan
has not been reduced to writing, a written summary of its
material terms, (ii) if the Plan is subject to the
disclosure requirement of Title I of ERISA, the summary
plan description, and in the case of each other Plan, any
similar employee summary, (iii) if the Plan is intended to
be qualified under Section 401(a) of the Code, the most
recent determination letter (or opinion letter upon which the
Company or any Company Subsidiary is entitled to rely) issued by
the Internal Revenue Service (IRS), (iv) if the
Plan is subject to the requirement that a Form 5500 series
annual report/return be filed, the three most recently filed
annual reports/returns, (v) all related trust agreements,
group annuity contracts and administrative services agreements,
(vi) for each Plan that is funded, the three most recent
financial statements and actuarial reports for each such Plan,
and (vii) since January 1, 2005, any material
communications received from or sent to the IRS or the
U.S. Department of Labor relating to an audit or similar
process involving the Plan. Section 3.14(a) of the Company
Disclosure Schedule sets forth a list of all material Plans.
(b) There is no entity (other than the Company or any
Company Subsidiary) that, together with the Company or any
Company Subsidiary, was, during the five years preceding the
date of this Agreement, or currently would be, treated as a
single employer within the meaning of Section 414(b), (c),
(m) or (o) of the Code or Section 4001(b) of
ERISA (an ERISA Affiliate).
(c) Each Plan has been established and administered in all
material respects in accordance with its terms and the
provisions of applicable Law, including ERISA and the Code (and
the rules and regulations
A-16
thereunder). None of the Plans is currently under examination by
the IRS or the U.S. Department of Labor. All contributions,
premiums and expenses, if any, due under each Plan have been
timely made. Each Plan intended to be qualified under
Section 401(a) of the Code has received a favorable
determination letter (or opinion letter upon which the Company
or any Company Subsidiary may rely) from the IRS that it is so
qualified, and to the knowledge of the Company nothing has
occurred since the date of such letter that adversely affected
the qualified status of or reasonably would be expected to
disqualify such Plan. Each trust created under any such Plan is
exempt from Tax under Section 501(a) of the Code. Except as
set forth on Section 3.14(c) of the Company Disclosure
Schedule, no Plan is or has been subject to Section 302 of
ERISA or Section 412 of the Code. To the knowledge of the
Company, no event has occurred and no condition exists that
would subject the Company or any Company Subsidiary either
directly or by reason of their affiliation with any member of
their Controlled Group (defined as any organization
that is a member of a controlled group of organizations within
the meaning of Sections 414 (b), (c), (m) or
(o) of the Code), to any Tax, fine, lien, penalty or other
liability imposed by ERISA, the Code or other applicable Laws,
rules or regulations which could result in any material
liability on the part of the Company or any Company Subsidiary.
(d) Except for continuation of health coverage described in
Section 4980B of the Code or Section 601 et seq. of
ERISA (COBRA) and, except as provided on
Section 3.14(d) of the Company Disclosure Schedule, no Plan
provides for medical, dental, life insurance coverage or any
other welfare benefits after termination of employment or for
other post-employment welfare benefits.
(e) No material Action (other than routine claims for
benefits in the ordinary course) is pending or, to the knowledge
of the Company, threatened against any Plan (including any audit
or other administrative proceeding by the U.S. Department
of Labor, the IRS or other Governmental Entities).
(f) Except as set forth on Section 3.14(f) of the
Company Disclosure Schedules, neither the Company nor any of the
Company Subsidiaries nor any ERISA Affiliate has ever
maintained, sponsored, contributed to, been required to
contribute to, or incurred any liability under any defined
benefit pension plan subject to Title IV of ERISA,
including without limitation any multi-employer plan as defined
in Section 3(37) or Section 4001(a)(3) of ERISA or any
multiple employer plan as defined in Section 413(c) of the
Code, or any plan that has two or more contributing sponsors at
least two of whom are not under common control, within the
meaning of Section 4063(a) of ERISA.
(g) Neither the Company nor any Company Subsidiary, nor, to
the knowledge of the Company, any other disqualified
person or party in interest (as defined in
Section 4975(e)(2) of the Code and Section 3(14) of
ERISA, respectively) has engaged in any transactions in
connection with any Plan that would result in the imposition on
the Company or any Company Subsidiary of a material penalty
pursuant to Section 502 of ERISA, damages pursuant to
Section 409 of ERISA or a material tax pursuant to
Section 4975 of the Code.
