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As filed with the Securities and Exchange Commission on July 14, 2011
Registration Statement No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
Registration Statement
Under the
Securities Act of 1933
BROWN SHOE COMPANY, INC.
(Exact name of each registrant as specified in its respective charter)
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New York
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5661
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43-0197190 |
(State or other jurisdiction of
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(Primary standard industrial
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(I.R.S. employer |
incorporation or organization)
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classification code number)
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identification number) |
See Table of Additional Registrants Below
8300 Maryland Avenue
St. Louis, Missouri 63105
(314) 854-4000
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
Michael I. Oberlander, Esq.
Senior Vice President, General Counsel and Corporate Secretary
Brown Shoe Company, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63105
(314) 854-4000
(Address, including zip code, and telephone number, including area code, of
principal executive
offices of each registrant)
Copies to:
Robert J. Endicott, Esq.
Bryan Cave llp
211 N. Broadway
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102
Tel: 314-259-2000
Fax: 314-259-2020
Approximate date of commencement of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection with the
formation of a holding company and there is compliance with General Instruction G, check the
following box: o
If this form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities
Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o |
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Accelerated filer þ |
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Non-accelerated filer o |
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum |
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Proposed maximum |
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Amount to be |
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Offering Price Per |
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aggregate offering |
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Title of each class of securities to be registered |
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registered |
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Unit(1) |
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price(1) |
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Amount of registration fee |
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7⅛% Senior Notes due 2019 |
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$200,000,000 |
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100% |
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$200,000,000 |
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$23,220 |
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Guarantees of the 7⅛% Senior Notes due 2019 |
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(2) |
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(1) |
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Estimated pursuant to Rule 457(f) solely for the purpose of calculating the registration fee. |
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Pursuant to Rule 457(n), no separate fee is payable with respect to the guarantees of the
Senior Notes being registered. |
The co-registrants hereby amend this Registration Statement on such date or dates as may be
necessary to delay its effective date until the co-registrants shall file a further amendment which
specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
Table of Additional Registrants
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State or other jurisdiction |
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Primary standard |
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Exact name of each registrant as specified |
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of incorporation or |
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industrial classification |
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I.R.S. employer |
in its respective charter |
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organization |
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code number |
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identification number |
Sidney Rich Associates, Inc.* |
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Missouri |
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5139 |
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43-0910619 |
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Brown Group Retail, Inc.* |
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Pennsylvania |
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5661 |
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25-1323027 |
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Brown Shoe International Corp.* |
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Delaware |
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5139 |
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43-1375891 |
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Buster Brown & Co.* |
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Missouri |
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5139 |
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43-1661024 |
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Bennett Footwear Group LLC* |
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Delaware |
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5139 |
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04-3437154 |
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American Sporting Goods Corporation* |
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Delaware |
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5139 |
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13-3191696 |
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The Basketball Marketing Company, Inc.* |
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Delaware |
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5139 |
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23-2727003 |
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Edelman Shoe, Inc.* |
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Delaware |
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5139 |
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20-0440392 |
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Shoes.com, Inc.* |
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Delaware |
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5661 |
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95-4781822 |
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Brown Shoe Company of Canada Ltd** |
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Canada |
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5661 |
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Not applicable |
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Address, including zip code, and telephone number, including area code, of principal
executive offices are the same as those of Brown Shoe Company, Inc., a New York corporation. |
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The address, including zip code, of principal executive offices is 1857 Rogers Road, Perth,
Ontario, Canada, K7H3E8, and the telephone number, including area code, of principal executive
offices is 613-267-2000. |
The information in this prospectus is not complete and may be changed. We may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 14, 2011
Brown Shoe Company, Inc.
Offer to Exchange
$200,000,000 7⅛% Senior Notes due 2019
for $200,000,000 7⅛% Senior Notes due 2019
that have been registered under the Securities Act of 1933
We are offering to exchange an aggregate principal amount of up to $200,000,000 of our new
7⅛% Senior Notes due 2019, which we refer to as the exchange notes, for a like amount of
our outstanding 7⅛% Senior Notes due 2019, which we refer to as the original notes, in a
transaction registered under the Securities Act of 1933, as amended.
Terms of the exchange offer:
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We will exchange all original notes that are validly tendered and not withdrawn
prior to the expiration of the exchange offer. |
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You may withdraw tenders of original notes at any time prior to the expiration of the
exchange offer. |
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We believe that the exchange of original notes for exchange notes will not be a taxable
event for U.S. federal income tax purposes. |
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The form and terms of the exchange notes are identical in all material respects to the
form and terms of the original notes, except that (i) the exchange notes are registered
under the Securities Act, (ii) the transfer restrictions and registration rights applicable
to the original notes do not apply to the exchange notes, and (iii) the exchange notes will
not contain provisions relating to liquidated damages relating to our registration
obligations. |
The exchange offer will expire at 5:00 p.m., New York City time, on , 2011,
unless we extend the offer. We will announce any extension by press release or other permitted
means no later than 9:00 a.m. on the business day after the expiration of the exchange offer. You
may withdraw any original notes tendered until the expiration of the exchange offer.
The exchange notes will not be listed on any securities exchange.
For a discussion of factors you should consider in determining whether to tender your
original notes, see the information under Risk Factors beginning on page 19 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities, or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2011.
We have not authorized anyone to give any information or to make any representations
concerning this exchange offer except that which is in this prospectus, or which is referred to
under Where You Can Find More Information. If anyone gives or makes any other information or
representation, you should not rely on it. This prospectus is not an offer to sell or a
solicitation of an offer to buy securities in any circumstances in which the offer or solicitation
is unlawful. You should not interpret the delivery of this prospectus, or any sale of securities,
as an indication that there has been no change in our affairs since the date of this prospectus.
You should also be aware that information in this prospectus may change after this date.
This prospectus incorporates important business and financial information about Brown Shoe
that is not included in or delivered with this prospectus. This information is available without
charge to holders of the original notes upon written or oral request directed to us at Investor
Relations Department, Brown Shoe Company, Inc., 8300 Maryland Avenue, St. Louis, Missouri 63105,
telephone: (314) 854-4000. To obtain timely delivery, holders must request the information no later
than five business days before the expiration date. The expiration date is , 2011.
TERMS USED IN THIS PROSPECTUS
Unless otherwise noted or indicated by the context, in this prospectus:
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the terms Company, we, us, Brown Shoe, and our refer to Brown Shoe Company,
Inc. and its subsidiaries; when such terms refer to the Company as of any date prior to
February 17, 2011, ASG is not included within the meaning of the terms unless otherwise
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the term ASG refers to American Sporting Goods Corporation and its subsidiaries; |
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the term Notes refers to, collectively, the original notes and the exchange notes; |
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references to our acquisition of ASG refers to the acquisition by one of our
subsidiaries of all of the outstanding capital stock of ASG from the ASG stockholders, the
related exercise by the loan parties under our revolving credit facility of the $150.0
million designated event accordion feature to fund the acquisition of the ASG capital
stock, and the increase of the aggregate amount available under the revolving credit
facility from $380.0 million to $530.0 million, all effective as of February 17, 2011. See
Description of Certain Indebtedness; |
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references to our fiscal years are to the twelve months ended on the Saturday nearest
to January 31 of the applicable year (for example, fiscal year 2010 is the 52-week
period ended January 29, 2011); all of our fiscal years included 52 weeks, except for
fiscal 2006, which included 53 weeks; references to ASGs fiscal years are to the twelve
months ended December 31 of the applicable year; |
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the term 83/4% Notes refers to our 83/4% Senior Notes due 2012, all of which were
either repurchased by us in the Tender Offer or which were redeemed by us on June 10,
2011; and |
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the term Tender Offer refers to the cash tender offer for all of our outstanding
83/4% Notes, which we launched on April 27, 2011 and which expired at 5:00 p.m., New York
City time on May 25, 2011. |
The data included and incorporated by reference in this prospectus regarding markets and
ranking, including the size of certain markets and our position and the positions of our
competitors within these markets, are based on third party studies and surveys, industry and
general publications and our estimates based on our managements knowledge and experience in the
markets in which we operate. Our estimates have been based on information obtained from our
customers, suppliers, trade and business organizations and other contacts in the markets in which
we operate. We believe these estimates to be accurate as of the date of this prospectus or the date
of the material incorporated by reference in which these estimates appear. However, this
information may prove to be inaccurate because of the method by which we obtained some of the data
for our estimates or because this information cannot always be verified with complete certainty due
to the limits on the availability and reliability of raw data, the voluntary nature of the data
gathering process and other limitations and uncertainties. As a result, you should be aware that
market, ranking and other similar data included in this prospectus, and estimates and beliefs based
on that data, may not be reliable. We cannot guarantee the accuracy or completeness of such
information contained in this prospectus.
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FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included in this prospectus, any
prospectus supplement and certain information incorporated by reference which is referred to under
the heading Where You Can Find More Information, are statements that constitute forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934. Words such as expects, anticipates, approximates,
believes, estimates, will, plan, and intends and variations of such words and similar
expressions are intended to identify such forward-looking statements. Such statements are subject
to various risks and uncertainties that could cause actual results to differ materially. These
include:
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changing consumer demands, which may be influenced by consumers disposable income,
which in turn can be influenced by general economic conditions; |
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potential disruption to the Companys business and operations as it integrates ASG
into its business; |
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potential disruption to the Companys business and operations as it implements its
information technology initiatives; |
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the Companys ability to utilize its new information technology system to
successfully execute its strategies, including integrating ASGs business; |
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intense competition within the footwear industry; |
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our ability to anticipate and respond to rapidly changing fashion trends and
purchasing patterns particularly as it may impact certain periods such the back-to-school
period in our fiscal third quarter; |
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customer concentration and increased consolidation in the retail industry; |
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political and economic conditions or other threats to the continued and uninterrupted
flow of inventory from China, where ASG has manufacturing facilities and both ASG and
Brown Shoe rely heavily on third-party manufacturing facilities for a significant amount
of their inventory; |
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the Companys ability to recruit and retain senior management and other key
associates; |
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the Companys ability to attract and retain licensors and protect intellectual
property rights; |
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the Companys ability to secure/exit leases on favorable terms; |
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the Companys ability to maintain relationships with current suppliers; |
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compliance with applicable laws and standards with respect to lead content in paint
and other product safety issues; |
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the Companys ability to source product at a pace consistent with increased demand
for footwear; and |
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the impact of rising prices in a potentially inflationary global environment. |
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You are cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties and that actual results may differ materially from
those predicted in the forward-looking statements or which may be anticipated from historical
results or trends. In addition to the information contained in our other filings with the
Securities and Exchange Commission, factors that could affect future performance include, among
others, those set forth under the heading Risk Factors beginning on page 19.
We operate in a very competitive and rapidly changing environment. New risk factors emerge
from time to time and it is not possible for management to predict all such risk factors, nor can
it assess the impact of all such risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements. Given these risks and uncertainties, you should not place undue
reliance on forward-looking statements, which speak only as of the date of this prospectus, as a
prediction of actual results.
All subsequent written and oral forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by the cautionary statements above.
You should not place undue reliance on those statements, which speak only as of the date on which
they are made. We do not undertake any obligation to release publicly any revisions to these
forward-looking statements after the completion of this exchange offer to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated events, unless we
are obligated under federal securities laws to update and disclose material developments related to
previously disclosed information.
You should also be aware that while we do, from time to time, communicate with securities
analysts, it is against our policy to disclose to them any material non-public information or other
confidential commercial information. Accordingly, you should not assume that we agree with any
statement or report issued by any analyst irrespective of the content of the statement or report.
Thus, to the extent that reports issued by securities analysts contain any projections, forecasts
or opinions, such reports are not our responsibility.
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PROSPECTUS SUMMARY
The following summary highlights significant aspects of our business and this exchange offer,
but it does not include all the information you should consider prior to deciding whether to
exchange the original notes for the exchange notes. You should read this entire prospectus,
including the documents incorporated by reference, the information set forth in Risk Factors and
our financial statements and related notes, before deciding whether to exchange the original notes
for the exchange notes.
Company Overview
We were founded in 1878 and are one of the leading footwear retailers and wholesalers in the
United States, providing a broad range of casual, dress and athletic footwear brands for women, men
and children at a variety of price points through multiple distribution channels. Our net sales in
fiscal year 2010 were $2.5 billion. In fiscal year 2010, we sold over 90 million pairs of footwear.
At the end of fiscal year 2010, we operated over 1,369 retail stores in the U.S., Canada, China and
Guam, primarily under the Famous Footwear and Naturalizer names. In addition, we design, source and
market footwear to over 2,000 retailers primarily in the U.S. and Canada as well as approximately
50 other countries, including department stores, national chain retailers, mass merchandisers and
specialty footwear retailers. Our retail and wholesale operations accounted for approximately 70%
and 30%, respectively, of our fiscal year 2010 net sales.
We operate our business primarily through the following three segments:
Famous Footwear. Famous Footwear, with 1,110 stores at the end of 2010 and net sales of
$1.5 billion in 2010, is one of Americas leading family branded footwear retailers selling
value-priced footwear for the entire family, based on the number of stores it operates and
sales volume compiled by the Company from published information of its direct competitors. Its
target customers are women who buy brand-name fashionable shoes at value prices for themselves
and their families. These stores average approximately 7,000 square feet and generated sales
per square foot of $187 in fiscal year 2010, reflecting a same store sales increase of 10.5%
versus fiscal 2009.
Famous Footwear stores feature a wide selection of value-priced brand-name, athletic,
casual and dress shoes for the entire family, including various Company-owned and licensed
products. Brands carried include, among others, Nike, Skechers, New Balance, Puma, Converse,
DC, adidas, Asics, LifeStride, Naturalizer, Vans, Dr. Scholls, Rocket Dog, Reebok, Bearpaw,
Dockers, Hot Kiss, Connie and Madden Girl. The Company-owned and licensed brands are sold to
Famous Footwear by our Wholesale Operations segment at a profit and represent approximately 15%
of Famous Footwear net sales of footwear. Famous Footwear stores are located in strip shopping
centers, outlet malls and regional malls in all 50 states and Guam. In addition to our retail
footwear stores, we operate a FamousFootwear.com website as a Famous Footwear internet
retailing store.
Wholesale Operations. Our Wholesale Operations segment designs, sources and markets
casual, dress and athletic footwear brands for women, men and children at a variety of price
points. Certain of our branded footwear products are developed pursuant to licensing
agreements. Our footwear is distributed to over 2,000 retailers, including national chains,
department stores, mass merchandisers, independent retailers, catalogs and online retailers
throughout the United States and Canada as well as approximately 50 other countries (including
intersegment sales). The most significant wholesale customers include many of the nations
largest retailers, including national chains such as TJX Corporation (including TJ Maxx and
Marshalls), Retail Ventures (including DSW), Ross Stores and Kohls; department stores such as
Macys, Nordstrom, Dillards, Bon-Ton and Belk; and mass merchandisers such as Walmart,
Collective Brands, Inc. (including Payless ShoeSource), Target and Sears.
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We have a portfolio of owned and licensed brands, including Naturalizer, Dr. Scholls, Sam
Edelman, Franco Sarto, LifeStride, Buster Brown, Via Spiga, Etienne Aigner, Carlos by Carlos
Santana, Vera Wang Lavender, and Fergie/Fergalicious by Fergie. As described below, our
acquisition of ASG has expanded our portfolio of owned brands into athletic and outdoor
footwear brands, including Avia, rykä and AND 1.
According to NPD Group, we were the second largest womens fashion wholesaler in the U.S.
at the end of fiscal year 2010. Our Wholesale Operations segment generated $754.4 million of
net sales in fiscal year 2010, and, when combined with ASGs wholesale operations on a pro
forma basis, such operations generated $968.9 million of net sales in fiscal year 2010.
Specialty Retail. Our Specialty Retail segment, composed of 259 stores as of the end of
fiscal year 2010, includes the Naturalizer, Brown Shoe Closet, F.X. LaSalle, Via Spiga and Sam
Edelman retail concepts and our shoes.com and other e-commerce businesses, with the exception
of FamousFootwear.com, which is included in the Famous Footwear segment.
The Naturalizer retail stores are complementary to and a showcase for our Naturalizer
brand of womens shoes. These stores are designed and merchandised to appeal to the Naturalizer
customer, who is style-and comfort-conscious and who seeks quality and value in her footwear
selections. The Naturalizer stores offer a selection of womens footwear styles, including
casual, dress, boots and sandals, primarily under the Naturalizer brand. At the end of 2010, we
operated 110 Naturalizer stores in the United States and 105 Naturalizer stores in Canada. Of
the total 215 Naturalizer stores, approximately 64% are located in regional malls, with a few
stores having street locations, and average approximately 1,200 square feet in size. The other
36% of stores are located in outlet malls and average approximately 2,400 square feet in size.
Our Specialty Retail segment also includes other store concepts that sell other premium brands.
We operate shoes.com, a pure-play internet retailing company, which offers a diverse
selection of footwear and accessories to women, men and children that includes footwear
purchased from outside suppliers, Company-branded and licensed footwear, and certain
merchandise sold in Famous Footwear stores. In connection with our multi-channel approach to
reach consumers, we also operate Naturalizer.com, Naturalizer.ca and ViaSpiga.com, which offer
substantially the same product selection to consumers as sold in their respective retail
stores. Additional websites such as ShoeSteal.com, DrSchollsShoes.com, SamEdelman.com,
CarlosShoes.com, LifeStride.com, FergieShoes.com and FrancoSarto.com function as retail outlets
for the online consumer and serve as additional brand-building vehicles for the Company.
Acquisition of ASG
On February 17, 2011, we entered into a stock purchase agreement with ASG and ASGs
stockholders, pursuant to which one of our subsidiaries acquired all of the outstanding capital
stock of ASG from the ASG stockholders on that date. ASG is a designer, manufacturer and marketer
of a broad range of athletic footwear with a strong presence in walking, fitness and basketball. It
was founded in 1983 and is headquartered in Aliso Viejo, California.
The acquisition adds performance athletic and outdoor footwear brands to our portfolio,
including Avia, rykä and AND 1, complementing our existing fitness and comfort offerings. Avia, a
multisport endurance brand, offers shoes for endurance athletes, fitness enthusiasts and people
seeking a healthy lifestyle. The brand is primarily distributed through national and shoe chains,
mass merchandisers and our Famous Footwear retail stores. rykä is a leading womens performance
lifestyle brand focused on fitness. rykä is managed, designed and solely dedicated to creating
womens performance footwear. The brand is
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distributed through department stores, specialty retailers and our Famous Footwear retail
stores. AND 1 is an authentic basketball brand that caters to hard-core basketball players. Its
product offerings appeal to youth and those seeking premium gear at affordable value. The brand is
primarily distributed through national and shoe chains and our Famous Footwear retail stores.
ASG operates three primary manufacturing facilities in China as well as other facilities in
the United States and China used for design, development, distribution and sales and administrative
purposes.
Competitive Strengths and Business Strategy
Brown Shoes mission is to inspire people to feel good and live better... feet first. The
following strengths serve as a foundation for this mission and for our business strategy:
Complementary Retail-Wholesale Platform. We believe that our complementary
retail-wholesale platform allows us to capture a significant market share of the footwear
industry. Through this platform, we gain key consumer insights by working with our vendors,
customers and industry partners. Our Famous Footwear stores offer branded value-priced
athletic, casual and dress footwear for the entire family. Famous Footwear sells various
Company-owned and licensed products which are sold to Famous Footwear by our Wholesale
Operations segment at a profit and represent approximately 15% of Famous Footwear net sales of
footwear. Our Naturalizer retail stores provide us with a dedicated channel to showcase our
popular Naturalizer brand of womens footwear. Our Via Spiga and Sam Edelman retail stores
allow us to showcase the Via Spiga and Sam Edelman brands, respectively. In our Wholesale
Operations segment, we design, source and market branded and private label womens, mens and
childrens footwear across a wide range of styles and price points to over 2,000 retailers,
including national chains, department stores, mass merchandisers, independent retailers,
catalogs and online retailers throughout the United States and Canada as well as approximately
50 other countries. We believe the insights into consumer trends that we gain at our Famous
Footwear and specialty retail stores allow us to adjust both our retail and wholesale product
offerings to address these trends. We believe that our complementary and flexible
retail-wholesale platform is well-positioned to respond to and benefit from changing consumer
trends in the footwear industry.
Portfolio of Established Brands in Key Consumer Focus Areas. We have built a portfolio of
well-known footwear brands with broad consumer appeal, and we are focusing our efforts on three
broad consumer trends that we believe provide long-term opportunities for growth: Family,
Healthy Living and Contemporary Fashion. Our brands are targeted to specific customer segments
representing different styles and taste levels in these three key areas and we continue to
evolve our portfolio of brands to meet the demands of our customers. Famous Footwear is a
leading family branded footwear retailer whose primary target customers are active,
contemporary moms who seek brands and the latest styles at a value for themselves and their
families. Naturalizer, Dr. Scholls and our recently acquired athletic and outdoor footwear
brands (Avia, rykä and AND 1) provide customers with comfort, health and wellness and
performance footwear. Our contemporary fashion brands, including Sam Edelman, Franco Sarto, Via
Spiga, and Vera Wang Lavender provide stylish and sophisticated footwear to consumers.
Strong Consumer Connections Across Multiple Channels. Our Wholesale Operations customers
include national chains, department stores, mass merchandisers, independent retailers, catalogs
and online retailers. According to NPD Groups Point of Sale Tracking Service, we ranked number
two in terms of dollar sales of womens fashion footwear sold through department stores,
national chains, national shoe chains, and athletic specialty stores for the calendar year
2010. We have earned a strong reputation among our customers by consistently providing them
with differentiated branded and
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private label footwear at competitive prices. Our acquisition of ASG adds the element of
athletic footwear to comfort and fitness offerings, to better position us to meet consumer
demand for products that support active and healthy lifestyles. ASG company sales ranked
seventh in the U.S. performance athletic footwear market for the calendar year 2010, according
to NPD Groups Point of Sale Tracking Service. We believe that our strong and long-standing
consumer connections will be an important component of our future success.
Famous Footwear has a customer loyalty program that informs and rewards frequent customers
with product previews, earned incentives based upon purchase continuity, and other periodic
promotional offers. In 2010, more than half of our Famous Footwear net sales were generated by
our Rewards members. Additionally, continued focus on social media is building a stronger
connection with our customers, allowing us to both listen to and communicate with our core
market. We will continue to seek to expand ways for customers to connect to our brands (beyond
email, Facebook, Twitter, YouTube and proprietary mobile applications) to drive our fans from
the digital world into profitable and loyal customers in our multi-channel selling
environments.
Global Design and Sourcing Expertise. We believe that one of the key contributors to our
success is our global design and sourcing expertise. We maintain design teams for our brands in
St. Louis, Missouri, New York and China as well as other select fashion locations, including
Italy. We have sourcing and product development offices in China, Hong Kong, Italy, Macau, New
York City and St. Louis and through an agent partnership in Brazil and Central America. We
source product through a global network of third-party independent footwear manufacturers
operating approximately 100 manufacturing facilities.
We attribute our ability to achieve consistent quality, competitive prices and on-time
delivery to the breadth of our established relationships. Additionally, in our Dongguan, China,
and our Putien, China, offices, we operate a total of four sample-making facilities with unique
and diverse capabilities, including footwear for women, men and children, providing speed,
control and execution in product development. We believe we are able to source footwear at
various price levels throughout the world and shift sourcing to alternative countries, over
time, based upon trade conditions, economic advantages, production capabilities and other
factors.
Increased Differentiation at Famous Footwear. Our strategy is to enhance Famous Footwears
reputation as a leading footwear retailer for families and to grow our store base. We aim to
accomplish this strategy by:
|
|
|
Opening new stores in targeted markets, including an expected five net new
stores in fiscal 2011 and 25 net new stores in fiscal 2012 and 2013; |
|
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|
Enforcing stricter opening and closing criteria leading to new stores
performing at over $200 per square foot, while closing underperforming stores; |
|
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|
Reaching target consumers through innovative marketing, including in-store
media campaigns and strengthening Make Today Famous across all customer touchpoints; |
|
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|
Working with our suppliers to provide compelling branded value-priced footwear,
including current styles and exclusive offerings; |
|
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|
Providing a convenient, consumer-oriented shopping experience; and |
4
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Strengthening position as the destination for fitness and healthy living
footwear in the family channel. |
Grow Sales of our Brand Portfolio. We plan to increase sales of our owned and licensed
brands, including those added through the acquisition of ASG, by:
|
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Continuing to focus on healthy living and contemporary fashion; |
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|
Increasing the style component of our offerings and delivering compelling
product to build brand preference; |
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Continuing to add design talent to meet the changing demands of the consumer; |
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Increasing floor space with our existing retail customers and penetrating new
retail accounts; and |
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Strengthening brand awareness among retailers and consumers through continued
marketing and brand-building activities. |
5
THE EXCHANGE OFFER
On May 11, 2011, we issued $200,000,000 aggregate principal amount of 7⅛% Senior Notes due
2019, the original notes to which the exchange offer applies, to a group of initial purchasers in
reliance on exemptions from, or in transactions not subject to, the registration requirements of
the Securities Act and applicable securities laws. In connection with the sale of the original
notes to the initial purchasers, we entered into a registration rights agreement pursuant to which
we agreed, among other things, to deliver this prospectus to you, to commence this exchange offer
and to use our commercially reasonable efforts to complete the exchange offer within 180 days of
the issuance of the original notes. The summary below describes the principal terms and conditions
of the exchange offer. Some of the terms and conditions described below are subject to important
limitations and exceptions. See The Exchange Offer for a more detailed description of the terms
and conditions of the exchange offer and Description of the Exchange Notes for a more detailed
description of the terms of the exchange notes.
|
|
|
The Exchange Offer
|
|
We are offering to exchange up to $200,000,000 aggregate principal
amount of our new 7⅛% Senior Notes due 2019, which have been
registered under the Securities Act, in exchange for your original
notes. The form and terms of these exchange notes are identical in
all material respects to the original notes. The exchange notes,
however, will not contain transfer restrictions and registration
rights applicable to the original notes.
To exchange your original notes, you must properly tender them, and
we must accept them. We will accept and exchange all original notes
that you validly tender and do not validly withdraw. We will issue
registered exchange notes promptly after the expiration of the
exchange offer. |
|
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|
Resale of exchange notes
|
|
Based on interpretations by the staff of the SEC as detailed in a
series of no-action letters issued to third parties, we believe
that, as long as you are not a broker-dealer, the exchange notes
offered in the exchange offer may be offered for resale, resold or
otherwise transferred by you without compliance with the
registration and prospectus delivery requirements of the Securities
Act as long as: |
|
|
|
you are acquiring the exchange notes in the ordinary course
of your business; |
|
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|
|
you are not participating, do not intend to participate in
and have no arrangement or understanding with any person to
participate in a distribution of the exchange notes; and |
|
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|
you are not an affiliate of ours within the meaning of
Rule 405 of the Securities Act. |
|
|
|
|
|
If any of these conditions is not satisfied and you transfer any
exchange notes issued to you in the exchange offer without
delivering a proper prospectus or without qualifying for a
registration exemption, you may incur liability under the
Securities Act. Moreover, our belief that transfers of exchange
notes would be permitted without registration or prospectus
delivery under the conditions described above is based on SEC
interpretations given to other, unrelated issuers in similar
exchange offers. We cannot assure you that the SEC would make |
6
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|
a similar interpretation with respect to our exchange offer. We will
not be responsible for or indemnify you against any liability you
may incur under the Securities Act. |
|
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|
|
Any broker-dealer that acquires exchange notes for its own account
in exchange for original notes must represent that the original
notes to be exchanged for the exchange notes were acquired by it as
a result of market-making activities or other trading activities
and acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any offer to
resell, resale or other retransfer of the exchange notes. However,
by so acknowledging and by delivering a prospectus, such
participating broker-dealer will not be deemed to admit that it is
an underwriter within the meaning of the Securities Act. During
the period ending 180 days after the consummation of the exchange
offer, subject to extension in limited circumstances, a
participating broker-dealer may use this prospectus for an offer to
sell, a resale or other retransfer of exchange notes received in
exchange for original notes which it acquired through market-making
activities or other trading activities. |
|
|
|
Expiration Date
|
|
The exchange offer will expire at 5:00 p.m., New York City time, on
, 2011, unless we extend the expiration date. |
|
|
|
Accrued Interest on the
Exchange Notes and the
Original Notes
|
|
The exchange notes will bear interest from the most recent date to
which interest has been paid on the original notes or, if no
interest has been paid, from the date of original issuance of the
original notes. If your original notes are accepted for exchange,
then you will receive interest on the exchange notes and not on the
original notes. Any original notes not tendered will remain
outstanding and continue to accrue interest according to their
terms. |
|
|
|
Conditions
|
|
The exchange offer is subject to customary conditions. We may
assert or waive these conditions in our sole discretion. If we
materially change the terms of the exchange offer, we will
resolicit tenders of the original notes. See The Exchange
OfferConditions to the Exchange Offer for more information
regarding conditions to the exchange offer. |
|
|
|
Procedures for Tendering
Original Notes
|
|
Each holder of original notes that wishes to tender their original
notes must either: |
|
|
|
complete, sign and date the accompanying letter of
transmittal or a facsimile copy of the letter of transmittal, have
the signatures on the letter of transmittal guaranteed, if
required, and deliver the letter of transmittal, together with any
other required documents (including the original notes), to the
exchange agent; or |
|
|
|
|
if original notes are tendered pursuant to book-entry
procedures, the tendering holder must deliver a completed and |
7
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|
|
duly executed letter of transmittal or arrange with The Depository Trust
Company, or DTC, to cause an agents message to be transmitted with
the required information (including a book-entry confirmation) to
the exchange agent; or |
|
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|
|
comply with the procedures set forth below under
Guaranteed Delivery Procedures. |
|
|
|
|
|
Holders of original notes that tender original notes in the
exchange offer must represent that the following are true: |
|
|
|
the holder is acquiring the exchange notes in the ordinary
course of its business; |
|
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|
|
the holder is not participating in, does not intend to
participate in, and has no arrangement or understanding with any
person to participate in a distribution of the exchange notes;
and |
|
|
|
|
the holder is not an affiliate of us within the meaning
of Rule 405 of the Securities Act. |
|
|
|
|
|
Do not send letters of transmittal, certificates representing
original notes or other documents to us or DTC. Send these
documents only to the exchange agent at the appropriate address
given in this prospectus and in the letter of transmittal. We could
reject your tender of original notes if you tender them in a manner
that does not comply with the instructions provided in this
prospectus and the accompanying letter of transmittal. See Risk
FactorsThere are significant consequences if you fail to exchange
your original notes for further information. |
|
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|
Special Procedures for
|
|
|
Tenders by Beneficial Owners
of Original Notes |
|
If: |
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|
|
you beneficially own original notes; |
|
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|
|
those notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee; and |
|
|
|
|
you wish to tender your original notes in the exchange offer, |
|
|
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|
|
please contact the registered holder as soon as possible and
instruct it to tender on your behalf and comply with the
instructions set forth in this prospectus and the letter of
transmittal. |
|
|
|
Guaranteed Delivery Procedures
|
|
If you hold original notes in certificated form or if you own
original notes in the form of a book-entry interest in a global
note deposited with the trustee, as custodian for DTC, and you wish
to tender those original notes but: |
|
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|
your original notes are not immediately available; |
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|
|
time will not permit you to deliver the required documents to |
8
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|
the exchange agent by the expiration date; or |
|
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|
|
you cannot complete the procedure for book-entry transfer
on time, |
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|
|
you may tender your original notes pursuant to the procedures
described in The Exchange OfferProcedures for Tendering Original
NotesGuaranteed Delivery. |
|
|
|
Withdrawal Rights
|
|
You may withdraw your tender of original notes under the exchange
offer at any time before the exchange offer expires. Any withdrawal
must be in accordance with the procedures described in The
Exchange OfferWithdrawal Rights. |
|
|
|
Effect on Holders of
Outstanding Original Notes
|
|
As a result of making this exchange offer, and upon acceptance for
exchange of all validly tendered original notes, we will have
fulfilled our obligations under the registration rights agreement.
Accordingly, there will be no liquidated or other damages payable
under the registration rights agreement if original notes were
eligible for exchange, but not exchanged, in the exchange
offer. |
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|
|
If you do not tender your original notes or we reject your tender,
your original notes will remain outstanding and will be entitled to
the benefits of the indenture governing the notes. Under such
circumstances, you would not be entitled to any further
registration rights under the registration rights agreement, except
under limited circumstances. Existing transfer restrictions would
continue to apply to the original notes. |
|
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|
|
Any trading market for the original notes could be adversely
affected if some but not all of the original notes are tendered and
accepted in the exchange offer. |
|
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|
Material U.S. Federal Income
and Estate Tax Consequences
|
|
Your exchange of original notes for exchange notes should not be
treated as a taxable event for U.S. federal income tax purposes.
See Material U.S. Federal Income and Estate Tax Consequences. |
|
|
|
Use of Proceeds
|
|
We will not receive any proceeds from the exchange offer or the
issuance of the exchange notes. We have used a portion of the net
proceeds of the offering of the original notes to fund the
repurchase, repayment or other discharge of all of our $150 million
in principal amount 83/4% Notes. We have used the remaining net
proceeds from the offering of the original notes for general
corporate purposes, including to repay amounts outstanding under
our existing revolving credit facility. |
9
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Acceptance of Original Notes and
Delivery of Original Notes
|
|
We will accept for exchange any and
all original notes properly tendered
prior to the expiration of the
exchange offer. We will complete the
exchange offer and issue the
exchange notes promptly after the
expiration date. |
|
|
|
Exchange Agent
|
|
Wells Fargo Bank, National
Association is serving as exchange
agent for the exchange offer. The
address and telephone number of the
exchange agent are provided in this
prospectus under The Exchange
OfferExchange Agent and in the
letter of transmittal. |
10
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the exchange notes will be identical in all material respects to the
form and terms of the original notes, except that the exchange notes:
|
|
|
will have been registered under the Securities Act; |
|
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|
|
will not bear restrictive legends restricting their transfer under the Securities Act; |
|
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|
|
will not be entitled to the registration rights that apply to the original notes; and |
|
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|
|
will not contain provisions relating to an increase in the interest rate borne by the
original notes under circumstances related to the timing of the exchange offer. |
The exchange notes represent the same debt as the original notes and are governed by the same
indenture, which is governed by New York law. A brief description of the material terms of the
exchange notes follows:
|
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Issuer
|
|
Brown Shoe Company, Inc. |
|
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|
Securities
|
|
$200.0 million in principal amount of 7⅛% senior notes
due 2019. |
|
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|
Maturity
|
|
May 15, 2019. |
|
|
|
Interest
|
|
Annual rate: 7⅛%. |
|
|
Payment frequency: every six months on May 15 and
November 15. First payment: November 15, 2011. |
|
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|
Denominations
|
|
Minimum denominations of $2,000 and integral multiples
of $1,000 in excess thereof. |
|
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Ranking
|
|
The notes will be our general unsecured unsubordinated
obligations. Accordingly, they will rank: |
|
|
|
equally with all of our existing and future unsecured
unsubordinated debt; |
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|
effectively subordinated to our existing and future
secured debt to the extent of the assets securing such
debt, including all borrowings under our existing
revolving credit agreement; |
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|
senior to of any of our existing or future
subordinated debt; and |
|
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|
structurally behind all of the liabilities of our
subsidiaries that are not guarantors, including trade
payables. |
|
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|
Assuming we had completed the acquisition of ASG, the
offering of the original notes, and the repurchase or
redemption of all of the 83/4% Notes described in this
prospectus, all as of April 30, 2011, we would have had
$443.2 million of debt outstanding, $244.7 million of
which would have been secured debt. As of April 30,
2011, our non-guarantor subsidiaries had liabilities of
$96.6 million. |
|
Guarantees
|
|
The notes will be initially guaranteed on a senior
unsecured basis |
11
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|
by each of our restricted subsidiaries
that is an obligor or guarantor under our existing
revolving credit facility. |
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|
The guarantees will be general unsecured unsubordinated
obligations of the guarantors. Accordingly, they will
rank equally with all unsecured unsubordinated debt of
the guarantors, effectively subordinated to all secured
debt of the guarantors to the extent of the assets
securing such debt (including the guarantees by the
guarantors of obligations under our existing revolving
credit agreement), and senior to all existing and
future subordinated debt of the guarantors. |
|
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Optional Redemption
|
|
Prior to May 15, 2014, we may redeem some or all of the
notes at a redemption price equal to the sum of the
principal amount of the notes to be redeemed, plus
accrued and unpaid interest, plus a make whole
premium specified in this prospectus. We may redeem
some or all of the notes at any time on or after May
15, 2014 at the redemption prices described in this
prospectus under the caption Description of
NotesOptional Redemption. |
|
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|
In addition, on or before May 15, 2014, we may redeem
up to 35% of the notes with the net cash proceeds from
certain equity offerings at the redemption price listed
in Description of NotesOptional Redemption.