(h) Each non-governmental plan maintained, or contributed
to, by or on behalf of the Company or any Company Subsidiary
applicable to Company Employees located outside of the United
States (a Foreign Plan) and each material
non-governmental welfare benefit plan maintained or contributed
to by or on behalf of or applicable to the Company Employees
located outside of the United States (a Foreign Welfare
Plan), has been administered in material compliance with
its terms and the requirements of all applicable Laws and
regulations, and all required contributions to each Foreign Plan
and Foreign Welfare Plan have been made. All Foreign Plans that
are required to be funded are funded to the extent required
under applicable Law in all material respects. There are no
Actions (other than routine benefit claims) pending or, to the
knowledge of the Company, threatened against any Foreign Plan or
Foreign Welfare Plan, or, to the Companys knowledge, no
facts or circumstances exist that could give rise to any such
Actions, except in each case as has not resulted in liability
that is material to the Company and the Company Subsidiaries
taken as a whole.
(i) Except as required by applicable Law or as set forth on
Section 3.14(i) of the Company Disclosure Schedule, no Plan
exists that, as a result of the execution of this Agreement,
shareholder approval of this Agreement, or the consummation of
the transactions contemplated by this Agreement, would
(i) result in severance pay or any increase in severance
pay upon any termination of employment after the date of this
Agreement (except as required by the Code or ERISA),
(ii) except as contemplated by Section 2 with respect
to Options, Restricted Shares and ESPP Options, accelerate the
time of payment or vesting or result in any
A-17
payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or
result in any other material obligation pursuant to, any Plan,
or (iii) limit or restrict the right of the Company to
merge, amend or terminate any of the Plans.
(j) No deduction for federal income tax purposes has been
nor is any such deduction expected by the Company to be
disallowed for remuneration paid by the Company or any Company
Subsidiary by reason of Section 162(m) of the Code solely
by reason of the transactions contemplated hereby.
(k) To the Companys knowledge, each Plan that is a
non-qualified deferred compensation plan or arrangement subject
to Section 409A of the Code has been operated and
administered in good faith compliance with Section 409A of
the Code, IRS Notice
2005-1 and
other applicable IRS guidance from the period beginning
January 1, 2005 through the date hereof, except in each
case as has not resulted in liability that is material to the
Company and the Company Subsidiaries taken as a whole.
Section 3.15 Labor
Matters. Neither the Company nor any of the
Company Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. Neither
the Company nor any of the Company Subsidiaries is subject to a
dispute, strike or work stoppage except as has not, individually
or in the aggregate, had a Company Material Adverse Effect. To
the knowledge of the Company, there are no organizational
efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving any Company
Employees.
Section 3.16 Environmental
Matters.
(a) Except as set forth on Section 3.16(a) of the
Company Disclosure Schedule or has not had, individually or in
the aggregate, a Company Material Adverse Effect, (i) none
of the Company or any of the Company Subsidiaries is in
violation of any Environmental Law or, except for any violation
that has been fully resolved, has violated in the past any
Environmental Law; (ii) to the knowledge of the Company,
there is and has been no Release of Hazardous Substances, on or
under any of the properties currently owned, leased, occupied or
operated by the Company or any of the Company Subsidiaries or,
during the period of the Companys or the Company
Subsidiaries ownership, lease, occupation or operation
thereof, formerly owned, leased, occupied or operated by the
Company or any of the Company Subsidiaries that would reasonably
be expected to result in a liability to the Company or any of
the Company Subsidiaries that would be material the Company and
the Company Subsidiaries taken as a whole; (iii) the
Company and the Company Subsidiaries have obtained and are in
compliance with all required Environmental Permits and, except
for any noncompliance that has been fully resolved, have been in
the past in compliance with such permits; (iv) there are no
Actions, orders, written claims or written notices pending or,
to the knowledge of the Company, issued to or threatened against
the Company or any of the Company Subsidiaries alleging
violations of or liability under any Environmental Law or
otherwise concerning the Release or management of Hazardous
Substances or with respect to any matter concerning the
protection of the environment or pollution, including natural
resources; and (v) the Company and any of the Company
subsidiaries has made (or will make) accessable to Parent and
Merger Sub copies of all environmental assessments, audits,
studies, and other environmental reports in its possession
related to the Company, any of the Company subsidiaries, or any
of its current or former properties or operations.
(b) Parent and Merger Sub acknowledge that (i) the
representations and warranties contained in this
Section 3.16 are the only representations and warranties
being made with respect to compliance with or liability under
Environmental Laws related to the Company or to the Company
Subsidiaries or to this Agreement or to its subject matter and
(ii) no other representation or warranty contained in this
Agreement (including pursuant to Section 3.7) shall apply
to any such matters and no other representation or warranty,
express or implied, is being made with respect thereto.
(c) For purposes of this Agreement:
(i) Environmental Laws means any Laws
(including common law) of the United States federal, state,
local,
non-United
States, or any other Governmental Entity, relating to
(A) Releases or threatened Releases of Hazardous Substances
or materials containing Hazardous Substances; (B) the
presence, production, manufacture, handling, transport, use,
treatment, storage, emission, discharge, distribution,
A-18
labeling, testing, processing, control, cleanup or disposal of
Hazardous Substances or materials containing Hazardous
Substances; or (C) pollution or protection of the
environment, including natural resources, or of human health as
such is affected by Hazardous Substances or materials containing
Hazardous Substances.
(ii) Environmental Permits means any permit,
consent, license, registration, approval, notification or any
other authorization pursuant to any Environmental Law.
(iii) Hazardous Substances means (A) those
substances, materials or wastes defined as toxic, hazardous,
acutely hazardous, pollutants or contaminants, in, or regulated
under, the following United States federal statutes and any
analogous foreign or state statutes, and all regulations
thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the
Clean Water Act, the Safe Drinking Water Act, the Atomic Energy
Act, the Federal Insecticide, Fungicide, and Rodenticide Act and
the Clean Air Act or any other Environmental Law;
(B) petroleum and petroleum products, including crude oil
and any fractions thereof; (C) natural gas, synthetic gas,
and any mixtures thereof; and (D) polychlorinated
biphenyls, asbestos, radioactive materials, radon and molds that
would reasonably be expected to have an adverse effect on human
health, and urea formaldehyde foam insulation.
(iv) Release means any release, spilling,
leaking, pumping, pouring, discharging, emitting, emptying,
escaping, leaching, injecting, dumping, disposing or migrating
into or through the indoor or outdoor environment.
Section 3.17
No Breach.
(a) The execution, delivery and performance of this
Agreement do not and the consummation by the Company of the
Merger and the other transactions contemplated by this Agreement
will not (i) violate any provision of the charter or bylaws
of the Company or the comparable organizational documents of a
Company Subsidiary, (ii) violate, conflict with or result
in the breach of any of the terms or conditions of, result in
modification of or the cancellation or loss of a benefit under,
require any consent, notice or other action under, or otherwise
give any other contracting party the right to terminate,
accelerate obligations under or receive payment or additional
rights under or constitute (or with notice or lapse of time, or
both, constitute) a default under, any Material Contract
(excluding Permits), (iii) assuming expiration of the
applicable waiting period under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), violate any Law applicable to the Company or any of
the Company Subsidiaries or by which any of the Companys
or the Company Subsidiaries assets or properties is bound,
(iv) violate any material Permit, (v) except for
(a) filings with the SEC under the Exchange Act,
(b) filings pursuant to the TBCA as contemplated herein,
(c) the filing of a pre-merger notification report under
the HSR Act, and any merger control, competition or fair trade
Law filings in foreign jurisdictions if and to the extent
required, (d) filings required with, and approvals required
by, the NYSE and the CHX rules and regulations, and (e) the
notifications and consents listed on Section 3.17(a) of the
Company Disclosure Schedule, require any registration or filing
with, notice to, or Permit, order, authorization, consent or
approval of, any Governmental Entity or any third party pursuant
to a Material Contract, or (vi) result in the creation of
any Lien on the assets or properties of the Company or a Company
Subsidiary (other than Permitted Liens), excluding from the
foregoing clauses (ii), (iii), (iv), (v) and
(vi) violations, conflicts, breaches, accelerations, rights
or entitlements, defaults and Liens which, and filings,
registrations, notices, Permits, orders, authorizations,
consents and approvals the absence of which has not had,
individually or in the aggregate, a Company Material Adverse
Effect. Notwithstanding the foregoing, for all purposes of the
Agreement, the Company does not make any representation or
warranty (pursuant to this Section 3.17 or elsewhere in
this Agreement) regarding the effect of the applicable
antitrust, merger control, competition or fair trade Laws on its
ability to execute, deliver, or perform its obligations under
this Agreement or to consummate the Merger as a result of the
enactment, promulgation, application, or threatened or actual
judicial or administrative investigation or litigation under, or
enforcement of, any antitrust, merger control, competition or
fair trade Law with respect to the consummation of the Merger.
(b) As of the date of this Agreement, the Company does not
have knowledge that any landlord or licensor has notified the
Company that it would withhold any consent required upon the
consummation of the
A-19
Merger with respect to the agreements listed on
Section 3.17(b) of the Company Disclosure Schedule, except
to the extent that the failure to obtain such consents would not
have a Company Material Adverse Effect.