However, we may only make such redemptions if at least
65% of the aggregate principal amount of notes issued
under the indenture remains outstanding immediately
after the occurrence of such redemption. |
|
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|
Change of Control
|
|
If we experience specific kinds of changes in control,
we must offer to purchase the notes at 101% of their
face amount, plus accrued interest. |
|
|
|
Certain Covenants
|
|
The indenture governing the notes will, among other
things, limit our ability and the ability of our
restricted subsidiaries to: |
|
|
|
borrow money or sell preferred stock; |
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|
create liens; |
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pay dividends on or redeem or repurchase stock; |
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make certain types of investments; |
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|
sell stock in our restricted subsidiaries; |
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|
restrict dividends or other payments from
subsidiaries; |
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enter into transactions with affiliates; |
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|
issue guarantees of debt; and |
|
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|
sell assets or merge with other companies. |
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|
Certain of these covenants will be suspended if the
notes are assigned an investment grade rating by both
S&P and Moodys |
12
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and no default has occurred and is
continuing. If either rating on the notes should
subsequently decline to below investment grade, the
suspended covenants will be reinstated. These covenants
contain important exceptions, limitations and
qualifications. For more details, see Description of
Notes. |
|
|
|
Absence of an
Established Public
Market for the
Exchange Notes
|
|
The exchange notes will be new securities for which
there is currently no market. We do not intend to apply
for a listing of the exchange notes on any securities
exchange. Accordingly, we cannot assure you that a
liquid market for the exchange notes will develop or be
maintained. |
|
|
|
Trustee
|
|
Wells Fargo Bank, National Association |
|
|
|
Governing Law
|
|
The indenture and the notes will be governed by, and
construed in accordance with, the laws of the State of
New York. |
|
|
|
Risk Factors
|
|
See Risk Factors, beginning on page 19 of this
prospectus and the other information in or incorporated
by reference in this prospectus for a discussion of
factors you should consider carefully before deciding
to invest in the notes. |
13
Summary Financial Data for Brown Shoe
The following table sets forth summary consolidated historical financial and other data for
the periods ended and as of the dates indicated. Our summary financial data presented below for and
as of the end of each of the last three fiscal years are derived from our audited consolidated
financial statements incorporated by reference into this prospectus. This information is only a
summary and should be read in conjunction with Brown Shoes audited consolidated financial
statements and notes thereto included in our 2010 Annual Report, which is incorporated by reference
into this prospectus. The summary consolidated financial data for the fiscal quarters ended May 1,
2010 and April 30, 2011 is derived from our unaudited consolidated financial statements
incorporated by reference into this prospectus and should be read in conjunction with those
unaudited consolidated financial statements and notes thereto. In the opinion of management, our
unaudited consolidated financial statements for the fiscal quarters ended May 1, 2010 and April 30,
2011 include all normal recurring adjustments necessary for a fair presentation of results for the
unaudited interim periods. Results from past periods are not necessarily indicative of results that
may be expected for any future period.
|
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|
|
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|
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|
|
|
|
|
|
|
|
Fiscal Quarter Ended (2) |
|
|
|
Fiscal Year Ended (1) |
|
|
May 1, |
|
|
April 30, |
|
|
|
January 31, |
|
|
January 30, |
|
|
January 29, |
|
|
2010 |
|
|
2011 |
|
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
|
(dollars in millions) |
|
|
(dollars in millions) |
|
Statement of Earnings Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
2,276.4 |
|
|
$ |
2,242.0 |
|
|
$ |
2,504.1 |
|
|
$ |
597.7 |
|
|
$ |
624.6 |
|
Cost of goods sold |
|
|
1,394.2 |
|
|
|
1,338.9 |
|
|
|
1,500.5 |
|
|
|
350.1 |
|
|
|
374.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
882.2 |
|
|
|
903.1 |
|
|
|
1,003.6 |
|
|
|
247.6 |
|
|
|
249.8 |
|
Selling and administrative expenses |
|
|
851.8 |
|
|
|
859.7 |
|
|
|
923.0 |
|
|
|
224.6 |
|
|
|
235.5 |
|
Restructuring and other special charges, net |
|
|
54.3 |
|
|
|
11.9 |
|
|
|
7.9 |
|
|
|
1.7 |
|
|
|
1.7 |
|
Impairment of goodwill and intangible assets |
|
|
149.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net loss of nonconsolidated affiliate |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) earnings |
|
|
(173.3 |
) |
|
|
31.5 |
|
|
|
72.7 |
|
|
|
21.3 |
|
|
|
12.6 |
|
Interest expense |
|
|
(17.1 |
) |
|
|
(20.2 |
) |
|
|
(19.7 |
) |
|
|
(4.5 |
) |
|
|
(6.7 |
) |
Interest income |
|
|
1.8 |
|
|
|
0.4 |
|
|
|
0.2 |
|
|
|
|
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings before income taxes |
|
|
(188.6 |
) |
|
|
11.7 |
|
|
|
53.2 |
|
|
|
16.8 |
|
|
|
6.0 |
|
Income tax benefit (provision) |
|
|
53.8 |
|
|
|
(1.3 |
) |
|
|
(16.1 |
) |
|
|
(6.3 |
) |
|
|
(2.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings |
|
$ |
(134.8 |
) |
|
$ |
10.4 |
|
|
$ |
37.1 |
|
|
$ |
10.5 |
|
|
$ |
3.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net (loss) earnings attributable to noncontrolling interests |
|
|
(1.6 |
) |
|
|
0.9 |
|
|
|
(0.1 |
) |
|
|
0.5 |
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings attributable to Brown Shoe Company, Inc. |
|
$ |
(133.2 |
) |
|
$ |
9.5 |
|
|
$ |
37.2 |
|
|
$ |
10.0 |
|
|
$ |
3.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
34.3 |
|
|
$ |
118.1 |
|
|
$ |
(2.3 |
) |
|
$ |
42.1 |
|
|
$ |
3.7 |
|
Investing activities |
|
|
(81.1 |
) |
|
|
(50.0 |
) |
|
|
(54.8 |
) |
|
|
(11.3 |
) |
|
|
(163.2 |
) |
Financing activities |
|
|
79.0 |
|
|
|
(30.0 |
) |
|
|
57.3 |
|
|
|
(97.6 |
) |
|
|
85.7 |
|
Depreciation and amortization |
|
|
54.9 |
|
|
|
51.1 |
|
|
|
50.3 |
|
|
|
12.3 |
|
|
|
14.3 |
|
Purchases of property and equipment |
|
|
60.4 |
|
|
|
24.9 |
|
|
|
30.8 |
|
|
|
(5.1 |
) |
|
|
(7.1 |
) |
Capitalized software |
|
|
16.3 |
|
|
|
25.1 |
|
|
|
24.0 |
|
|
|
(6.2 |
) |
|
|
(2.6 |
) |
Ratio of Earnings to Fixed Charges (3) |
|
|
N/A |
|
|
|
1.22 |
x |
|
|
2.09 |
x |
|
|
2.39 |
x |
|
|
1.45 |
x |
Pro Forma Ratio of Earnings to Fixed Charges (3) (4) |
|
|
|
|
|
|
|
|
|
|
2.22 |
x |
|
|
|
|
|
|
1.73 |
x |
Balance Sheet Data (at end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
86.9 |
|
|
$ |
125.8 |
|
|
$ |
126.5 |
|
|
$ |
59.5 |
|
|
$ |
54.2 |
|
Working capital |
|
|
279.3 |
|
|
|
294.2 |
|
|
|
296.4 |
|
|
|
307.4 |
|
|
|
198.7 |
|
Total assets |
|
|
1,026.0 |
|
|
|
1,040.2 |
|
|
|
1,148.0 |
|
|
|
954.4 |
|
|
|
1,240.6 |
|
Total debt |
|
|
262.5 |
|
|
|
244.5 |
|
|
|
348.0 |
|
|
|
150.0 |
|
|
|
438.0 |
|
Total shareholders equity |
|
|
402.2 |
|
|
|
411.2 |
|
|
|
415.9 |
|
|
|
420.2 |
|
|
|
419.8 |
|
Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores (at end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Famous Footwear |
|
|
1,138 |
|
|
|
1,129 |
|
|
|
1,110 |
|
|
|
1,134 |
|
|
|
1,112 |
|
Specialty Retail |
|
|
306 |
|
|
|
282 |
|
|
|
259 |
|
|
|
269 |
|
|
|
252 |
|
Same store sales change (5): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Famous Footwear |
|
|
(4.7 |
)% |
|
|
0.5 |
% |
|
|
10.5 |
% |
|
|
15.5 |
% |
|
|
(3.9 |
)% |
Specialty Retail |
|
|
(3.4 |
)% |
|
|
0.8 |
% |
|
|
6.6 |
% |
|
|
16.2 |
% |
|
|
(1.0 |
)% |
14
|
|
|
(1) |
|
All fiscal years include 52 weeks. |
|
(2) |
|
Each fiscal quarter includes 13 weeks. |
|
(3) |
|
For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income (loss) before income taxes and fixed
charges, and fixed charges consist of interest expense, capitalized
interest, amortization of debt issuance costs and the portion of
operating lease rentals deemed representative of the interest factor.
In the fiscal year ended January 31, 2009, earnings were insufficient
to cover fixed charges by $188.8 million. |
|
(4) |
|
Pro forma ratio of earnings to fixed charges reflects the acquisition
of ASG as if it occurred on January 31, 2010. |
|
(5) |
|
Same store sales changes are calculated by comparing the sales in
stores that have been open at least 13 months. This method avoids the
distorting effect that grand opening sales have in the first month of
operation. Relocated stores are treated as new stores. Closed stores
are excluded from the calculation. Same store sales is not a measure
of financial performance under GAAP. Same store sales is not
calculated in the same manner by all companies and accordingly is not
necessarily comparable to similarly entitled measures of other
companies and may not be an appropriate measure for performance
relative to other companies. |
15
Summary Financial Data for ASG
The summary financial data for ASG presented below for and as of the end of each of the last
two fiscal years are derived from ASGs audited consolidated financial statements. This information
is only a summary and should be read in conjunction with ASGs audited consolidated financial
statements and the notes thereto included in this prospectus and in our Current Report on Form
8-K/A, filed with the SEC on April 22, 2011, which is incorporated by reference into this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2010 |
|
|
|
(dollars in millions) |
|
Statement of Income Data: |
|
|
|
|
|
|
|
|
Revenues, net |
|
$ |
176.2 |
|
|
$ |
231.7 |
|
Cost of sales |
|
|
113.2 |
|
|
|
144.2 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
63.0 |
|
|
|
87.5 |
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
58.4 |
|
|
|
62.0 |
|
Other expenses, net |
|
|
2.6 |
|
|
|
0.6 |
|
Interest expense |
|
|
1.1 |
|
|
|
0.7 |
|
Interest and miscellaneous income |
|
|
|
|
|
|
(0.6 |
) |
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
0.9 |
|
|
|
24.8 |
|
Income tax provision |
|
|
0.5 |
|
|
|
9.8 |
|
|
|
|
|
|
|
|
Net income |
|
$ |
0.4 |
|
|
$ |
15.0 |
|
|
|
|
|
|
|
|
Noncontrolling interest in (income) loss of consolidated subsidiaries |
|
|
(0.1 |
) |
|
|
0.2 |
|
|
|
|
|
|
|
|
Net income attributable to American Sporting Goods Corporation and Subsidiaries |
|
$ |
0.3 |
|
|
$ |
15.2 |
|
|
|
|
|
|
|
|
Other Financial Data: |
|
|
|
|
|
|
|
|
Net cash provided by (used in) |
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
7.8 |
|
|
$ |
19.1 |
|
Investing activities |
|
|
(0.9 |
) |
|
|
(4.6 |
) |
Financing activities |
|
|
(3.1 |
) |
|
|
(14.5 |
) |
Depreciation and amortization |
|
|
4.3 |
|
|
|
4.0 |
|
Purchases of property, plant and equipment |
|
|
2.2 |
|
|
|
4.6 |
|
Balance Sheet Data (at end of period): |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
5.3 |
|
|
$ |
5.9 |
|
Working capital |
|
|
37.2 |
|
|
|
53.0 |
|
Total assets |
|
|
106.4 |
|
|
|
114.9 |
|
Total debt and capital lease obligations |
|
|
26.1 |
|
|
|
11.6 |
|
Total stockholders equity |
|
|
56.4 |
|
|
|
72.0 |
|
16
Summary Unaudited Pro Forma Condensed Consolidated Financial Data
The following table sets forth our summary unaudited pro forma condensed consolidated
financial data, giving effect to the acquisition of ASG as if it had occurred on the dates
indicated below and after giving effect to the pro forma adjustments. The summary unaudited pro
forma condensed consolidated statement of earnings for the fiscal year ended January 29, 2011 has
been derived from the audited statement of earnings for our fiscal year 2010 and ASGs audited
statement of income for ASGs fiscal year 2010 and gives effect to the consummation of the
acquisition as if it occurred on January 31, 2010. The unaudited pro forma condensed consolidated
balance sheet as of January 29, 2011 has been derived from our audited balance sheet as of January
29, 2011 and ASGs audited balance sheet as of December 31, 2010, adjusted to give effect to the
acquisition as if it occurred on January 29, 2011. The summary unaudited pro forma condensed
consolidated statement of earnings for the fiscal quarter ended April 30, 2011 has been derived
from the unaudited statement of earnings for our first quarter 2011 and ASGs unaudited statement
of income for ASGs first quarter 2011 and gives effect to the consummation of the acquisition as
if it occurred on January 31, 2010. The pro forma adjustments are based upon available information
and certain assumptions that we consider reasonable. The pro forma results of operations are not
necessarily indicative of the results of operations that would have been achieved had the
transactions reflected therein been consummated on the date indicated or that will be achieved in
the future. We have presented the pro forma condensed consolidated statement of earnings for our
fiscal year 2010 because we believe investors may find such data to be a useful measure of our
recent operating performance.
The pro forma adjustments and allocation of purchase price are preliminary and are based on
our estimates of the fair value of the assets acquired and liabilities assumed. The final purchase
price allocation will be completed after asset and liability valuations are finalized. This final
valuation will be based on the actual assets and liabilities of ASG that exist as of the date of
the acquisition. Any final adjustments may materially change the allocation of the purchase price,
which could affect the fair value assigned to the assets and liabilities and could result in a
significant change to the unaudited pro forma condensed consolidated financial data presented
below.
The unaudited pro forma condensed consolidated financial data below are only a summary and
should be read in conjunction with ASGs audited consolidated financial statements and the notes
thereto included in this prospectus, and Brown Shoes audited consolidated financial statements and
notes thereto included in our 2010 Annual Report, which is incorporated by reference into this
prospectus.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
Fiscal Quarter Ended |
|
|
|
January 29, 2011 |
|
|
April 30, 2011 |
|
|
|
(dollars in millions) |
|
Statement of Earnings Data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
2,718.6 |
|
|
$ |
632.6 |
|
Cost of goods sold |
|
|
1,638.9 |
|
|
|
377.4 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,079.7 |
|
|
|
255.2 |
|
Selling and administrative expenses |
|
|
980.1 |
|
|
|
238.1 |
|
Restructuring and other special charges, net |
|
|
6.8 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
Operating earnings |
|
|
92.8 |
|
|
|
16.9 |
|
Interest expense |
|
|
(25.6 |
) |
|
|
(7.0 |
) |
Interest income |
|
|
0.3 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
67.5 |
|
|
|
10.0 |
|
Income tax provision |
|
|
(21.7 |
) |
|
|
(3.4 |
) |
|
|
|
|
|
|
|
Net earnings |
|
$ |
45.8 |
|
|
$ |
6.6 |
|
|
|
|
|
|
|
|
Net loss attributable to non controlling interests |
|
|
(0.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Brown Shoe Company, Inc. |
|
$ |
46.2 |
|
|
$ |
6.6 |
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
|
Fiscal Quarter Ended |
|
|
|
January 29, 2011 |
|
|
April 30, 2011 |
|
|
|
(dollars in millions) |
|
Balance Sheet Data (at end of period): |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
132.4 |
|
|
|
|
|
Working capital |
|
|
201.9 |
|
|
|
|
|
Total assets |
|
|
1,350.8 |
|
|
|
|
|
Total debt (1) |
|
|
510.2 |
|
|
|
|
|
Total shareholders equity |
|
|
410.7 |
|
|
|
|
|
Other Financial Data: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
$ |
56.3 |
|
|
$ |
14.6 |
|
Purchases of property and equipment |
|
|
35.4 |
|
|
|
7.1 |
|
Capitalized software |
|
|
24.0 |
|
|
|
2.6 |
|
Net loss attributable to noncontrolling interests |
|
|
(0.4 |
) |
|
|
|
|
Net earnings attributable to Brown Shoe Company, Inc. |
|
|
46.2 |
|
|
|
6.6 |
|
|
|
|
(1) |
|
Total debt is defined as long-term debt plus borrowings under
revolving credit agreement. |
18
RISK FACTORS
You should carefully consider each of the following risks and all of the other information
included or incorporated by reference in this prospectus before deciding to participate in the
exchange offer described in this prospectus. Some of the following risks relate principally to your
participation or failure to participate in the exchange offer and ownership of our exchange notes.
Other risks relate principally to our business in general and the industry in which we operate. Our
business, financial condition or results of operations could be materially adversely affected due
to any of these risks.
Risks Relating to the Exchange Offer
There are significant consequences if you fail to exchange your original notes.
We did not register the original notes under the Securities Act or any state securities laws,
nor do we intend to do so after the exchange offer. As a result, the original notes may only be
transferred in limited circumstances under the securities laws. If you do not exchange your
original notes in the exchange offer, you will lose your right to have the original notes
registered under the Securities Act, subject to certain limitations. If you continue to hold
original notes after the exchange offer, you may be unable to sell the original notes. Original
notes that are not tendered or are tendered but not accepted will, following the exchange offer,
continue to be subject to existing restrictions.
You cannot be sure that an active trading market for the exchange notes will develop.
There is no existing market for the exchange notes. We do not intend to apply for a listing of
the exchange notes on any securities exchange. We do not know if an active public market for the
exchange notes will develop or, if developed, will continue. If an active public market does not
develop or is not maintained, the market price and liquidity of the exchange notes may be adversely
affected. We cannot make any assurances regarding the liquidity of the market for the exchange
notes, the ability of holders to sell their exchange notes or the price at which holders may sell
their exchange notes. In addition, the liquidity and the market price of the exchange notes may be
adversely affected by changes in the overall market for securities similar to the exchange notes,
by changes in our financial performance or prospects and by changes in conditions in our industry.
You must follow the appropriate procedures to tender your original notes or they will not be
exchanged.
The exchange notes will be issued in exchange for the original notes only after timely receipt
by the exchange agent of the original notes or a book-entry confirmation related thereto, a
properly completed and executed letter of transmittal or an agents message and all other required
documentation. If you want to tender your original notes in exchange for exchange notes, you should
allow sufficient time to ensure timely delivery. Neither we nor the exchange agent are under any
duty to give you notification of defects or irregularities with respect to tenders of original
notes for exchange. Original notes that are not tendered or are tendered but not accepted will,
following the exchange offer, continue to be subject to the existing transfer restrictions. In
addition, if you tender the original notes in the exchange offer to participate in a distribution
of the exchange notes, you will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. For additional
information, please refer to the sections entitled The Exchange Offer and Plan of Distribution
later in this prospectus.
19
Risks Relating to the Notes
Our substantial debt could adversely affect our cash flow and prevent us from fulfilling our
obligations under the notes.
We have now, and will continue to have after the exchange offer, a significant amount of debt.
In connection with our acquisition of ASG, we exercised our option to increase the amount of
availability under our revolving credit facility by $150 million, from $380 million to
$530 million. As of April 30, 2011, assuming we had completed the acquisition of ASG, the offering
of the original notes, and the Tender Offer as of such date and subsequent redemption of the
balance of our 83/4% Notes, we would have had $443.2 million of total debt.
Our substantial amount of debt could have important consequences to you. For example, it
could:
|
|
|
make it more difficult for us to satisfy our obligations under the notes; |
|
|
|
|
increase our vulnerability to general adverse economic and industry conditions; |
|
|
|
|
require us to dedicate a substantial portion of our cash flow from operations to make
interest and principal payments on our debt, thereby limiting the availability of our cash
flow to fund future capital expenditures, working capital and other general corporate
requirements; |
|
|
|
|
limit our flexibility in planning for, or reacting to, changes in our business and
the industry in which we operate; |
|
|
|
|
place us at a competitive disadvantage compared with competitors that have less debt;
and |
|
|
|
|
limit our ability to borrow additional funds, even when necessary to maintain
adequate liquidity. |
In addition, borrowings under our existing revolving credit agreement bear interest at
variable rates. If market interest rates increase, we will have higher debt service requirements,
which could adversely affect our cash flow. While we may enter into agreements limiting our
exposure to higher interest rates, any such agreements may not offer complete protection from this
risk.
Despite our current levels of debt, we may still be able to incur substantially more debt. This
could further exacerbate the risks associated with our substantial debt.
We may be able to incur additional debt in the future. The terms of our existing revolving
credit agreement and the indenture governing the notes will allow us to incur substantial amounts
of additional debt, subject to certain limitations. As of April 30, 2011, assuming we had completed
the acquisition of ASG, the offering of the original notes, and consummated the Tender Offer and
subsequent redemption of the balance of our 83/4% Notes, our existing revolving credit agreement
would have permitted additional borrowings of up to $256.1 million. In addition, the revolving
credit agreement provides for up to an additional $150.0 million of optional availability pursuant
to a provision commonly referred to as an accordion feature, subject to the satisfaction of
certain conditions. If new debt is added to our current debt levels, the related risks we could
face would be magnified.
Although these notes are referred to as senior notes, they will be effectively subordinated to
our and the subsidiary guarantors secured debt.
The notes, and each guarantee of the notes, are unsecured and therefore will be effectively
subordinated to any secured debt we, or the relevant guarantor, may incur to the extent of the
assets securing such debt. In the event of a bankruptcy or similar proceeding involving us or a
guarantor, the
20
assets which serve as collateral for any secured debt will be available to satisfy the
obligations under the secured debt before any payments are made on the notes. As of April 30, 2011,
assuming we had completed the acquisition of ASG, the offering of the original notes, and
consummated the Tender Offer and subsequent redemption of the balance of our 83/4% Notes, as of such
date, we would have had $244.7 million of secured debt outstanding, all of which would have been
secured debt under our existing revolving credit agreement, and up to $256.1 million of additional
availability under our existing revolving credit agreement. The notes will be effectively
subordinated to any borrowings under our existing revolving credit agreement and future secured
debt. See Description of Certain Indebtedness. The indenture governing the notes will allow us to
incur a substantial amount of additional secured debt.
Not all of our subsidiaries will guarantee the notes, and the assets of our non-guarantor
subsidiaries may not be available to make payments on the notes.
The guarantors of the notes will not include all of our subsidiaries. In particular, our
foreign subsidiaries (other than Brown Shoe Company of Canada Ltd), certain of our domestic
subsidiaries, our inactive domestic subsidiaries and all of our future unrestricted subsidiaries
will not guarantee the notes. Payments on the notes are only required to be made by us and the
subsidiary guarantors. As a result, no payments are required to be made from assets of subsidiaries
that do not guarantee the notes, unless those assets are transferred by dividend or otherwise to us
or a subsidiary guarantor. In 2010, our non-guarantor subsidiaries had net sales of $216.6 million,
or 8.0% of our pro forma consolidated net sales for such period, and earnings before income taxes
of $14.4 million, or 21.3% of our pro forma consolidated earnings before income taxes for such
period. At April 30, 2011, our non-guarantor subsidiaries had total assets of $181.2 million.
In the event that any non-guarantor subsidiary becomes insolvent, liquidates, reorganizes,
dissolves or otherwise winds up, holders of its debt and its trade creditors generally will be
entitled to payment on their claims from the assets of that subsidiary before any of those assets
are made available to us. Consequently, your claims in respect of the notes will be effectively
subordinated to all of the liabilities of our non-guarantor subsidiaries, including trade payables.
As of April 30, 2011, our non-guarantor subsidiaries had $96.6 million of liabilities.
To service our debt, we will require a significant amount of cash, which may not be available to
us.
Our ability to make payments on, or repay or refinance, our debt, including the notes, and to
fund our operations and our planned capital expenditures, will depend largely upon our future
operating performance. Our future performance, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are beyond our control. In
addition, our ability to borrow funds in the future to make payments on our debt will depend on the
satisfaction of the covenants in our existing revolving credit agreement and our other debt
agreements, including the indenture governing the notes, and other agreements we may enter into in
the future. Specifically, our ability to borrow under our existing revolving credit agreement is
limited to the lesser of the total commitments and the borrowing base, which is based on stated
percentages of the sum of eligible accounts receivable and inventory, as defined, less applicable
reserves. In addition, if excess availability under this facility falls below the greater of (i)
12.5% of the lesser of (x) the borrowing base or (y) the total commitments and (ii) $35.0 million,
we will be subject to minimum fixed charge coverage ratio requirements. We cannot assure you that
our business will generate sufficient cash flow from operations or that future borrowings will be
available to us under our existing revolving credit agreement or from other sources in an amount
sufficient to enable us to pay our debt, including the notes, or to fund our other liquidity needs.
In addition, prior to the repayment of the notes, we will be required to refinance our
existing revolving credit facility. We cannot assure you that we will be able to refinance any of
our debt, including
21
our existing revolving credit facility, on commercially reasonable terms or at all. If we were
unable to make payments or refinance our debt or obtain new financing under these circumstances, we
would have to consider other options, such as:
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sales of assets; |
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sales of equity; and/or |
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negotiations with our lenders to restructure the applicable debt. |
Our existing revolving credit agreement, any future credit agreements we may enter into from
time to time and the indenture governing the notes may restrict, or market or business conditions
may limit, our ability to do some of these things.
If we are unable to meet our debt service obligations under the notes or our revolving credit
facility, the holders of the notes and the lenders under our revolving credit facility would have
the right, following the applicable cure periods, to cause the entire principal amount of such
obligations to become immediately due and payable. If the amounts outstanding under these
instruments are accelerated, we cannot assure you that our assets will be sufficient to repay in
full the money owed to the lenders under our revolving credit facility or holders of the notes.
The agreements governing our debt, including the notes and our existing revolving credit agreement,
contain various covenants that impose restrictions on us that may affect our ability to operate our
business and to make payments on the notes.
Our existing agreements impose and future financing agreements are likely to impose, operating
and financial restrictions on our activities. These restrictions require us, under certain
circumstances, to maintain a minimum fixed charge coverage ratio, and limit or prohibit our ability
to, among other things:
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incur additional debt and issue preferred stock; |
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create liens; |
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redeem and/or prepay certain debt; |
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pay dividends on our stock or repurchase stock; |
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make certain investments; |
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engage in specified sales of assets; |
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enter into transactions with affiliates; |
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enter new lines of business; |
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engage in consolidations, mergers and acquisitions; |
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make certain capital expenditures; and |
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restrict our subsidiaries ability to pay dividends and make other distributions. |
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These restrictions on our ability to operate our business could seriously harm our business
by, among other things, limiting our ability to take advantage of financing, merger and acquisition
and other corporate opportunities.
Various risks, uncertainties and events beyond our control could affect our ability to comply
with these covenants and maintain these financial ratios. Failure to comply with any of the
covenants in our existing or future financing agreements could result in a default under those
agreements and under other agreements containing cross-default provisions. A default would permit
lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any
collateral securing the debt. Under these circumstances, we might not have sufficient funds or
other resources to satisfy all of our obligations, including our obligations under the notes. In
addition, the limitations imposed by financing agreements on our ability to incur additional debt
and to take other actions might significantly impair our ability to obtain other financing.
The guarantees may not be enforceable because of fraudulent conveyance laws.
The guarantors guarantees of the notes may be subject to review under federal bankruptcy law
or relevant state fraudulent conveyance laws if a bankruptcy lawsuit is commenced by or on behalf
of our or the guarantors unpaid creditors. Under these laws, if in such a lawsuit a court were to
find that, at the time a guarantor incurred debt (including debt represented by the guarantee),
such guarantor:
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incurred this debt with the intent of hindering, delaying or defrauding current or
future creditors; or |
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received less than reasonably equivalent value or fair consideration for incurring
this debt and the guarantor: |
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was insolvent or was rendered insolvent by reason of the related financing
transactions; |
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was engaged, or about to engage, in a business or transaction for which its
remaining assets constituted unreasonably small capital to carry on its business; or |
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intended to incur, or believed that it would incur, debts beyond its ability to
pay these debts as they mature, as all of the foregoing terms are defined in or
interpreted under the relevant fraudulent transfer or conveyance statutes, |
then the court could void the guarantee or subordinate the amounts owing under the guarantee to the
guarantors presently existing or future debt or take other actions detrimental to you.
The measure of insolvency for purposes of the foregoing considerations will vary depending
upon the law of the jurisdiction that is being applied in any such proceeding. Generally, an entity
would be considered insolvent if, at the time it incurred the debt or issued the guarantee:
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it could not pay its debts or contingent liabilities as they become due; |
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the sum of its debts, including contingent liabilities, is greater than its assets,
at fair valuation; or |
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the present fair saleable value of its assets is less than the amount required to pay
the probable liability on its total existing debts and liabilities, including contingent
liabilities, as they become absolute and mature. |
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If a guarantee is voided as a fraudulent conveyance or found to be unenforceable for any other
reason, you will not have a claim against that obligor and will only be our creditor or that of any
guarantor whose obligation was not set aside or found to be unenforceable. In addition, the loss of
a guarantee will constitute a default under the indenture, which default would cause all
outstanding notes to become immediately due and payable.
We believe that, at the time the guarantors initially incur the debt represented by the
guarantees, the guarantors:
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will not be insolvent or rendered insolvent by the incurrence; |
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will have sufficient capital to run our or their businesses effectively; and |
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will be able to pay obligations on the notes and the guarantees as they mature or
become due. |
In reaching the foregoing conclusions we have relied upon our analyses of internal cash flow
projections and estimated values of the assets and liabilities of the guarantors. In addition, we
have relied on a limitation to be contained in the guarantors guarantees that limits each
guarantee as necessary to prevent it from constituting a fraudulent conveyance under applicable
law. However, a court passing on these questions might not reach the same conclusions.
We may be unable to make a change of control offer required by the indenture governing the notes,
which would cause defaults under the indenture governing the notes, our existing revolving credit
agreement and our other financing arrangements.
The terms of the notes will require us to make an offer to repurchase the notes upon the
occurrence of a change of control at a purchase price equal to 101% of the principal amount of the
notes, plus accrued interest to the date of the purchase. The terms of our existing revolving
credit agreement will require, and other financing arrangements may require, repayment of amounts
outstanding in the event of a change of control and limit our ability to fund the repurchase of
your notes in certain circumstances. It is possible that we will not have sufficient funds at the
time of the change of control to make the required repurchase of notes or that restrictions in our
existing revolving credit agreement and other financing agreements will not allow the repurchases.
See Description of NotesRepurchase at the Option of HoldersChange of Control.
If the notes are rated investment grade certain covenants contained in the indenture will be
suspended and you will lose the protection of these covenants unless or until the notes
subsequently are rated below investment grade.
The indenture contains certain covenants that will be suspended for so long as the notes are
rated investment grade. These covenants restrict, among other things, our and our restricted
subsidiaries ability to, among other things:
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make restricted payments; |
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incur debt; |
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engage in transactions with affiliates; and |
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engage in certain sales of assets and make offers to repurchase notes. |
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Because these restrictions will not apply when the notes are rated investment grade, we may be
able to incur additional debt and consummate transactions that may impair our ability to satisfy
our obligations with respect to the notes. In addition, we would not be required to make an offer
to repurchase the notes with the excess proceeds of any asset sales during the suspension of the
covenant restricting our ability to engage in certain asset sales. These covenants will only be
restored if the credit ratings assigned to the notes later fall below investment grade and actions
taken while the notes were rated investment grade will remain in effect. See Description of
NotesCertain CovenantsLimitation of Applicability of Certain Covenants if Notes Rated
Investment Grade.
Risks Relating to Our Business
Economic conditions may adversely impact demand for our products, reduce access to credit and cause
our customers and others with whom we do business to suffer financial hardship, all of which could
adversely impact our business, results of operations, financial condition and cash flows.
During 2008 and 2009, worldwide economic conditions deteriorated in many countries and
regions, including the United States. Despite some positive trends during the second half of 2009
and throughout 2010, business conditions may remain difficult for the foreseeable future. Consumer
spending is affected by many factors, including, among others, general business conditions,
interest rates, inflation, consumer debt levels, the availability of consumer credit, health care
costs, currency exchange rates, taxation, gasoline prices, real estate values, foreclosure rates,
unemployment trends, economic consequences of military action or terrorist activities and other
matters that influence consumer confidence and spending. Many of these factors are outside of our
control and may have a negative impact on our sales and margins. Our customers purchases,
including our products, could decline during periods when disposable income is lower, when prices
increase in response to rising costs or in periods of actual or perceived unfavorable economic
conditions. If we encounter increases in our product costs, these may not be offset by comparable
rises in the income of consumers of our products. These consumers may choose to purchase fewer of
our products or purchase lower-priced products of our competitors in response to higher prices for
our products or may choose not to purchase our products at prices that reflect our price increases
that become effective from time to time. If any of these events occur, or if unfavorable economic
conditions further challenge the consumer environment, our business, results of operations,
financial condition and cash flows could be adversely affected.
In addition, economic conditions, including decreased access to credit, may result in
financial difficulties leading to restructurings, bankruptcies, liquidations and other unfavorable
events for our customers, product suppliers, insurers, logistics and other service providers and
financial institutions that are counterparties to our credit facilities and derivatives
transactions. Our customers may experience diminished liquidity that could result in an increase in
our credit risk, or our customers may encounter an inability to obtain credit to finance purchases
of our products. If third parties on which we rely for goods or services are unable to overcome
difficulties resulting from the deterioration in worldwide economic conditions and provide us with
the materials and services we need, or if counterparties to our credit facilities or derivatives
transactions do not perform their obligations, our business, results of operations, financial
condition and liquidity could be adversely affected. For example, over the last few years, we
experienced some disruption in product sourcing as a result of certain unforeseen factory closures.
While the financial consequences to the Company of these closures were not material, the impact of
many closures of major facilities may have an adverse effect on product sourcing. We attempt to
mitigate this risk in a variety of ways, including diversification among factories, but such risk
to our business and results of operations cannot be completely eliminated.
We face risks relating to competition.
Competition is intense in the footwear industry. Certain of our competitors are larger and
have greater financial, marketing and technological resources than we do. In addition, there are
low barriers of
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entry into this industry and new companies may enter the markets in which we compete, further
increasing competition in the industry. Our success depends upon our ability to remain competitive
in the areas of style, price, quality, location and service, among others, and in part on our
ability to anticipate and respond to changing merchandise and fashion trends and consumer
preferences and demands in a timely manner. The industry has also been impacted by retailers
aggressively competing on the basis of price. Accordingly, there has been competitive pressure on
us to keep our selling prices low. Additionally, retailers are increasingly relying on private
label brands, which compete with our products directly. Further, these retailers, in some cases,
are deciding to source more of their products directly from manufacturers overseas, reducing their
reliance on wholesalers. If we are unable to respond effectively to these competitive pressures,
our business and results of operations may be adversely affected.
We face risks related to the maintenance of proper inventory levels.
We place orders with manufacturers for some of our products prior to the time we receive all
of our customers orders. We do this to minimize purchasing costs, the time necessary to fill
customer orders and the risk of non-delivery. We also maintain an inventory of certain products
that we anticipate will be in greater demand. We may fail to gauge the fashion tastes of consumers
or differentiate our retail and wholesale offerings. Also, current economic conditions make it
increasingly difficult for us and our customers to accurately forecast product demand trends, and
we may be unable to sell the products we have ordered in advance from manufacturers or that we have
in our inventory. Inventory levels in excess of customer demand may result in inventory
write-downs, and the sale of excess inventory at discounted prices could significantly impair the
brand image and have a material adverse effect on our operating results and financial condition.
Conversely, if we underestimate consumer demand for our products or if our manufacturers fail to
supply the quality products that we require at the time we need them, we may experience inventory
shortages. Inventory shortages might delay shipments to customers, negatively impact retailer and
distributor relationships, negatively impact our sales results and diminish brand awareness.
We face risks relating to changes in consumer preferences.
The footwear industry is subject to rapidly changing consumer demands and fashion trends.
Accordingly, our success in both our wholesale and retail operations depends in large part on our
ability to anticipate, understand and react to changing consumer demands. Our products must appeal
to a broad range of consumers whose preferences cannot be predicted with certainty and are subject
to rapid change. The success of our products, merchandising strategies and marketing strategies and
programs will also depend on a favorable reception by our customers. Furthermore, consumer
preferences and purchasing patterns may be influenced by consumers disposable income, which could
impact the success of our operations.
We rely on foreign sources of production.
General
We rely almost entirely on foreign sourcing for our footwear products. We source footwear
products from independent third-party manufacturing facilities located in China and, to a much
lesser extent, Brazil and other countries. At times, we are a major customer of these third-party
manufacturing facilities. However, there is substantial competition in the footwear industry for
quality footwear manufacturers. Accordingly, our future results will partly depend on maintaining
close working relationships with our principal manufacturers.
As is common in the industry, we do not have any long-term contracts with our independent
third-party foreign manufacturers. We cannot ensure that we will not experience difficulties with
such manufacturers, including reduction in the availability of production capacity, failure to meet
production
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deadlines, increases in manufacturing costs or failure to meet our quality standards. Foreign
manufacturing is subject to a number of risks, including work stoppages, political instability,
expropriation, nationalization, foreign currency fluctuations, changing economic conditions, the
imposition of tariffs, import and export controls and other non-tariff barriers and changes in
governmental policies or climate change legislation. These risks, as well as other factors outside
of our control, such as manufacturing or shipping delays or quality problems, could disrupt the
manufacturing process and timeliness of merchandise deliveries and result in lost sales, order
cancellations or excessive markdowns, any of which could have an adverse effect on our business,
results of operations and financial condition.
We require our third-party foreign manufacturers to meet our standards and footwear-industry
standards for working conditions and other matters, including compliance with applicable labor,
environmental and other laws, before we place orders with them to manufacture products for us. A
failure by any of our third-party manufacturers to adhere to these standards or laws could cause us
to incur additional costs for our products and could cause negative publicity and harm our business
and reputation. We also require our third-party foreign manufacturers to meet our and industry
standards for product safety, including compliance with applicable laws and standards with respect
to lead content in paint and other safety issues. A failure by any of our third-party manufacturers
to adhere to product safety standards could lead to a product recall, which could result in
critical media coverage and harm our business and reputation and could cause us to incur additional
costs.
We cannot predict whether additional United States or foreign customs quotas, duties, taxes or
other changes or restrictions will be imposed upon the importation of foreign produced products in
the future or what effect such actions could have on our business, financial condition or results
of operations.
Furthermore, our products depend on the availability of leather and other raw materials. Any
significant shortage of quantities or increases in the cost of leather or other materials or
resources used to produce our products could have a material adverse effect on our business and
results of operations.
China
We rely heavily on manufacturing facilities located in China. Historically, the trade
relationship between the United States and China has not had a material adverse effect on our
business, financial condition or results of operations. There have been, however, and may in the
future be, threats to the trade relationships between the United States and China. There can be no
assurance that the trade relationship between the United States and China will not worsen, and if
it does worsen, that our financial condition or results of operations will not be materially
adversely affected thereby.
We cannot predict the effect that changes in the economic and political conditions in the
United States and China could have on the economics of doing business with Chinese manufacturers.
Examples include, but are not limited to, the following:
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manufacturing capacity in China may shift from footwear to other industries with
manufacturing margins that are perceived to be higher; |
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growth in domestic footwear consumption in China could lead to a significant decrease
in factory space available for the manufacture of footwear to be exported; and |
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currently, many footwear manufacturers in China are facing labor shortages as migrant
workers seek better wages and working conditions in other industries and vocations. |
Any of the conditions described above, including the continuation of certain trends
identified, could adversely affect our current manufacturers operations and the ability to source
footwear from these
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manufacturers, and we may experience difficulties or delays in sourcing our footwear as well
as higher footwear costs.
Although we believe we could find alternative manufacturing sources for those products we
currently source from China through independent third-party manufacturing facilities in other
countries, the loss of a substantial portion of our Chinese manufacturing capacity would have a
material adverse effect on the Company. For example, alternative manufacturers may have higher
prices, less favorable payment terms, less manufacturing capacity, lower quality standards or
increased lead times for delivery. If we are unable to provide products consistent with our
standards or the manufacture of our footwear is delayed or becomes more expensive, this could
result in our customers canceling orders, refusing to accept deliveries or demanding reductions in
purchase prices, any of which could have a material adverse effect on our business and results of
operations. In addition, the occurrence of a natural disaster, such as an earthquake or hurricane,
the outbreak of a pandemic disease in China or any other disaster, such as that caused by a nuclear
meltdown in which radioactive material is released into the environment, would severely interfere
with the manufacture of our products and have a material adverse effect on the Company.
Currency
Although we purchase most products from foreign manufacturers in United States dollars and
otherwise engage in foreign currency hedging transactions, we cannot ensure that we will not
experience cost variations with respect to exchange rate changes. For example, although we purchase
footwear made in China using United States dollars, recently Chinese manufacturers have been
increasing their United States dollar prices to compensate for the appreciation of the Chinese
currency against the United States dollar.
We face risks relating to operating newly acquired manufacturing facilities in China.
Our acquisition of ASG on February 17, 2011, included manufacturing facilities in China that
are now owned and operated by Brown Shoe. Although these facilities account for only a portion of
total production of performance athletic footwear and outdoor brands acquired from ASG, these
manufacturing operations are subject to a number of potential risks. Such risks include, among
others:
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inflation or changes in political and economic conditions; |
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unstable regulatory environments; |
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changes in import and export duties; |
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domestic and foreign customs and tariffs; |
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potentially adverse tax consequences; |
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trade restrictions; |
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restrictions on the transfer of funds into or out of China; |
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labor unrest and/or shortages; and |
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logistical and communications challenges. |
These risks may have an adverse effect on our Chinese manufacturing operations and on our
overall business and results of operations.
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We lease the land where our Chinese manufacturing facilities are located from the Chinese
government through land use rights agreements. Although we believe our relationship with the
Chinese government is good, if the Chinese government decided to terminate our land use rights
agreements, our assets could become impaired, and our ability to meet our customers orders could
be impacted. This could have a material adverse effect on our business and results of operations.
We face risks relating to customer concentration in our wholesale business.
Our wholesale customers include national chains, mass merchandisers, department stores,
independent retailers, catalogs and online retailers. Several of our customers operate multiple
department store divisions. Furthermore, we often sell multiple types of licensed, branded and
private-label footwear to these same national chains, mass merchandisers, department stores,
independent retailers, catalogs and online retailers. While we believe purchasing decisions in many
cases are made independently by the buyers and merchandisers of each of the customers, a decision
by a significant customer, including any multiple national chain operators, mass merchandiser,
department store, independent retailer, catalog and/or online retailer or any other significant
customer, to decrease the amount of footwear products purchased from us could have a material
adverse effect on our business, financial condition or results of operations.
The retail industry has experienced increased consolidation. As this trend continues, our
wholesale customers will likely seek more favorable terms for their purchases of our products,
which could limit our ability to raise prices or achieve our profit goals. In turn, we may not be
able to recoup raw material or other cost increases. Sales on terms less favorable to us than our
current terms will have an adverse effect on our profitability. Consolidation could lead to a
decrease in the number of stores that carry our products and could expose us to greater
concentration of accounts receivable risk. In addition, retailers are deciding to source more of
their products directly from manufacturers overseas and reducing their reliance on wholesalers. If
retailers continue to increase their direct sourcing of footwear from overseas, this could have a
material adverse effect on our business and results of operations.
We are dependent on our information technology systems.
Our computer network and systems are essential to all aspects of our operations. If there were
to be a major disruption of our information technology operations, we believe that we would be able
to recover necessary information, but we do not have complete assurance that we would be able to do
so. Further, we do not have complete assurance that we would be able to repair our systems to allow
us to continue operations without significant business interruption. If a disruption is of a nature
that delays or prohibits implementation of recovery arrangements, it could have a material adverse
effect on our results of operations.
To support our business strategy while streamlining and transforming day-to-day operations for
our integrated business model, we converted certain of our existing internally developed and
certain other third-party applications to an integrated enterprise resource planning (ERP)
information technology system provided by third-party vendors. While we believe the implementation
of these systems provides significant opportunity for us, such a major undertaking carries various
risks and uncertainties that could cause actual results to differ materially. These include: (i)
changes in the anticipated benefits of strategic business transformation; (ii) our ability to
utilize our new information technology system and perform our business processes as designed to
successfully execute our strategies; and (iii) the additional risk of future unforeseen issues,
interruptions and costs. In the fourth quarter of 2010, we went live on the wholesale portion of
our new ERP system, and experienced some delays in the financial statement closing process and
timely access to key information used to monitor our business. While we are addressing these
issues,
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the timeline for stabilization of the issues experienced and optimization of benefits expected
from the implementation of the ERP system are not now determinable.
We may fail to protect the integrity and security of customer and associate information.
We routinely possess sensitive customer and associate information and, while we have taken
reasonable and appropriate steps to protect that information, if our security procedures and
controls were compromised, it could harm our business, reputation, results of operations and
financial condition and may increase the costs we incur to protect against such information
security breaches, such as increased investment in technology, the costs of compliance with
consumer protection laws and costs resulting from consumer fraud.
We depend on key personnel to manage our business effectively and may be unable to retain senior
management and recruit and retain other key associates.
Our success depends on the ability to attract, retain and motivate qualified management,
administrative, product development and sales personnel to support existing operations and future
growth. Competition for qualified personnel in the footwear industry is intense, and we compete for
these individuals with other companies that in many cases have substantial financial and other
resources. The loss of the services of any members of senior management, the inability to attract
and retain other qualified personnel, or the inability to effectively transition senior management
positions could have a material adverse effect on our business, results of operations and financial
condition. We may also be unable to retain key management personnel in businesses that we acquire.
We face risks relating to our licensed and owned intellectual property.
Licenses
The success of our Wholesale Operations segment to date has been due, in part, to our ability
to attract and retain licensors that have strong, well-recognized brands and trademarks. Our
license agreements are generally for an initial term of two to four years, subject to renewal, but
even where we have longer-term licenses or have an option to renew a license, such agreements are
dependent upon our achieving certain results in marketing the licensed products. While we believe
we will generally be able to decide whether to renew our existing licenses and obtain new licenses
in the future, there can be no assurance we will be able to renew our current licenses or obtain
new licenses. In addition, certain of our license agreements are not exclusive, and new or existing
competitors may obtain similar licenses.
Many of our license agreements require minimum royalty payments. Our ability to generate
sufficient sales and profitability to cover these minimum royalty requirements is not guaranteed,
and if sales of such products are not sufficient to generate these minimum payments, it could have
a material adverse effect on our business and results of operations.
Trademarks
We believe that our trademarks and trade names are important to our business and are generally
sufficient to permit us to carry on our business as presently conducted and planned. We cannot,
however, know whether we will be able to secure protection for our intellectual property in the
future or if that protection will be adequate for future operations. Furthermore, we face the risk
of ineffective protection of intellectual property rights in jurisdictions where we source and
distribute our products. We also cannot be certain that our activities do not infringe on the
proprietary rights of others. If we are compelled to
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prosecute infringing parties, defend our intellectual property or defend ourselves from
intellectual property claims made by others, we may face significant expenses and liability.
We are dependent on leased locations.
Our Famous Footwear and Specialty Retail segments operate footwear stores. We lease all of
these stores. Accordingly, the success of our operations, in part, is dependent on our ability to
secure affordable, long-term leases in desirable locations and to secure renewals of such leases.
Although we believe that most of our current leases can be renewed on acceptable terms, no
assurance can be given that we will be able to successfully negotiate lease renewals on existing
stores or to obtain acceptable terms for new stores in desirable locations, and the failure to do
so could have an adverse effect on our ability to grow our business and our financial condition and
results of operations.
We are dependent on distribution centers.
We currently use six distribution centers, which serve as the source of replenishment of
inventory for our footwear stores operated by our Famous Footwear and Specialty Retail segments and
serve our Wholesale Operations segment. If complications arise with certain of our operating
distribution centers or these distribution centers are severely damaged or destroyed, our other
distribution centers may not be able to support the resulting additional distribution demands and
we may be unable to locate alternative persons or entities capable of doing so. This may adversely
affect our ability to deliver inventory on a timely basis, which could adversely affect our results
of operations.
We are dependent on major branded suppliers.
Our Famous Footwear retail chain purchases a substantial portion of its footwear products from
major branded suppliers. While we believe our relationships with our current suppliers are good,
the loss of any of our major suppliers or product developed exclusively for Famous Footwear could
have a material adverse effect on our business, financial condition and results of operations. As
is common in the industry, we do not have any long-term contracts with our suppliers. In addition,
the success of our financial performance is dependent on the ability of Famous Footwear to obtain
products from its suppliers on a timely basis and on acceptable terms.
We face risks that our quarterly sales and earnings may fluctuate, which may result in volatility
in our stock price.
Our quarterly sales and earnings can vary due to a number of factors, including, among others,
weather and shipment delays, many of which are beyond our control. Accordingly, we may not be able
to accurately predict our quarterly sales and earnings. In our wholesale business, sales of
footwear are dependent on orders from our major customers, and they may change delivery schedules,
change the mix of products they order or cancel orders without penalty. In addition, our wholesale
customers set the delivery schedule for shipments of our products, which could cause shifts of
sales between quarters. Our Famous Footwear retail business is seasonally weighted to the
back-to-school season, which falls into our fiscal third quarter. As a result the success of our
back to school offering, which is affected by our ability to anticipate consumer demand and fashion
trends, could have disproportional impact on our full year results. In addition, our annualized tax
rate is based on projections of our domestic and international operating results for the year,
which we review and revise as necessary each quarter. As a result of these specific and other
general factors, our operating results will vary from quarter to quarter, and the results for any
particular quarter may not be indicative of results for the full year. Any shortfall in sales or
earnings from the levels expected by investors or securities analysts could cause a decrease in the
trading price of our securities.
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We could be adversely affected by changes in tax laws, policies and treaties.
Our financial results are significantly impacted by our effective tax rates, for both domestic
and international operations; therefore, changes in domestic and/or international tax laws,
interpretations, policies and treaties may result in increased volatility of our financial results.
The passage of any currently existing or future legislation, as a result of changes in domestic or
international tax laws, that defers or eliminates certain tax deductions that are currently
available to the Company would result in the Company paying higher income taxes and, depending on
the specifics of the changes, could materially and negatively affect our financial condition and
results of operations.
We may face transitional challenges with acquisitions and/or joint ventures.
Periodically, we pursue acquisitions of other companies or businesses and/or joint ventures.
Although we review the records of acquisition candidates, such an in-depth review of the records
may not reveal existing or potential problems. As a result, we may not become familiar enough with
the business to fully assess its strengths and weaknesses, and accordingly, we may assume adverse
operating conditions and/or unanticipated liabilities, and the business may not perform as well as
expected. We face the risk that the returns on acquisitions and/or joint ventures will not support
the expenditures or indebtedness incurred to acquire or launch such businesses. We also face the
risk that we will not be able to integrate acquisitions and/or joint ventures into our existing
operations effectively without substantial expense, delay or other operational or financial
problems. Integration may be hindered by, among other things, differing procedures, including
internal controls, business practices and technology systems. We may need to allocate more
management resources to integration than we planned, which may adversely affect our ability to
pursue other profitable activities.
With our recent acquisition of ASG, we have expanded our presence in the highly competitive
performance footwear market.
Our acquisition of ASG added performance athletic and outdoor footwear brands to our existing
wholesale portfolio of brands, strengthening our position in the performance footwear market. The
performance footwear market is highly competitive in the United States and worldwide, and market
participants face many challenges. Consumer perceptions of our newly acquired performance footwear
brands, competitive product offerings and technologies, rapid changes in footwear technology and
consumer preferences, any negative professional and expert opinions on the unique technologies and
designs of the newly acquired performance footwear brands and performance claims that may arise and
any negative publicity and media attention associated with this product category that may arise may
constitute significant risk factors in our operations and may negatively impact our business.
We could be adversely affected by the failure of financial institutions to fulfill their
commitments under our Credit Agreement.
Our Third Amended and Restated Credit Agreement (the Credit Agreement), which matures on
January 7, 2016, is provided by a syndicate of financial institutions, with each institution
agreeing severally (and not jointly) to make revolving credit loans to us in an aggregate amount of
up to $530.0 million in accordance with the terms of the Credit Agreement. In addition, the Credit
Agreement provides for up to an additional $150.0 million of optional availability pursuant to a
provision commonly referred to as an accordion feature, subject to the satisfaction of certain
conditions. If one or more of the financial institutions participating in the revolving credit
facility were to default on its obligation to fund its commitment, the portion of the facility
provided by such defaulting financial institution would not be available to us.
32
We may be unable to maintain our credit rating, thus negatively affecting our ability to access
capital and increasing our interest expense.
The credit ratings agencies periodically review our capital structure and the quality and
stability of our earnings. Any negative ratings actions could constrain the capital available to
our company or our industry and could limit our access to long-term funding or cause such access to
be available at a higher borrowing cost for our operations. We are dependent upon our ability to
access capital at rates and on terms we determine to be attractive. If our ability to access
capital becomes constrained, our interest costs will likely increase, which could adversely affect
our financial condition and results of operations.
We are subject to periodic litigation and other regulatory proceedings.
We are a defendant from time to time in lawsuits and regulatory actions (including
environmental matters) relating to our business and to our past operations. Due to the inherent
uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate
outcome of any such proceedings. An unfavorable outcome could have a material adverse impact on our
business, financial condition and results of operations. In addition, regardless of the outcome of
any litigation or regulatory proceedings, such proceedings are expensive and will require that we
devote substantial resources and executive time to defend the Company. See Item 3, Legal
Proceedings, in our 2010 Annual Report, incorporated by reference into this prospectus, for further
discussion of pending matters.
We are subject to rising insurance costs.
We self-insure a significant portion of our expected losses under our workers compensation,
employment practices, health, disability, cyber risk, general liability, automobile and property
programs, among others. The liabilities associated with the risks that are retained by us are
estimated by considering our historical claims experience and data from actuarial sources. The
estimated accruals for these liabilities could be affected if claims differ from the assumptions
used and historical trends. Unanticipated changes in the estimates underlying our reserves for
these losses, such as claims experience, inflation and regulatory changes, could have a material
adverse effect on our financial condition and results of operations.
We are subject to legislative or regulatory initiatives related to global warming/climate change
concerns, which could negatively affect our business.
There has been an increasing focus and continuous debate on global climate change, including
increased attention from regulatory agencies and legislative bodies globally. This increased focus
may lead to new initiatives directed at regulating an unspecified array of environmental matters.
Legislative, regulatory or other efforts globally to combat climate change could have negative
implications, including, but not limited to, future tax increases, increased costs of
transportation and utilities and other cost increases imposed on foreign sources of production, all
of which could decrease our operating profits. We are unable to predict the potential effects that
any such future environmental initiatives may have on our business.
33
THE TRANSACTIONS
The Tender Offer and Subsequent Redemption of the 83/4% Notes
We have used a portion of the net proceeds of the original notes to fund the repurchase of all
of our existing 83/4% Notes, of which approximately $150 million principal amount was outstanding
prior to the launch of the Tender Offer.
In the Tender Offer, we paid $1,003.75 per $1,000 principal amount of the $99,218,000
aggregate principal amount of the 83/4% Notes that were validly tendered at or prior to 5:00 p.m.,
New York City time, on May 10, 2011 (the Consent Payment Deadline), which included the consent
payment of $10.00 per $1,000 principal amount of such notes, plus accrued and unpaid interest up to
but not including the date of purchase. On June 10, 2011, we redeemed the remaining $50,782,000
million aggregate principal amount 83/4% Notes that were not tendered and accepted as part of the
Tender Offer.
The Offering of the Original Notes and the Exchange Offer
In connection with the Tender Offer and subsequent redemption of the 83/4% Notes described
above, we completed the private placement of $200 million of our 7⅛% Senior Notes due 2019 on May
11, 2011. The original notes are, and the exchange notes we are offering in the exchange offer will
be, initially guaranteed by each of our subsidiaries that is an obligor or guarantor under our
existing revolving credit facility. Simultaneously with the private placement of the original
notes, the subsidiary guarantors and Brown Shoe entered into a registration rights agreement on May
11, 2011 with the initial purchasers of the original notes. Under the registration rights
agreement, we were obligated to file the registration statement (of which this prospectus is a
part) on or before August 9, 2011, use our commercially reasonable efforts to cause such
registration statement to become effective no later than November 7, 2011, and, when such
registration statement is effective, deliver this prospectus to the holders of the original notes.
We must use our commercially reasonable efforts to complete the exchange offer on or before the
date that is 30 business days after the target effective date of such registration statement. If we
do not meet our obligations under the registration statement, we must pay liquidated damages to the
holders of the original notes until we have cured our default. Pursuant to the exchange offer, you
may exchange your original notes for exchange notes, which have substantially the same terms as the
original notes. You should read the discussion under the heading Prospectus SummarySummary of
Terms of Exchange Notes and Description of the Exchange Notes for further information regarding
the exchange notes.
34
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. Because the exchange notes have
substantially identical terms as the original notes, the issuance of the exchange notes will not
result in any increase in our indebtedness. The exchange offer is intended to satisfy our
obligations under the registration rights agreement. Gross proceeds from the offering of the
original notes were approximately $193.7 million, after deducting the initial purchasers discount
and certain offering expenses. We have used a portion of the net proceeds of the offering of the
original notes to fund the repurchase, repayment or other discharge of all of our $150 million in
principal amount 83/4% Notes. We have used the remaining net proceeds from the offering of the
original notes for general corporate purposes, including to repay amounts outstanding under our
existing revolving credit facility.
35
CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of April
30, 2011 (i) on an actual basis and (ii) on an adjusted basis to give effect, as of such date, to
the offering of the original notes and the application of the net proceeds of the offering of the
original notes to repay all $150.0 million principal amount of our outstanding 83/4% Notes. This
information should be read in conjunction with Brown Shoes audited consolidated financial
statements and notes thereto included in our 2010 Annual Report, which is incorporated by reference
into this prospectus.
|
|
|
|
|
|
|
|
|
|
|
April 30, 2011 |
|
|
|
|
|
|
|
Pro Forma, |
|
|
|
Actual |
|
|
As Adjusted |
|
|
|
(dollars in millions) |
|
Cash and cash equivalents |
|
$ |
54.2 |
|
|
$ |
54.2 |
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
|
|
|
Existing revolving credit agreement |
|
$ |
288.0 |
|
|
$ |
244.7 |
|
Existing 83/4% Notes due 2012 |
|
|
150.0 |
|
|
|
|
|
7⅛% Senior Notes due 2019 |
|
|
|
|
|
|
198.5 |
|
|
|
|
|
|
|
|
Total debt |
|
|
438.0 |
|
|
|
443.2 |
|
Total shareholders equity |
|
|
419.8 |
|
|
|
419.2 |
(1) |
|
|
|
|
|
|
|
Total capitalization |
|
$ |
857.8 |
|
|
$ |
862.4 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects the following charges in connection with the repayment
of our existing 83/4% Notes: i) a $0.4 million charge, net of $0.2
million tax benefit, related to the write-off of deferred
financing costs and ii) a $0.2 million charge, net of $0.2
million tax benefit, related to the tender premium incurred.
Excludes the impact of call premium that would have been paid as
of April 30, 2011 if Notes had been redeemed on that date and any
other debt retirement charges in connection with the repayment of
our existing 83/4% Notes. |
36
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges and for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended |
|
Fiscal Quarter Ended |
|
|
February 3, |
|
February 2, |
|
January 31, |
|
January 30, |
|
January 29, |
|
May 1, |
|
April 30, |
|
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
2010 |
|
2011 |
Ratio of earnings
to fixed
charges(1) |
|
|
3.30x |
|
|
|
3.09x |
|
|
|
|
|
|
|
1.22x |
|
|
|
2.09x |
|
|
|
2.39x |
|
|
|
1.45x |
|
|
|
|
(1) |
|
For purposes of calculating the ratio of earnings to fixed charges, earnings consist of
income (loss) before income taxes and fixed charges, and fixed charges consist of interest expense,
capitalized interest, amortization of debt issuance costs and the portion of operating lease
rentals deemed representative of the interest factor. In the fiscal year ended January 31, 2009,
earnings were insufficient to cover fixed charges by $188.8 million. |
37
DESCRIPTION OF CERTAIN INDEBTEDNESS
Existing Revolving Credit Agreement
General
On January 7, 2011, we and certain of our subsidiaries (the Loan Parties) entered into a
Third Amended and Restated Credit Agreement (the Credit Agreement). The Credit Agreement replaced
the Second Amended and Restated Credit Agreement, dated as of January 21, 2009 (the Former Credit
Agreement), which was scheduled to mature on January 21, 2014. The Credit Agreement now matures on
January 7, 2016. As of the end of fiscal year 2010, and prior to the amendment and restatement, the
Credit Agreement provided for revolving credit in an aggregate amount of up to $380.0 million,
subject to the calculated borrowing base restrictions, and may be increased at the Companys option
by (a) up to $150.0 million from time to time during the term of the Credit Agreement (the general
purpose accordion feature) and (b) an additional $150.0 million prior to February 28, 2011 (the
designated event accordion feature), in both instances subject to the satisfaction of certain
conditions and the willingness of existing or new lenders to assume the increased commitment.
Borrowing availability under the Credit Agreement is limited to the lesser of the total commitments
and the borrowing base, which is based on stated percentages of the sum of eligible accounts
receivable and inventory, as defined, less applicable reserves. Under the Credit Agreement, the
Loan Parties obligations are secured by a first priority security interest in all accounts
receivable, inventory and certain other collateral.
At April 30, 2011, we had $288.0 million in borrowings outstanding and $8.4 million in letters
of credit outstanding under the Credit Agreement. Total additional borrowing availability was
$212.8 million at April 30, 2011.
Effective February 17, 2011, the Loan Parties exercised the $150.0 million designated event
accordion feature to fund the acquisition of ASG, increasing the aggregate amount available under
the Credit Agreement from $380.0 million to $530.0 million. The Credit Agreement still provides for
access to an additional $150.0 million of optional availability pursuant to the general purpose
accordion feature, subject to satisfaction of certain conditions and the willingness of existing or
new lenders to assume the increased commitment.
Brown Shoe Company, Inc. is the lead borrower and the following subsidiaries are each
co-borrowers under our existing revolving credit agreement: Sidney Rich Associates, Inc., Brown
Group Retail, Inc., Brown Shoe International Corp., Buster Brown & Co., Bennett Footwear Group LLC,
Shoes.com, Inc., Edelman Shoe, Inc., ASG and The Basketball Marketing Company, Inc. Our Canadian
subsidiary, Brown Shoe Company of Canada Ltd (our Canadian subsidiary), guarantees the
obligations of us and the co-borrowers under the Credit Agreement.
Interest
Interest on borrowings is at variable rates based on the London Inter-Bank Offered Rate
(LIBOR) or the prime rate, as defined in the Credit Agreement, plus a spread. The interest rate
and fees for letters of credit varies based upon the level of excess availability under the Credit
Agreement. There is an unused line fee payable on the unused portion under the facility and a
letter of credit fee payable on the outstanding face amount under letters of credit.
Maturity
38
Our Credit Agreement matures on January 7, 2016.
Security and Guarantees
Our and the co-borrower subsidiaries obligations under our Credit Agreement are guaranteed by
Brown Shoe Company, Inc., each of the co-borrowers, and our Canadian subsidiary. The obligations of
Brown Shoe Company, Inc. and of the co-borrowers and guarantors under our existing revolving credit
agreement are secured by a first priority security interest in all of their respective accounts
receivable, inventory and certain other collateral (including cash), including all proceeds of such
collateral.
Covenants
The Credit Agreement limits our ability to incur additional indebtedness, create liens, make
investments or specified payments, give guarantees, pay dividends, make capital expenditures and
merge or acquire or sell assets. In addition, certain additional covenants would be triggered if
excess availability were to fall below specified levels, including fixed charge coverage ratio
requirements. Furthermore, if excess availability falls below the greater of (i) 15.0% of the
lesser of (x) the borrowing base or (y) the total commitments and (ii) $35.0 million for three
consecutive business days, or an event of default occurs, the lenders may assume dominion and
control over our cash (a cash dominion event) until such event of default is cured or waived or
the excess availability exceeds such amount for 30 consecutive days.
Events of Default
The Credit Agreement contains customary events of default including, without limitation,
payment defaults, breaches of representations and warranties, covenant defaults, cross-defaults to
other material indebtedness, certain events of bankruptcy and insolvency, judgment defaults in
excess of a certain threshold, the failure of any guaranty or security document supporting the
agreement to be in full force and effect and a the occurrence of change of control. In addition, if
the excess availability falls below the greater of (i) 12.5% of the lesser of (x) the borrowing
base or (y) the total commitments and (ii) $35.0 million and the fixed charge coverage ratio is
less than 1.0 to 1.0, we would be in default under the Credit Agreement. The Credit Agreement also
contains certain other covenants and restrictions. We were in compliance with all covenants and
restrictions under the Credit Agreement as of April 30, 2011.
39
THE EXCHANGE OFFER
Purpose of the Exchange Offer
Simultaneously with the sale of the original notes, we entered into a registration rights
agreement with the initial purchasers of the original notes Merrill Lynch, Pierce, Fenner &
Smith Incorporated and J.P. Morgan Securities LLC. Under the registration rights agreement, we
agreed, among other things, to:
|
|
|
file a registration statement relating to a registered exchange offer for the original
notes with the SEC no later than 90 days after the date of the issuance of the original
notes; |
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|
|
use our commercially reasonable efforts to cause the SEC to declare the registration
statement effective under the Securities Act no later than 180 days after the date of the
issuance of the original notes; and |
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|
commence and use our commercially reasonable efforts to consummate the exchange offer no
later than the 30th business day after the registration statement was declared effective by
the SEC. |
We are conducting the exchange offer to satisfy our obligations under the registration rights
agreement. If we fail to meet certain specified deadlines under the registration rights agreement,
we will be obligated to pay liquidated damages to the holders of the original notes. A copy of the
registration rights agreement has been filed with the SEC as Exhibit 10.1 to our Current Report on
Form 8-K dated May 11, 2011 and filed on May 13, 2011, and is incorporated by reference as an
exhibit to the registration statement of which this prospectus is a part.
The form and terms of the exchange notes are the same as the form and terms of the original
notes, except that the exchange notes:
|
|
|
will be registered under the Securities Act; |
|
|
|
|
will not bear restrictive legends restricting their transfer under the Securities Act; |
|
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|
will not be entitled to the registration rights that apply to the original notes; and |
|
|
|
|
will not contain provisions relating to liquidated damages in connection with the
original notes under circumstances related to the timing of the exchange offer. |
The exchange offer is not extended to original note holders in any jurisdiction where the
exchange offer does not comply with the securities or blue sky laws of that jurisdiction.
Terms of the Exchange Offer
We are offering to exchange up to $200,000,000 aggregate principal amount of exchange notes
for a like aggregate principal amount of original notes. The original notes must be tendered
properly in accordance with the conditions set forth in this prospectus and the accompanying letter
of transmittal on or prior to the expiration date and not withdrawn as permitted below. In exchange
for original notes properly tendered and accepted, we will issue a like total principal amount of
up to $200,000,000 in exchange notes. This prospectus, together with the letter of transmittal, is
first being sent on or about , 2011, to all holders of original notes known to us. Our
obligation to accept original notes for exchange in the exchange offer is subject to the conditions
described below under the heading Conditions to the Exchange Offer. The exchange offer is not
conditioned upon holders tendering a minimum principal amount of original notes. As of the date of
this prospectus, $200,000,000 aggregate principal amount of original notes are outstanding.
Original notes tendered in the exchange offer must be in denominations of the principal amount
of $2,000 and any integral multiple of $1,000 in excess thereof.
Holders of the original notes do not have any appraisal or dissenters rights in connection
with the exchange offer. If you do not tender your original notes or if you tender original notes
that we do not
40
accept, your original notes will remain outstanding. Any original notes will be entitled to
the benefits of the indenture but will not be entitled to any further registration rights under the
registration rights agreement, except under limited circumstances. Existing transfer restrictions
would continue to apply to such original notes. See Risk FactorsThere are significant
consequences if you fail to exchange your original notes for more information regarding original
notes outstanding after the exchange offer.
After the expiration date, we will return to the holder any tendered original notes that we
did not accept for exchange.
None of us, our board of directors or our management recommends that you tender or not tender
original notes in the exchange offer or has authorized anyone to make any recommendation. You must
decide whether to tender in the exchange offer and, if you decide to tender, the aggregate amount
of original notes to tender.
The expiration date is 5:00 p.m., New York City time, on , 2011, or such later date and
time to which we extend the exchange offer.
We have the right, in accordance with applicable law, at any time:
|
|
|
to delay the acceptance of the original notes; |
|
|
|
|
to terminate the exchange offer and not accept any original notes for exchange if we
determine that any of the conditions to the exchange offer have not occurred or have not
been satisfied; |
|
|
|
|
to extend the expiration date of the exchange offer and retain all original notes
tendered in the exchange offer other than those notes properly withdrawn; and |
|
|
|
|
to waive any condition or amend the terms of the exchange offer in any manner. |
If we materially amend the exchange offer, we will as promptly as practicable distribute a
prospectus supplement to the holders of the original notes disclosing the change and extend the
exchange offer.
If we exercise any of the rights listed above, we will as promptly as practicable give oral or
written notice of the action to the exchange agent and will make a public announcement of such
action. In the case of an extension, an announcement will be made no later than 9:00 a.m., New York
City time on the next business day after the previously scheduled expiration date.
Acceptance of Original Notes for Exchange and Issuance of Original Notes
As promptly as practicable after the expiration date, we will accept all original notes
validly tendered and not withdrawn, and we will issue exchange notes registered under the
Securities Act to the exchange agent. The exchange agent might not deliver the exchange notes to
all tendering holders at the same time. The timing of delivery depends upon when the exchange agent
receives and processes the required documents.
We will be deemed to have exchanged original notes validly tendered and not withdrawn when we
give oral or written notice to the exchange agent of our acceptance of the tendered original notes,
with written confirmation of any oral notice to be given promptly thereafter. The exchange agent is
our agent for receiving tenders of original notes, letters of transmittal and related documents.
In tendering original notes, you must warrant in the letter of transmittal or in an agents
message (described below) that:
|
|
|
you have full power and authority to tender, exchange, sell, assign and transfer
original notes; |
|
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|
|
we will acquire good, marketable and unencumbered title to the tendered original notes,
free and clear of all liens, restrictions, charges and other encumbrances; and |
|
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|
|
the original notes tendered for exchange are not subject to any adverse claims or
proxies. |
41
You also must warrant and agree that you will, upon request, execute and deliver any
additional documents requested by us or the exchange agent to complete the exchange, sale,
assignment and transfer of the original notes.
Procedures for Tendering Original Notes
Valid Tender
When the holder of original notes tenders, and we accept, original notes for exchange, a
binding agreement between us, on the one hand, and the tendering holder, on the other hand, is
created, subject to the terms and conditions set forth in this prospectus and the accompanying
letter of transmittal. Except as set forth below, a holder of original notes who wishes to tender
original notes for exchange must, on or prior to the expiration date:
|
|
|
transmit a properly completed and duly executed letter of transmittal, including all
other documents required by such letter of transmittal (including original notes), to the
exchange agent, Wells Fargo Bank, National Association at the address set forth below under
the heading Exchange Agent; |
|
|
|
|
if original notes are tendered pursuant to the book-entry procedures set forth below,
the tendering holder must deliver a completed and duly executed letter of transmittal or
arrange with DTC to cause an agents message to be transmitted with the required
information (including a book-entry confirmation), to the exchange agent at the address set
forth below under the heading Exchange Agent, or |
|
|
|
|
comply with the provisions set forth below under Guaranteed Delivery. |
In addition, on or prior to the expiration date:
|
|
|
the exchange agent must receive the certificates for the original notes and the letter
of transmittal; |
|
|
|
|
the exchange agent must receive a timely confirmation of the book-entry transfer of the
original notes being tendered into the exchange agents account at DTC, along with the
letter of transmittal or an agents message; or |
|
|
|
|
the holder must comply with the guaranteed delivery procedures described below. |
The letter of transmittal or agents message may be delivered by mail, facsimile, hand
delivery or overnight carrier, to the exchange agent.
The term agents message means a message transmitted to the exchange agent by DTC which
states that DTC has received an express acknowledgment that the tendering holder agrees to be bound
by the letter of transmittal and that we may enforce the letter of transmittal against such holder.
If you beneficially own original notes and those notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee or custodian and you wish to tender your
original notes in the exchange offer, you should contact the registered holder as soon as possible
and instruct it to tender the original notes on your behalf and comply with the instructions set
forth in this prospectus and the letter of transmittal.
If you tender fewer than all of your original notes, you should fill in the amount of notes
tendered in the appropriate box on the letter of transmittal. If you do not indicate the amount
tendered in the appropriate box, we will assume you are tendering all original notes that you hold.
The method of delivery of the certificates for the original notes, the letter of transmittal
and all other required documents is at the election and sole risk of the holders. If delivery is by
mail, we recommend registered mail with return receipt requested, properly insured, or overnight
delivery service. In all cases, you should allow sufficient time to assure timely delivery. No
letters of
42
transmittal or original notes should be sent directly to us. Delivery is complete when the
exchange agent actually receives the items to be delivered. Delivery of documents to DTC in
accordance with DTCs procedures does not constitute delivery to the exchange agent.
Signature Guarantees
Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be
guaranteed unless the original notes surrendered for exchange are tendered:
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by a registered holder of original notes who has not completed the box entitled Special
Issuance Instructions or Special Delivery Instructions on the letter of transmittal; or |
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|
for the account of an eligible institution. |
An eligible institution is a firm or other entity which is identified as an Eligible
Guarantor Institution in Rule 17Ad-15 under the Exchange Act, including:
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a bank; |
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|
a broker, dealer, municipal securities broker or dealer or government securities broker
or dealer; |
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a credit union; |
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a national securities exchange, registered securities association or clearing agency; or |
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|
a savings association. |
If signatures on a letter of transmittal or notice of withdrawal are required to be
guaranteed, the guarantor must be an eligible institution.
If original notes are registered in the name of a person other than the signer of the letter
of transmittal, the original notes surrendered for exchange must be endorsed or accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form as determined by us
in our sole discretion, duly executed by the registered holder with the holders signature
guaranteed by an eligible institution.
Book-Entry Transfers
For tenders by book-entry transfer of original notes cleared through DTC, the exchange agent
will make a request to establish an account at DTC for purposes of the exchange offer. Any
financial institution that is a DTC participant may make book-entry delivery of original notes by
causing DTC to transfer the original notes into the exchange agents account at DTC in accordance
with DTCs procedures for transfer. The exchange agent and DTC have confirmed that any financial
institution that is a participant in DTC may use the Automated Tender Offer Program, or ATOP,
procedures to tender original notes. Accordingly, any participant in DTC may make book-entry
delivery of original notes by causing DTC to transfer those original notes into the exchange
agents account in accordance with its ATOP procedures for transfer.
Notwithstanding the ability of holders of original notes to effect delivery of original notes
through book-entry transfer at DTC, either:
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|
the letter of transmittal or a facsimile thereof, or an agents message in lieu of the
letter of transmittal, with any required signature guarantees and any other required
documents must be transmitted to and received by the exchange agent prior to the expiration
date at the address given below under Exchange Agent; or |
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the guaranteed delivery procedures described below must be complied with. |
43
Guaranteed Delivery
If a holder wants to tender original notes in the exchange offer and (1) the certificates for
the original notes are not immediately available or all required documents are unlikely to reach
the exchange agent on or prior to the expiration date, or (2) a book-entry transfer cannot be
completed on a timely basis, the original notes may be tendered if the holder complies with the
following guaranteed delivery procedures:
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the tender is made by or through an eligible institution; |
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|
the eligible institution delivers a properly completed and duly executed notice of
guaranteed delivery, substantially in the form provided, to the exchange agent on or prior
to the expiration date: |
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setting forth the name and address of the holder of the original notes being
tendered and the amount of the original notes being tendered; |
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|
stating that the tender is being made; and |
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|
guaranteeing that, within three (3) New York Stock Exchange trading days after
the date of execution of the notice of guaranteed delivery, the certificates for all
physically tendered original notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, together with a properly completed and duly executed
letter of transmittal, or an agents message, with any required signature guarantees
and any other documents required by the letter of transmittal, will be deposited by the
eligible institution with the exchange agent; and |
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the exchange agent receives the certificates for the original notes, or a confirmation
of book-entry transfer, and a properly completed and duly executed letter of transmittal,
or an agents message in lieu thereof, with any required signature guarantees and any other
documents required by the letter of transmittal within three (3) New York Stock Exchange
trading days after the notice of guaranteed delivery is executed for all such tendered
original notes. |
You may deliver the notice of guaranteed delivery by hand, facsimile, mail or overnight
delivery to the exchange agent and you must include a guarantee by an eligible institution in the
form described above in such notice.
Our acceptance of properly tendered original notes is a binding agreement between the
tendering holder and us upon the terms and subject to the conditions of the exchange offer.
Determination of Validity
We, in our sole discretion, will resolve all questions regarding the form of documents,
validity, eligibility, including time of receipt, and acceptance for exchange of any tendered
original notes. Our determination of these questions as well as our interpretation of the terms and
conditions of the exchange offer, including the letter of transmittal, will be final and binding on
all parties. A tender of original notes is invalid until all defects and irregularities have been
cured or waived. Holders must cure any defects and irregularities in connection with tenders of
original notes for exchange within such reasonable period of time as we will determine, unless we
waive the defects or irregularities. Neither us, any of our affiliates or assigns, the exchange
agent nor any other person is under any obligation to give notice of any defects or irregularities
in tenders nor will they be liable for failing to give any such notice.
We reserve the absolute right, in our sole and absolute discretion:
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to reject any tenders determined to be in improper form or unlawful; |
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to waive any of the conditions of the exchange offer; and |
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to waive any condition or irregularity in the tender of original notes by any holder,
whether or not we waive similar conditions or irregularities in the case of other holders. |
44
If any letter of transmittal, endorsement, bond power, power of attorney, or any other
document required by the letter of transmittal is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, that person must indicate such capacity when signing. In addition, unless
waived by us, the person must submit proper evidence satisfactory to us, in our sole discretion, of
his or her authority to so act.
Resales of Exchange Notes
Based on interpretive letters issued by the SEC staff to third parties in transactions similar
to the exchange offer, we believe that a holder of exchange notes, other than a broker-dealer, may
offer exchange notes for resale, resell and otherwise transfer the exchange notes without
delivering a prospectus to prospective purchasers, if the holder acquired the exchange notes in the
ordinary course of business, has no intention of engaging in a distribution (as defined under the
Securities Act) of the exchange notes and is not an affiliate (as defined under the Securities
Act) of Brown Shoe. We will not seek our own interpretive letter. As a result, we cannot assure you
that the staff will take the same position on this exchange offer as it did in interpretive letters
to other parties in similar transactions.