Section 3.18 Board
Approvals; Anti-Takeover; Vote Required.
(a) The Company Board of Directors has (i) duly and
validly approved and adopted resolutions addressing all
corporate action required to be taken by the Company Board of
Directors to authorize and adopt this Agreement and the Merger
and (ii) subject to the other terms and conditions of this
Agreement, resolved to submit this Agreement to the shareholders
of the Company and to recommend that the shareholders of the
Company approve and adopt this Agreement and the Merger.
(b) Except to the extent addressed in Section 3.18(e),
assuming the accuracy of the representations and warranties set
forth in Section 4.7(c), the Company and the Company Board
of Directors has taken all action necessary such that no
restrictions contained in any anti-takeover,
fair price, moratorium, control
share acquisition, business combination or
similar Law, including the Tennessee Business Combination Act or
provision in the Companys charter or bylaws will apply to
or prohibit the execution, delivery or performance of or
compliance with this Agreement or the Merger.
(c) The Company Board of Directors has taken such action as
is necessary to amend the Company Rights Agreement such that the
execution, delivery or performance of or compliance with this
Agreement and the Merger will not: (i) result in Parent
becoming an Acquiring Person under the Company
Rights Agreement or (ii) result in the grant of any rights
to any person under the Company Rights Agreement or enable,
require or cause the Company Rights to become exercisable, be
exercised or deemed exercised, or be distributed or otherwise
triggered.
(d) Assuming the accuracy of the representations and
warranties set forth in Section 4.7(c), the affirmative
vote of the holders of a majority of the outstanding shares of
Company Common Stock and Company Preferred Stock voting together
as a single group (the Company Shareholder Approval)
is the only vote of the Companys shareholders necessary to
approve or adopt this Agreement and the Merger.
(e) Assuming the accuracy of the representations and
warranties set forth in Section 4.7(c), and further
assuming that Parent conducts the Employee Preferred Stock
Tender Offer in accordance with the terms set forth in
Section 5.4 and it otherwise meets the requirements of
Section 48-103-102(10)(B)(v)
of the Tennessee Investor Protection Act, the Company Board of
Directors has taken or will take (prior to the commencement of
the Employee Preferred Stock Tender Offer) such action as is
necessary (including recommending in favor of the Employee
Preferred Stock Tender Offer to the holders of the Employee
Preferred Stock) to assure that none of the transactions
contemplated by this Agreement, including the Merger and the
Employee Preferred Stock Tender Offer, will, to the
Companys knowledge, be a takeover offer under
the Tennessee Investor Protection Act.
(f) As of the date of this Agreement, Dissenters
rights under the TBCA are not available to the holders of
Company Common Stock for the transactions contemplated by this
Agreement, including the Merger.
Section 3.19
Financial Advisor.
(a) The Company Board of Directors has received the opinion
of Goldman Sachs & Co. substantially to the effect
that, as of the date hereof, and based upon and subject to the
factors and assumptions set forth therein, the Per Share Price
to be received by the holders of shares of Company Common Stock
pursuant to this Agreement is fair from a financial point of
view to such holders, a signed copy of which will be shown to
Parent promptly after it is available following the date hereof.
It is agreed and understood that such opinion is for the benefit
of the Company Board of Directors and may not be relied on by
Parent or Merger Sub.
(b) Other than Goldman Sachs & Co., no broker,
investment banker, financial advisor, finder, agent or similar
intermediary has acted on behalf of the Company or any Company
Subsidiary in connection with this Agreement or the transactions
contemplated hereby, and there are no other brokerage
commissions, finders fees, financial advisors fees
or similar fees or commissions payable in connection herewith
based on any agreement, arrangement, commitment or understanding
with the Company or any Company Subsidiary, or any
A-20
action taken by or on behalf of the Company or any Company
Subsidiary. The Company has made available to Parent a true,
complete and correct copy of the Companys engagement
letter with Goldman Sachs & Co.