By tendering original notes, the holder, other than participating broker-dealers, as defined
below, of those original notes will represent to us that, among other things:
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the exchange notes acquired in the exchange offer are being obtained in the ordinary
course of business of the person receiving the exchange notes, whether or not that person
is the holder; |
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neither the holder nor any other person receiving the exchange notes is engaged in,
intends to engage in or has an arrangement or understanding with any person to participate
in a distribution (as defined under the Securities Act) of the exchange notes; and |
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neither the holder nor any other person receiving the exchange notes is an affiliate
(as defined under the Securities Act) of Brown Shoe. |
If any holder or any such other person is an affiliate of Brown Shoe or is engaged in,
intends to engage in or has an arrangement or understanding with any person to participate in a
distribution of the exchange notes, such holder or other person:
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may not rely on the applicable interpretations of the staff of the SEC referred to
above; and |
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must comply with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. |
Each broker-dealer that receives exchange notes for its own account in exchange for original
notes must represent that the original notes to be exchanged for the exchange notes were acquired
by it as a result of market-making activities or other trading activities and acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in connection with any
offer to resell, resale or other retransfer of the exchange notes pursuant to the exchange offer.
Any such broker-dealer is referred to as a participating broker-dealer. However, by so
acknowledging and by delivering a prospectus, the participating broker-dealer will not be deemed to
admit that it is an underwriter (as defined under the Securities Act). If a broker-dealer
acquired original notes as a result of market-making or other trading activities, it may use this
prospectus, as amended or supplemented, in connection with offers to resell, resales or retransfers
of exchange notes received in exchange for the original notes pursuant to the exchange offer. We
have agreed that, during the period ending 180 days after the consummation of the exchange offer,
subject to extension in limited circumstances, we will use all commercially reasonable efforts to
keep the exchange offer registration statement effective and make this prospectus available to any
broker-dealer for use in connection with any such resale. See Plan of Distribution for a
discussion of the exchange and resale obligations of broker-dealers in connection with the exchange
offer.
45
Withdrawal Rights
You can withdraw tenders of original notes at any time prior to 5:00 p.m., New York City time,
on the expiration date.
For a withdrawal to be effective, you must deliver a written notice of withdrawal to the
exchange agent. The notice of withdrawal must:
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specify the name of the person tendering the original notes to be withdrawn; |
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identify the original notes to be withdrawn, including the total principal amount of
original notes to be withdrawn; |
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where certificates for original notes are transmitted, list the name of the registered
holder of the original notes if different from the person withdrawing the original notes; |
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contain a statement that the holder is withdrawing his election to have the original
notes exchanged; and |
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be signed by the holder in the same manner as the original signature on the letter of
transmittal by which the original notes were tendered, including any required signature
guarantees, or be accompanied by documents of transfer to have the trustee with respect to
the original notes register the transfer of the original notes in the name of the person
withdrawing the tender. |
If you delivered or otherwise identified pursuant to the guaranteed delivery procedures
original notes to the exchange agent, you must submit the serial numbers of the original notes to
be withdrawn and the signature on the notice of withdrawal must be guaranteed by an eligible
institution, except in the case of original notes tendered for the account of an eligible
institution. If you tendered original notes as a book-entry transfer, the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the withdrawn original notes
and you must deliver the notice of withdrawal to the exchange agent. You may not rescind
withdrawals of tender; however, original notes properly withdrawn may again be tendered at any time
on or prior to the expiration date.
We will determine all questions regarding the form of withdrawal, validity, eligibility,
including time of receipt, and acceptance of withdrawal notices. Our determination of these
questions as well as our interpretation of the terms and conditions of the exchange offer
(including the letter of transmittal) will be final and binding on all parties. Neither us, any of
our affiliates or assigns, the exchange agent nor any other person is under any obligation to give
notice of any irregularities in any notice of withdrawal, nor will they be liable for failing to
give any such notice.
In the case of original notes tendered by book-entry transfer through DTC, the original notes
withdrawn or not exchanged will be credited to an account maintained with DTC. Withdrawn original
notes will be returned to the holder after withdrawal. The original notes will be returned or
credited to the account maintained with DTC as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Any original notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the holder thereof without
cost to the holder.
Properly withdrawn original notes may again be tendered by following one of the procedures
described under Procedures for Tendering Original Notes above at any time prior to 5:00 p.m.,
New York City time, on the expiration date.
Conditions to the Exchange Offer
Notwithstanding any other provision of the exchange offer, we are not required to accept for
exchange, or to issue exchange notes in exchange for, any original notes, and we may terminate or
amend the exchange offer, if at any time prior to 5:00 p.m., New York City time, on the expiration
date, we determine that the exchange offer violates applicable law or SEC policy.
46
The foregoing conditions are for our sole benefit, and we may assert them regardless of the
circumstances giving rise to any such condition, or we may waive the conditions, completely or
partially, whenever or as many times as we choose, in our reasonable discretion. The foregoing
rights are not deemed waived because we fail to exercise them, but continue in effect, and we may
still assert them whenever or as many times as we choose. If we determine that a waiver of
conditions materially changes the exchange offer, the prospectus will be amended or supplemented,
and the exchange offer extended, if appropriate, as described under Terms of the Exchange
Offer.
In addition, at a time when any stop order is threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or with respect to the
qualification of the indenture under the Trust Indenture Act of 1939, as amended (the Trust
Indenture Act), we will not accept for exchange any original notes tendered, and no exchange notes
will be issued in exchange for any such original notes.
If we terminate or suspend the exchange offer based on a determination that the exchange offer
violates applicable law or SEC policy, the registration rights agreement requires that we, as soon
as practicable after such determination, use our commercially reasonable efforts to cause a shelf
registration statement covering the resale of the original notes to be filed and declared effective
by the SEC.
Exchange Agent
We appointed Wells Fargo Bank, National Association as exchange agent for the exchange offer.
You should direct questions and requests for assistance, requests for additional copies of this
prospectus or of the letter of transmittal and requests for notices of guaranteed delivery to the
exchange agent at the address and phone number as follows:
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Registered & Certified Mail:
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Regular Mail or Courier:
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In Person by Hand Only: |
Wells Fargo Bank, National
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Wells Fargo Bank, National
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Wells Fargo Bank, National |
Association
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Association
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Association |
Corporate Trust Operations
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Corporate Trust Operations
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Corporate Trust Services |
MAC N9303-121
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MAC N9303-121
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Northstar East Building |
P.O. Box 1517
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6th St & Marquette Avenue
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12th Floor |
Minneapolis, MN 55480
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Minneapolis, MN 55479
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608 Second Avenue South
Minneapolis, MN 55402 |
Or By Facsimile Transmission: (612) 667-6282
Attention: Corporate Trust Operations
Telephone: (800) 344-5128
If you deliver letters of transmittal and any other required documents to an address or
facsimile number other than those listed above, your tender is invalid.
Fees and Expenses
The registration rights agreement provides that we will bear all expenses in connection with
the performance of our obligations relating to the registration of the exchange notes and the
conduct of the exchange offer. These expenses include registration and filing fees, accounting and
legal fees and printing costs, among others. We will pay the exchange agent reasonable and
customary fees for its services and reasonable out-of-pocket expenses. We will also reimburse
brokerage houses and other custodians, nominees and fiduciaries for customary mailing and handling
expenses incurred by them in forwarding this prospectus and related documents to their clients that
are holders of original notes and for handling or tendering for such clients.
We have not retained any dealer-manager in connection with the exchange offer and will not pay
any fee or commission to any broker, dealer, nominee or other person, other than the exchange
agent, for soliciting tenders of original notes pursuant to the exchange offer.
47
Transfer Taxes
Holders who tender their original notes for exchange will not be obligated to pay any transfer
taxes in connection with the exchange. If, however, exchange notes issued in the exchange offer are
to be delivered to, or are to be issued in the name of, any person other than the holder of the
original notes tendered, or if a transfer tax is imposed for any reason other than the exchange of
original notes in connection with the exchange offer, then the holder must pay any such transfer
taxes, whether imposed on the registered holder or on any other person. If satisfactory evidence of
payment of, or exemption from, such taxes is not submitted with the letter of transmittal, the
amount of such transfer taxes will be billed directly to the tendering holder.
Consequences of Failure to Exchange Original Notes
Holders who desire to tender their original notes in exchange for exchange notes should allow
sufficient time to ensure timely delivery. Neither the exchange agent nor Brown Shoe is under any
duty to give notification of defects or irregularities with respect to the tenders of notes for
exchange.
Original notes that are not tendered or are tendered but not accepted will, following the
consummation of the exchange offer, continue to be subject to the provisions in the indenture
regarding the transfer and exchange of the original notes and the existing restrictions on transfer
set forth in the legend on the original notes and in the confidential offering memorandum dated
April 27, 2011 relating to the original notes. Except in limited circumstances with respect to
specific types of holders of original notes, we will have no further obligation to provide for the
registration under the Securities Act of such original notes. In general, original notes, unless
registered under the Securities Act, may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable state securities laws.
We do not currently anticipate that we will take any action to register the original notes under
the Securities Act or under any state securities laws.
Upon completion of the exchange offer, holders of the original notes will not be entitled to
any further registration rights under the registration rights agreement, except under limited
circumstances. Holders of the exchange notes and any original notes which remain outstanding after
consummation of the exchange offer will vote together as a single class for purposes of determining
whether holders of the requisite percentage of the class have taken certain actions or exercised
certain rights under the indenture.
Consequences of Exchanging Original Notes
Under existing interpretations of the Securities Act by the SECs staff contained in several
no-action letters to third parties, we believe that the exchange notes may be offered for resale,
resold or otherwise transferred by holders after the exchange offer other than by any holder who is
one of our affiliates (as defined in Rule 405 under the Securities Act). Such notes may be
offered for resale, resold or otherwise transferred without compliance with the registration and
prospectus delivery provisions of the Securities Act, if:
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such exchange notes are acquired in the ordinary course of such holders business; and |
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such holder, other than broker-dealers, has no arrangement or understanding with any
person to participate in the distribution of the exchange notes. |
However, the SEC has not considered the exchange offer in the context of a no-action letter
and we cannot guarantee that the staff of the SEC would make a similar determination with respect
to the exchange offer as in such other circumstances. Each holder, other than a broker-dealer, must
furnish a written representation, at our request, that:
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it is not an affiliate of Brown Shoe; |
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it is not engaged in, and does not intend to engage in, a distribution of the exchange
notes and has no arrangement or understanding to participate in a distribution of exchange
notes; and |
48
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it is acquiring the exchange notes in the ordinary course of its business. |
Each broker-dealer that receives exchange notes for its own account in exchange for original
notes must acknowledge that such original notes were acquired by such broker-dealer as a result of
market-making or other trading activities and that it will deliver a prospectus in connection with
any resale of such exchange notes. See Plan of Distribution for a discussion of the exchange and
resale obligations of broker-dealers in connection with the exchange offer.
49
DESCRIPTION OF THE EXCHANGE NOTES
The Company issued the original notes, and will issue the exchange notes, under an Indenture
dated as of May 11, 2011 (the Indenture) among itself, the Guarantors and Wells Fargo Bank,
National Association as trustee (the Trustee). The terms of the notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust Indenture Act. The terms
of the exchange notes are the same as the terms of the original notes, except that (i) the exchange
notes will be registered under the Securities Act, (ii) the exchange notes will not bear
restrictive legends restricting their transfer under the Securities Act, (iii) holders of the
exchange notes are not entitled to certain rights under the registration rights agreement and (iv)
the exchange notes will not contain provisions relating to liquidated damages in connection with
the original notes under circumstances related to the timing of the exchange offer.
The following description is a summary of the material provisions of the Indenture. It does
not restate those agreements in their entirety. We urge you to read the Indenture because it, and
not this description, defines your rights as holders of the notes. Anyone who receives this
prospectus may obtain a copy of the Indenture without charge by writing to Brown Shoe Company, Inc.
at 8300 Maryland Avenue, St. Louis, Missouri 63105, Attention: Treasurer.
You can find the definitions of some terms used in this description below under the caption
"Certain Definitions. Some defined terms used in this description but not defined below under
the caption Certain Definitions have the meanings assigned to them in the Indenture. In this
description, the word Company refers only to Brown Shoe Company, Inc. and not to any of its
subsidiaries, and the Notes refers to the exchange notes.
Brief Description of the Notes
The Notes:
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are general unsecured obligations of the Company; |
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are effectively subordinated to all existing and future secured obligations of the
Company, including the obligations of the Company under the Credit Agreement, to the
extent of the assets securing such obligations, and to all existing and future liabilities
of the Companys subsidiaries that are not Guarantors, to the extent of the assets of such
subsidiaries; |
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are pari passu in right of payment with all existing and future unsecured,
unsubordinated obligations of the Company; |
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will rank senior in right of payment to any future unsecured obligations of the
Company that are, by their terms, expressly subordinated in right of payment to the Notes;
and |
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are guaranteed by the Guarantors. |
Assuming our acquisition of ASG, the offering of the original notes, and the Tender Offer and
subsequent redemption of the 83/4% Notes had all been completed as of April 30, 2011:
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the Company would have had $443.2 million of consolidated indebtedness outstanding,
$244.7 million of which would have been secured indebtedness; and |
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the Companys Subsidiaries that are not Guarantors would have had $96.6 million of
liabilities. |
50
As of the date of the Indenture, all of our subsidiaries will be Restricted Subsidiaries.
However, under the circumstances described below under the caption Certain
CovenantsDesignation of Restricted and Unrestricted Subsidiaries, we will be permitted to
designate certain of our subsidiaries as Unrestricted Subsidiaries. Any Unrestricted Subsidiaries
will not be subject to any of the restrictive covenants in the Indenture and will not guarantee the
Notes.
Principal, Maturity and Interest
The Indenture provides for the issuance by the Company of Notes with an unlimited principal
amount, of which $200.0 million will be issued in this exchange offer. The Company may issue
additional notes (the Additional Notes) from time to time after this exchange offer under the
Indenture without the consent of the Holders. Any offering of Additional Notes is subject to the
covenant described below under the caption Certain CovenantsIncurrence of Indebtedness. The
Notes and any Additional Notes subsequently issued under the Indenture would be treated as a single
class for all purposes under the Indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. The Company will issue Notes in denominations of $2,000 and
integral multiples of $1,000 in excess thereof. The Notes will mature on May 15, 2019.
Interest on the Notes will accrue at the rate of 7⅛% per annum and will be payable
semi-annually in arrears on May 15 and November 15, commencing on November 15, 2011. The Company
will make each interest payment to the Holders of record on the immediately preceding May 1 and
November 1.
Interest on the Notes will accrue from the date of original issuance or, if interest has
already been paid, from the date it was most recently paid. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company, the Company will pay all
principal, interest and premium and Additional Interest, if any, on that Holders Notes in
accordance with those instructions. All other payments on Notes will be made at the office or
agency of the Paying Agent and Registrar unless the Company elects to make interest payments by
check mailed to the Holders at their addresses set forth in the register of Holders.
Paying Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar. The Company may change the
Paying Agent or Registrar without prior notice to the Holders, and the Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all purposes.
51
Note Guarantees
The Notes are guaranteed, jointly and severally, by all our Subsidiaries that Incur or
Guarantee Obligations under the Credit Agreement. Each Note Guarantee:
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is a general unsecured obligation of the Guarantor; |
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is effectively subordinated to all existing and future secured obligations of the
Guarantor, including the Guarantee of the Guarantor under the Credit Agreement; |
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is pari passu in right of payment with all existing and future unsecured,
unsubordinated obligations of the Guarantor; and |
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will rank senior in right of payment to any future unsecured obligations of the
Guarantor that are, by their terms, expressly subordinated in right of payment to the
Guarantee. |
The obligations of each Guarantor under its Note Guarantee will be limited as necessary to
prevent that Note Guarantee from constituting a fraudulent conveyance under applicable law. See
Risk FactorsThe guarantees may not be enforceable because of fraudulent conveyance laws.
Assuming our acquisition of ASG, the offering of the original notes, and the Tender Offer and
subsequent redemption of the 83/4% Notes had all been completed as of April 30, 2011, the Guarantors
would have had $244.7 million of indebtedness outstanding (other than guarantees of the Notes), all
of which would have been secured indebtedness.
See Certain CovenantsGuarantees.
Optional Redemption
At any time prior to May 15, 2014 the Company may redeem all or a portion of the Notes, on not
less than 30 nor more than 60 days prior notice, in amounts of $2,000 and integral multiples of
$1,000, at a price equal to the greater of:
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100% of the aggregate principal amount of the Notes to be redeemed, together with
accrued and unpaid interest and Additional Interest, if any, to the date of redemption,
and |
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the sum of the present values of the principal of the Notes being redeemed plus
scheduled payments of interest (not including any portion of such payments of interest
accrued as of the date of redemption) from the date of redemption to May 15, 2014
discounted to the redemption date (assuming the Notes are redeemed on May 15, 2014) on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate, plus 50 basis points, together with accrued and unpaid interest
and Additional Interest, if any, to the date of redemption. |
However, if a redemption date is after an interest record date but on or prior to the
corresponding interest payment date, the semi-annual payment of interest becoming due on such date
shall be payable to a holder of record as of the relevant record date and the redemption price
shall not include such interest payment.
For purposes of calculating the redemption price, the following terms have the meanings set
forth below:
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Adjusted Treasury Rate means, with respect to any redemption date, the rate per annum
equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue,
assuming a price for the Comparable Treasury Issue (expressed as a percentage of the principal
amount) equal to the Comparable Treasury Price for the redemption date.
Comparable Treasury Issue means the U.S. treasury security selected by an Independent
Investment Banker that would be used, at the time of selection and in accordance with customary
financial practice, in pricing issues of corporate debt securities of comparable maturity to
the remaining term of the Notes (assuming the Notes mature on May 15, 2014).
Comparable Treasury Price means either (1) the average of the Reference Treasury Dealer
Quotations for the redemption date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations or (2) if the Company obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all quotations obtained.
Independent Investment Banker means one of the Reference Treasury Dealers that the
Company appoints.
Reference Treasury Dealer means each of Merrill Lynch, Pierce, Fenner & Smith
Incorporated and J.P. Morgan Securities LLC, (and each of their respective successors) and any
other additionally recognized investment banking firm that is a primary U.S. government
securities dealer specified from time to time by the Company.
Reference Treasury Dealer Quotations means, with respect to each Reference Treasury
Dealer and any redemption date, the average of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Company by such Reference Treasury Dealer as of 3:30 p.m., New York time, on the
third business day preceding the redemption date.
In addition, at any time prior to May 15, 2014, the Company may redeem up to 35% of the
aggregate principal amount of Notes issued under the Indenture (including any Additional Notes) at
a redemption price of 107.125% of the principal amount thereof, plus accrued and unpaid interest
and Additional Interest, if any, thereon to the redemption date (subject to the rights of Holders
of record on a record date to receive payments of interest on the relevant interest payment date),
with the net cash proceeds of one or more Equity Offerings; provided that:
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at least 65% of the aggregate principal amount of Notes issued under the Indenture
(including any Additional Notes) remains outstanding immediately after the occurrence of
such redemption (excluding Notes held by the Company or its Subsidiaries); and |
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the redemption must occur within 45 days of the date of the closing of such Equity
Offering. |
On or after May 15, 2014, the Company may redeem all or a part of the Notes upon not less than
30 nor more than 60 days notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Additional Interest, if any, thereon,
to the applicable redemption date (subject to the rights of Holders of record on a record date to
receive payments of interest on the relevant interest payment date), if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
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Year |
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Percentage |
2014 |
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105.344 |
% |
2015 |
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103.563 |
% |
2016 |
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101.781 |
% |
2017 and thereafter |
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100.000 |
% |
If less than all of the Notes are to be redeemed at any time, the Trustee will select
Notes (subject to applicable procedures of DTC if the Notes are Global Notes) for redemption as
follows:
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if the Notes are listed on any national securities exchange, in compliance with the
requirements of such principal national securities exchange; or |
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if the Notes are not so listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate. |
No Notes of $2,000 or less shall be redeemed in part. Notices of redemption shall be mailed by
first class mail at least 30 but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at its registered address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that relates to that Note
shall state the portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion of the original Note will be issued in the name of the
Holder thereof upon cancellation of the original Note (or if the Notes is a Global Note, an
adjustment shall be made to the schedule attached thereto). Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on
Notes or portions of them called for redemption.
Mandatory Redemption; Open Market Purchases
The Company is not required to make mandatory redemption or sinking fund payments with respect
to the Notes. The Company is not prohibited, however, from acquiring Notes by means other than
redemption, whether pursuant to a tender offer, open market transactions or otherwise, assuming
such acquisition does not otherwise violate the terms of the Indenture or any other agreement to
which the Company is a party.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Notes will have the right to require the Company
to repurchase all or any part (equal to $2,000 and integral multiples of $1,000) of that Holders
Notes pursuant to an offer (a Change of Control Offer) on the terms set forth in the Indenture.
In the Change of Control Offer, the Company will offer payment (a Change of Control Payment) in
cash equal to not less than 101% of the aggregate principal amount of Notes repurchased plus
accrued and unpaid interest and Additional Interest, if any, thereon, to the date of repurchase
(the Change of Control Payment Date, which date will be no earlier than the date of such Change
of Control), provided, however, that notwithstanding the occurrence of a Change of Control, the
Company shall not be obligated to purchase the Notes pursuant to this section in the event that it
has mailed the notice to exercise its right to redeem all the Notes under the terms of the section
titled Optional Redemption at any time prior to the requirement to consummate the Change of
Control and redeems the Notes in accordance with such notice.
54
No later than 30 days following any Change of Control, the Company will mail a notice to each
Holder, with a copy to the Trustee, describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified
in such notice, which date will be no earlier than 30 days and no later than 60 days from the date
such notice is mailed, pursuant to the procedures required by the Indenture and described in such
notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict with the Change of
Control provisions of the Indenture, the Company will comply with the applicable securities laws
and regulations and will not be deemed to have breached its obligations under the Change of Control
provisions of the Indenture by virtue of such compliance.
On the Change of Control Payment Date, the Company will, to the extent lawful:
|
(1) |
|
accept for payment all Notes or portions thereof properly tendered pursuant to the
Change of Control Offer; |
|
(2) |
|
deposit with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof so tendered; and |
|
(3) |
|
deliver or cause to be delivered to the Trustee the Notes so accepted together with
an Officers Certificate stating the aggregate principal amount of Notes or portions
thereof being purchased by the Company. |
The Paying Agent will promptly mail or wire transfer to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.
The Company will publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Credit Agreement prohibits the Company from purchasing any Notes unless certain conditions
are satisfied, and also provides that certain change of control events with respect to the Company
would constitute a default under the Credit Agreement. Any future credit agreements or other
similar agreements to which the Company becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or refinance such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Companys failure to purchase tendered Notes would constitute
an Event of Default under the Indenture which would, in turn, constitute a default under such other
agreements.
The provisions described above that require the Company to make a Change of Control Offer
following a Change of Control will be applicable regardless of whether any other provisions of the
Indenture are applicable. Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
55
The Company will not be required to make a Change of Control Offer upon a Change of Control if
a third party makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer
made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the direct or indirect sale,
transfer, conveyance or other disposition of all or substantially all of the properties or assets
of the Company and its Restricted Subsidiaries taken as a whole. Although there is a limited body
of case law interpreting the phrase substantially all, there is no precise established definition
of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, transfer, conveyance or other disposition
of less than all of the assets of the Company and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an
Asset Sale unless:
|
(1) |
|
the Company (or the Restricted Subsidiary, as the case may be) receives consideration
at the time of such Asset Sale at least equal to the Fair Market Value of the assets or
Equity Interests issued or sold or otherwise disposed of; and |
|
(2) |
|
at least 75% of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash, Cash Equivalents or Replacement Assets or a combination
of the foregoing. For purposes of this provision, each of the following shall be deemed to
be cash: |
|
(a) |
|
any liabilities (as shown on the Companys or such Restricted Subsidiarys
most recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities, Indebtedness that is by its terms pari passu with, or
subordinated to, the Notes or any Note Guarantee and liabilities to the extent owed
to the Company or any Affiliate of the Company) that are assumed by the transferee of
any such assets or Equity Interests pursuant to a written assignment and assumption
agreement that releases the Company or such Restricted Subsidiary from further
liability therefor; |
|
|
(b) |
|
any securities, notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash within 180 days after the date of such Asset
Sale (to the extent of the cash received in that conversion); and |
|
|
(c) |
|
any Designated Non-cash Consideration received by the Company or any of its
Restricted Subsidiaries in such Asset Sale having an aggregate Fair Market Value,
taken together with all other Designated Non-cash Consideration received pursuant to
this clause (c) that is at that time outstanding, not to exceed $50.0 million. |
Within 365 days after the receipt of any Net Proceeds from an Asset Sale, the Company may
apply such Net Proceeds at its option:
|
(1) |
|
to repay Indebtedness secured by such assets; |
56
|
(2) |
|
to purchase Replacement Assets (or enter into a binding agreement to purchase such
Replacement Assets; provided that (x) such purchase is consummated within 60 days after
the date of such binding agreement and (y) if such purchase is not consummated within the
period set forth in subclause (x), the Net Proceeds not so applied will be deemed to be
Excess Proceeds (as defined below)); or |
|
(3) |
|
any combination of the foregoing. |
Pending the final application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture.
On the 366th day after an Asset Sale or such earlier date, if any, as the Company determines
not to apply the Net Proceeds relating to such Asset Sale as set forth in preceding paragraph (each
such date being referred as an Excess Proceeds Trigger Date), such aggregate amount of Net
Proceeds that has not been applied on or before the Excess Proceeds Trigger Date as permitted in
the preceding paragraph (Excess Proceeds) will be applied by the Company to make an offer (an
Asset Sale Offer) to all Holders of Notes and all holders of other Indebtedness that is pari
passu with the Notes or any Note Guarantee containing provisions similar to those set forth in the
Indenture with respect to offers to purchase with the proceeds of sales of assets, with a copy to
the Trustee, to purchase the maximum principal amount of Notes and such other pari passu
Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale
Offer will be equal to 100% of the principal amount of the Notes and such other pari passu
Indebtedness plus accrued and unpaid interest and Additional Interest, if any, to the date of
purchase, and will be payable in cash.
The Company may defer the Asset Sale Offer until there are aggregate unutilized Excess
Proceeds equal to or in excess of $25.0 million resulting from one or more Asset Sales, at which
time the entire unutilized amount of Excess Proceeds (not only the amount in excess of $25.0
million) will be applied as provided in the preceding paragraph. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such
other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Notes and such other pari passu Indebtedness will be purchased on a pro rata basis
based on the principal amount of Notes and such other pari passu Indebtedness tendered. Upon
completion of each Asset Sale Offer, the Excess Proceeds subject to such Asset Sale will no longer
be deemed to be Excess Proceeds.
The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict with the Asset Sales
provisions of the Indenture, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the Asset Sale provisions
of the Indenture by virtue of such compliance.
The Credit Agreement prohibits the Company from purchasing any Notes unless certain conditions
are satisfied, and also provides that certain asset sale events with respect to the Company
constitute a default under the Credit Agreement. Any future credit agreements or other similar
agreements to which the Company becomes a party may contain similar restrictions and provisions. In
the event an Asset Sale occurs at a time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not obtain such a
consent or refinance such borrowings, the
57
Company will remain prohibited from purchasing Notes. In such case, the Companys failure to
purchase tendered Notes would constitute an Event of Default under the Indenture which may, in
turn, constitute a default under such other agreements.
Certain Covenants
Limitation of Applicability of Certain Covenants if Notes Rated Investment Grade
Following the first day:
|
(a) |
|
the Notes have been rated Investment Grade; and |
|
(b) |
|
no Default or Event of Default has occurred and is continuing under the indenture, |
then, beginning on that day and continuing until the Reversion Date (as defined below), the
Company and its Restricted Subsidiaries will not be subject to the provisions of the Indenture
summarized under the following headings (collectively, the Suspended Covenants):
Repurchase at the Option of HoldersAsset Sales;
Restricted Payments;
Incurrence of Indebtedness;
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries;
the provisions of clause (3) of the first paragraph of Merger, Consolidation or Sale of
Assets;
Transactions with Affiliates;
Designation of Restricted and Unrestricted Subsidiaries; and
Limitation on Issuances and Sales of Equity Interests in Restricted Subsidiaries.
If at any time the Notes cease to be rated Investment Grade or if a Default or Event of
Default occurs and is continuing, then the Suspended Covenants will thereafter be reinstated as if
such covenants had never been suspended (the Reversion Date) and be applicable pursuant to the
terms of the indenture (including in connection with performing any calculation or assessment to
determine compliance with the terms of the indenture), unless and until the Notes are subsequently
rated Investment Grade and no Default or Event of Default is in existence (in which event the
Suspended Covenants shall no longer be in effect for such time that the Notes continue to be rated
Investment Grade and no Default or Event of Default is in existence); provided, however, that no
Default, Event of Default or breach of any kind shall be deemed to exist under the Indenture, the
Notes or the Note Guarantees with respect to the Suspended Covenants based on, and none of the
Company or any of its Subsidiaries shall bear any liability for, any actions taken or events
occurring during the Suspension Period (as defined below), or any actions taken at any time
pursuant to any contractual obligation arising prior to the Reversion Date, regardless of whether
such actions or events would have been permitted if the applicable Suspended Covenants remained in
effect during such period. The period of time between the date of suspension of the covenants and
the Reversion Date is referred to as the Suspension Period. The Company will promptly notify the
Trustee of the occurrence of any Suspension Period or Reversion Date.
58
On the Reversion Date, all Indebtedness Incurred during the Suspension Period will be
classified to have been Incurred pursuant to the first paragraph of Incurrence of Indebtedness
or one of the clauses set forth in the second paragraph of Incurrence of Indebtedness (to the
extent such Indebtedness would be permitted to be Incurred thereunder as of the Reversion Date and
after giving effect to the Indebtedness Incurred prior to the Suspension Period and outstanding on
the Reinstatement Date). To the extent such Indebtedness would not be so permitted to be Incurred
pursuant to the first and second paragraphs of Incurrence of Indebtedness, such Indebtedness
will be deemed to have been outstanding on the Issue Date, so that it is classified as permitted
under clause (2) of the second paragraph of Incurrence of Indebtedness. Calculations made after
the Reversion Date of the amount available to be made as Restricted Payments under Restricted
Payments will be made as though the covenants described under Restricted Payments had been in
effect since the Issue Date and throughout the Suspension Period. Accordingly, Restricted Payments
made during the Suspension Period will reduce the amount available to be made as Restricted
Payments under paragraph (A) of Restricted Payments. In addition, during the Suspension Period
the Company will not be permitted to designate any Subsidiary as an Unrestricted Subsidiary.
There can be no assurance that the Notes will ever be rated Investment Grade or maintain such
rating if achieved.
Restricted Payments
|
(A) |
|
The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly: |
|
(i) |
|
declare or pay (without duplication) any dividend or make any other payment
or distribution on account of the Companys or any of its Restricted Subsidiaries
Equity Interests (including, without limitation, any payment in connection with any
merger or consolidation involving the Company or any of its Restricted Subsidiaries)
or to the direct or indirect holders of the Companys or any of its Restricted
Subsidiaries Equity Interests in their capacity as such (other than dividends,
payments or distributions (x) payable in Equity Interests (other than Disqualified
Stock) of the Company or (y) to the Company or a Restricted Subsidiary of the
Company); |
|
|
(ii) |
|
purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any Restricted Subsidiary thereof
held by Persons other than the Company or any of its Wholly Owned Restricted
Subsidiaries; |
|
|
(iii) |
|
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to the
Notes or the Note Guarantees, except (a) a payment of interest or principal at the
Stated Maturity thereof or (b) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement of any such Indebtedness in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity, in
each case due within one year of the date of such purchase, repurchase, redemption,
defeasance or other acquisition or retirement; or |
|
|
(iv) |
|
make any Restricted Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as Restricted
Payments), |
unless, at the time of and after giving effect to such Restricted Payment:
59
|
(1) |
|
no Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof; and |
|
|
(2) |
|
the Company would, at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to Incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption Incurrence of
Indebtedness; and |
|
|
(3) |
|
such Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Company and its Restricted Subsidiaries commencing on and after
January 30, 2011 (excluding Restricted Payments permitted by clauses (2), (3), (4), (5),
(6) and (9) of the next succeeding paragraph (B)), is less than the sum, without
duplication, of: |
|
(a) |
|
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) commencing on and after January 30, 2011 to the end of the
Companys most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus |
|
|
(b) |
|
100% of the aggregate net cash proceeds or the Fair Market Value of
property other than cash received by the Company since January 30, 2011 as a
contribution to its common equity capital or from the issue or sale of Equity
Interests (other than Disqualified Stock) of the Company or from the Incurrence of
Indebtedness of the Company that has been converted into or exchanged for such Equity
Interests (other than Equity Interests sold to, or Indebtedness held by, a Subsidiary
of the Company), plus |
|
|
(c) |
|
with respect to Restricted Investments made by the Company and its
Restricted Subsidiaries commencing on and after January 30, 2011, an amount equal to
the net reduction in such Restricted Investments in any Person resulting from
repayments of loans or advances, or other transfers of assets, in each case to the
Company or any Restricted Subsidiary or from the net cash proceeds from the sale of
any such Restricted Investment (except, in each case, to the extent any such payment
or proceeds are included in the calculation of Consolidated Net Income), from the
release of any Guarantee (except to the extent any amounts are paid under such
Guarantee) or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries, not to exceed, in each case, the amount of Restricted Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary commencing on and after January 30, 2011. |
|
(B) |
|
The preceding provisions will not prohibit, so long as, in the case of clauses (7),
(8), and (11) below, no Default has occurred and is continuing or would be caused thereby: |
|
(1) |
|
the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with the
provisions of the Indenture; |
|
|
(2) |
|
the payment of any dividend by a Restricted Subsidiary of the Company to
the holders of its Common Stock on a pro rata basis; |
|
|
(3) |
|
the redemption, repurchase, retirement, defeasance or other acquisition of
any subordinated Indebtedness of the Company or any Guarantor or of any Equity
Interests of the Company |
60
|
|
|
or any Restricted Subsidiary in exchange for, or out of the net cash proceeds of a
contribution to the common equity of the Company or a substantially concurrent sale
(other than to a Subsidiary of the Company) of, Equity Interests (other than
Disqualified Stock) of the Company; provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement, defeasance
or other acquisition will be excluded from clause (3)(b) of the preceding paragraph
(A); |
|
|
(4) |
|
the repayment, defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net cash proceeds
from an Incurrence of Permitted Refinancing Indebtedness; |
|
|
(5) |
|
Investments acquired as a capital contribution to, or in exchange for, or
out of the net cash proceeds of a substantially concurrent offering of, Equity
Interests (other than Disqualified Stock) of the Company; provided that the amount of
any such net cash proceeds that are utilized for any such acquisition or exchange
shall be excluded from clause (3)(b) of the preceding paragraph (A); |
|
|
(6) |
|
the purchase, repurchase, redemption, acquisition or retirement for value
of any Capital Stock of the Company upon the exercise of warrants, options or similar
rights if such Capital Stock constitutes all or a portion of the exercise price or is
surrendered in connection with satisfying any federal or state income tax obligation
incurred in connection with such exercise; provided that no cash payment in respect
of such purchase, repurchase, redemption, acquisition, retirement or exercise shall
be made by the Company or any Restricted Subsidiary thereof; |
|
|
(7) |
|
the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company held by any current or former employee, officer,
director or consultant of the Company (or any of its Restricted Subsidiaries) or
their respective estates, spouses, former spouses or family members pursuant to the
terms of any employee equity subscription agreement, stock option agreement or
similar agreement entered into in the ordinary course of business; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired Equity
Interests in any fiscal year will not exceed $5.0 million; |
|
|
(8) |
|
the declaration and payment of cash dividends on the Companys issued and
outstanding Common Stock in an amount not to exceed $0.45 per share (as adjusted for
stock splits and similar transactions after the Issue Date) per fiscal year; provided
that the aggregate amount of all dividends declared or paid pursuant to this clause
(8) shall not exceed $18.0 million in any fiscal year; |
|
|
(9) |
|
the payment of any contingent consideration or purchase price adjustment
and any payment under any indemnification obligation, in each case, pursuant to the
terms of the Stock Purchase Agreement (including the Earn-out Agreement delivered in
connection with the Stock Purchase Agreement and as in effect on the Issue Date); |
|
|
(10) |
|
the payment of cash in lieu of the issuance of fractional shares of Equity
Interests upon conversion or exchange of securities convertible into or exchangeable
for Equity Interests of the Company; provided that any such cash payment shall not be
for the purpose of evading the limitations of this covenant (as determined in good
faith by the Board of Directors of the Company); and |
61
|
(11) |
|
other Restricted Payments not otherwise permitted pursuant to this covenant
in an aggregate principal amount since the Issue Date not to exceed $75.0 million. |
The amount of all Restricted Payments (other than cash) shall be the Fair Market Value on the
date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued
to or by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment.
Incurrence of Indebtedness
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, Incur any Indebtedness; provided, however, that the Company or any of its Restricted
Subsidiaries may Incur Indebtedness if the Fixed Charge Coverage Ratio for the Companys most
recently ended four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is Incurred would have been at
least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been Incurred at the beginning of such
four-quarter period.
The first paragraph of this covenant will not prohibit the Incurrence of any of the following
items of Indebtedness (collectively, Permitted Debt):
|
(1) |
|
the Incurrence by the Company of Indebtedness under Credit Facilities (and the
Incurrence by the Guarantors of Guarantees thereof) in an aggregate principal amount at
any one time outstanding pursuant to this clause (1) (with letters of credit being deemed
to have a principal amount equal to the maximum potential liability of the Company and its
Restricted Subsidiaries thereunder) not to exceed the greater of (x) $680.0 million, and
(y) the Borrowing Base on such date of Incurrence; |
|
|
(2) |
|
the Incurrence of Existing Indebtedness; |
|
|
(3) |
|
the Incurrence by the Company and the Guarantors of Indebtedness represented by the
Notes and the related Note Guarantees to be issued on the Issue Date; |
|
|
(4) |
|
the Incurrence by the Company or any Restricted Subsidiary of the Company of
Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase
money obligations, in each case, Incurred for the purpose of financing all or any part of
the purchase price or cost of construction or improvement of property, plant or equipment
used in the business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness Incurred to refund,
refinance or replace any Indebtedness Incurred pursuant to this clause (4), not to exceed
at any time outstanding the greater of (x) $40.0 million and (y) 7.5% of the Companys
Consolidated Net Tangible Assets on such date of Incurrence; |
|
|
(5) |
|
the Incurrence by the Company or any Restricted Subsidiary of the Company of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used
to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that
was permitted by the Indenture to be Incurred under the first paragraph of this covenant
or clauses (2), (3), (4), (5) or (15) of this paragraph; |
|
|
(6) |
|
the Incurrence by the Company or any of its Restricted Subsidiaries of intercompany
Indebtedness owing to and held by the Company or any of its Restricted Subsidiaries;
provided, however, that: |
62
|
(a) |
|
if the Company or any Guarantor is the obligor on such Indebtedness, such
Indebtedness must be unsecured and expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Notes, in the case of the
Company, or the Note Guarantee, in the case of a Guarantor; |
|
|
(b) |
|
Indebtedness owed to the Company or any Guarantor must be evidenced by an
unsubordinated promissory note, unless the obligor under such Indebtedness is the
Company or a Guarantor; |
|
|
(c) |
|
(i) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Restricted Subsidiary thereof, will be
deemed, in each case, to constitute an Incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted by this
clause (6); |
|
(7) |
|
the Guarantee by the Company or any of the Guarantors of Indebtedness of the Company
or a Restricted Subsidiary of the Company that was permitted to be Incurred by another
provision of this covenant; |
|
|
(8) |
|
the Incurrence by the Company or any of its Restricted Subsidiaries of Hedging
Obligations that are Incurred for the purpose of fixing, hedging or swapping interest
rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any
such agreements previously made for such purposes), and not for speculative purposes, and
that do not increase the Indebtedness of the obligor outstanding at any time other than as
a result of fluctuations in interest rates, commodity prices or foreign currency exchange
rates or by reason of fees, indemnities and compensation payable thereunder; |
|
|
(9) |
|
the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
arising from agreements providing for indemnification, adjustment of purchase price or
similar obligations, or Guarantees or letters of credit, surety bonds or performance bonds
securing any obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in any case Incurred in connection with the disposition of any business,
assets or Capital Stock of any Restricted Subsidiary (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of such business, assets
or Capital Stock of such Restricted Subsidiary for the purpose of financing such
acquisition), so long as the principal amount does not exceed the gross proceeds actually
received by the Company or any Restricted Subsidiary thereof in connection with such
disposition; |
|
|
(10) |
|
the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
arising from the honoring by a bank or other financial institution of a check, draft or
similar instrument drawn against insufficient funds in the ordinary course of business,
provided, however, that such Indebtedness is extinguished within five Business Days of its
Incurrence; |
|
|
(11) |
|
the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
constituting reimbursement obligations with respect to letters of credit in respect of
workers compensation claims or self-insurance obligations or bid, performance or surety
bonds (in each case other than for an obligation for borrowed money); |
|
|
(12) |
|
the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
constituting reimbursement obligations with respect to letters of credit issued in the
ordinary course of |
63
|
|
|
business; provided that, upon the drawing of such letters of credit or the Incurrence of
such Indebtedness, such obligations are reimbursed within 30 days following such drawing or
Incurrence; |
|
|
(13) |
|
the Incurrence by the Company of Indebtedness to the extent that the net proceeds
thereof are promptly deposited to defease or to satisfy and discharge the Notes; |
|
|
(14) |
|
the incurrence of any Indebtedness by a Receivables Subsidiary that is not recourse
to the Company or any other Restricted Subsidiary of the Company (other than Standard
Securitization Undertakings) incurred in connection with a Qualified Receivables
Transaction; or |
|
|
(15) |
|
the Incurrence by the Company or any of its Restricted Subsidiaries of additional
Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing Indebtedness Incurred to refund,
refinance or replace any Indebtedness Incurred pursuant to this clause (15), not to exceed
the greater of (x) $40.0 million and (y) 7.5% of the Companys Consolidated Net Tangible
Assets on such date of Incurrence. |
For purposes of determining compliance with this covenant, in the event that any proposed
Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in
clauses (1) through (15) above, or is entitled to be Incurred pursuant to the first paragraph of
this covenant, the Company will be permitted to classify such item of Indebtedness at the time of
its Incurrence in any manner that complies with this covenant. In addition, any Indebtedness
originally classified as Incurred pursuant to clauses (1) through (15) above may later be
reclassified by the Company such that it will be deemed as having been Incurred pursuant to another
of such clauses to the extent that such reclassified Indebtedness could be incurred pursuant to
such new clause at the time of such reclassification. Notwithstanding the foregoing, Indebtedness
under the Credit Agreement outstanding on the Issue Date shall be deemed to have been Incurred on
such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt.
Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that
may be Incurred pursuant to this covenant will not be deemed to be exceeded with respect to any
outstanding Indebtedness due solely to the result of fluctuations in the exchange rates of
currencies.
The Company will not Incur any Indebtedness that is subordinate or junior in right of payment
to any other Indebtedness of the Company unless it is subordinate in right of payment to the Notes
to the same extent. The Company will not permit any Guarantor to Incur any Indebtedness that is
subordinate or junior in right of payment to any other Indebtedness of such Guarantor unless it is
subordinate in right of payment to such Guarantors Note Guarantee to the same extent. For purposes
of the foregoing, no Indebtedness will be deemed to be subordinated in right of payment to any
other Indebtedness of the Company or any Guarantor, as applicable, solely by reason of any Liens or
Guarantees arising or created in respect thereof or by virtue of the fact that the holders of any
secured Indebtedness have entered into intercreditor agreements giving one or more of such holders
priority over the other holders in the collateral held by them.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries to, create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other
than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless
all payments due under the Indenture and the Notes are secured on an equal and ratable basis with
the obligations so secured (or, in the case of Indebtedness subordinated to the Notes or the
related Note Guarantees, prior or
64
senior thereto, with the same relative priority as the Notes will have with respect to such
subordinated Indebtedness) until such time as such obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create or permit to exist or become effective any consensual encumbrance or restriction
on the ability of any Restricted Subsidiary to:
|
(1) |
|
pay dividends or make any other distributions on its Capital Stock (or with respect
to any other interest or participation in, or measured by, its profits) to the Company or
any of its Restricted Subsidiaries or pay any liabilities owed to the Company or any of
its Restricted Subsidiaries; |
|
|
(2) |
|
make loans or advances to the Company or any of its Restricted Subsidiaries; or |
|
|
(3) |
|
transfer any of its properties or assets to the Company or any of its Restricted
Subsidiaries. |
However, the preceding restrictions will not apply to encumbrances or restrictions:
|
(1) |
|
existing under, by reason of or with respect to the Credit Agreement, Existing
Indebtedness or any other agreements in effect on the Issue Date and any amendments,
modifications, restatements, renewals, extensions, supplements, refundings, replacements
or refinancings thereof, provided that the encumbrances and restrictions in any such
amendments, modifications, restatements, renewals, extensions, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, than those
contained in the Credit Agreement, Existing Indebtedness or such other agreements, as the
case may be, as in effect on the Issue Date; |
|
|
(2) |
|
set forth in the Indenture, the Notes and the Note Guarantees; |
|
|
(3) |
|
existing under, by reason of or with respect to applicable law; |
|
|
(4) |
|
with respect to any Person or the property or assets of a Person acquired by the
Company or any of its Restricted Subsidiaries existing at the time of such acquisition and
not incurred in connection with or in contemplation of such acquisition, which encumbrance
or restriction is not applicable to any Person or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired and any
amendments, modifications, restatements, renewals, extensions, supplements, refundings,
replacements or refinancings thereof, provided that the encumbrances and restrictions in
any such amendments, modifications, restatements, renewals, extensions, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a whole, than
those in effect on the date of the acquisition; |
|
|
(5) |
|
in the case of clause (3) of the first paragraph of this covenant: |
|
(A) |
|
that restrict in a customary manner the subletting, assignment or transfer
of any property or asset that is subject to a lease, license, conveyance or contract
or similar property or asset, |
|
|
(B) |
|
existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary thereof not otherwise prohibited by the Indenture or |
65
|
(C) |
|
arising or agreed to in the ordinary course of business, not relating to
any Indebtedness, and that do not, individually or in the aggregate, detract from the
value of property or assets of the Company or any Restricted Subsidiary thereof in
any manner material to the Company or any Restricted Subsidiary thereof; |
|
(6) |
|
existing under, by reason of or with respect to any agreement for the sale or other
disposition of all or substantially all of the Capital Stock of, or property and assets
of, a Restricted Subsidiary that restrict distributions by that Restricted Subsidiary
pending such sale or other disposition; |
|
|
(7) |
|
restrictions on cash or other deposits or net worth imposed by customers or required
by insurance, surety or bonding companies, in each case, under contracts entered into in
the ordinary course of business; and |
|
|
(8) |
|
any Purchase Money Note, or other Indebtedness or contractual requirements of a
Receivables Subsidiary in connection with a Qualified Securitization Transaction; provided
that such restrictions only apply to such Receivables Subsidiary. |
Merger, Consolidation or Sale of Assets
The Company will not, directly or indirectly: (1) consolidate or merge with or into another
Person (whether or not the Company is the surviving corporation) or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties and assets of the Company
and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another
Person, unless:
|
(1) |
|
either: (a) the Company is the surviving corporation; or (b) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, conveyance or other disposition will have been made (i) is a
corporation organized or existing under the laws of the United States, any state thereof
or the District of Columbia and (ii) assumes all the obligations of the Company under the
Notes, the Indenture and the Registration Rights Agreement pursuant to agreements
reasonably satisfactory to the Trustee; |
|
|
(2) |
|
immediately after giving effect to such transaction, no Default or Event of Default
exists; |
|
|
(3) |
|
the Company or the Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made, will, on the date of such transaction after giving pro
forma effect thereto and any related financing transactions as if the same had occurred at
the beginning of the applicable four-quarter period, be permitted to Incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the caption Incurrence of
Indebtedness; |
|
|
(4) |
|
each Guarantor, unless such Guarantor is the Person with which the Company has
entered into a transaction under this covenant, will have by supplemental indenture
confirmed its obligations under the Notes and the Indenture; and |
|
|
(5) |
|
the Company delivers to the Trustee an Officers Certificate (attaching the
arithmetic computation to demonstrate compliance with clause (3) above) and an Opinion of
Counsel stating that such transaction and such agreement complies with this covenant and
that all conditions precedent provided for herein relating to such transaction have been
complied with. |
66
Clauses (2), (3) and (5) above will not apply to any merger, consolidation or sale,
assignment, transfer, conveyance or other disposition of assets between or among the Company and
any of its Restricted Subsidiaries if, in the good faith determination of the Board of Directors of
the Company, the sole purpose of the transaction is to reincorporate the Company in another state
of the United States. Upon any consolidation or merger, or any sale, assignment, transfer,
conveyance or other disposition of all or substantially all of the assets of the Company in
accordance with this covenant, the successor corporation formed by such consolidation or into or
with which the Company is merged or to which such sale, assignment, transfer, conveyance or other
disposition is made will succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, assignment, conveyance or other disposition, the provisions of
the Indenture referring to the Company will refer instead to the successor corporation and not to
the Company), and may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor Person had been named as the Company in the Indenture. In any such
event (other than any transfer by way of lease), the predecessor Company will be released and
discharged from all liabilities and obligations in respect of the Notes and the Indenture and the
predecessor Company may be dissolved, wound up or liquidated at any time thereafter.
In addition, the Company and its Restricted Subsidiaries may not, directly or indirectly,
lease all or substantially all of the properties or assets of the Company and its Restricted
Subsidiaries considered as one enterprise, in one or more related transactions, to any other
Person. Clause (3) above will not apply to any merger, consolidation or sale, assignment, transfer,
conveyance or other disposition of assets between or among the Company and any of its Restricted
Subsidiaries.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into, make, amend, renew or extend any transaction,
contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any
Affiliate (each, an Affiliate Transaction), unless:
|
(1) |
|
such Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable arms-length transaction by the Company or such Restricted Subsidiary with a
Person that is not an Affiliate of the Company or any of its Restricted Subsidiaries; and |
|
(2) |
|
the Company delivers to the Trustee: |
|
(a) |
|
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $3.5 million, an
Officers Certificate certifying that such Affiliate Transaction or series of related
Affiliate Transactions complies with this covenant; and |
|
|
(b) |
|
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $20.0 million, either (x)
a Board Resolution set forth in an Officers Certificate certifying that such
Affiliate Transaction or series of related Affiliate Transactions complies with this
covenant and that such Affiliate Transaction or series of related Affiliate
Transactions has been approved by a majority of the disinterested members of the
Board of Directors of the Company or (y), an opinion as to the fairness to the
Company or such Restricted Subsidiary of such Affiliate Transaction or series of
related Affiliate Transactions from a financial point of view issued by an
independent accounting, appraisal or investment banking firm of national standing. |
67
The following items shall not be deemed to be Affiliate Transactions and, therefore, will not
be subject to the provisions of the prior paragraph:
|
(1) |
|
transactions between or among the Company and/or its Restricted Subsidiaries; |
|
|
(2) |
|
payment of reasonable and customary fees to, and reasonable and customary
indemnification and similar payments on behalf of, directors of the Company or any of its
Restricted Subsidiaries; |
|
|
(3) |
|
Restricted Payments that are permitted by the provisions of the Indenture described
above under the caption Restricted Payments; |
|
|
(4) |
|
any sale of Capital Stock (other than Disqualified Stock) of the Company; |
|
|
(5) |
|
transactions pursuant to agreements or arrangements in effect on the Issue Date and
described in this prospectus, or any amendment, modification, or supplement thereto or
replacement thereof, as long as such agreement or arrangement, as so amended, modified,
supplemented or replaced, taken as a whole, is not more disadvantageous to the Company and
its Restricted Subsidiaries than the original agreement or arrangement in existence on the
Issue Date; |
|
|
(6) |
|
any employment, consulting, service or termination agreement, or reasonable and
customary indemnification arrangements, entered into by the Company or any of its
Restricted Subsidiaries with officers and employees of the Company or any of its
Restricted Subsidiaries that are Affiliates of the Company and the payment of compensation
to such officers and employees (including amounts paid pursuant to employee benefit plans,
employee stock option or similar plans), so long as such agreement, arrangement or payment
have been approved by a majority of the disinterested members of the Board of Directors of
the Company (or by the Companys Compensation Committee so long as such committee
satisfies applicable independence tests under federal securities laws and the primary
exchange on which the Companys Common Stock is listed); |
|
|
(7) |
|
transactions with a Person that is an Affiliate of the Company solely because the
Company, directly or indirectly, owns Equity Interests in, or controls, such Person; and |
|
|
(8) |
|
commission, payroll, travel and similar advances to officers and employees of the
Company or any of its Restricted Subsidiaries made consistent with past practices. |
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors of the Company may designate any Restricted Subsidiary of the Company
to be an Unrestricted Subsidiary; provided that:
|
(1) |
|
any Guarantee by the Company or any Restricted Subsidiary thereof of any Indebtedness
of the Subsidiary being so designated will be deemed to be an Incurrence of Indebtedness
by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such
designation, and such Incurrence of Indebtedness would be permitted under the covenant
described above under the caption Incurrence of Indebtedness; |
|
(2) |
|
the aggregate Fair Market Value of all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary being so designated (including any
Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of such
Subsidiary) will be deemed |
68
|
|
|
to be a Restricted Investment made as of the time of such designation and that such
Investment would be permitted under the covenant described above under the caption
Restricted Payments; |
|
(3) |
|
such Subsidiary does not hold any Liens on any property of the Company or any
Restricted Subsidiary thereof; |
|
(4) |
|
the Subsidiary being so designated: |
|
(a) |
|
is not party to any agreement, contract, arrangement or understanding with
the Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company; |
|
|
(b) |
|
is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for
additional Equity Interests or (ii) to maintain or preserve such Persons financial
condition or to cause such Person to achieve any specified levels of operating
results; and |
|
|
(c) |
|
has not Guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted Subsidiaries,
except to the extent such Guarantee or credit support would be released upon such
designation; and |
|
(5) |
|
no Default or Event of Default would be in existence following such designation. |
Any designation of a Restricted Subsidiary of the Company as an Unrestricted Subsidiary shall
be evidenced to the Trustee by filing with the Trustee the Board Resolution giving effect to such
designation and an Officers Certificate certifying that such designation complied with the
preceding conditions and was permitted by the Indenture. If, at any time, any Unrestricted
Subsidiary would fail to meet any of the preceding requirements, it will thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness, Investments, or Liens
on the property, of such Subsidiary will be deemed to be Incurred or made by a Restricted
Subsidiary of the Company as of such date and, if such Indebtedness, Investments or Liens are not
permitted to be Incurred or made as of such date under the Indenture, the Company will be in
default under the Indenture.
The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided that:
|
(1) |
|
such designation will be deemed to be an Incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation will only be permitted if such Indebtedness is permitted under the
covenant described under the caption Incurrence of Indebtedness, calculated on a pro
forma basis as if such designation had occurred at the beginning of the applicable
four-quarter reference period; |
|
(2) |
|
all outstanding Investments owned by such Unrestricted Subsidiary will be deemed to
be made as of the time of such designation and such designation will only be permitted if
such Investments would be permitted under the covenant described above under the caption
Restricted Payments; |
69
|
(3) |
|
all Liens upon property or assets of such Unrestricted Subsidiary existing at the
time of such designation would be permitted under the caption Liens; and |
|
(4) |
|
no Default or Event of Default would be in existence following such designation. |
Limitation on Issuances and Sales of Equity Interests in Restricted Subsidiaries
The Company will not transfer, convey, sell or otherwise dispose of, and will not permit any
of its Restricted Subsidiaries to, issue, transfer, convey, sell or otherwise dispose of any Equity
Interests in any Restricted Subsidiary of the Company to any Person (other than the Company or a
Restricted Subsidiary of the Company or, if necessary, shares of its Capital Stock constituting
directors qualifying shares or issuances of shares of Capital Stock of foreign Restricted
Subsidiaries to foreign nationals, to the extent required by applicable law), except sales of
Equity Interests of a Restricted Subsidiary of the Company by the Company or a Restricted
Subsidiary thereof; provided that (x) the Company or such Restricted Subsidiary selling such Equity
Interests complies with the covenant described above under the caption Repurchase at the Option
of HoldersAsset Sales, (y) any sales of Preferred Stock of a Restricted Subsidiary that result
in such Preferred Stock being held by a Person other than the Company or a Restricted Subsidiary
thereof will be deemed to be an Incurrence of Indebtedness and must comply with the covenant
described above under the caption Incurrence of Indebtedness and (z) if, immediately after
giving effect to such issuance, transfer, conveyance, sale or other disposition, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary, any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted to be made under
the covenant described above under the caption Restricted Payments if made on the date of such
issuance or sale.
Guarantees
The Company will not permit any of its Restricted Subsidiaries, directly or indirectly, to
Guarantee or pledge any assets to secure the payment of any other Indebtedness of the Company or
any Domestic Subsidiary unless such Restricted Subsidiary is a Guarantor or simultaneously executes
and delivers to the Trustee an Opinion of Counsel and a supplemental indenture providing for the
Guarantee of the payment of the Notes by such Restricted Subsidiary, which Guarantee shall be
senior (in the case of subordinated Indebtedness) to or pari passu with such Subsidiarys Guarantee
of such other Indebtedness.
A Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or
consolidate with or merge with or into (whether or not such Guarantor is the surviving Person),
another Person, other than the Company or another Guarantor, unless:
|
(1) |
|
immediately after giving effect to that transaction, no Default or Event of Default
exists; and |
|
|
(2) |
|
either: |
|
(a) |
|
the Person acquiring the property in any such sale or disposition or the
Person formed by or surviving any such consolidation or merger (if other than the
Guarantor) is organized or existing under the laws of the United States, any state
thereof or the District of Columbia and assumes all the obligations of that Guarantor
under the Indenture, its Note Guarantee and the Registration Rights Agreement
pursuant to a supplemental indenture satisfactory to the Trustee; or |
|
|
(b) |
|
such sale or other disposition or consolidation or merger complies with the
covenant described above under the caption Repurchase at the Option of
HoldersAsset Sales. |
70
The Note Guarantee of a Guarantor will be released:
|
(1) |
|
in connection with any sale or other disposition of the Capital Stock of a Guarantor
to a Person that is not (either before or after giving effect to such transaction) a
Restricted Subsidiary of the Company, if after giving effect to such sale or other
disposition such Guarantor is no longer a Restricted Subsidiary of the Company and such
sale of such Capital Stock of that Guarantor complies with the covenant described above
under the caption Repurchase at the Option of HoldersAsset Sales; |
|
|
(2) |
|
if the Company properly designates any Restricted Subsidiary that is a Guarantor as
an Unrestricted Subsidiary under the Indenture; |
|
|
(3) |
|
solely in the case of a Note Guarantee created after the Issue Date pursuant to the
first paragraph of this covenant, upon the release or discharge of the Guarantee which
resulted in the creation of such Note Guarantee pursuant to this covenant, except a
discharge or release by or as a result of payment under such Guarantee; or |
|
|
(4) |
|
upon the legal defeasance or covenant defeasance or the satisfaction and discharge of
the Indenture, in each case, in compliance with the terms of the terms of the Indenture. |
At the request of the Company, and upon delivery to the Trustee of an Officers Certificate
and an Opinion of Counsel that such release complies with the Indenture, the Trustee shall execute
and deliver an appropriate instrument evidencing such release.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary thereof to, engage in any
business other than Permitted Businesses, except to such extent as would not be material to the
Company and its Restricted Subsidiaries taken as a whole.
Payments for Consent
The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes
for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of
the Indenture or the Notes unless such consideration is offered to be paid and is paid to all
Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement. Notwithstanding the
foregoing, in any offer or payment of consideration for any consent, waiver or amendment of any of
the terms or provisions of the indenture or the notes in connection with an exchange offer, the
Company and any of its Subsidiaries may exclude (i) Holders or beneficial owners of the notes that
are not institutional accredited investors as defined in subparagraphs (a)(1), (2), (3) or (7) of
Rule 501 under the Securities Act, and (ii) Holders or beneficial owners of the Notes in any
jurisdiction where the inclusion of such Holders or beneficial owners would require the Company or
any such Restricted Subsidiaries to comply with the registration requirements or other similar
requirements under any securities laws of such jurisdiction, or the solicitation of such consent,
waiver or amendment from, or the granting of such consent or waiver, or the approval of such
amendment by, Holders or beneficial owners in such jurisdiction would be unlawful, in each case as
determined by the Company in its sole discretion.
Reports
71
The Company will furnish to the Trustee and, upon request, to beneficial owners and
prospective investors a copy of all of the information and reports referred to in clauses (1) and
(2) below within the time periods specified in the Commissions rules and regulations:
|
(1) |
|
all quarterly and annual financial information that would be required to be contained
in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to
file such Forms, including a Managements Discussion and Analysis of Financial Condition
and Results of Operations and, with respect to the annual information only, a report on
the annual financial statements by the Companys certified independent accountants; and |
|
|
(2) |
|
all current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports; |
provided that, if the Commission has accepted any of the Companys reports as provided in the
immediately succeeding paragraph and such reports have been made available to the public on the
Commissions EDGAR system (or any similar successor system), the Company will have no obligations
to furnish such report to the Trustee, beneficial owners or prospective investors.
Whether or not required by the Commission, the Company will comply with the periodic reporting
requirements of the Exchange Act and will file the reports specified in the preceding paragraph
with the Commission within the time periods specified above unless the Commission will not accept
such a filing. The Company agrees that it will not take any action for the purpose of causing the
Commission not to accept any such filings. If, notwithstanding the foregoing, the Commission will
not accept the Companys filings for any reason, the Company will post the reports referred to in
the preceding paragraph on its website within the time periods that would apply if the Company were
required to file those reports with the Commission.
If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the
quarterly and annual financial information required by this covenant shall include a reasonably
detailed presentation, either on the face of the financial statements or in the footnotes thereto,
and in Managements Discussion and Analysis of Financial Condition and Results of Operations, of
the financial condition and results of operations of the Company and its Restricted Subsidiaries
separate from the financial condition and results of operations of the Unrestricted Subsidiaries of
the Company.
Events of Default and Remedies
Each of the following is an Event of Default:
|
(1) |
|
default for 30 days in the payment when due of interest on, or Additional Interest
with respect to, the Notes; |
|
|
(2) |
|
default in payment when due (whether at maturity, upon acceleration, redemption or
otherwise) of the principal of, or premium, if any, on the Notes; |
|
|
(3) |
|
failure by the Company or any of its Restricted Subsidiaries to comply with the
provisions described under the captions Repurchase at the Option of HoldersChange of
Control, Repurchase at the Option of HoldersAsset Sales or Certain
CovenantsMerger, Consolidation or Sale of Assets; |
72
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(4) |
|
failure by the Company or any of its Restricted Subsidiaries for 45 days after
written notice by the Trustee or Holders representing 25% or more of the aggregate
principal amount of Notes outstanding to comply with any of the other agreements in the
Indenture; |
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(5) |
|
default under any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by
the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee
now exists, or is created after the Issue Date, if that default: |
|
(a) |
|
is caused by a failure to make any payment when due at the final maturity
of such Indebtedness (a Payment Default); or |
|
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(b) |
|
results in the acceleration of such Indebtedness prior to its express
maturity, |
|
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|
|
and, in each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $25.0 million or
more; |
|
(6) |
|
failure by the Company or any of its Restricted Subsidiaries to pay final judgments
(to the extent such judgments are not paid or covered by insurance provided by a reputable
carrier that has the ability to perform and has acknowledged coverage in writing)
aggregating in excess of $25.0 million, which judgments are not paid, discharged or stayed
for a period of 60 days after such judgments have become final and non-appealable; |
|
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(7) |
|
except as permitted by the Indenture, any Note Guarantee of a Guarantor that is a
Significant Subsidiary, or the Note Guarantees of any group of Guarantors that, taken
together, would constitute a Significant Subsidiary, shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in full
force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Note Guarantee; and |
|
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(8) |
|
certain events of bankruptcy or insolvency with respect to the Company, any Guarantor
or any Significant Subsidiary of the Company (or any Restricted Subsidiaries that together
would constitute a Significant Subsidiary). |
In the case of an Event of Default arising from certain events of bankruptcy or insolvency,
with respect to the Company, all outstanding Notes will become due and payable immediately without
further action or notice. If any other Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable immediately by notice in writing to the Company specifying the Event of
Default(s).
Holders of the Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest or Additional Interest) if it
determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then outstanding by
notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default
or Event of
73
Default and its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest or Additional Interest on, or the principal of, the Notes. The
Holders of a majority in principal amount of the then outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for exercising any remedy available
to the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or
the Indenture, that may involve the Trustee in personal liability, or that the Trustee determines
in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction (it being understood that the Trustee does not have an affirmative duty to
ascertain whether or not any such directions are unduly prejudicial to such Holders) and may take
any other action it deems proper that is not inconsistent with any such direction received from
Holders of Notes. A Holder may not pursue any remedy with respect to the Indenture or the Notes
unless:
|
(1) |
|
the Holder gives the Trustee written notice of a continuing Event of Default; |
|
|
(2) |
|
the Holders of at least 25% in aggregate principal amount of outstanding Notes make a
written request to the Trustee to pursue the remedy; |
|
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(3) |
|
such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; |
|
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(4) |
|
the Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and |
|
|
(5) |
|
during such 60-day period, the Holders of a majority in aggregate principal amount of
the outstanding Notes do not give the Trustee a direction that is inconsistent with the
request. |
However, such limitations do not apply to the right of any Holder of a Note to receive payment
of the principal of, premium or Additional Interest, if any, or interest on, such Note or to bring
suit for the enforcement of any such payment, on or after the due date expressed in the Notes,
which right shall not be impaired or affected without the consent of the Holder.
In the case of any Event of Default occurring by reason of any willful action or inaction
taken or not taken by or on behalf of the Company with the intention of avoiding payment of the
premium that the Company would have had to pay if the Company then had elected to redeem the Notes
pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also
become and be immediately due and payable to the extent permitted by law upon the acceleration of
the Notes.
The Company is required to deliver to the Trustee annually within 120 days after the end of
each fiscal year a statement regarding compliance with the Indenture. Upon becoming aware of any
Default or Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator, stockholder, member, manager or partner of the
Company or any Guarantor, as such, shall have any liability for any obligations of the Company or
the Guarantors under the Notes, the Indenture, the Note Guarantees or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part of the consideration
for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal
securities laws.
74
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its obligations
discharged with respect to the outstanding Notes and all obligations of the Guarantors discharged
with respect to their Note Guarantees (Legal Defeasance) except for:
|
(1) |
|
the rights of Holders of outstanding Notes to receive payments in respect of the
principal of, or interest or premium and Additional Interest, if any, on such Notes when
such payments are due from the trust referred to below; |
|
|
(2) |
|
the Companys obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments held in
trust; |
|
|
(3) |
|
the rights, powers, trusts, duties and immunities of the Trustee, and the Companys
and the Guarantors obligations in connection therewith; and |
|
|
(4) |
|
the Legal Defeasance provisions of the Indenture. |
In addition, the Company may, at its option and at any time, elect to have the obligations of
the Company and the Guarantors released with respect to certain covenants that are described in the
Indenture (Covenant Defeasance) and thereafter any omission to comply with those covenants shall
not constitute a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under Events of Default will no longer constitute
Events of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(1) |
|
the Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, investment bank or appraisal firm
expressed in a written certificate of such firm of independent public accountants,
investment bank or appraisal firm to the Trustee, to pay the principal of, or interest and
premium and Additional Interest, if any, on the outstanding Notes on the Stated Maturity
or on the applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption date; |
|
|
(2) |
|
in the case of Legal Defeasance, the Company shall have delivered to the Trustee an
Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company
has received from, or there has been published by, the Internal Revenue Service a ruling
or (b) since the Issue Date, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; |
|
|
(3) |
|
in the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal income tax
on the same |
75
|
|
|
amounts, in the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred; |
|
|
(4) |
|
no Default or Event of Default shall have occurred and be continuing either: (a) on
the date of such deposit; or (b) insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 123rd day after
the date of deposit; |
|
|
(5) |
|
such Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; |
|
|
(6) |
|
the Company must have delivered to the Trustee an Opinion of Counsel to the effect
that, (1) assuming no intervening bankruptcy of the Company or any Guarantor between the
date of deposit and the 123rd day following the deposit and assuming that no Holder is an
insider of the Company under applicable bankruptcy law, after the 123rd day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors rights
generally, including Section 547 of the United States Bankruptcy Code and Section 15 of
the New York Debtor and Creditor Law and (2) the creation of the defeasance trust does not
violate the Investment Company Act of 1940; |
|
|
(7) |
|
the Company must deliver to the Trustee an Officers Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of Notes
over the other creditors of the Company with the intent of defeating, hindering, delaying
or defrauding creditors of the Company or others; |
|
|
(8) |
|
if the Notes are to be redeemed prior to their Stated Maturity, the Company must
deliver to the Trustee irrevocable instructions to redeem all of the Notes on the
specified redemption date; and |
|
|
(9) |
|
the Company must deliver to the Trustee an Officers Certificate and an Opinion of
Counsel, each stating that all conditions precedent relating to the Legal Defeasance or
the Covenant Defeasance have been complied with. |
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture, the Notes or the Note
Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture, the Notes or the Note Guarantees may be
waived with the consent of the Holders of a majority in principal amount of the then outstanding
Notes (including, without limitation, consents obtained in connection with a purchase of, or tender
offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not (with respect to
any Notes held by a non-consenting Holder):
|
(1) |
|
reduce the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; |
|
|
(2) |
|
reduce the principal of or change the fixed maturity of any Note or reduce the
premium payable upon the redemption of any Note or change the time at which any Note may
be redeemed as |
76
|
|
|
described under Optional Redemption (excluding for greater certainty any notice periods
with respect to Notes that are otherwise redeemable); |
|
|
(3) |
|
reduce the rate of or change the time for payment of interest on any Note; |
|
|
(4) |
|
waive a Default or Event of Default in the payment of principal of, or interest, or
premium or Additional Interest, if any, on, the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount of the
Notes and a waiver of the payment default that resulted from such acceleration); |
|
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(5) |
|
make any Note payable in money other than U.S. dollars; |
|
|
(6) |
|
make any change in the provisions of the Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of, or
interest or premium or Additional Interest, if any, on, the Notes; |
|
|
(7) |
|
release any Guarantor from any of its obligations under its Note Guarantee or the
Indenture, except in accordance with the terms of the Indenture; |
|
|
(8) |
|
impair the right to institute suit for the enforcement of any payment on or with
respect to the Notes or the Note Guarantees; |
|
|
(9) |
|
amend, change or modify the obligation of the Company to make and consummate an Asset
Sale Offer with respect to any Asset Sale in accordance with the covenant described under
the caption Repurchase at the Option of HoldersAsset Sales after the obligation to
make such Asset Sale Offer has arisen, or the obligation of the Company to make and
consummate a Change of Control Offer in the event of a Change of Control in accordance
with the covenant described under the caption Repurchase at the Option of HoldersChange
of Control after such Change of Control has occurred, including, in each case, amending,
changing or modifying any definition relating thereto; |
|
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(10) |
|
except as otherwise permitted under the covenants described under the captions
Certain CovenantsMerger, Consolidation and Sale of Assets and Certain
CovenantsGuarantees, consent to the assignment or transfer by the Company or any
Guarantor of any of their rights or obligations under the Indenture; |
|
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(11) |
|
amend or modify any of the provisions of the Indenture or the related definitions
affecting the ranking of the Notes or any Note Guarantee in any manner adverse to the
Holders of the Notes or any Note Guarantee; or |
|
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(12) |
|
make any change in the preceding amendment and waiver provisions. |
Notwithstanding the preceding, without the consent of any Holder of Notes, the Company, the
Guarantors and the Trustee may amend or supplement the Indenture, the Notes or the Note Guarantees
to:
|
(1) |
|
cure any ambiguity, defect or inconsistency; |
|
|
(2) |
|
provide for uncertificated Notes in addition to or in place of certificated Notes; |
77
|
(3) |
|
provide for the assumption of the Companys or any Guarantors obligations to Holders
of Notes in the case of a merger or consolidation or sale of all or substantially all of
the Companys or such Guarantors assets; |
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(4) |
|
make any change that would provide any additional rights or benefits to the Holders
of Notes or that does not materially adversely affect the legal rights under the Indenture
of any such Holder; |
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(5) |
|
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act; |
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(6) |
|
comply with the provisions described under Certain CovenantsGuarantees; |
|
|
(7) |
|
comply with the rules of any applicable securities depositary; |
|
|
(8) |
|
evidence and provide for the acceptance of appointment by a successor Trustee; |
|
|
(9) |
|
provide for the issuance of Additional Notes in accordance with the Indenture; or |
|
|
(10) |
|
conform the text of the Indenture, the Note Guarantees, or the Notes to any provision
of this Description of Notes to the extent that such provision in this Description of
Notes was intended to be a verbatim recitation of a provision of the Indenture, the Note
Guarantees or the Notes. |
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect as to all Notes issued
thereunder, when:
|
(a) |
|
all Notes that have been authenticated (except lost, stolen or destroyed
Notes that have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust and thereafter repaid to the Company) have been
delivered to the Trustee for cancellation; or |
|
|
(b) |
|
all Notes that have not been delivered to the Trustee for cancellation have
become due and payable by reason of the mailing of a notice of redemption or
otherwise or will become due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts as will
be sufficient without consideration of any reinvestment of interest, to pay and
discharge the entire indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium and Additional Interest, if any, and accrued
interest to the date of maturity or redemption; |
|
(2) |
|
no Default or Event of Default shall have occurred and be continuing on the date of
such deposit referred to in clause (1)(b) above or shall occur as a result of such deposit
and such deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which the Company or any Guarantor is a party or by which
the Company or any Guarantor is bound; |
|
|
(3) |
|
the Company or any Guarantor has paid or caused to be paid all sums payable by it
under the Indenture; and |
78
|
(4) |
|
the Company has delivered irrevocable instructions to the Trustee under the Indenture
to apply the deposited money referred to in clause (1)(b) above toward the payment of the
Notes at maturity or the redemption date, as the case may be. |
In addition, the Company must deliver an Officers Certificate and an Opinion of Counsel to
the Trustee stating that all conditions precedent to satisfaction and discharge have been
satisfied.
Concerning the Trustee
If the Trustee or any of its Affiliates becomes a creditor of the Company or any Guarantor,
the Indenture and the Trust Indenture Act limit its right to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires
any conflicting interest (as defined in the Trust Indenture Act) it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign in accordance with the
Indenture and the Trust Indenture Act.
The Indenture provides that in case an Event of Default shall occur and be continuing, the
Trustee will be required, in the exercise of the rights and powers vested in it by the Indenture,
to use the degree of care of a prudent man in the conduct of his own affairs under the
circumstances. Subject to certain restrictions, the Holders of at least a majority in aggregate
principal amount of the Notes outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or power conferred on
the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other
Holder or that would involve the Trustee in personal liability. Subject to such provisions, the
Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at
the request or direction of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or expense.
Book-Entry, Delivery and Form
Except as set forth below, Notes will be issued in registered, global form in minimum
denominations of $2,000 and integral multiples of $1,000 in excess thereof. Notes will be issued at
the closing of this offering only upon surrender of original notes.
The exchange notes initially will be represented by one or more notes in registered, global
form (the Global Note). On the date of the closing of the exchange offer, the Global Note will be
deposited upon issuance with the Trustee as custodian for The Depository Trust Company (DTC), and
registered in the name of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Except as set forth below, the Global Notes may be transferred, in whole and not in part, only
to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the
Global Notes may be exchanged for Notes in certificated form. See Exchange of Global Notes for
Certificated Notes.
Ownership of interests in the Global Note (Book-Entry Interests) will be limited to persons
that have accounts with DTC, or persons that hold interests through such Participants (as defined
below). Except under the limited circumstances described below, beneficial owners of Book-Entry
Interests will not be entitled to physical delivery of exchange notes in definitive form.
79
Book-Entry Interests will be shown on, and transfers thereof will be effected only through,
records maintained in book-entry form by DTC or DTCs nominees and Participants. In addition while
the exchange notes are in global form, holders of Book-Entry Interests will not be considered the
owners or holders of exchange notes for any purpose. So long as the exchange notes are held in
global form, DTC or its nominees will be considered the sole holders of the Global Note for all
purposes under the indenture. In addition, Participants must rely on the procedures of DTC and
Indirect Participants (as defined below) must rely on the procedures of DTC and the Participants
through which they own Book-Entry Interests to transfer their interests or to exercise any rights
of holders under the Indenture. Transfers of beneficial interests in the Global Note will be
subject to the applicable rules and procedures of DTC and its Participants or Indirect
Participants, which may change from time to time.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear and Clearstream
are provided solely as a matter of convenience. These operations and procedures are solely within
the control of the respective settlement systems and are subject to changes by them. The Company
takes no responsibility for these operations and procedures and urges investors to contact the
system or their participants directly to discuss these matters.