Section 3.20 Information
in the Proxy Statement. The proxy statement
to be provided to the Companys shareholders in connection
with the Company Shareholders Meeting (such proxy statement,
inclusive of any amendment thereof or supplement thereto, the
Proxy Statement) on the date mailed to the
Companys shareholders and at the time of any meeting of
the Companys shareholders to be held in connection with
the Merger, will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading, except that no representation is made by the Company
with respect to statements made therein based on information
supplied in writing by or related to, or the sufficiency of
disclosures related to, Parent or Merger Sub. The Proxy
Statement will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 3.21 Affiliate
Transactions. No executive officer or
director of the Company or any Company Subsidiary or any person
owning 5% or more of the Company Common Stock or, to the
Companys knowledge, any affiliate or family member of any
such officer, director or owner (an Affiliated
Party) is a party to any Contract with or binding upon the
Company or any Company Subsidiary or has any material interest
in any property or assets owned by the Company or any Company
Subsidiary or has engaged in any transaction (other than those
related to employment or incentive arrangements) with the
Company that is material to the Company within the last
12 months, in each case, of the type that would be required
to be disclosed under Item 404 of
Regulation S-K
under the Securities Act.
Section 3.22 Suppliers
and Vendors. Set forth in Section 3.22
of the Company Disclosure Schedule is a list of the twenty
largest merchandise vendors of the Company and the Company
Subsidiaries based on the dollar value of materials or products
purchased by the Company and the Company Subsidiaries for the
fiscal year ended February 3, 2007. As of the date of this
Agreement, the existing suppliers of the Company are adequate
for the operation of the business of the Company and the Company
Subsidiaries as presently conducted. Except as would not have a
Company Material Adverse Effect, since February 3, 2007 and
through the date hereof, (a) the Company has not received
any written notice or threat of any material change in relations
with any of the major suppliers of the Company or the Company
Subsidiaries, the result of which would be material and adverse
to the Company and the Company Subsidiaries taken as a whole,
and (b) the Company has not received from any of the major
suppliers of the Company or any Company Subsidiaries any written
notices of termination or material alteration of any Contract or
business relationship governed thereby and, to the
Companys knowledge, no other party to any such Contract
intends or has indicated in writing an intent to
(i) terminate, (ii) not renew or extend (if
contemplated by the terms thereof and requested by the Company),
(iii) seek to amend or modify, or (iv) not fully
perform its obligations under any Contract.
Section 3.23 Inventory. Except
as would not have a Company Material Adverse Effect, as of the
date hereof, all inventory of the Company and the Company
Subsidiaries, whether or not reflected in the latest balance
sheet included in the Company SEC Reports, consist of a quality
and quantity usable and saleable in the Companys and the
Company Subsidiaries ordinary course of business, except
for obsolete items and items of below-standard quality, all of
which have been or will be written-off or written-down to net
realizable value on the balance sheet included in the
Companys SEC Reports, and except for inventory items
having an aggregate value not to exceed $3,000,000.
Section 3.24 No
Other Representations or Warranties; Investigation by
Parent. Parent and Merger Sub each
acknowledges and agrees that (a) it has had an opportunity
to discuss the business of the Company and the Company
Subsidiaries with the management of the Company, (b) it has
had reasonable access to (i) the books and records of the
Company and the Company Subsidiaries and (ii) the
electronic dataroom maintained by the Company through Merrill
Corporation for purposes of the transactions contemplated by
this Agreement, (c) it has been afforded the opportunity to
ask questions of and receive answers from officers of the
Company and (d) except for the representations and
warranties contained in this Section 3, and any
certificates delivered by the Company in connection with
Closing, neither Parent nor Merger Sub have relied upon or
otherwise been induced by, any other express or implied
representation or warranty with respect to the Company or with
A-21
respect to any information provided to or made available to
Parent or Merger Sub in connection with the transaction
contemplated hereunder. Neither the Company nor any other person
will have or be subject to any liability or indemnification
obligation to Parent, Merger Sub or any other person resulting
from the distribution to Parent or Merger Sub, or Parents
or Merger Subs use of, any such information, including any
information, documents, projections, forecasts or other material
made available to Parent or Merger Sub in certain data rooms or
management presentations in expectation of the transactions
contemplated by this Agreement, unless any such information is
expressly included in a representation or warranty contained in
this Section 3 or in the corresponding section of the
Company Disclosure Schedule.
Section 4. Representations
and Warranties of Parent.
Except as set forth in the disclosure schedule delivered by
Parent to the Company on the date hereof (the Parent
Disclosure Schedule), Parent and Merger Sub hereby jointly
and severally make the representations and warranties set forth
in this Section 4 to the Company. The section numbers of
the Parent Disclosure Schedule are numbered to correspond to the
section numbers of this Agreement to which they refer. Any
information set forth in one section of the Parent Disclosure
Schedule will be deemed to apply to each other section or
subsection of this Agreement to which its relevance is
reasonably apparent.
Section 4.1 Organization. Each
of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its organization. Parent and Merger Sub are duly
qualified or otherwise authorized to transact business as a
foreign corporation or organization in each jurisdiction where
the character of the properties owned, leased or operated by
them or the nature of their business makes such qualification or
authorization necessary, except for such failures to be so
qualified or licensed and in good standing that would not
reasonably be likely to prevent or materially delay Parent and
Merger Subs ability to consummate the transactions
contemplated hereby (a Parent Material Adverse
Effect). Parent has made available to the Company a
complete and correct copy of the articles of incorporation,
charter, bylaws or other applicable governing instruments of
Parent and Merger Sub.
Section 4.2 Authority
to Execute and Perform Agreement. Parent and
Merger Sub have the necessary corporate power and authority to
enter into, execute and deliver this Agreement and to perform
fully their obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation of
the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and
Merger Sub. This Agreement has been duly executed and delivered
by Parent and Merger Sub and, assuming the due authorization,
execution and delivery hereof by the Company, constitutes a
valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, except to
the extent that enforcement of the rights and remedies created
hereby is subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application
affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law). No vote of
holders of capital stock of Parent is necessary to approve this
Agreement and the Merger and other transactions contemplated
hereby.
Section 4.3 No
Conflict; Required Filings and Consents.
(a) The execution and delivery by Parent and Merger Sub of
this Agreement do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will
not, (i) violate (A) any provision of the articles of
incorporation, charter, bylaws or other organizational documents
of Parent or Merger Sub, (B) subject to the filings and
other matters referred to in Section 4.3(b), any Law
applicable to Parent or Merger Sub or their properties or
assets, or (C) any Contract to which Parent or Merger Sub
is a party or by which their respective assets or properties are
bound in any material respect, or (ii) require the consent
of, or registration, declaration or filing with, any third party
under any Contract to which Parent or Merger Sub is a party or
by which their respective assets or properties are bound,
except, in the case of clauses (i)(B), (i)(C) and
(ii) above, for such violations, consents, registrations,
declarations and filings that, individually or in the aggregate,
would not reasonably be expected to have a Parent Material
Adverse Effect.
A-22
(b) No consent of, or registration, declaration or filing
with, any third party or Governmental Entity is required to be
obtained or made by or with respect to Parent or Merger Sub in
connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated
hereby, other than (i) filing of a pre-merger notification
report under the HSR Act, (ii) the filing with the SEC of
such reports under Section 13 of the Exchange Act as may be
required in connection with this Agreement and the transactions
contemplated hereby, (iii) the filing of the Articles of
Merger with the Secretary of State of the State of Tennessee and
any appropriate documents with the relevant authorities of the
other jurisdictions in which Parent or Merger Sub is qualified
to do business, (iv) compliance with and filings under the
merger control, competition or fair trade Laws of any foreign
jurisdiction, if and to the extent required, (v) as set
forth in Section 4.3 of the Parent Disclosure Schedule and
(vi) such items that have not had and are not reasonably
likely to have, individually or in the aggregate, a Parent
Material Adverse Effect.
Section 4.4 Information
in the Proxy Statement. The information
supplied in writing by Parent and Merger Sub expressly for
inclusion in the Proxy Statement will not contain at the time it
is first mailed to the shareholders of the Company or at the
time of the Company Shareholders Meeting, any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under
which they were made, not misleading.
Section 4.5 Litigation. As
of the date hereof, there is no Action pending or, to the
knowledge of Parent, threatened, against Parent or any of its
affiliates before any Governmental Entity that would or seeks to
delay or prevent the consummation of the Merger. As of the date
hereof, neither Parent nor any of its affiliates is subject to
any continuing order of, consent decree, settlement agreement or
other similar written agreement with, or, to the knowledge of
Parent, continuing investigation by, any Governmental Entity, or
any order, writ, judgment, injunction, decree, determination or
award of any Governmental Entity that would or seeks to delay or
prevent the consummation of the Merger.