DTC has advised the Company that DTC is a limited-purpose trust company created to hold
securities for its participating organizations (collectively, the Participants) and to facilitate
the clearance and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants include securities
brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing
corporations and certain other organizations. Access to DTCs system is also available to other
entities such as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly (collectively, the
Indirect Participants). Persons who are not Participants may beneficially own securities held by
or on behalf of DTC only through the Participants or the Indirect Participants. The ownership
interests in, and transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by it:
|
(1) |
|
upon deposit of the Global Notes, DTC will credit the accounts of Participants
designated by the Initial Purchasers with portions of the principal amount of the Global
Notes; and |
|
(2) |
|
ownership of these interests in the Global Notes will be shown on, and the transfer
of ownership thereof will be effected only through, records maintained by DTC (with
respect to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interest in the Global Notes). |
We understand that under existing industry practice, in the event that we request any action
of holders of exchange notes, or an owner of a beneficial interest in the Global Note desires to
take any action that DTC, as the holder of such Global Note, is entitled to take, DTC would
authorize the Participants to take the action and the Participants would authorize beneficial
owners owning through the Participants to take the action or would otherwise act upon the
instruction of the beneficial owners. Neither we nor the trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account of notes by DTC, or
for maintaining, supervising or reviewing any records of DTC relating to the notes.
80
All interests in a Global Note may be subject to the procedures and requirements of DTC. The
laws of some jurisdictions, including certain states of the United States, require that certain
Persons take physical delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Note to such Persons will be limited to that
extent. Because DTC can act only on behalf of Participants, which in turn act on behalf of Indirect
Participants, the ability of a Person having beneficial interests in a Global Note to pledge such
interests to Persons that do not participate in the DTC system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical certificate evidencing such
interests.
Except as described below, owners of interests in the Global Notes will not have Notes
registered in their names, will not receive physical delivery of Notes in certificated form and
will not be considered the registered owners or Holders thereof under the Indenture for any
purpose.
Payments in respect of the principal of, and interest and premium and Additional Interest, if
any, on a Global Note registered in the name of DTC or its nominee will be payable to DTC in its
capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat the Persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving payments and for all other
purposes. Consequently, neither the Company, the Trustee nor any agent of the Company or the
Trustee has or will have any responsibility or liability for:
|
(1) |
|
any aspect of DTCs records or any Participants or Indirect Participants records
relating to or payments made on account of beneficial ownership interest in the Global
Notes or for maintaining, supervising or reviewing any of DTCs records or any
Participants or Indirect Participants records relating to the beneficial ownership
interests in the Global Notes; or |
|
(2) |
|
any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. |
DTC has advised the Company that its current practice, upon receipt of any payment in respect
of securities such as the Notes (including principal and interest), is to credit the accounts of
the relevant Participants with the payment on the payment date unless DTC has reason to believe it
will not receive payment on such payment date. Each relevant Participant is credited with an amount
proportionate to its beneficial ownership of an interest in the principal amount of the relevant
security as shown on the records of DTC. Payments by the Participants and the Indirect Participants
to the beneficial owners of Notes will be governed by standing instructions and customary practices
and will be the responsibility of the Participants or the Indirect Participants and will not be the
responsibility of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be
liable for any delay by DTC or any of its Participants in identifying the beneficial owners of the
Notes, and the Company and the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with DTCs procedures,
and will be settled in same-day funds, and transfers between participants in Euroclear and
Clearstream will be effected in accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and Euroclear or
Clearstream participants, on the other hand, will be effected through DTC in accordance with DTCs
rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in accordance with the rules
and procedures and within the established deadlines (Brussels time) of such system. Euroclear or
Clearstream, as the case may be, will,
81
if the transaction meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Note in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly to the depositories for Euroclear or
Clearstream.
DTC has advised the Company that it will take any action permitted to be taken by a Holder of
Notes only at the direction of one or more Participants to whose account DTC has credited the
interests in the Global Notes and only in respect of such portion of the aggregate principal amount
of the Notes as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Notes, DTC reserves the right to exchange the
Global Notes for legended Notes in certificated form, and to distribute such Notes to its
Participants.
Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate
transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream,
they are under no obligation to perform or to continue to perform such procedures, and may
discontinue such procedures at any time. Neither the Company nor the Trustee nor any of their
respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream
or their respective participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered certificated form
(Certificated Notes) if:
|
(1) |
|
DTC (a) notifies the Company that it is unwilling or unable to continue as depositary
for the Global Notes or (b) has ceased to be a clearing agency registered under the
Exchange Act, and in each case the Company fails to appoint a successor depositary; |
|
|
(2) |
|
the Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of Certificated Notes (DTC has advised the Company that, in such event, under
current DTC practices, DTC would notify its participants of the Companys request, but
will only withdraw beneficial interests from a Global Note at the request of each DTC
participant); or |
|
|
(3) |
|
there shall have occurred and be continuing a Default or Event of Default with
respect to the Notes and DTC requests Certificated Notes. |
In addition, beneficial interests in a Global Note may be exchanged for Certificated Notes
upon prior written notice given to the Trustee by or on behalf of DTC in accordance with the
Indenture. In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial
interests in Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with its customary
procedures) and will bear the applicable restrictive legend, unless that legend is not required by
applicable law.
Exchange of Certificated Notes for Global Notes
Certificated Notes may not be exchanged for beneficial interests in any Global Note unless the
transferor first delivers to the Trustee a written certificate (in the form provided in the
Indenture) to the effect that such transfer will comply with the appropriate transfer restrictions
applicable to such Notes.
Same Day Settlement and Payment
82
The Company will make payments in respect of the Notes represented by the Global Notes
(including principal, premium, if any, interest and Additional Interest, if any) by wire transfer
of immediately available funds to the accounts specified by the Global Note Holder. The Company
will make all payments of principal, interest and premium and Additional Interest, if any, with
respect to Certificated Notes by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing a check to each
such Holders registered address. The Notes represented by the Global Notes are expected to be
eligible to trade in DTCs Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such Notes will, therefore, be required by DTC to be settled in immediately
available funds. The Company expects that secondary trading in any Certificated Notes will also be
settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream
participant purchasing an interest in a Global Note from a Participant in DTC will be credited, and
any such crediting will be reported to the relevant Euroclear or Clearstream participant, during
the securities settlement processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC. DTC has advised the Company that
cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or
through a Euroclear or Clearstream participant to a Participant in DTC will be received with value
on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash
account only as of the business day for Euroclear or Clearstream following DTCs settlement date.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference is made to the
Indenture for a full disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
Additional Interest means all additional interest owing on the Notes pursuant to the
Registration Rights Agreement.
Affiliate of any specified Person means (1) any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with such specified Person
or (2) any executive officer or director of such specified Person. For purposes of this definition,
control, as used with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise; provided that beneficial
ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms controlling, controlled by and under common control
with shall have correlative meanings.
Asset Sale means:
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(1) |
|
the sale, lease, conveyance or other disposition of any property or assets of the
Company or any Restricted Subsidiary thereof other than a transaction governed by the
provisions of the Indenture described above under the caption Repurchase at the Option
of HoldersChange of Control and/or the provisions described above under the caption
Certain CovenantsMerger, Consolidation or Sale of Assets; and |
|
(2) |
|
the issuance of Equity Interests by any of the Companys Restricted Subsidiaries or
the sale by the Company or any Restricted Subsidiary thereof of Equity Interests in any of
its Subsidiaries (other than directors qualifying shares and shares issued to foreign
nationals to the extent required by applicable law). |
83
Notwithstanding the preceding, the following items shall be deemed not to be Asset Sales:
|
(1) |
|
any single transaction or series of related transactions that involves assets having
a Fair Market Value of less than $5.0 million; |
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(2) |
|
a sale, lease, conveyance or other disposition of assets between or among the Company
and its Restricted Subsidiaries; |
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(3) |
|
an issuance of Equity Interests by a Restricted Subsidiary of the Company to the
Company or to another Restricted Subsidiary; |
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(4) |
|
the sale, lease, sublease, license or sublicense or consignment of equipment,
inventory, accounts receivable or other assets in the ordinary course of business; |
|
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(5) |
|
any sale of accounts receivable, or participations therein, in connection with any
Qualified Receivables Transaction; |
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(6) |
|
the licensing of intellectual property to third Persons on reasonable and customary
terms in the ordinary course of business consistent with past practice; provided that such
licensing does not materially interfere with the business of the Company or any of its
Restricted Subsidiaries; |
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(7) |
|
the sale or other disposition of Cash Equivalents; |
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(8) |
|
dispositions of accounts receivable in connection with the compromise, settlement or
collection thereof in the ordinary course of business or in bankruptcy or similar
proceedings; |
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(9) |
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a Restricted Payment that is permitted by the covenant described above under the
caption Certain CovenantsRestricted Payments and any Permitted Investment; |
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(10) |
|
any sale or disposition of any property or equipment that has become damaged, worn
out, obsolete or otherwise unsuitable for use in connection with the business of the
Company or its Restricted Subsidiaries; and |
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(11) |
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the creation of a Lien not prohibited by the Indenture. |
Beneficial Owner has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that in calculating the beneficial ownership of any particular person
(as that term is used in Section 13(d)(3) of the Exchange Act), such person shall be deemed to
have beneficial ownership of all securities that such person has the right to acquire by
conversion or exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms Beneficially Owns and
Beneficially Owned shall have a corresponding meaning.
Board of Directors means:
|
(1) |
|
with respect to a corporation, the board of directors of the corporation or, except
in the context of the definitions of Change of Control and Continuing Directors, a
duly authorized committee thereof; |
|
|
(2) |
|
with respect to a partnership, the Board of Directors of the general partner of the
partnership; and |
84
|
(3) |
|
with respect to any other Person, the board or committee of such Person serving a
similar function. |
Board Resolution means a resolution certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board of Directors of the Company and to be in full
force and effect on the date of such certification.
Borrowing Base means, as of any date, an amount equal to the sum of (i) 80% of the book
value of all accounts receivable owned by the Company or any of its Restricted Subsidiaries
(excluding any accounts receivable (x) more than 90 days past due, (y) due from Affiliates of the
Company or (z) in which any Receivables Subsidiary has any interest) as of the most recent fiscal
quarter for which internal financial statements are available and (ii) 65% of the net book value of
all inventory owned by the Company or any of its Restricted Subsidiaries as of the most recent
fiscal quarter for which internal financial statements are available, all calculated on a
consolidated basis and in accordance with GAAP.
Business Day means any day other than a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized or required by law,
regulation or executive order to remain closed.
Capital Lease Obligation means, at the time any determination thereof is to be made, the
amount of the liability in respect of a capital lease that would at that time be required to be
capitalized on a balance sheet in accordance with GAAP. For greater certainty, a lease that would
not have been classified as a capital lease had it been in place on the Issue Date, shall not be
considered a Capital Lease Obligation under the Indenture.
Capital Stock means:
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(1) |
|
in the case of a corporation, corporate stock; |
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(2) |
|
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate stock; |
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(3) |
|
in the case of a partnership or limited liability company, partnership or membership
interests (whether general or limited); and |
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(4) |
|
any other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing Person. |
Cash Equivalents means:
|
(1) |
|
United States dollars or, in the case of any Restricted Subsidiary organized under
the laws of any jurisdiction outside the United States, such local currencies held by such
Restricted Subsidiary from time to time in the ordinary course of business; |
|
|
(2) |
|
securities issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof), maturing, unless such
securities are deposited to defease any Indebtedness, not more than one year from the date
of acquisition; |
|
|
(3) |
|
commercial paper having one of the two highest ratings obtainable from Moodys or S&P
and in each case maturing within 90 days after the date of acquisition; |
85
|
(4) |
|
certificates of deposit and eurodollar time deposits with maturities of one year or
less from the date of acquisition, bankers acceptances with maturities not exceeding one
year and overnight bank deposits, in each case (x) with any commercial bank organized
under the laws of the United States, Canada or the United Kingdom (or any state, province
or territory thereof) or any foreign branch thereof having capital and surplus aggregating
at least $100.0 million or (y) insured by any nation or government, any state, province,
municipality or other political subdivision thereof, any central bank (or similar monetary
or regulatory authority) thereof, any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing, and any department, agency, board, commission,
tribunal, committee or instrumentality of any of the foregoing; |
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(5) |
|
mutual funds substantially all of the assets of which constitute Cash Equivalents of
the kinds described in clauses (1) through (4) of this definition; |
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|
(6) |
|
deposit accounts in the ordinary course of business with financial institutions (A)
located in the United States of America, Canada or the United Kingdom and (B) located in a
jurisdiction other than the United States of America, Canada or the United Kingdom in an
amount not in excess of $20.0 million in the aggregate; and |
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(7) |
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fully collateralized repurchase obligations of any commercial bank organized under
the laws of the United States of America or any state thereof, having capital and surplus
aggregating at least $100.0 million, having a term of not more than 30 days, with respect
to securities issued or fully guaranteed by the government of the United States of
America. |
Change of Control means the occurrence of any of the following:
|
(1) |
|
the direct or indirect sale, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets of the Company and its Restricted
Subsidiaries, taken as a whole, to any person (as that term is used in Section 13(d)(3)
of the Exchange Act); |
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(2) |
|
the adoption of a plan relating to the liquidation or dissolution of the Company; |
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(3) |
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any person or group (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) becomes the Beneficial Owner, directly or indirectly, of 50% or more of the
voting power of the Voting Stock of the Company; |
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|
(4) |
|
the first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors; or |
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(5) |
|
the Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into the Company, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company or such other
Person is converted into or exchanged for cash, securities or other property, other than
any such transaction where (A) the Voting Stock of the Company outstanding immediately
prior to such transaction is converted into or exchanged for Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person constituting a majority of the
outstanding shares of such Voting Stock of such surviving or transferee Person
(immediately after giving effect to such issuance) and (B) immediately after such
transaction, no person or group (as such terms are used in Section 13(d) and 14(d) of
the Exchange Act) becomes, directly or indirectly, the Beneficial Owner of 50% or more of
the voting power of the Voting Stock of the surviving or transferee Person. |
86
Commission means the United States Securities and Exchange Commission.
Common Stock means, with respect to any Person, any Capital Stock (other than Preferred
Stock) of such Person, whether outstanding on the Issue Date or issued thereafter.
Consolidated Cash Flow means, with respect to any specified Person for any period, the
Consolidated Net Income of such Person for such period plus:
|
(1) |
|
provision for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was deducted in
computing such Consolidated Net Income; plus |
|
|
(2) |
|
Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the
extent that any such Fixed Charges were deducted in computing such Consolidated Net
Income; plus |
|
|
(3) |
|
depreciation, amortization (including amortization of intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period), non-cash asset
impairment charges and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any future period
or amortization of a prepaid cash expense that was paid in a prior period) of such Person
and its Restricted Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such Consolidated Net
Income; minus |
|
|
(4) |
|
non-cash items increasing such Consolidated Net Income for such period, other than
the accrual of revenue consistent with past practice; |
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or profits of, the
Fixed Charges of and the depreciation and amortization and other non-cash expenses of, a Restricted
Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated Cash
Flow of the Company (A) in the same proportion that the Net Income of such Restricted Subsidiary
was added to compute such Consolidated Net Income of the Company and (B) only to the extent that a
corresponding amount would be permitted at the date of determination to be dividended or
distributed to the Company by such Restricted Subsidiary without prior governmental approval (that
has not been obtained), and without direct or indirect restriction pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
Consolidated Net Income means, with respect to any specified Person for any period, the
aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided that:
|
(1) |
|
the Net Income or loss of any Person that is not a Restricted Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid in cash to the specified Person or a
Restricted Subsidiary thereof; |
|
|
(2) |
|
the Net Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any |
87
|
|
|
agreement, instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its equityholders; |
|
|
(3) |
|
the Net Income of any Person acquired during the specified period for any period
prior to the date of such acquisition shall be excluded; |
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|
(4) |
|
the cumulative effect of a change in accounting principles shall be excluded; and |
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|
(5) |
|
notwithstanding clause (1) above, the Net Income or loss of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the specified Person or one of
its Subsidiaries. |
Consolidated Net Tangible Assets of any Person means, as of any date, the amount which, in
accordance with GAAP, would be set forth under the caption Total Assets (or any like caption) on
a consolidated balance sheet of such Person and its Restricted Subsidiaries, as of the end of the
most recently ended fiscal quarter for which internal financial statements are available, less (1)
all intangible assets, including, without limitation, goodwill, trade names, trademarks, patents,
purchased technology, unamortized debt discount and other like intangible assets, as shown on the
most recent balance sheet of the Company prepared in conformity with GAAP and (2) current
liabilities.
Continuing Directors means, as of any date of determination, any member of the Board of
Directors of the Company who:
|
(1) |
|
was a member of such Board of Directors on the Issue Date; or |
|
(2) |
|
was nominated for election or elected to such Board of Directors with the approval of
a majority of the Continuing Directors who were members of such Board of Directors at the
time of such nomination or election. |
Credit Agreement means that certain Third Amended and Restated Credit Agreement, dated as of
January 7, 2011, by and among the Company, the loan parties party thereto, Bank of America, N.A.,
as Lead Issuing Bank, Lead Arranger, Administrative Agent and Collateral Agent, and the other
lenders named therein, including any related notes, Guarantees, collateral documents, instruments
and agreements executed in connection therewith, and in each case as amended, restated, modified,
renewed, refunded, replaced or refinanced from time to time, regardless of whether such amendment,
restatement, modification, renewal, refunding, replacement or refinancing is with the same
financial institutions or otherwise.
Credit Facilities means, one or more debt facilities (including, without limitation, the
Credit Agreement), indentures, commercial paper facilities or other arrangements, in each case with
banks or other financial institutions or investors, providing for revolving credit loans, term
loans, notes, receivables financing (including through the sale of receivables to such institutions
or to special purpose entities formed to borrow from such institutions against such receivables),
letters of credit or other Indebtedness, in each case, as amended, restated, modified, renewed,
refunded, replaced, restructured, refinanced, repaid, increased or extended in whole or in part
from time to time.
Default means any event that is, or with the passage of time or the giving of notice or both
would be, an Event of Default.
Designated Non-cash Consideration means the Fair Market Value of non-cash consideration
received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that
is so designated as Designated Non-cash Consideration pursuant to an Officers Certificate, setting
forth the
88
basis of such valuation, less the amount of Cash Equivalents received in connection with a
subsequent sale of such Designated Non-cash Consideration.
Disqualified Stock means any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in each case at the option
of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is one year after the date on which the
Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the caption Certain
CovenantsRestricted Payments. The term Disqualified Stock shall also include any options,
warrants or other rights that are convertible into Disqualified Stock or that are redeemable at the
option of the holder, or required to be redeemed, prior to the date that is one year after the date
on which the Notes mature.
Domestic Subsidiary means any Restricted Subsidiary of the Company other than a Restricted
Subsidiary that is (1) a controlled foreign corporation under Section 957 of the Internal Revenue
Code (a) whose primary operating assets are located outside the United States and (b) that is not
subject to tax under Section 882(a) of the Internal Revenue Code because of a trade or business
within the United States (other than any entity under this clause (1) that Guarantees Indebtedness
of the Company or any of its other Domestic Subsidiaries) or (2) a Subsidiary of an entity
described in the preceding clause (1).
Earn-out Obligation means any contingent consideration based on future operating performance
of the acquired Person or assets or other purchase price adjustment or indemnification obligation
payable following the consummation of an acquisition based on criteria set forth in the
documentation governing or relating to such acquisition.
Equity Interests means Capital Stock and all warrants, options or other rights to acquire
Capital Stock (but excluding any debt security that is convertible into, or exchangeable for,
Capital Stock).
Equity Offering means (i) an offer and sale of Capital Stock (other than Disqualified Stock)
of the Company pursuant to a registration statement that has been declared effective by the
Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or
otherwise relating to equity securities issuable under any employee benefit plan of the Company) or
(ii) any private placement of Capital Stock (other than Disqualified Stock) of the Company to any
Person other than an Affiliate of the Company.
Existing Indebtedness means the aggregate principal amount of Indebtedness of the Company
and its Restricted Subsidiaries (other than Indebtedness under the Credit Agreement or under the
Notes and the related Note Guarantees) in existence on the Issue Date.
Fair Market Value means the price that would be paid in an arms-length transaction between
an informed and willing seller under no compulsion to sell and an informed and willing buyer under
no compulsion to buy, as determined in good faith by an executive officer of the Company.
Notwithstanding the foregoing, (1) if the Fair Market Value exceeds $10.0 million, the
determination of Fair Market Value must be made by the Board of Directors of the Company and be
evidenced by a Board Resolution attached to an Officers Certificate delivered to the Trustee and
(2) if the Fair Market Value exceeds $25.0 million, the determination of Fair Market Value must be
made by the Board of Directors of the
89
Company and such determination of Fair Market Value must be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national standing.
Fixed Charges means, with respect to any specified Person for any period, the sum, without
duplication, of:
|
(1) |
|
the consolidated interest expense of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit (other than trade letters of credit in the
ordinary course of business) or bankers acceptance financings, and net of the effect of
all payments made or received pursuant to Hedging Obligations; plus |
|
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(2) |
|
the consolidated interest of such Person and its Restricted Subsidiaries that was
capitalized during such period; plus |
|
|
(3) |
|
any interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person
or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called
upon; plus |
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(4) |
|
the product of (a) all dividends, whether paid or accrued and whether or not in cash,
on any series of Disqualified Stock or Preferred Stock of such Person or any of its
Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity
Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted
Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, |
in each case, on a consolidated basis and in accordance with GAAP.
Fixed Charge Coverage Ratio means with respect to any specified Person for any period, the
ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such
Person for such period. In the event that the specified Person or any of its Restricted
Subsidiaries Incurs, repays, repurchases or redeems any Indebtedness or issues, repurchases or
redeems Preferred Stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the Calculation Date), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such Incurrence, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Preferred
Stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of such
period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
|
(1) |
|
acquisitions and dispositions of business entities or property and assets
constituting a division or line of business of any Person that have been made by the
specified Person or any of its Restricted Subsidiaries (or any entity that subsequently
becomes a Restricted Subsidiary of the Company), including through mergers or
consolidations and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to the Calculation
Date shall be given pro forma effect as if they had occurred on the |
90
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|
|
first day of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated on a pro forma basis in accordance with Regulation S-X
under the Securities Act, but without giving effect to clause (3) of the proviso set forth
in the definition of Consolidated Net Income; |
|
|
(2) |
|
the Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, shall be excluded; |
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|
(3) |
|
the Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP shall be excluded, but only to the extent that the obligations giving
rise to such Fixed Charges will not be obligations of the specified Person or any of its
Restricted Subsidiaries following the Calculation Date; and |
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(4) |
|
consolidated interest expense attributable to interest on any Indebtedness (whether
existing or being Incurred) computed on a pro forma basis and bearing a floating interest
rate shall be computed as if the rate in effect on the Calculation Date (taking into
account any interest rate option, swap, cap or similar agreement applicable to such
Indebtedness if such agreement has a remaining term in excess of 12 months or, if shorter,
at least equal to the remaining term of such Indebtedness) had been the applicable rate
for the entire period. |
GAAP means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants, the opinions and pronouncements of the Public Company Accounting Oversight Board and
in the statements and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
Government Securities means securities that are direct obligations of the United States of
America for the timely payment of which its full faith and credit is pledged.
Guarantee means, as to any Person, a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or indirect, in any manner
including, without limitation, by way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of any Indebtedness of another
Person.
Guarantors means:
|
(1) |
|
each of our Subsidiaries that Incurs or Guarantees Obligations under the Credit
Agreement; and |
|
(2) |
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any other Subsidiary that executes a Note Guarantee in accordance with the provisions
of the Indenture; |
and their respective successors and assigns until released from their obligations under their Note
Guarantees and the Indenture in accordance with the terms of the Indenture.
Hedging Obligations means, with respect to any specified Person, the obligations of such
Person under:
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(1) |
|
interest rate swap agreements, interest rate cap agreements, interest rate collar
agreements and other agreements or arrangements with respect to interest rates; |
91
|
(2) |
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commodity swap agreements, commodity option agreements, forward contracts and other
agreements or arrangements with respect to commodity prices; and |
|
(3) |
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foreign exchange contracts, currency swap agreements and other agreements or
arrangements with respect to foreign currency exchange rates. |
Holder means a Person in whose name a Note is registered.
Incur means, with respect to any Indebtedness, to incur (by merger, conversion, exchange or
otherwise), create, issue, assume, Guarantee or otherwise become directly or indirectly liable for
or with respect to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness (and Incurrence and Incurred shall have meanings correlative to the foregoing);
provided that (1) any Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary of the Company will be deemed to be Incurred by such Restricted Subsidiary at
the time it becomes a Restricted Subsidiary of the Company and (2) neither the accrual of interest
nor the accretion of original issue discount nor the payment of interest in the form of additional
Indebtedness with the same terms and the payment of dividends on Disqualified Stock or Preferred
Stock in the form of additional shares of the same class of Disqualified Stock or Preferred Stock
(to the extent provided for when the Indebtedness or Disqualified Stock or Preferred Stock on which
such interest or dividend is paid was originally issued) shall be considered an Incurrence of
Indebtedness; provided that in each case the amount thereof is for all other purposes included in
the Fixed Charges and Indebtedness of the Company or its Restricted Subsidiary as accrued.
Indebtedness means, with respect to any specified Person, any indebtedness of such Person,
whether or not contingent:
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(1) |
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in respect of borrowed money; |
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(2) |
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evidenced by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof); |
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(3) |
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in respect of bankers acceptances; |
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(4) |
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in respect of Capital Lease Obligations; |
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(5) |
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in respect of the balance deferred and unpaid of the purchase price of any property
or services, except any such balance that constitutes an accrued expense or trade payable;
provided that Indebtedness will not include any Earn-out Obligation, except to the extent
that the contingent consideration relating thereto is not paid within 30 days after the
amount due is finally determined; |
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(6) |
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representing Hedging Obligations; |
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(7) |
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representing Disqualified Stock valued at the greater of its voluntary or involuntary
maximum fixed repurchase price plus accrued dividends; or |
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(8) |
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in the case of a Subsidiary of such Person, representing Preferred Stock valued at
the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued
dividends. |
In addition, the term Indebtedness includes (x) all Indebtedness of others secured by a Lien on
any asset of the specified Person (whether or not such Indebtedness is assumed by the specified
Person), provided
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that the amount of such Indebtedness shall be the lesser of (A) the Fair Market Value of such asset
at such date of determination and (B) the amount of such Indebtedness, and (y) to the extent not
otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person.
For purposes hereof, the maximum fixed repurchase price of any Disqualified Stock or Preferred
Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms
of such Disqualified Stock or Preferred Stock, as applicable, as if such Disqualified Stock or
Preferred Stock were repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture.
The amount of the Indebtedness in respect of any Hedging Obligations at any time shall be
equal to the amount payable as a result of the termination of such Hedging Obligations at such
time. The amount of any Indebtedness outstanding as of any date shall be the outstanding balance at
such date of all unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving rise to the
obligation, and shall be:
|
(1) |
|
the accreted value thereof, in the case of any Indebtedness issued with original
issue discount; and |
|
(2) |
|
the principal amount thereof, together with any interest thereon that is more than 30
days past due, in the case of any other Indebtedness. |
Notwithstanding the foregoing, Indebtedness will not include any guarantee by the Company or
any of its Restricted Subsidiaries of operating lease obligations that are not Indebtedness.
Investment Grade means, with respect to a debt rating of the Notes, a rating of Baa3 or
higher by Moodys together with a rating of BBB- or higher by S&P or, in the event S&P or Moodys
or both shall cease rating the Notes (for reasons outside the control of the Company) and the
Company shall select any other Rating Agency, the equivalent of such ratings by such other Rating
Agency.
Investments means, with respect to any Person, all direct or indirect investments by such
Person in other Persons (including Affiliates) in the form of loans or other extensions of credit
(including Guarantees), advances, capital contributions (by means of any transfer of cash or other
property to others or any payment for property or services for the account or use of others),
purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as investments on a balance
sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of
the Company, the Company shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the Fair Market Value of the Investment in such Subsidiary not sold or
disposed of. The acquisition by the Company or any Restricted Subsidiary of the Company of a Person
that holds an Investment in a third Person shall be deemed to be an Investment by the Company or
such Restricted Subsidiary in such third Person in an amount equal to the Fair Market Value of the
Investment held by the acquired Person in such third Person.
Issue Date means the date of original issuance of the Notes under the Indenture.
Lien means, with respect to any asset, any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise
perfected under applicable law, including any conditional sale or other title retention agreement,
any lease in the nature thereof, any option or other agreement to sell or give a security interest
in and any filing of or
93
agreement to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction.
Moodys means Moodys Investors Service, Inc. or any successor to its debt rating business.
Net Income means, with respect to any specified Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock
dividends, excluding, however:
|
(1) |
|
any gain or loss, together with any related provision for taxes on such gain or loss,
realized in connection with: (a) any sale of assets outside the ordinary course of
business of such Person; or (b) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or
any of its Restricted Subsidiaries; |
|
|
(2) |
|
any extraordinary gain or loss, together with any related provision for taxes on such
extraordinary gain or loss; |
|
|
(3) |
|
any non-cash goodwill or intangible asset impairment charges resulting from the
application of FAS 142; |
|
|
(4) |
|
any non-cash charges related to restructuring, debt retirement and/or store closings; |
|
|
(5) |
|
taxes expensed or paid in accordance with the provisions of the American Jobs
Creation Act of 2004 on any funds repatriated by any Restricted Subsidiary of the Company
to the Company; provided that the aggregate amount of such funds the taxes relating to
which are excluded from the calculation of Net Income of the Company pursuant to this
clause shall not exceed $60.0 million; and |
|
|
(6) |
|
all non-cash expenses related to stock-based compensation plans, including stock
option non-cash expenses. |
Net Proceeds means the aggregate cash proceeds, including payments in respect of deferred
payment obligations (to the extent corresponding to the principal, but not the interest component,
thereof) received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of (1) the direct costs relating to such
Asset Sale, including, without limitation, legal, accounting, investment banking and brokerage
fees, and sales commissions, and any relocation expenses incurred as a result thereof, (2) taxes
paid or payable as a result thereof, in each case, after taking into account any available tax
credits or deductions and any tax sharing arrangements, (3) amounts required to be applied to the
repayment of Indebtedness or other liabilities secured by a Lien on the asset or assets that were
the subject of such Asset Sale or required to be paid as a result of such sale, (4) any reserve for
adjustment in respect of the sale price of such asset or assets established in accordance with
GAAP, (5) in the case of any Asset Sale by a Restricted Subsidiary of the Company, payments to
holders of Equity Interests in such Restricted Subsidiary in such capacity (other than such Equity
Interests held by the Company or any Restricted Subsidiary thereof) to the extent that such payment
is required to permit the distribution of such proceeds in respect of the Equity Interests in such
Restricted Subsidiary held by the Company or any Restricted Subsidiary thereof and (6) appropriate
amounts to be provided by the Company or its Restricted Subsidiaries as a reserve against
liabilities associated with such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale, all as determined in
accordance with GAAP; provided that (a) excess amounts set aside for payment
94
of taxes pursuant to clause (2) above remaining after such taxes have been paid in full or the
statute of limitations therefor has expired and (b) amounts initially held in reserve pursuant to
clause (6) no longer so held, will, in the case of each of subclause (a) and (b), at that time
become Net Proceeds.
Note Guarantee means a Guarantee of the Notes pursuant to the Indenture.
Obligations means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation governing any
Indebtedness.
Officer means, with respect to any Person, the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer,
any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.
Officers Certificate means a certificate signed on behalf of the Company by at least two
Officers of the Company, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of the Company, that meets the
requirements of the Indenture.
Opinion of Counsel means an opinion from legal counsel, who may be counsel to or an employee
of the Company, or other counsel reasonably acceptable to the Trustee, that meets the requirements
of the Indenture.
Permitted Business means any business conducted or proposed to be conducted (as described in
the prospectus) by the Company and its Restricted Subsidiaries on the date of the Indenture and
other businesses reasonably related or ancillary thereto.
Permitted Investments means:
|
(1) |
|
any Investment in the Company or in a Restricted Subsidiary of the Company; |
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|
(2) |
|
any Investment in Cash Equivalents; |
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|
(3) |
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any Investment by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of such Investment: |
|
(a) |
|
such Person becomes a Restricted Subsidiary of the Company; or |
|
|
(b) |
|
such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary of the Company; |
|
(4) |
|
any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant described above
under the caption Repurchase at the Option of HoldersAsset Sales; |
|
|
(5) |
|
Investments to the extent acquired in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; |
|
|
(6) |
|
Hedging Obligations that are Incurred for the purpose of fixing, hedging or swapping
interest rate, commodity price or foreign currency exchange rate risk (or to reverse or
amend any such agreements previously made for such purposes), and not for speculative
purposes; |
95
|
(7) |
|
stock, obligations or securities received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with, customers and
suppliers, in each case in the ordinary course of business or received in satisfaction of
judgment; |
|
|
(8) |
|
advances to customers or suppliers in the ordinary course of business that are, in
conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the
balance sheet of the Company or its Restricted Subsidiaries and endorsements for
collection or deposit arising in the ordinary course of business; |
|
|
(9) |
|
commission, payroll, travel and similar advances to officers and employees of the
Company or any of its Restricted Subsidiaries made consistent with past practices; |
|
|
(10) |
|
Investments by the Company or a Restricted Subsidiary of the Company in a Receivables
Subsidiary or any Investment by a Receivables Subsidiary in any other Person, in each
case, in connection with a Qualified Receivables Transaction; |
|
|
(11) |
|
Investments consisting of the licensing or contribution of intellectual property in
the ordinary course of business; |
|
|
(12) |
|
Loans or advances to employees of the Company or any of its Restricted Subsidiaries
that are approved in good faith by a majority of the disinterested members of the Board of
Directors of the Company in an aggregate amount outstanding not to exceed $2.0 million at
any time; and |
|
|
(13) |
|
other Investments in any Person other than an Unrestricted Subsidiary (provided that
any such corporation, partnership, joint venture or other entity is not an Affiliate of
the Company or is an Affiliate of the Company solely because the Company, directly or
indirectly, owns Equity Interests in, or controls, such corporation, partnership, joint
venture or other entity) having an aggregate Fair Market Value (measured on the date each
such Investment was made and without giving effect to subsequent changes in value), when
taken together with all other Investments made pursuant to this clause (13) since the date
of the Indenture, not to exceed $50.0 million. |
Permitted Liens means:
|
(1) |
|
Liens securing obligations in an amount when created or Incurred, together with the
amount of all other obligations and Indebtedness secured by a Lien under this clause (1)
at that time outstanding, not to exceed the greater of (a) the aggregate amount of
Indebtedness permitted to be Incurred pursuant to clause (1) of the second paragraph under
the caption Certain CovenantsIncurrence of Indebtedness; and (b) the maximum
principal amount of Indebtedness that, as of the date such Indebtedness could be incurred
and after giving effect to the incurrence of such Indebtedness, would not cause the
Secured Leverage Ratio of the Company and the Restricted Subsidiaries to exceed 3.5 to
1.0; |
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|
(2) |
|
Liens on the assets of the Company or any Restricted Subsidiary thereof securing
Indebtedness Incurred under clause (15) of the second paragraph of the covenant described
under the caption Certain CovenantsIncurrence of Indebtedness; |
|
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(3) |
|
Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor; |
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|
(4) |
|
Liens on property of a Person existing at the time such Person is merged with or into
or consolidated with the Company or any Restricted Subsidiary of the Company; provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do |
96
|
|
|
not extend to any assets other than those of the Person merged into or consolidated with
the Company or the Restricted Subsidiary; |
|
|
(5) |
|
Liens on property existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary of the Company, provided that such Liens were in existence prior to
the contemplation of such acquisition and do not extend to any property other than the
property so acquired by the Company or the Restricted Subsidiary; |
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(6) |
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Liens securing the Notes and the Note Guarantees; |
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(7) |
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Liens existing on the date of the Indenture; |
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(8) |
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Liens securing Permitted Refinancing Indebtedness; provided that such Liens do not
extend to any property or assets other than the property or assets that secure the
Indebtedness being refinanced; |
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(9) |
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Liens on property or assets used to defease or to satisfy and discharge Indebtedness;
provided that (a) the Incurrence of such Indebtedness was not prohibited by the Indenture
and (b) such defeasance or satisfaction and discharge is not prohibited by the Indenture; |
|
|
(10) |
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Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (4) of the second paragraph of the covenant described under the caption Certain
CovenantsIncurrence of Indebtedness; provided that any such Lien (i) covers only the
assets acquired, constructed or improved with such Indebtedness and (ii) is created within
180 days of such acquisition, construction or improvement; |
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(11) |
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Liens to secure Indebtedness Incurred for the purpose of financing all or any part of
the purchase price or cost of construction or improvement of any warehouse facility used
in the business of the Company or any Restricted Subsidiary of the Company, in an
aggregate principal amount not to exceed at any time outstanding $35.0 million; |
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(12) |
|
Liens on cash or Cash Equivalents securing Hedging Obligations of the Company or any
of its Restricted Subsidiaries (a) that are Incurred for the purpose of fixing, hedging or
swapping interest rate, commodity price or foreign currency exchange rate risk (or to
reverse or amend any such agreements previously made for such purposes), and not for
speculative purposes, or (b) securing letters of credit that support such Hedging
Obligations; |
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(13) |
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Liens incurred or deposits made in the ordinary course of business in connection with
workers compensation, unemployment insurance or other social security obligations; |
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(14) |
|
Lien, deposits or pledges to secure the performance of bids, tenders, contracts
(other than contracts for the payment of Indebtedness), leases, or other similar
obligations arising in the ordinary course of business; |
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|
(15) |
|
survey exceptions, encumbrances, easements or reservations of, or rights of other
for, rights of way, zoning or other restrictions as to the use of properties, and defects
in title which, in the case of any of the foregoing, were not incurred or created to
secure the payment of Indebtedness, and which in the aggregate do not materially adversely
affect the value of such properties or materially impair the use for the purposes of which
such properties are held by the Company or any of its Restricted Subsidiaries; |
97
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(16) |
|
judgment and attachment Liens not giving rise to an Event of Default and notices of
lis pendens and associated rights related to litigation being contested in good faith by
appropriate proceedings and for which adequate reserves have been made; |
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(17) |
|
Liens, deposits or pledges to secure public or statutory obligations, surety, stay,
appeal, indemnity, performance or other similar bonds or obligations; and Liens, deposits
or pledges in lieu of such bonds or obligations, or to secure such bonds or obligations,
or to secure letters of credit in lieu of or supporting the payment of such bonds or
obligations; |
|
|
(18) |
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Liens in favor of collecting or payor banks having a right of setoff, revocation,
refund or chargeback with respect to money or instruments of the Company or any Subsidiary
thereof on deposit with or in possession of such bank; |
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(19) |
|
any interest or title of a lessor, licensor or sublicensor in the property subject to
any lease, license or sublicense; |
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(20) |
|
Liens arising from precautionary UCC financing statements regarding operating leases
or consignments; |
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(21) |
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Liens of franchisors in the ordinary course of business not securing Indebtedness; |
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(22) |
|
Liens for taxes, assessments and governmental charges not yet delinquent or being
contested in good faith and for which adequate reserves have been established to the
extent required by GAAP; |
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(23) |
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Liens on cash and Cash Equivalents to secure letters of credit for the account of any
Person that were in existence prior to, and not in contemplation of, the acquisition of
such Person by the Company or any Restricted Subsidiary of the Company pending the
replacement thereof with letters of credit issued under the Credit Agreement; provided
that the aggregate Fair Market Value of all cash and Cash Equivalents subject to such
Liens pursuant to this clause (23) shall not at any time exceed $5.0 million; |
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|
(24) |
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carriers, warehousemens, mechanics, materialmens, repairmens and other like
Liens imposed by law, arising in the ordinary course of business and securing obligations
that are not overdue by more than 30 days or are being contested in good faith by
appropriate proceedings and for which adequate reserves have been made; and |
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(25) |
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Liens incurred in the ordinary course of business of the Company or any Restricted
Subsidiary of the Company with respect to obligations that do not exceed at any time
outstanding the greater of (x) $25.0 million and (y) 5.0% of the Companys Consolidated
Net Tangible Assets on such date of Incurrence. |
Permitted Refinancing Indebtedness means:
|
(A) |
|
any Indebtedness of the Company or any of its Restricted Subsidiaries (other than
Disqualified Stock) issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or
any of its Restricted Subsidiaries (other than Disqualified Stock and intercompany
Indebtedness); provided that: |
|
(1) |
|
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted value, if
applicable) of the |
98
|
|
|
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus
all accrued and unpaid interest thereon and the amount of any reasonably determined
premium necessary to accomplish such refinancing and such reasonable expenses
incurred in connection therewith); |
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(2) |
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such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to Maturity equal
to or greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; |
|
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(3) |
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if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes or the Note
Guarantees, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of the Notes and is subordinated in right of payment to
the Notes or the Note Guarantees, as applicable, on terms at least as favorable,
taken as a whole, to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded; |
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(4) |
|
if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is pari passu in right of payment with the Notes or any Note
Guarantees, such Permitted Refinancing Indebtedness is pari passu with, or
subordinated in right of payment to, the Notes or such Note Guarantees; and |
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|
(5) |
|
such Indebtedness is Incurred by either (a) the Restricted Subsidiary
that is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded or (b) the Company; and |
|
(B) |
|
any Disqualified Stock of the Company or any of its Restricted Subsidiaries issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew, replace
or refund Indebtedness or other Disqualified Stock of the Company or any of its Restricted
Subsidiaries (other than Indebtedness or Disqualified Stock held by the Company or any of
its Restricted Subsidiaries); provided that: |
|
(1) |
|
the liquidation or face value of such Permitted Refinancing Indebtedness
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness, or the liquidation or face value of the Disqualified Stock, as
applicable, so extended, refinanced, renewed, replaced or refunded (plus all accrued
and unpaid interest or dividends thereon and the amount of any reasonably determined
premium necessary to accomplish such refinancing and such reasonable expenses
incurred in connection therewith); |
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(2) |
|
such Permitted Refinancing Indebtedness has a final redemption date later
than the final maturity or redemption date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness or Disqualified Stock being extended, refinanced, renewed, replaced or
refunded; |
|
|
(3) |
|
such Permitted Refinancing Indebtedness has a final redemption date later
than the final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable, taken as a whole, to the Holders of Notes as
those contained in the documentation governing the Indebtedness or Disqualified Stock
being extended, refinanced, renewed, replaced or refunded; |
99
|
(4) |
|
such Permitted Refinancing Indebtedness is not redeemable at the option of
the holder thereof or mandatorily redeemable prior to the final maturity or
redemption date of the Indebtedness or Disqualified Stock being extended, refinanced,
renewed, replaced or refunded; and |
|
|
(5) |
|
such Disqualified Stock is issued by either (a) the Restricted Subsidiary
that is the issuer of the Indebtedness or Disqualified Stock being extended,
refinanced, renewed, replaced or refunded or (b) the Company. |
Person means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited liability company or government or
other entity.