Section 4.6 Financing. Parent
has delivered to the Company a true and complete copy of the
Debt Commitment Letter, dated as of the date hereof (the
Commitment Letter), made by UBS Loan Finance LLC and
UBS Securities LLC (together, the Lender), and
accepted by Parent, pursuant to which the Lender has committed
to provide the debt financing (the Financing) to
Parent that is necessary to consummate the transactions
contemplated hereby. The Commitment Letter is, as of the date of
this Agreement, in full force and effect in the form so
delivered. The Commitment Letter has not been amended in any
respect that could reasonably be expected to impair or delay the
availability of the financing contemplated thereby on the
Closing Date. There are no conditions precedent or other
contingencies related to the funding of the full amount of the
Financing, other than as set forth in or contemplated by the
Commitment Letter (the Disclosed Conditions), and no
Person (including, without limitation, the Lender) has any
contractual right to impose (i) any condition precedent to
such funding other than the Disclosed Conditions or
(ii) any reduction to the aggregate amount available under
the Commitment Letter on the Closing Date (or any term or
condition which would have the effect of reducing the aggregate
amount under the Commitment Letter on the Closing Date). Parent
has fully paid all commitment fees required to be paid prior to
the Closing Date in connection with the Commitment Letter. The
aggregate proceeds contemplated by the Commitment Letter,
together with other sources of capital available to Parent, will
be sufficient when funded for Parent and the Surviving
Corporation to pay the aggregate Merger Consideration (including
any applicable Merger Consideration in consideration of the
conversion of the Company Preferred Stock and the Convertible
Debentures) and the Cash Out Amount, to refinance any
outstanding indebtedness of the Company contemplated hereby to
be so refinanced, to redeem the Company Preferred Stock (if
applicable), to consummate the Employee Preferred Stock Tender
Offer (if applicable), and to pay all fees and expenses payable
by Parent in connection with the Financing, the Merger or any
other transactions contemplated by this Agreement. As of the
date of this Agreement, Parent does not have any reason to
believe that any of the conditions to the Financing will not be
satisfied or that the Financing will not be available to Merger
Sub on the Closing Date. For avoidance of doubt, it shall not be
a condition to Closing for Parent or Merger Sub to obtain the
Financing or any alternative financing.
A-23
Section 4.7 Parent
and Merger Sub.
(a) Merger Sub has been formed solely for the purpose of
engaging in the transactions contemplated hereby and prior to
the Effective Time will have engaged in no other business
activities and will have incurred no liabilities or obligations
other than as contemplated herein.
(b) As of the date hereof and through and including the
Effective Time, Parent shall own all of the equity securities of
Merger Sub.
(c) Each of Parent, Merger Sub and their respective
affiliates do not own (directly or indirectly, beneficially or
of record) and is not a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, any shares of capital stock of the
Company (other than as contemplated by this Agreement). There
are no Contracts between Parent, Merger Sub or any affiliate
thereof, on the one hand, and any member of the Companys
management or directors, on the other hand, as of the date
hereof that relate in any way to the Company or the transactions
contemplated by this Agreement. Prior to the Company Board of
Directors approving this Agreement, the Merger and the other
transactions contemplated hereby for purposes of the applicable
provisions of the Tennessee Business Combination Act, neither
Parent nor Merger Sub, alone or acting together with any other
person as a group, was at any time, or became, an
interested shareholder of the Company thereunder or
has taken any action that would cause any anti-takeover statute
under the Tennessee Business Combination Act to be applicable to
this Agreement.
(d) Parent has filed all forms, reports, registrations,
statements, certifications and other documents required to be
filed by it with, or furnished by Parent to, the SEC for all
periods beginning on or after January 1, 2004, including
each document required to be filed by Parent with the SEC in
connection with the Merger and the related transactions (the
Parent SEC Reports). The Parent SEC Reports were
prepared in accordance with the applicable requirements of the
Exchange Act and the Securities Act, and did not, as of their
respective dates, contain any untrue statement of a material
fact or omit to state a material fact required to be stated or
incorporated by reference therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. As of the date of this
Agreement, there are no outstanding or unresolved comments in
comment letters received from the SEC. To the knowledge of
Parent, as of the date hereof, none of the Parent SEC Reports is
the subject of ongoing SEC review.
Section 4.8 Brokers. Other
than UBS Investment Bank and Peter J. Solomon Securities
Company, LLC, no broker, finder, agent or similar intermediary
has acted on behalf of Parent or Merger Sub in connection with
this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finders fees or
similar fees or commissions payable in connection herewith based
on any agreement, arrangement or understanding with Parent or
Merger Sub or any of their respective affiliates, or any action
taken by Parent or Merger Sub or any of their respective
affiliates.