Preferred Stock means, with respect to any Person, any Capital Stock of such Person that has
preferential rights to any other Capital Stock of such Person with respect to dividends or
redemptions upon liquidation.
Purchase Money Note means a promissory note evidencing a line of credit, or evidencing other
Indebtedness, owed to the Company or any Restricted Subsidiary of the Company in connection with a
Qualified Receivables Transaction, which note shall be repaid from cash available to the maker of
such note, other than amounts required to be established as reserves pursuant to agreement, amounts
paid to investors in respect of interest, principal and other amounts owing to such investors and
amounts paid in connection with the purchase of newly generated receivables.
Qualified Receivables Transaction means any transaction or series of transactions that may
be entered into by the Company or by any Restricted Subsidiary of the Company pursuant to which the
Company or any Restricted Subsidiary of the Company may sell, convey or otherwise transfer to a
Receivables Subsidiary, any accounts receivable (whether now existing or arising in the future) of
the Company or any Restricted Subsidiary of the Company and any asset related thereto, including,
without limitation, all collateral securing such accounts receivable, and all Guarantees or other
obligations in respect of such accounts receivable, proceeds of such accounts receivable and other
assets that are customarily transferred, or in respect of which security interests are customarily
granted, in connection with an asset securitization transaction involving accounts receivable.
Rating Agency means a statistical rating agency or agencies, as the case may be, nationally
recognized in the United States and selected by the Company (as certified by a resolution of the
Board of Directors of the Company) which shall be substituted for S&P or Moodys, or both, as the
case may be.
Receivables Subsidiary means a Subsidiary of the Company (other than a Guarantor) that
engages in no activities other than in connection with the financing of accounts receivables and
that is designated by the Board of Directors of the Company (as provided below) as a Receivables
Subsidiary (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of
which (i) is guaranteed by the Company or any other Restricted Subsidiary of the Company (excluding
Guarantees of obligations (other than the principal of, and interest on, Indebtedness) pursuant to
Standard Securitization Undertakings), (ii) is recourse to or obligates the Company or any other
Restricted Subsidiary of the Company in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of the Company or any other Restricted
Subsidiary of the Company, directly or indirectly, contingently or otherwise to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither the
Company nor any other Restricted Subsidiary of the Company has any material contract, agreement,
arrangement or understanding (except in connection with a Purchase Money Note or Qualified
Receivables Transaction) other than on terms no less favorable to the Company or such other
Restricted Subsidiary of the Company than those that might be obtained at the time from Persons
that are not Affiliates of the Company, other than fees payable in the ordinary course of business
in connection
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with servicing accounts receivable, and (c) to which neither the Company nor any other
Restricted Subsidiary of the Company has any obligation to maintain or preserve such entitys
financial condition or cause such entity to achieve a certain level of operating results. Any such
designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board Resolution giving effect to such designation and an
Officers Certificate certifying, to the best of such officers knowledge and belief after
consulting with counsel, that such designation complied with the foregoing conditions.
Registration Rights Agreement means the Registration Rights Agreement, to be dated the date
of the Indenture, among the Company, the Guarantors and Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
Replacement Assets means (1) non-current assets that will be used or useful in a Permitted
Business or (2) substantially all the assets of a Permitted Business or a majority of the Voting
Stock of any Person engaged in a Permitted Business that will become on the date of acquisition
thereof a Restricted Subsidiary of such Person.
Restricted Investment means an Investment other than a Permitted Investment.
Restricted Subsidiary of a Person means any Subsidiary of such Person that is not an
Unrestricted Subsidiary.
S&P means Standard & Poors Ratings Services, a division of McGraw Hill, Inc., a New York
corporation or any successor to its debt rating business.
Secured Indebtedness means any Indebtedness secured by a Lien.
Secured Leverage Ratio means, as of any date of determination with respect to any Person,
the ratio of (1) Secured Indebtedness of such Person and its Restricted Subsidiaries as of such
date of calculation (determined on a consolidated basis in accordance with GAAP), less any
Indebtedness Incurred pursuant to clause (1) of the second paragraph under the caption Certain
CovenantsIncurrence of Indebtedness, plus $680.0 million to (2) Consolidated Cash Flow of such
Person and its Restricted Subsidiaries for the period of the most recent four consecutive fiscal
quarters ending prior to the date of such determination for which financial statements prepared on
a consolidated basis in accordance with GAAP are available. In the event that the Company or any of
its Restricted Subsidiaries Incurs or redeems any Secured Indebtedness subsequent to the
commencement of the period for which the Secured Leverage Ratio is being calculated but prior to
the event for which the calculation of the Secured Leverage Ratio is made, then the Secured
Leverage Ratio shall be calculated giving pro forma effect to such Incurrence or redemption of
Indebtedness as if the same had occurred at the beginning of the applicable four fiscal quarter
period. The Secured Leverage Ratio shall be calculated in a manner consistent with the definition
of Fixed Charge Coverage Ratio, including any pro forma adjustments to Consolidated Cash Flow as
set forth therein (including for acquisitions).
Significant Subsidiary means any Subsidiary that would constitute a significant subsidiary
within the meaning of Article 1 of Regulation S-X of the Securities Act.
Standard Securitization Undertaking means representations, warrantees, covenants and
indemnities entered into by the Company or any Restricted Subsidiary of the Company, which in the
good faith judgment of the Board of Directors of the Company, are reasonably customary in an
accounts receivable transaction.
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Stated Maturity means, with respect to any installment of interest or principal on any
series of Indebtedness, the date on which such payment of interest or principal was scheduled to be
paid in the original documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof. The Stated Maturity of any intercompany
Indebtedness payable upon demand shall be the date of demand of payment under such Indebtedness.
Stock Purchase Agreement means the Stock Purchase Agreement, dated as of the February 17,
2011, by and among the Company, Brown Shoe Netherlands B.V., American Sporting Goods Corporation,
the individual stockholders listed on the signature pages thereto and Jerome A. Turner, as the
initial representative.
Subsidiary means, with respect to any specified Person:
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any corporation, association, limited liability company or other business entity of
which more than 50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other Subsidiaries of that Person (or a combination
thereof); and |
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any partnership (a) the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or one or more Subsidiaries of such Person (or any combination thereof). |
Unrestricted Subsidiary means any Subsidiary of the Company that is designated by the Board
of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution in
compliance with the covenant described under the caption Certain CovenantsDesignation of
Restricted and Unrestricted Subsidiaries, and any Subsidiary of such Subsidiary.
Voting Stock of any Person as of any date means the Capital Stock of such Person that is at
the time entitled to vote in the election of the Board of Directors of such Person.
Weighted Average Life to Maturity means, when applied to any Indebtedness at any date, the
number of years obtained by dividing:
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the sum of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and the making
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the then outstanding principal amount of such Indebtedness. |
Wholly Owned Restricted Subsidiary of any specified Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of which (other than
directors qualifying shares or Investments by foreign nationals mandated by applicable law) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted Subsidiaries of such
Person.
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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES
The following is a summary of the material U.S. federal income and, in the case of non-U.S.
holders (as defined below), estate, tax consequences relevant to the exchange of original notes for
exchange notes pursuant to the exchange offer, and the ownership and disposition of exchange notes
acquired by U.S. holders and non-U.S. holders (collectively referred to as holders) pursuant to
the exchange offer. This discussion does not describe all of the U.S. federal income tax
consequences that may be relevant to a holder in light of its particular circumstances or to
holders subject to special rules, including, without limitation, tax-exempt organizations, holders
subject to the U.S. federal alternative minimum tax, dealers in securities or currencies, financial
institutions, insurance companies, regulated investment companies, certain former citizens or
residents of the U.S., partnerships, S corporations or other pass-through entities, U.S. holders
(as defined below) whose functional currency is not the U.S. dollar and persons that hold the notes
in connection with a straddle, hedging, conversion or other risk-reduction transaction.
The U.S. federal income tax consequences set forth below are based upon the Internal Revenue
Code of 1986, as amended (the Code), Treasury regulations promulgated thereunder, court
decisions, and rulings and pronouncements of the Internal Revenue Service (IRS) all as in effect
on the date hereof and, all of which are subject to change or differing interpretations at any time
with possible retroactive effect. There can be no assurance that the IRS will not challenge one or
more of the tax consequences described herein, and we have not sought any ruling from the IRS with
respect to statements made and conclusions reached in this discussion. Furthermore, there can be no
assurance that the IRS will agree with such statements and conclusions.
As used herein, the term U.S. holder means a beneficial owner of an exchange note that is
for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the U.S.; |
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a corporation, or other entity taxable as a corporation for U.S. federal income tax
purposes, created or organized in or under the laws of the U.S. or of any state thereof or
the District of Columbia; |
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an estate the income of which is subject to U.S. federal income taxation regardless
of its source; or |
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a trust, if a court within the U.S. is able to exercise primary jurisdiction over its
administration and one or more U.S. persons have authority to control all of its
substantial decisions, or if the trust has a valid election in effect under applicable
Treasury regulations to be treated as a U.S. person. |
As used herein, the term non-U.S. holder means a beneficial owner of an exchange note that
is neither a U.S. holder nor a partnership or an entity treated as a partnership for U.S. federal
income tax purposes.
If a partnership (including any entity treated as a partnership for U.S. federal income tax
purposes) is a beneficial owner of an original note or exchange note, the tax treatment of a
partner in the partnership generally will depend upon the status of the partner and the activities
of the partnership. A beneficial owner that is a partnership and partners in such a partnership
should consult their tax advisors about the U.S. federal income tax consequences of the exchange of
original notes for exchange notes pursuant to the exchange offer and the ownership and disposition
of exchange notes acquired pursuant to the exchange offer.
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This discussion does not address the tax consequences arising under any state, local or
foreign law. Furthermore, this discussion does not consider the effect of the U.S. federal estate
or gift tax laws (except as set forth below with respect to certain U.S. federal estate tax
consequences to non-U.S. holders).
Investors should consult their own tax advisors with respect to the application of the U.S.
federal income tax laws to their particular situations as well as any tax consequences arising
under the U.S. federal estate or gift tax rules or under the laws of any state, local or foreign
taxing jurisdiction or under any applicable tax treaty.
U.S. Holders
Exchange Offer
The exchange of an original note for an exchange note pursuant to the exchange offer will not be
treated as a taxable exchange for U.S. federal income tax purposes. Consequently, U.S. holders will
not recognize gain or loss upon receipt of an exchange note. The holding period for an exchange
note will include the holding period for the original note and the initial basis in the exchange
note will be the same as the adjusted basis in the original note.
Treatment of the Notes
In certain circumstances, we may be obligated to pay amounts in excess of the stated interest
or principal on the exchange notes, including as described under Description of the Exchange
NotesOptional Redemption, and Description of the Exchange NotesRepurchase at the Option of
HoldersChange of Control. Our obligation to pay such excess amounts may cause the IRS to take
the position that the exchange notes are contingent payment debt instruments for U.S. federal
income tax purposes. If the IRS is successful in such an assertion, the timing and amount of income
included and the character of gain recognized with respect to the exchange notes may be different
from the consequences described herein. Notwithstanding this possibility, we do not believe that
the exchange notes are contingent payment debt instruments, and consequently, we do not intend to
treat the exchange notes as contingent payment debt instruments. Such determination by us is
binding on all holders unless a holder discloses its differing position in a statement attached to
its timely filed U.S. federal income tax return for the taxable year during which a exchange note
was acquired. The remainder of this discussion assumes that the exchange notes will not be treated
as contingent payment debt instruments for U.S. federal income tax purposes.
Payments of Interest
In general, a U.S. holder will be required to recognize as ordinary income any interest
received or accrued on the exchange notes, in accordance with the U.S. holders regular method of
tax accounting.
Market Discount
If a U.S. holder purchased an original note (which will be exchanged for an exchange note
pursuant to the exchange offer) for an amount that is less than its adjusted issue price, the
amount of such difference should be treated as market discount for U.S. federal income tax
purposes. Subject to a de minimis exception, gain realized on the maturity, sale, exchange,
redemption, retirement or other taxable disposition of a market discount note will be treated as
ordinary income to the extent of any accrued market discount not previously recognized (including,
in the case of an exchange note, any market discount accrued on the original note for which such
exchange note was exchanged). Unless a U.S holder elects to accrue market discount under a constant
yield method, any market discount will be considered to
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accrue ratably during the period from the date of acquisition of a note (including, in the
case of an exchange note exchanged for an original note, the date of the acquisition of the
original note) to the maturity date.
A U.S. holder may elect to include market discount in income currently as it accrues, either
ratably or on a constant yield method. In that case, such holders tax basis in its notes will
increase by such income inclusions. An election to include market discount in income currently,
once made, will apply to all market discount obligations acquired by such holder during the taxable
year of the election and thereafter, and may not be revoked without consent of the IRS.
If a U.S. holder does not make such an election, in general, all or a portion of its interest
expense on any indebtedness incurred or continued in order to purchase or carry notes (including,
in the case of an exchange note, the interest expense of any indebtedness incurred or continued in
order to purchase or carry the original note for which such exchange note was exchanged) may be
deferred until maturity or certain earlier dispositions.
The rules regarding market discount are complex. U.S. Holders should consult their own tax
advisors regarding the market discount rules.
Amortizable Bond Premium
If a U.S. holder purchased the original notes for an amount greater than their face value,
such holder will have purchased such notes with amortizable bond premium. Such holder generally may
elect to amortize that premium from the purchase date to the maturity date of the notes under the
constant yield method. Amortizable bond premium generally may be deducted against interest income
on the original note or the exchange note (including, in the case of an exchange note, the income
on the original note for which such exchange note was exchanged) and generally may not be deducted
against other income. A U.S. holders basis in a note will be reduced by any premium amortization
deductions. An election to amortize premium on a constant yield method, once made, generally
applies to all debt obligations held or subsequently acquired by such holder during the taxable
year of the election and thereafter, and may not be revoked without IRS consent.
The rules regarding amortizable bond premium are complex. U.S. Holders should consult their
own tax advisors regarding the amortizable bond premium rules.
Sale, Redemption, or Other Taxable Disposition of Exchange Notes
A U.S. holder generally will recognize capital gain or loss on the sale, redemption or other
taxable disposition of an exchange note. The U.S. holders gain or loss will equal the difference
between the proceeds received by the holder (other than redemption proceeds attributable to accrued
interest) and the holders adjusted tax basis in the exchange note. The proceeds received by a U.S.
holder will include the amount of any cash and the fair market value of any other property received
for the exchange note. In general, a U.S. holders adjusted tax basis in a note will equal the
amount paid for the note increased by any market discount previously included in income and
decreased (but not below zero) by amortized bond premium and the amount of any payments other than
qualified stated interest payments received with respect to the note. The portion of any redemption
proceeds that is attributable to accrued interest will not be taken into account in computing the
U.S. holders capital gain or loss. Instead, that portion will be recognized as ordinary interest
income to the extent that the U.S. holder has not previously included the accrued interest in
income. The gain or loss recognized by a U.S. holder on a disposition of the exchange note will be
capital gain or loss and will be long-term capital gain or loss if the holder held the exchange
note for more than one year. Under current U.S. federal income tax law, net long-term capital gains
of
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non-corporate U.S. holders (including individuals) are eligible for taxation at preferential
rates. The deductibility of capital losses is subject to limitation.
Medicare Tax
For taxable years beginning after December 31, 2012, recently enacted legislation generally
will impose a 3.8% Medicare tax on a portion or all of the net investment income of certain
individuals with a modified adjusted gross income of over $200,000 ($250,000 in the case of joint
filers) and on the undistributed net investment income of certain estates and trusts. For these
purposes, net investment income generally will include interest (including interest paid with
respect to a note), dividends, annuities, royalties, rents, net gain attributable to the
disposition of property not held in a trade or business (including net gain from the sale,
exchange, redemption or other taxable disposition of an exchange note) and certain other income,
but will be reduced by any deductions properly allocable to such income or net gain. If you are a
U.S. holder that is an individual, estate or trust, you are urged to consult your tax advisors
regarding the applicability of the Medicare tax to your income and gains in respect of your
investment in the exchange notes.
Information Reporting and Backup Withholding
Unless a U.S. holder is an exempt recipient, such as a corporation, payments made with respect
to the exchange notes may be subject to information reporting and may also be subject to U.S.
federal backup withholding at the applicable rate if a U.S. holder fails to comply with applicable
U.S. information reporting and certification requirements.
Backup withholding is not an additional tax. Any amount withheld from you under the backup
withholding rules generally will be allowed as a refund or a credit against your U.S. federal
income tax liability, provided the required information is furnished timely to the IRS.
Non-U.S. Holders
Exchange Offer
Non-U.S. holders will not recognize gain or loss upon receipt of an exchange note for an
original note pursuant to the exchange offer.
Payments of Interest
Interest paid on an exchange note by us or our agent to a non-U.S. holder will qualify for the
portfolio interest exemption and will not be subject to U.S. federal income tax or withholding of
such tax, provided that such interest income is not effectively connected with a U.S. trade or
business of the non-U.S. holder (and, if a tax treaty applies, is not attributable to a U.S.
permanent establishment or fixed base maintained by the non-U.S. holder within the U.S.) and
provided that the non-U.S. holder:
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does not actually or by attribution own 10% or more of the combined voting power of
all classes of our stock entitled to vote; |
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is not a controlled foreign corporation for U.S. federal income tax purposes that is
related to us actually or by attribution through stock ownership; |
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is not a bank that acquired the notes in consideration for an extension of credit
made pursuant to a loan agreement entered into in the ordinary course of business; and |
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either (a) provides an appropriate IRS Form W-8 (or a suitable substitute form)
signed under penalties of perjury that includes the non-U.S. holders name and address,
and certifies as to non-U.S. status in compliance with applicable law and regulations; or
(b) is a securities clearing organization, bank or other financial institution that holds
customers securities in the ordinary course of its trade or business and provides a
statement to us or our agent under penalties of perjury in which it certifies that such an
IRS Form W-8 (or a suitable substitute form) has been received by it from the non-U.S.
holder or qualifying intermediary and furnishes us or our agent with a copy. The Treasury
regulations provide special certification rules for notes held by a foreign partnership
and other intermediaries. |
If such non-U.S. holder cannot satisfy the requirements described above, payments of interest
made to the non-U.S. holder will be subject to withholding of 30% U.S. federal withholding tax
unless such holder provides us with the appropriate, properly executed, IRS Form W-8 claiming an
exemption from (or reduction of) withholding under the benefit of a treaty.
If interest on an exchange note is effectively connected with a U.S. trade or business by a
non-U.S. holder and, if a tax treaty applies, is attributable to a U.S. permanent establishment or
fixed base maintained by the non-U.S. holder within the U.S., the non-U.S. holder generally will
not be subject to withholding if the non-U.S. holder complies with applicable IRS certification
requirements (i.e., by delivering a properly executed IRS Form W-8ECI or suitable substitute form)
and generally will be subject to U.S. federal income tax on a net income basis at regular graduated
rates in the same manner as if the holder were a U.S. holder. In the case of a non-U.S. holder that
is a corporation, such effectively connected income also may be subject to the additional branch
profits tax, which generally is imposed on a foreign corporation on the deemed repatriation from
the U.S. of effectively connected earnings and profits at a 30% rate (or such lower rate as may be
prescribed by an applicable tax treaty).
Sale, Redemption or Other Taxable Disposition of the Exchange Notes
Generally, any gain recognized by a non-U.S. holder on the disposition of an exchange note
(other than amounts attributable to accrued and unpaid interest, which are described under
Payments of Interest above) will not be subject to U.S. federal income tax and withholding,
unless:
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the gain is effectively connected with the conduct of a U.S. trade or business by the
non-U.S. holder (and, if required by an applicable tax treaty, the gain is attributable to
a permanent establishment maintained in the U.S. by the non-U.S. holder); or |
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the non-U.S. holder is an individual who is present in the U.S. for 183 days or more
during the taxable year of that disposition, and certain other conditions are met or the
non-U.S. holder is subject to Code provisions applicable to certain U.S. expatriates. |
A non-U.S. holder should consult his or her tax advisor regarding the tax consequences of the
purchase, ownership and disposition of the exchange notes.
Information Reporting and Backup Withholding
Non-U.S. holders may be required to comply with certain certification procedures to establish
that the holder is not a U.S. person in order to avoid information reporting and backup
withholding.
Backup withholding is not an additional tax. Any amount withheld from you under the backup
withholding rules generally will be allowed as a refund or a credit against your U.S. federal
income tax liability, provided the required information is furnished timely to the IRS.
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Non-U.S. holders should consult their tax advisors regarding the application of information
reporting and backup withholding in their particular situations, the availability of an exemption
therefrom, and the procedures for obtaining such an exemption, if available.
U.S. Estate Tax
Exchange notes held, or treated as held, by an individual who is not a citizen or resident of
the U.S., as specifically defined for U.S. federal estate tax purposes, at the time of death will
not be included in the decedents gross estate for U.S. federal estate tax purposes, provided that,
at the time of death, the non-U.S. holder does not own, actually or by attribution, 10% or more of
the total combined voting power of all classes of our stock entitled to vote, and provided that, at
the time of death, payments with respect to such exchange notes would not have been effectively
connected with the conduct of a trade or business within the U.S. by such non-U.S. holder.
THE U.S. FEDERAL INCOME AND ESTATE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON YOUR PARTICULAR SITUATION. YOU SHOULD
CONSULT YOUR OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO YOU OF THE EXCHANGE OF THE
ORIGINAL NOTES FOR THE EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER AND THE OWNERSHIP AND
DISPOSITION OF EXCHANGE NOTES ACQUIRED PURSUANT TO THE EXCHANGE OFFER, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
FEDERAL OR OTHER TAX LAWS.
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PLAN OF DISTRIBUTION
The exchange offer is not being made to, nor will we accept surrenders of original notes for
exchange from, holders of original notes in any jurisdiction in which the exchange offer or the
acceptance thereof would not be in compliance with the securities or blue sky laws of such
jurisdiction.
The distribution of this prospectus and the offer and sale of the exchange notes may be
restricted by law in certain jurisdictions. Persons who come into possession of this prospectus or
any of the exchange notes must inform themselves about and observe any such restrictions. You must
comply with all applicable laws and regulations in force in any jurisdiction in which you purchase,
offer or sell the exchange notes or possess or distribute this prospectus and, in connection with
any purchase, offer or sale by you of the exchange notes, must obtain any consent, approval or
permission required under the laws and regulations in force in any jurisdiction to which you are
subject or in which you make such purchase, offer or sale.
In reliance on interpretations of the staff of the SEC set forth in no-action letters issued
to third parties in similar transactions, we believe that the exchange notes issued in the exchange
offer in exchange for the original notes may be offered for resale, resold and otherwise
transferred by holders without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that the exchange notes are acquired in the ordinary course of each
such holders business and the holders are not engaged in and do not intend to engage in and have
no arrangement or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of exchange notes. This position does not apply to any holder that
is:
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an affiliate of Brown Shoe within the meaning of Rule 405 under the Securities Act; or |
All broker-dealers receiving exchange notes in the exchange offer are subject to a prospectus
delivery requirement with respect to resales of the exchange notes. Each broker-dealer receiving
exchange notes for its own account in the exchange offer must represent that the original notes to
be exchanged for the exchange notes were acquired by it as a result of market-making activities or
other trading activities and acknowledge that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any offer to resell, resale or other retransfer of the
exchange notes pursuant to the exchange offer. However, by so acknowledging and by delivering a
prospectus, the participating broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the Securities Act. We have agreed that, for a period ending upon the earlier
of (i) 180 days after the date of this prospectus or (ii) the date broker-dealers are no longer
required to deliver a prospectus in connection with resales, subject to extension under limited
circumstances, we will use all commercially reasonable efforts to keep the exchange offer
registration statement effective and make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with such resales. To date, the SEC has taken the position
that broker-dealers may use a prospectus such as this one to fulfill their prospectus delivery
requirements with respect to resales of exchange notes received in an exchange such as the exchange
pursuant to the exchange offer, if the original notes for which the exchange notes were received in
the exchange were acquired for their own accounts as a result of market-making or other trading
activities.
We will not receive any proceeds from any sale of the exchange notes by broker-dealers.
Broker-dealers acquiring exchange notes for their own accounts may sell the notes in one or more
transactions in the over-the-counter market, in negotiated transactions, through writing options on
the exchange notes or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-dealer and/or the
purchasers of such exchange notes.
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Any broker-dealer that held original notes acquired for its own account as a result of
market-making activities or other trading activities, that received exchange notes in the exchange
offer, and that participates in a distribution of exchange notes may be deemed to be an
underwriter within the meaning of the Securities Act and must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the exchange notes. Any profit
on these resales of exchange notes and any commissions or concessions received by a broker-dealer
in connection with these resales may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not admit that it is an underwriter within the meaning of the
Securities Act.
We have agreed to pay all expenses incident to our participation in the exchange offer,
including the reasonable fees and expenses of one counsel for the holders of original notes and the
initial purchasers, other than commissions or concessions of any broker-dealers and will indemnify
holders of the original notes, including any broker-dealers, against specified types of
liabilities, including liabilities under the Securities Act. We note, however, that in the opinion
of the SEC, indemnification against liabilities under federal securities laws is against public
policy and may be unenforceable.
LEGAL MATTERS
Certain legal matters with respect to the exchange notes and guarantees will be passed upon
for us by Bryan Cave LLP, St. Louis, Missouri. Certain legal matters of Pennsylvania law relating
to the guarantees by Brown Group Retail, Inc. will be passed upon for us by Cozen OConnor,
Philadelphia, Pennsylvania. Certain legal matters of Canadian law relating to the guarantees by
Brown Shoe Company of Canada Ltd will be passed upon for us by McMillan LLP, Ontario, Canada.
INDEPENDENT ACCOUNTANTS
Ernst & Young LLP, independent registered public accounting firm, has audited our financial
statements and schedule included in our Annual Report on Form 10-K for the fiscal year ended
January 29, 2011, as set forth in their report, which is incorporated by reference in this
prospectus.
The financial statements of ASG as of December 31, 2010 and 2009 and for the two years ended
December 31, 2010, incorporated by reference in this prospectus, have been audited by BDO USA, LLP,
an independent registered public accounting firm, and by Shanghai Zhonghua, Certified Public
Accountants, as stated in their reports appearing therein. In addition, in connection with SEC
requirements for a recently acquired subsidiary guarantor of the exchange notes, Ernst & Young LLP,
independent registered public accounting firm, has audited the financial statements included in
this prospectus for ASG for the fiscal year ended December 31, 2010, as set forth in their report,
which is included in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
Our Internet address is www.brownshoe.com. The information contained on our website is not
incorporated by reference into this prospectus and should not be considered part of this
prospectus.
We file annual, quarterly and current reports, proxy statements and other information with the
Securities and Exchange Commission (SEC). You can read and copy any materials we file with the SEC
at its Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can also obtain
information about the operation of the SECs Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains a Web site that contains information, and Brown Shoe files
electronically with the SEC, which you can access over the Internet at http://www.sec.gov.
110
We are incorporating by reference into this prospectus information that we file with the
SEC. This permits us to disclose important information to you by referencing these filed documents.
Any information referenced this way is considered to be a part of this prospectus and any
information filed by us with the SEC subsequent to the date of this prospectus automatically will
be deemed to update and supersede this information. We incorporate by reference the following
documents which we have filed with the SEC:
|
|
|
our Annual Report on Form 10-K for the fiscal year ended January 29, 2011, which we
filed with the SEC on April 1, 2011; |
|
|
|
our Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011, which
we filed with the SEC on June 9, 2011; and |
|
|
|
our Current Reports on Form 8-K filed with the SEC on February 17, 2011 (as amended
on Form 8-K/A filed with the SEC on April 22, 2011), April 27, 2011, May 11, 2011, May 13,
2011, and May 26, 2011. |
We incorporate by reference any filings made with the SEC in accordance with Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act on or after the date of this prospectus and before the
closing of the exchange offer. Documents incorporated by reference into this prospectus speak only
as of the dates stated in such documents. Any such statement or information so modified or
superseded shall not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
Descriptions in this prospectus, including those contained in the documents incorporated by
reference, of contracts and other documents are not necessarily complete and, in each instance,
reference is made to the copies of these contracts and documents filed as exhibits to the documents
incorporated by reference in this prospectus. We will provide to each person, including any
beneficial owner to whom a prospectus is delivered, without charge, upon written or oral request, a
copy of any or all of the documents that are incorporated by reference into this prospectus,
excluding any exhibits to those documents unless the exhibit is specifically incorporated by
reference as an exhibit in this prospectus. You should direct requests for documents to: Investor
Relations Department, Brown Shoe Company, Inc., 8300 Maryland Avenue, St. Louis, Missouri 63105,
telephone: (314) 854-4000.
111
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
|
|
|
F-2 |
|
Consolidated Financial Statements |
|
|
|
|
|
|
|
F-3 - F-4 |
|
|
|
|
F-5 |
|
|
|
|
F-6 |
|
|
|
|
F-7 - F-8 |
|
|
|
|
F-9 - F-24 |
|
|
|
|
F-25 |
|
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
American Sporting Goods Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of American Sporting Goods Corporation
and Subsidiaries (the "Company") as of December 31, 2010, and the related consolidated statements of income,
stockholders equity and comprehensive income, and cash flows for the year ended December 31, 2010.
These financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these financial statements based on our audit. We did not audit the
consolidated financial statements of the foreign holding company, ASG Asia Investments Company
Limited, which statements reflect total assets of $28,291,000 as of December 31, 2010 and total net
revenues of $58,059,000 for the year then ended. Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts
included for ASG Asia Investments Company Limited, is based solely on the reports of the other
auditors.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We
were not engaged to perform an audit of the Companys internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the consolidated financial position of
American Sporting Goods Corporation and Subsidiaries at December 31, 2010, and the consolidated
results of its operations and its cash flows for the period ended December 31, 2010, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young
St. Louis, Missouri
July 14, 2011
F-2
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2010
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
5,889 |
|
Accounts receivable, net of allowances for doubtful accounts
of $951,000 for 2010 |
|
|
31,714 |
|
Inventories, net |
|
|
50,371 |
|
Other receivables |
|
|
2,992 |
|
Income tax receivable |
|
|
1,380 |
|
Prepaid expenses and other current assets |
|
|
1,087 |
|
Deferred income taxes |
|
|
2,535 |
|
|
Total current assets |
|
|
95,968 |
|
|
|
|
|
|
Other assets |
|
|
44 |
|
Intangible assets, net |
|
|
5,350 |
|
Property, plant and equipment, net |
|
|
10,205 |
|
Deferred income taxes |
|
|
3,334 |
|
|
Total assets |
|
$ |
114,901 |
|
|
F-3
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
DECEMBER 31, 2010
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Liabilities and Equity |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Credit facility |
|
$ |
11,539 |
|
Accounts payable |
|
|
20,034 |
|
Accrued expenses |
|
|
11,075 |
|
Obligations under capital leases, current portion |
|
|
38 |
|
Income taxes payable |
|
|
251 |
|
|
Total current liabilities |
|
|
42,937 |
|
|
|
Equity |
|
|
|
|
Common
stock, $0.0001 par value. Authorized 200,000 shares; 100,000 shares issued and outstanding |
|
|
|
|
Preferred stock, $0.0001 par value. Authorized 30,000
shares; 21,000 shares issued and outstanding.
Liquidation value of $10,000 per share |
|
|
|
|
Additional paid-in capital |
|
|
5,000 |
|
Accumulated other comprehensive income |
|
|
2,255 |
|
Retained earnings |
|
|
64,566 |
|
|
Total stockholders equity attributable to American
Sporting Goods Corporation and Subsidiaries |
|
|
71,821 |
|
|
Noncontrolling interest in consolidated subsidiaries |
|
|
143 |
|
|
Total equity |
|
|
71,964 |
|
|
Total liabilities and equity |
|
$ |
114,901 |
|
|
See accompanying notes to consolidated financial statements.
F-4
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Revenues, net |
|
$ |
231,742 |
|
Cost of sales |
|
|
144,172 |
|
|
Gross profit |
|
|
87,570 |
|
Selling, general and administrative expenses |
|
|
61,965 |
|
Other expenses, net |
|
|
571 |
|
Interest expense |
|
|
743 |
|
Interest and miscellaneous income |
|
|
(474 |
) |
|
Income before income taxes |
|
|
24,765 |
|
Income taxes |
|
|
9,815 |
|
|
Net income |
|
|
14,950 |
|
Noncontrolling interest in loss of consolidated subsidiaries |
|
|
255 |
|
|
Net income attributable to American Sporting Goods
Corporation and Subsidiaries |
|
$ |
15,205 |
|
|
See accompanying notes to consolidated financial statements.
F-5
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
|
Noncontrolling |
|
|
|
|
|
|
Total |
|
|
|
Common Stock |
|
|
Preferred Stock |
|
|
Paid-in |
|
|
Comprehensive |
|
|
Retained |
|
|
Interest in |
|
|
Total |
|
|
Comprehensive |
|
(in thousands) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income |
|
|
Earnings |
|
|
Cons. Subs. |
|
|
Equity |
|
|
Income |
|
|
Balances, December
31, 2009 |
|
|
100 |
|
|
$ |
|
|
|
|
21 |
|
|
$ |
|
|
|
$ |
5,000 |
|
|
$ |
1,615 |
|
|
$ |
49,361 |
|
|
$ |
398 |
|
|
$ |
56,374 |
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,205 |
|
|
|
(255 |
) |
|
|
14,950 |
|
|
$ |
14,950 |
|
Foreign
currency
translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
640 |
|
|
|
|
|
|
|
|
|
|
|
640 |
|
|
|
640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,590 |
|
Comprehensive
loss attributable
to the
noncontrolling
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income attributable
to American
Sporting Goods
Corporation and
Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
15,845 |
|
|
Balances,
December 31, 2010 |
|
|
100 |
|
|
$ |
|
|
|
|
21 |
|
|
$ |
|
|
|
$ |
5,000 |
|
|
$ |
2,255 |
|
|
$ |
64,566 |
|
|
$ |
143 |
|
|
$ |
71,964 |
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Operating activities |
|
|
|
|
Net income |
|
$ |
14,950 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
4,008 |
|
Provision for doubtful accounts |
|
|
226 |
|
Inventory reserves |
|
|
(147 |
) |
Deferred income taxes |
|
|
(738 |
) |
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
|
|
1,377 |
|
Inventories |
|
|
(10,574 |
) |
Other receivables |
|
|
(2,259 |
) |
Income tax receivable |
|
|
1,216 |
|
Prepaid expenses and other current assets |
|
|
3,012 |
|
Other assets |
|
|
540 |
|
Accounts payable |
|
|
4,645 |
|
Accrued expenses |
|
|
2,732 |
|
Other liabilities |
|
|
66 |
|
|
Net cash provided by operating activities |
|
|
19,054 |
|
|
Investing activities |
|
|
|
|
Purchases of property, plant and equipment |
|
|
(4,574 |
) |
|
Net cash used in investing activities |
|
|
(4,574 |
) |
|
Financing activities |
|
|
|
|
Credit facility activity, net |
|
|
(14,479 |
) |
Payments of term loan payable other |
|
|
(25 |
) |
Payments of obligations under capital leases |
|
|
(43 |
) |
|
Net cash used in financing activities |
|
|
(14,547 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
640 |
|
|
Net increase in cash |
|
|
573 |
|
Cash and cash equivalents, beginning of year |
|
|
5,316 |
|
|
Cash and cash equivalents, end of year |
|
$ |
5,889 |
|
|
F-7
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)
YEAR ENDED DECEMBER 31, 2010
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
Cash and cash equivalents paid during year for: |
|
|
|
|
Income taxes paid, net |
|
$ |
8,693 |
|
Interest |
|
$ |
743 |
|
|
See accompanying notes to consolidated financial statements.