Section 4.9 Solvency. As
of the Effective Time, immediately after giving effect to all of
the transactions contemplated by this Agreement, including the
Financing, any alternative financing and the payment of the
aggregate Merger Consideration (including any applicable Merger
Consideration in consideration of the conversion of the Company
Preferred Stock and the Convertible Debentures) and the Cash Out
Amount, the redemption of the Company Preferred Stock (or the
funding of a trust for such purpose), amounts required to
consummate the Employee Preferred Stock Tender Offer (if
applicable), any other repayment or refinancing of debt that may
be contemplated in the Commitment Letter, and payment of all
related fees and expenses, the Surviving Corporation and Parent
will be Solvent. For purposes of this Section 4.9, the term
Solvent with respect to the Surviving Corporation
and Parent means that, as of any date of determination,
(a) the amount of the fair saleable value of the assets of
Parent and the Surviving Corporation and their respective
Subsidiaries, taken as a whole, exceeds, as of such date, each
of (i) the value of all liabilities of Parent and the
Surviving Corporation and their respective Subsidiaries, taken
as a whole, including contingent and other liabilities, as of
such date, as such terms are generally determined in accordance
with the applicable Tennessee, Indiana and federal Laws
governing determinations of the solvency of debtors, and
(ii) the amount that will be required to pay the probable
liabilities of Parent, the Surviving Corporation and their
respective Subsidiaries, taken as a whole, on their existing
debts (including contingent liabilities) as such debts become
absolute and matured; (b) Parent and the Surviving
Corporation will not
A-24
have, as of such date, an unreasonably small amount of capital
for the operation of the businesses in which they are engaged or
proposed to be engaged following such date; (c) Parent and
the Surviving Corporation will be able to pay their respective
liabilities, including contingent and other liabilities, as they
mature in the ordinary course of business; and (d) the
satisfaction of any other solvency requirement set forth in the
TBCA or pursuant to Indiana or federal Laws applicable to Parent
or the Surviving Corporation. It is agreed and understood that
Parent will obtain an opinion or opinions of a firm experienced
in rendering such opinions as to the solvency of Parent
following the transactions contemplated hereby. Parent will make
available to the Company (for the Companys reference but
not reliance) a true, complete and correct copy of the solvency
opinions referred to in the immediately preceding sentence
promptly after delivery thereof to Parent.
Section 4.10 No
Other Representations or Warranties. Except
for the representations and warranties contained in this
Section 4, and any certificate delivered by Parent or
Merger Sub in connection with Closing, the Company acknowledges
and agrees that none of Parent, Merger Sub or any other person
on behalf of Parent or Merger Sub makes, nor has the Company
relied upon or otherwise been induced by, any other express or
implied representation or warranty with respect to Parent or
Merger Sub or with respect to any other information provided to
or made available to the Company in connection with the
transactions contemplated hereunder. Except as provided in
Section 6.8, neither Parent, Merger Sub nor any other
person will have or be subject to any liability or
indemnification obligation to the Company or any other person
resulting from the distribution to the Company, or the
Companys use of, any such information, including any
information, documents, projections, forecasts or other material
made available to the Company in certain data rooms or
management presentations in expectation of the transactions
contemplated by this Agreement, unless any such information is
expressly included in a representation or warranty contained in
this Section 4 or in the corresponding section of the
Parent Disclosure Schedule.
Section 5. Conduct
of Business Pending the Merger; No Solicitation; Employee
Matters.
Section 5.1 Conduct
of Business. During the period from the date
of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, the Company
and each Company Subsidiary shall, except as required by Law, as
contemplated by this Agreement, as set forth on Section 5.1
of the Company Disclosure Schedule or to the extent that Parent
shall otherwise consent in writing (not to be unreasonably
withheld, conditioned or delayed), conduct their respective
businesses in the ordinary course on a basis consistent with
past practice. Without limiting the generality of the foregoing,
and to the extent consistent therewith, without the prior
written consent of Parent (not to be unreasonably withheld,
conditioned or delayed), during the period from the date hereof
and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company shall observe the
following covenants, in each case except as required by Law or
as contemplated by this Agreement or as set forth on
Section 5.1 of the Company Disclosure Schedule:
(a) Affirmative Covenants Pending Closing. The
Company shall:
(i) Preservation of the Business; Maintenance of
Properties, Material Contracts. Use reasonable best efforts,
on a basis consistent with past practices, to (A) preserve
the business of the Company and the Company Subsidiaries,
including without limitation, keeping available the services of
the current officers, employees and consultants of the Company
and the Company Subsidiaries and to preserve the present
relationships of the Company and the Company Subsidiaries with
customers, suppliers and other persons with which the Company or
any Company Subsidiary has significant business relations,
(B) advertise, promote and market the Companys
products, (C) keep the Companys and the Company
Subsidiaries material properties substantially intact,
preserve their goodwill and business, and maintain all physical
properties in good repair and condition, (D) perform and
comply in all material respects with the terms of the Material
Contracts, and (E) maintain, and comply in all material
respects with, all material Permits;
(ii) Insurance. Use reasonable best efforts to keep
in effect general liability, casualty, product liability,
workers compensation, directors and officers
liability and other material insurance policies in coverage
scope and amounts substantially similar to those in effect at
the dat