F-8
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
1. Description of Business
Nature of Business
American Sporting Goods Corporation and Subsidiaries (ASG or the Company) is a Delaware
corporation which was incorporated on December 29, 1983. Current operations include both the
manufacture and sale of sporting goods to retailers.
Basis of Consolidation
The consolidated financial statements include the accounts of ASG and its wholly-owned
subsidiaries, the Basketball Marketing Company, Inc. (AND 1), GAIC, LLC, a joint venture formed
in 2007 with an unrelated party, in which the Company owned a 75% interest and which was dissolved
in 2010, and ASG Asia Investments Company Limited (ASG Asia). GAIC, LLC was 100% consolidated in
the accompanying consolidated financial statements as the entity was controlled by ASG.
ASG Asia was formed in 2006 and incorporated in Hong Kong. At that time, the Company transferred
its interest in Suzhou Turntec Footwear Co., Ltd. (Suzhou) to ASG Asia. Suzhou was incorporated
in the Peoples Republic of China in January 1994 as a wholly foreign owned enterprise. Suzhous
operating period expired January 2010. Suzhou previously owned 100% of Shanghai American Sports
Trading Co., Ltd. (SAST), a company incorporated in the Peoples Republic of China. SASTs
operating period expires in 2012. In August 2008, Suzhou sold their interest in SAST; a 70%
interest was sold to ASG Asia and a 30% interest was sold to a related party, Wonderful Idea
Investments, Ltd., which is owned by an employee of the Company. See Note 16.
During 2006, ASG Asia formed Yingtan ASG Footwear Co. Ltd. (Yingtan ASG), a company incorporated
in the Peoples Republic of China. Yingtans operating period expires in 2021. During 2007, ASG
Asia formed Shangrao City ASG Footwear Co. Ltd. (Shangrao), a company incorporated in the
Peoples Republic of China. Shangraos operating period expires in 2022. All significant
intercompany accounts and transactions have been eliminated.
In 2009, Suzhou closed the factory located in Suzhou and moved to Yingtan province. Suzhou received
a new tax ID in Yingtan province in 2010 and changed its name to Yingtan Turntec Footwear Co., Ltd.
(Yingtan Turntec). In connection with the Suzhou factory closure, Suzhou recognized a severance
cost. See further discussion at Note 15. As of December 31, 2010, Yingtan Turntec was in the
process of liquidation.
The consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America.
F-9
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect the amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and the reported amounts of
revenues and expenses during the reporting periods. On an ongoing basis, the Company evaluates its
estimates, including those related to provisions for doubtful accounts, inventory reserves,
intangible assets, long-lived assets, and income taxes. The Company bases its estimates on
historical experience and on various other assumptions believed to be reasonable under the
circumstances. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
Cash equivalents are defined as liquid, short-term investments with original maturities of three
months or less when purchased.
Fair Value of Financial Instruments
The Companys consolidated financial instruments included cash and cash equivalents, accounts
receivable, accounts payable, accrued expenses, and current and long-term debt. The carrying amount
of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses are
considered to be representative of their respective fair values because of the short-term nature of
those instruments. The carrying amount of the line of credit approximates fair value since the
interest rate approximates the market rate for debt securities with similar terms and risk
characteristics.
Accounts Receivable and Allowances for Doubtful Accounts
Accounts receivables are stated at cost less an allowance for doubtful accounts. Management
provides for probable uncollectible amounts through a charge to earnings and a credit to an
allowance for doubtful accounts based on its assessment of the current status of individual
accounts. Balances that are still outstanding after management has used reasonable collection
efforts are written off through a charge to the allowance for doubtful accounts and a credit to
trade accounts receivable. Changes in the allowance for doubtful accounts have not been material to
the consolidated financial statements.
Inventory
Inventory is stated at the lower of cost (first-in, first-out and average cost methods) or market
value.
Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation. Leasehold
improvements are amortized over the shorter of the lease term or the estimated useful life of the
improvements. Major improvements are capitalized while routine repairs and maintenance are charged
to expense when incurred. Depreciation and amortization are calculated using the straight-line
method based on the following estimated useful lives:
F-10
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
|
|
|
Furniture and fixtures
|
|
5 years |
Machinery and equipment
|
|
3 to 10 years |
Leasehold improvements
|
|
Shorter of the lease term or useful life |
Production molds
|
|
1 to 2 years |
Vehicles
|
|
3 to 5 years |
Computer system and hardware
|
|
3 to 5 years |
|
Impairment of Long-Lived Assets
The Company assesses potential impairments to its long-lived assets when there is evidence that
events or changes in circumstances indicate that the carrying amount of an asset may not be
recovered. An impairment loss is recognized when the carrying amount of the long-lived asset is not
recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use
and eventual disposition of the asset. Any required impairment loss is measured as the amount by
which the carrying amount of a long-lived asset exceeds its fair value and is recorded as a
reduction in the carrying value of the related asset and a charge to operating results. Based upon
its assessment as of December 31, 2010, the Company has determined there was no impairment of its
long-lived assets.
Intangible Assets
The Company evaluates the carrying value of intangible assets for impairment in accordance with ASC
350, Intangibles Goodwill and Other. Indefinite-lived intangible assets are not amortized, but
rather reviewed for impairment at least annually.
Intangible assets consist of the following and are included in intangible assets, net on the
accompanying consolidated balance sheet as of December 31, 2010:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
License |
|
$ |
3,000 |
|
Trademarks |
|
|
3,439 |
|
Patents |
|
|
16 |
|
|
Total |
|
|
6,455 |
|
|
Less accumulated amortization |
|
|
(1,105 |
) |
|
|
|
$ |
5,350 |
|
|
ASG acquired the license for the Avia brand name on November 4, 2004 from a stockholder of the
Company for $3 million. The intangible assets above are indefinite lived intangibles. As such,
there is no amortization expense relating to the intangible assets for the year ended December 31,
2010. The Company has determined that there is no impairment as of December 31, 2010.
F-11
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
Comprehensive Income
In accordance with ASC 220, Comprehensive Income, the Company reports accumulated other
comprehensive income in its consolidated balance sheet. Comprehensive income includes net income
and other comprehensive income, which includes current period foreign currency translation
adjustments.
Foreign Currency Matters
The Company accounts for foreign operations in accordance with ASC 830, Foreign Currency Matters.
The foreign subsidiaries use their local currency as the functional currency.
Assets and liabilities are translated using the exchange rate at the balance sheet date. Income and
expense accounts are translated at average exchange rates prevailing during the period. Cumulative
unrealized translation gains and losses are reflected as a separate component of accumulated other
comprehensive income.
Revenue Recognition
The Company recognizes revenue from product sales when it is realized or realizable and earned,
which is generally at the time of shipment and passage of title. Revenue is considered to be
realized or realizable and earned when there is persuasive evidence of a sales arrangement in the
form of a contract or a purchase order, the product has been shipped, the sales price is fixed or
determinable and collectability is reasonably assured. Revenues, as well as accounts receivable,
are recorded net of estimated adjustments related to certain sales allowances, discounts and
rebates. If and when customer terms differ from the Companys standard practice, management
estimates and recognizes the differences at the balance sheet date. Allowances for advertising are
recorded as selling expenses.
Product Development
Product development costs are expensed as incurred. Such costs are included in selling, general and
administrative expenses on the consolidated statement of income and amounted to $2,413,000 for
2010.
Shipping and Handling Expenses
Shipping and handling expenses are included in selling, general and administrative expenses and
amounted to $2,991,000 for 2010.
Advertising Expenses
The Company and its subsidiaries expense the production costs of advertising the first time the
advertising takes place. Advertising and promotion costs aggregated approximately $19,309,000 in
2010. Of this amount, $1,034,000 represents costs associated with barter transactions in 2010. As
of December 31, 2010, the Company determined that unused barter credits did not have continuing
value on a go forward basis. Of the $1,034,000 recognized in 2010, approximately $945,000
represented a write-off of remaining unused barter credits.
Interest Expense
Interest expense during the year ended December 31, 2010, was approximately $743,000.
F-12
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
Income Taxes
The Company accounts for income taxes under the provisions of ASC 740, Income Taxes. This statement
requires the recognition of deferred tax assets and liabilities for the future consequences of
events that have been recognized in the Companys consolidated financial statements or tax returns.
Measurement of the deferred items is based on enacted tax laws. In the event the future consequence
of differences between the financial reporting bases and the tax bases of the Companys assets and
liabilities result in a
deferred tax asset, ASC 740 requires an evaluation of the probability of being able to realize the
future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is
recorded when it is more likely than not that some portion or all of the deferred tax asset will
not be realized.
3. Inventories, Net
Inventories comprise the following as of December 31, 2010:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Raw material |
|
$ |
2,535 |
|
Work in process |
|
|
3,093 |
|
Finished goods |
|
|
44,743 |
|
|
|
|
$ |
50,371 |
|
|
At December 31, 2010, the Company has reserved $1,877,000 for excess and slow moving inventory.
4. Property, Plant and Equipment, Net
Property, plant and equipment, net are comprised of the following as of December 31, 2010:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Furniture and fixtures |
|
$ |
196 |
|
Machinery and equipment |
|
|
11,703 |
|
Leasehold improvements |
|
|
1,738 |
|
Production molds |
|
|
3,835 |
|
Vehicles |
|
|
420 |
|
Computer system and hardware |
|
|
3,500 |
|
|
Total |
|
|
21,392 |
|
|
Less accumulated depreciation and amortization |
|
|
(12,038 |
) |
|
|
|
|
9,354 |
|
Construction-in-progress |
|
|
851 |
|
|
|
|
$ |
10,205 |
|
|
Depreciation and amortization expense for the year ended December 31, 2010 is $4,008,000.
F-13
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
Property, plant, and equipment include gross assets acquired under capital leases of $352,000 at
December 31, 2010 and related amortization included in accumulated depreciation was $324,000.
Capital leases are included as a component of machinery and equipment as well as computer systems
and hardware. Amortization of assets under capital leases is included in depreciation and
amortization expense. Property, plant, and equipment also included unamortized capitalized software
of $1,087,000 at December 31, 2010 and amortization of capitalized software for the year ended
December 31, 2010 was $268,000.
5. Credit Facility
On November 14, 2008, the Company entered into a two-year credit agreement, as amended, with a
financing company under which eligible accounts receivable are sold with recourse for a total
commitment of $45,000,000, expiring November 14, 2011, with one-year automatic renewals unless
terminated by either party with 60 days notice. This arrangement is accounted for as a secured
financing. Borrowings under the agreement are limited to a borrowing base equal to the sum of up to
85% of eligible accounts receivable (as defined) of ASG and AND 1 and the lesser of $15 million or
50% of eligible inventory (as defined) of ASG and AND 1 and 85% of the net orderly liquidation
value (as determined by an independent third-party appraisal acceptable to the bank) of the
Company, subject to certain additional limitations. Interest was payable monthly at 3.5% above the
banks LIBOR rate through May 2010 and as amended, is payable monthly at 2.5% above the banks
LIBOR rate, thereafter, subject to certain limitations. Amounts available for borrowing under the
agreement at December 31, 2010 were $25,241,000. The balance due under this agreement as of
December 31, 2010, was $11,539,000. Included in the credit facility balance is ASG and AND 1s
outstanding checks.
The credit facility is secured by an interest in substantially all of the assets of the Company, as
defined. Among other things, the Company is required to maintain a minimum tangible net worth (as
defined). The agreement provides the finance company with certain rights available to a secured
lender. As of December 31, 2010, the Company was in compliance with this covenant. See Note 16
regarding payoff of credit facility subsequent to December 31, 2010.
6. Term Loan Payable Other
The Company entered into a $166,000 term loan agreement with a software provider. Monthly payments
of $3,000, including interest at 6.5% a year, were due through September 2010. There was no balance
due under this agreement as of December 31, 2010.
7. Capital Stock
The preferred stock is 10% cumulative redeemable voting preferred stock, Series A (Series A
preferred stock). The Series A preferred stock is redeemable on or after March 31, 2008, at the
Companys option, at its liquidation value, plus any accumulated and unpaid dividends. The
liquidation value is $10,000 per share. Dividends are payable when declared. Each share of Series A
preferred stock is entitled to a number of votes equal to the product of 20 multiplied by the
number of votes represented by one share of common stock.
F-14
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
8. Obligations Under Capital Leases
The Company leases equipment under capital leases that expire on various dates through 2012.
Interest is payable monthly at interest rates between 5.3% and 6.5%. Future minimum lease payments
under the capital leases and the present value of the net minimum lease payments, are as follows
for the years ending December 31:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
2011 |
|
$ |
38 |
|
2012 |
|
|
4 |
|
|
|
Total minimum lease payments |
|
|
42 |
|
Less: Amounts representing interest |
|
|
4 |
|
|
|
Present value of net minimum lease payments |
|
|
38 |
|
Less: Current portion of capital leases |
|
|
(38 |
) |
|
|
Obligations under capital leases, net of current portion |
|
$ |
|
|
|
9. Leases
The Company and its subsidiaries rent office and warehouse space and equipment under long-term
leases and various month-to-month rentals. The long-term lease for office and warehouse space
contains provisions for increased rentals based on increases in real estate taxes and operating
expenses.
Minimum annual rentals under long-term leases comprise the following for the years ending December
31:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
2011 |
|
$ |
2,799 |
|
2012 |
|
|
1,062 |
|
2013 |
|
|
248 |
|
2014 |
|
|
231 |
|
2015 |
|
|
230 |
|
2016 and thereafter |
|
|
172 |
|
|
Total minimum lease payments |
|
$ |
4,742 |
|
|
F-15
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
Net rent expense for the year ended December 31, 2010 comprises:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Office and warehouse space |
|
$ |
3,051 |
|
Equipment |
|
|
339 |
|
|
|
|
|
3,390 |
|
Less sublease income(1) |
|
|
(52 |
) |
|
Total |
|
$ |
3,338 |
|
|
|
|
|
|
(1) |
|
Sublease income relates to leased space that was no longer being used. |
10. Income Taxes
Income tax provision comprises the following for the year ended December 31, 2010:
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Current |
|
|
|
|
Federal |
|
$ |
7,842 |
|
State |
|
|
2,244 |
|
Foreign |
|
|
467 |
|
|
|
|
|
10,553 |
|
|
|
|
|
|
|
Deferred |
|
|
|
|
Federal |
|
|
(564 |
) |
State |
|
|
(154 |
) |
Foreign |
|
|
(20 |
) |
|
|
|
|
(738 |
) |
|
Total income tax provision |
|
$ |
9,815 |
|
|
Income taxes at the statutory rate differ from the provision for income taxes primarily as a result
of certain expenses not deductible for tax purposes, and reduced tax rates on the Companys equity
in the operations of its foreign affiliates. Additionally, the Company experienced tax holidays for
certain foreign subsidiaries.
Deferred income taxes reflect the net effects of temporary differences between the carrying amount
of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes.
F-16
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
Significant components of deferred income tax assets and liabilities are as follows as of December
31, 2010:
|
|
|
|
|
(in thousands) |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
Operating loss carry forwards |
|
$ |
2,700 |
|
Tax credit carry forwards |
|
|
2,266 |
|
Inventory |
|
|
1,159 |
|
Allowance for bad debts |
|
|
379 |
|
Trade credits |
|
|
1,452 |
|
Other |
|
|
1,015 |
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
8,971 |
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Property and equipment |
|
|
(798 |
) |
Prepaids and other |
|
|
(108 |
) |
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
(906 |
) |
|
|
|
|
|
|
Subtotal |
|
|
8,065 |
|
|
|
|
|
|
Valuation allowance |
|
|
(2,196 |
) |
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
5,869 |
|
|
As of December 31, 2010, the Company has no federal net operating loss carryforwards and various
state operating loss carryforwards aggregating $38,416,000 expiring in years through 2028,
available to offset future taxable income. Some of the acquired net operating loss carryforward
from the AND 1 acquisition are limited in its use. At December 31, 2010, deferred income tax assets
include $2,258,000 for the tax effect of these state net operating loss carryforwards. The
valuation allowance is primarily related to state net operating loss carryforwards.
As of December 31, 2010, the Company has foreign net operating loss carryforwards of $1,769,000
expiring in years through 2014, available to offset future foreign taxable income, subject to local
tax bureau approval. At December 31, 2010, deferred income tax assets include $442,000, for the tax
effect of these foreign net operating loss carryforwards with a full valuation allowance.
F-17
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
11. Unrecognized Tax Benefits
The Company accounts for unrecognized tax benefits under the amended ASC 740, Income Taxes. There
are no uncertain tax positions recorded under this amendment nor any accruals related to interest
or penalties. The Company is under examination for tax years 2007 and 2008 by the Internal Revenue
Service. The Company believes that the results of the examination will not have a material impact
on the consolidated financial statements. The Company reports interest and penalties, if any,
related to uncertain tax positions in income tax expense. The Company is subject to examination in
various jurisdictions for tax years open to statute which include 2007 and forward for federal, and
2006 and forward for state.
12. 401(k) Plan
The Companys 401(k) Plan (the Plan) provides for benefits to eligible employees upon their
retirement, death, disability, or separation from the Company. AND 1 employees are covered by the
Companys Plan. The Plan permits participants to contribute a portion of their annual compensation,
as defined, to the extent allowed by law. The Plan requires the employer to contribute an amount
equal to 100% of the first 3% and 50% of the next 2% of the employees compensation. The Company
contributed approximately $369,000 to the Plan in 2010.
13. Related Party Transactions
The Company was acquired by Brown Shoe Company, Inc. (Brown Shoe) on February 17, 2011. See Note
16. During 2010, gross sales to Brown Shoe aggregated approximately $13,494,000. At December 31,
2010, net amounts due from Brown Shoe aggregated $1,107,000.
14. Business Concentrations
The Company and certain subsidiaries sell athletic footwear manufactured by contractors in China to
retailers located throughout the United States and in Canada, Europe, South America, Asia and New
Zealand. Total assets on the consolidated balance sheet included approximately $28,291,000 for ASG
Asia located in China, including Hong Kong, at December 31, 2010 (including cash of $5,887,000).
Although management believes that contractors would be available in other countries, a change in
suppliers could cause a delay in manufacturing and a possible increase in the cost of merchandise.
Approximately 16% of sales in 2010 were shipped to customers in California. Approximately 11% of
sales in 2010 were to customers located outside of the United States.
Sales to one customer aggregated approximately 16% of net revenues in 2010. Amounts due from one
customer aggregated approximately 16% of accounts receivable at December 31, 2010. The Company
performs ongoing credit evaluations of its customers to minimize credit risk and generally does not
require collateral. Foreign sales are primarily made under letters of credit and standby letters of
credit received from customers.
F-18
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
The Company and its domestic subsidiaries maintain their cash principally at one commercial bank.
At times, balances may exceed federally insured limits. The Company has never experienced any
losses related to these balances. All of our non-interest bearing cash balances were fully insured
at December 31, 2010 due to a temporary federal program in effect from December 31, 2010 through
December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible
accounts. Beginning 2013, insurance coverage will revert to $250,000 per depositor at each
financial institution, and the non-interest bearing cash balances may again exceed federally
insured limits. As of December 31, 2010, there are no deposits in interest-bearing amounts in
excess of federally insured limits.
15. Commitments and Contingencies
Contractual Obligations
AND 1 is obligated under promotional and advertising contracts through 2011. Future minimum
payments to be made under these agreements aggregate $476,000 in 2011.
ASG is obligated under promotional and advertising contracts through 2012. Future minimum payments
to be made under these agreements aggregate to $1,495,000 in 2011 and $860,000 in 2012. Certain
agreements also contain minimum royalty requirements. Future minimum royalty payments are $200,000
in both 2012 and 2013.
Claims and Litigation
In the normal course of business, the Company and its subsidiaries are parties to various claims
and/or litigation. Management believes that the settlement of all such claims and/or litigation,
considered in the aggregate, will not have a material adverse effect on the Companys consolidated
financial position.
During October 2010, a plaintiff commenced an adversary proceeding seeking to recover approximately
$404,000 against the Company pursuant to 11 U.S.C. §§ 547(b) and 550. On November 12, 2010, the
Company filed its answer to the complaint in which it generally denied allegations in the complaint
and raised statutory defenses, particularly defenses codified at 11 U.S.C. § 547(c), the new
value defense and the ordinary course of business defense. Discovery is still ongoing and no
trial date has been set. The Company believes that the defenses raised in the answer are
meritorious. Although the parties have engaged in some settlement discussions, the case remains in
its early stages and at this time the Company is unable to assess the Companys likelihood of
success, or at what amount, if any, the case may ultimately be settled.
During 2010, the Company was involved in litigation whereby the plaintiff asserted that the Company
had used expired patent numbers on its products. Settlement discussions are in process and the
Company has accrued an amount it believes is sufficient to cover the exposure as of December 31,
2010.
In September 2010, the Company received a cease and desist letter from a competitor claiming that
one of their products, the Avimotion, infringed a patent owned by the competitor. The Company
strongly believes they have not infringed upon such competitors patent and has formally responded
to the cease and desist letter. The Company has not heard from the competitor since October 2010
and no further legal action has been taken on this matter since that time.
F-19
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
During 2010, the Company was involved in litigation whereby the plaintiff claims he authored a song
that was used by the Companys subsidiary, AND 1, in one of its DVDs without his consent. The case
is in the early stages and no amount is estimable as of December 31, 2010 and through the date of
these consolidated financial statements as to the probable outcome.
During 2010, the Company was involved in litigation whereby the plaintiff claimed relative to their
purchase of the Companys footwear that there were breaches of express and implied warranties. The case
is in the early stages and no amount is estimable as of December 31, 2010 and through the date of
these consolidated financial statements as to the probable outcome.
During 2008, the Company received a civil complaint venued in Tel Aviv, Israel, alleging that AND 1
had breached its exclusive distribution agreement. The matter remains unresolved and the parties
are considering pursuing through formal mediation.
During 2010, certain legal matters were settled with parties. All amounts agreed to in such
settlements have been properly accrued for or were paid as of December 31, 2010.
Proged Sale Commitment
In connection with the Companys sale of former subsidiary, Proged, in 2007, the Company is
required to maintain a bank warranty in the amount of 500,000 Euros until July 1, 2011, for any
contingencies which may arise related to customs, penalties and surcharges which could be imposed
on Proged, provided they are related to transactions made by ASG while they were the owners. To
meet this requirement, the Company had a standby letter of credit with a bank for 500,000 Euros
which expires on July 1, 2011. In February 2011, a settlement was agreed upon for a payment of
$137,000. Subsequent to the payment, the standby letter of credit was canceled.
Severance Payment
The Company entered into a severance agreement with an executive in 2009 that provided for
severance pay and certain other benefits with payments through June 2010.
16. Subsequent Events Acquisition
On February 17, 2011, the Company was acquired by Brown Shoe Company, Inc. (Brown Shoe).
Simultaneously, the sellers entered into an earn-out agreement upon the satisfaction of certain
profitability goals subsequent to year end; the Companys President entered into a one year
consulting agreement and a five year non-compete agreement; and a Company director entered into a
two year non-compete agreement. In addition, certain employees of the Company received a
transaction bonus related to the acquisition. In connection with the acquisition, the Companys
credit facility was repaid in full and terminated.
In February 2011, ASG Asia acquired Wonderful Idea, the minority shareholder of SAST, and
indirectly owns the remaining 30% interest.
Management has evaluated events that have occurred subsequent to December 31, 2010 through July 14,
2011, the date on which the consolidated financial statements were available to be issued and has
determined that there were no material events requiring recognition or disclosure, except as
discussed above and in Note 17 below.
F-20
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
17. Subsequent Events Guarantee of Brown Shoe Company, Inc. Indebtedness
In connection with Brown Shoes acquisition of the Company on February 17, 2011, the Companys
domestic entities, American Sporting Goods Corporation (Parent) and The Basketball Marketing
Company, Inc. (Guarantor), became guarantors of Brown Shoes revolving credit agreement and
senior notes. The following tables present the condensed consolidating financial information for
the Company and its subsidiaries, together with consolidating eliminations, as of and for the
period ended December 31, 2010 as if these guarantees of Brown Shoes indebtedness had existed for
the entire period presented.
The condensed consolidating financial statements have been prepared using the equity method of
accounting in accordance with the requirements for presentation of such information. Management
believes that the information, presented in lieu of complete financial statements for each of the
guarantors, provides meaningful information to allow investors to determine the nature of the
assets held by, and operations and cash flows of, each of the consolidated groups.
F-21
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
American Sporting Goods Corporation and Subsidiaries
Condensed Consolidating Balance Sheet
As of December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
|
Guarantors |
|
|
Non-Guarantors |
|
|
Eliminations |
|
|
Total |
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2 |
|
|
$ |
|
|
|
$ |
5,887 |
|
|
$ |
|
|
|
$ |
5,889 |
|
Accounts receivable, net of allowances |
|
|
22,067 |
|
|
|
6,927 |
|
|
|
2,720 |
|
|
|
|
|
|
|
31,714 |
|
Intercompany receivables |
|
|
5,930 |
|
|
|
|
|
|
|
3,035 |
|
|
|
(8,965 |
) |
|
|
|
|
Inventories, net |
|
|
39,524 |
|
|
|
3,031 |
|
|
|
7,789 |
|
|
|
27 |
|
|
|
50,371 |
|
Other receivables |
|
|
693 |
|
|
|
59 |
|
|
|
2,240 |
|
|
|
|
|
|
|
2,992 |
|
Income tax receivable |
|
|
1,380 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,380 |
|
Prepaid expenses and other current assets |
|
|
880 |
|
|
|
207 |
|
|
|
|
|
|
|
|
|
|
|
1,087 |
|
Deferred income taxes |
|
|
2,513 |
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
2,535 |
|
|
Total current assets |
|
$ |
72,989 |
|
|
$ |
10,224 |
|
|
$ |
21,671 |
|
|
$ |
(8,916 |
) |
|
$ |
95,968 |
|
|
Other assets |
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 |
|
Intangible assets, net |
|
|
4,838 |
|
|
|
512 |
|
|
|
|
|
|
|
|
|
|
|
5,350 |
|
Property, plant and equipment, net |
|
|
3,561 |
|
|
|
79 |
|
|
|
6,565 |
|
|
|
|
|
|
|
10,205 |
|
Investment in subsidiaries |
|
|
56,955 |
|
|
|
|
|
|
|
|
|
|
|
(56,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
3,278 |
|
|
|
|
|
|
|
56 |
|
|
|
|
|
|
|
3,334 |
|
|
Total assets |
|
$ |
141,665 |
|
|
$ |
10,815 |
|
|
$ |
28,292 |
|
|
$ |
(65,871 |
) |
|
$ |
114,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility |
|
$ |
11,539 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
11,539 |
|
Accounts payable |
|
|
9,041 |
|
|
|
1,591 |
|
|
|
9,402 |
|
|
|
|
|
|
|
20,034 |
|
Intercompany payables |
|
|
3,025 |
|
|
|
58,326 |
|
|
|
|
|
|
|
(61,351 |
) |
|
|
|
|
Accrued expenses |
|
|
6,430 |
|
|
|
864 |
|
|
|
3,781 |
|
|
|
|
|
|
|
11,075 |
|
Obligations under capital leases,
current portion |
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38 |
|
Income taxes payable |
|
|
119 |
|
|
|
|
|
|
|
132 |
|
|
|
|
|
|
|
251 |
|
|
Total current liabilities |
|
$ |
30,192 |
|
|
$ |
60,781 |
|
|
$ |
13,315 |
|
|
$ |
(61,351 |
) |
|
$ |
42,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Sporting Goods Corporation and
subsidiaries shareholders equity |
|
|
111,473 |
|
|
|
(49,966 |
) |
|
|
14,834 |
|
|
|
(4,520 |
) |
|
|
71,821 |
|
Noncontrolling interest in consolidated
subsidiaries |
|
|
|
|
|
|
|
|
|
|
143 |
|
|
|
|
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
111,473 |
|
|
|
(49,966 |
) |
|
|
14,977 |
|
|
|
(4,520 |
) |
|
|
71,964 |
|
|
Total liabilities and equity |
|
$ |
141,665 |
|
|
$ |
10,815 |
|
|
$ |
28,292 |
|
|
$ |
(65,871 |
) |
|
$ |
114,901 |
|
|
F-22
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
American Sporting Goods Corporation and Subsidiaries
Condensed Consolidating Statement of Income
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Eliminations |
|
Total |
|
Revenues, net |
|
$ |
195,624 |
|
|
$ |
31,852 |
|
|
$ |
58,059 |
|
|
$ |
(53,793 |
) |
|
$ |
231,742 |
|
Cost of sales |
|
|
127,774 |
|
|
|
20,078 |
|
|
|
50,552 |
|
|
|
(54,232 |
) |
|
|
144,172 |
|
|
Gross profit |
|
|
67,850 |
|
|
|
11,774 |
|
|
|
7,507 |
|
|
|
439 |
|
|
|
87,570 |
|
|
Selling, general and administrative expenses |
|
|
47,500 |
|
|
|
7,960 |
|
|
|
6,558 |
|
|
|
(53 |
) |
|
|
61,965 |
|
Other expenses, net |
|
|
338 |
|
|
|
85 |
|
|
|
148 |
|
|
|
|
|
|
|
571 |
|
Interest expense |
|
|
491 |
|
|
|
252 |
|
|
|
|
|
|
|
|
|
|
|
743 |
|
Interest and miscellaneous income |
|
|
(399 |
) |
|
|
(75 |
) |
|
|
|
|
|
|
|
|
|
|
(474 |
) |
|
Income before income taxes |
|
|
19,920 |
|
|
|
3,552 |
|
|
|
801 |
|
|
|
492 |
|
|
|
24,765 |
|
Income taxes |
|
|
8,076 |
|
|
|
1,492 |
|
|
|
242 |
|
|
|
5 |
|
|
|
9,815 |
|
|
Net income |
|
|
11,844 |
|
|
|
2,060 |
|
|
|
559 |
|
|
|
487 |
|
|
|
14,950 |
|
|
Noncontrolling interest in loss of
consolidated subsidiaries |
|
|
|
|
|
|
|
|
|
|
255 |
|
|
|
|
|
|
|
255 |
|
Equity in operations of subsidiaries |
|
|
2,060 |
|
|
|
|
|
|
|
|
|
|
|
(2,060 |
) |
|
|
|
|
|
Net income attributable to American
Sporting Goods Corporation and Subsidiaries |
|
$ |
13,904 |
|
|
$ |
2,060 |
|
|
$ |
814 |
|
|
$ |
(1,573 |
) |
|
$ |
15,205 |
|
|
F-23
AMERICAN SPORTING GOODS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2010
American Sporting Goods Corporation and Subsidiaries
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Parent |
|
Guarantors |
|
Non-Guarantors |
|
Eliminations |
|
Total |
|
Net cash provided by operating activities |
|
$ |
13,800 |
|
|
$ |
1,924 |
|
|
$ |
3,294 |
|
|
$ |
36 |
|
|
|
$19,054 |
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(3,141 |
) |
|
|
(63 |
) |
|
|
(1,370 |
) |
|
|
|
|
|
|
(4,574 |
) |
|
Net cash used in investing activities |
|
|
(3,141 |
) |
|
|
(63 |
) |
|
|
(1,370 |
) |
|
|
|
|
|
|
(4,574 |
) |
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit facility activity, net |
|
|
(14,479 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,479 |
) |
Payments of term loan payable other |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25 |
) |
Payments of obligations under capital leases |
|
|
(43 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43 |
) |
Intercompany financing |
|
|
3,888 |
|
|
|
(1,865 |
) |
|
|
(2,068 |
) |
|
|
45 |
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(10,659 |
) |
|
|
(1,865 |
) |
|
|
(2,068 |
) |
|
|
45 |
|
|
|
(14,547 |
) |
|
Effect of exchange rate changes on cash and cash
equivalents |
|
|
|
|
|
|
|
|
|
|
721 |
|
|
|
(81 |
) |
|
|
640 |
|
|
Net increase in cash |
|
|
|
|
|
|
(4 |
) |
|
|
577 |
|
|
|
|
|
|
|
573 |
|
Cash and cash equivalents, beginning of year |
|
|
2 |
|
|
|
4 |
|
|
|
5,310 |
|
|
|
|
|
|
|
5,316 |
|
|
Cash and cash equivalents, end of year |
|
$ |
2 |
|
|
$ |
|
|
|
$ |
5,887 |
|
|
$ |
|
|
|
$ |
5,889 |
|
|
F-24
Report of Independent Registered Public Accounting Firm
The Board of Directors
ASG Asia Investments Company Limited
We have audited the accompanying consolidated balance sheets of ASG Asia Investments Company
Limited (the Company) as of December 31, 2010 and the related consolidated statements of
operations, shareholders equity and cash flows for the year then ended. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We
were not engaged to perform an audit of the Companys internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ASG Asia Investments Company Limited at December
31, 2010 and the consolidated results of its operations and its cash flows for the year then ended,
in conformity with U.S. generally accepted accounting principles.
/s/ Shanghai Zhonghua
Certified Public Accountants
Shanghai, P. R. China
March 30, 2011
F-25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Indemnification of Directors and Officers of the Issuer
The following summary is qualified in its entirety by reference to the complete text of
Sections 715, 717 and 721 through 725 of the New York Business Corporation Law and the certificate
of incorporation and the bylaws of Brown Shoe Company, Inc. (the Company).
New York law authorizes a corporation to indemnify any person made, or threatened to be made,
a party to any action or proceeding, civil or criminal, other than a shareholders derivative
action, by reason of being a director or officer of the corporation or serving any other entity in
any capacity (at the request of the corporation), against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys fees, in connection therewith, if such
director or officer acted in good faith, for a purpose he or she reasonably believed to be in, or,
in the case of service to any other entity, not opposed to, the best interests of the corporation
and, in criminal proceedings, had no reasonable cause to believe his or her conduct was unlawful. A
corporation may indemnify any person made, or threatened to be made, a party to a shareholders
derivative action, in the circumstances and to the extent described in the preceding sentence,
except that in such case no indemnification shall be made for a threatened action, or a pending
action which is settled or otherwise disposed of, or any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation, unless and only to the extent the
court finds that such person is fairly and reasonably entitled to such indemnification. Any person
who has been successful, on the merits or otherwise, in the defense of a civil or criminal
proceeding as described above in this paragraph, shall be entitled to indemnification under New
York law.
New York law provides that its statutory provisions relating to indemnification shall not be
exclusive of any other indemnification to which a director or officer may be entitled by reason of
the certificate of incorporation, bylaws, or, if authorized by the certificate or bylaws, by reason
of a resolution of the stockholders or the directors as of an agreement with the corporation,
provided that no indemnification may be made to or on behalf of an officer or director if a final
adjudication adverse to the director or officer establishes that his or her acts were committed in
bad faith or were the result of active and deliberate dishonesty and were material to the cause of
action adjudicated, or that such officer or director personally gained a financial profit or other
advantage to which he or she was not legally entitled.
The bylaws of the Company provide that the Company shall indemnify any director and officer,
and may indemnify any employee or agent, of the Company, or of any other entity if requested by the
Company to serve as such, against any claim, liability or expense incurred as a result of such
service, to the maximum extent permitted by law. To the extent that such employee or agent has been
successful in the defense of a civil or criminal proceeding arising out of such service, such
employee or agent shall be entitled to such indemnification. The bylaws also provide that such
indemnification is not exclusive of any other indemnification to which such director, officer,
employee or agent might be entitled, and authorize the Company to enter into agreements with any
such director, officer, employee or agent, providing such rights of indemnification as the Board of
Directors deems appropriate, provided that any such agreement shall not provide for indemnification
of such a director or officer if a judgment or other final adjudication adverse to such director or
officer establishes that his or her acts were committed in bad faith or were the result of active
or deliberate dishonesty and were material to the cause of action adjudicated, or that he or she
personally gained a financial profit or other advantage to which such director or officer was not
legally entitled. Finally, the Company may purchase and maintain insurance to indemnify any such
director, officer, employee or agent, to the maximum extent allowed by law, whether or not the
Company would otherwise have the power to indemnify such person.
II-1
The directors and officers of the Company are insured under a policy of directors and
officers liability insurance.
Indemnification of Directors and Officers of Guarantors
The following summaries are qualified in their entirety by reference to the complete text of
any statutes referred to below and the certificate of incorporation and the bylaws or similar
organizational documents of the applicable guarantor of the exchange notes.
Delaware Corporate Guarantors
Brown Shoe International Corp., American Sporting Goods Corporation, The Basketball Marketing
Company, Inc., Edelman Shoe, Inc., and Shoes.com, Inc. (collectively, the Delaware Guarantors)
are Delaware corporations. The Delaware General Corporation Law provides that indemnification is
permissible only when the director, officer, employee, or agent acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe the conduct was
unlawful. The Delaware General Corporation Law also precludes indemnification in respect of any
claim, issue, or matter as to which an officer, director, employee, or agent shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought shall determine
that, despite such adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court deems proper.
The bylaws of the Delaware Guarantors provide that each of the Delaware Guarantors shall have
the power to indemnify to the full extent authorized by law any director, officer, employee or
agent against any action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director, officer, employee or agent of
such Delaware Guarantor. Further, the Articles of Incorporation of the Delaware Guarantors state
that the board of directors of each Delaware Guarantor may cause such Delaware Guarantor to
purchase and maintain insurance on behalf of any director, officer, employee or agent of the
Delaware Guarantor, or is or was serving at the request of the Delaware Guarantor or for its
benefit as a director, officer, employee or agent of any other corporation, or as the
representative of the Delaware Guarantor, against any expense, liability or loss asserted against
or incurred by any such person in any such capacity or arising out of any such status, whether or
not such Delaware Guarantor would have the power to indemnify such person against such expense,
liability or loss.
Directors or officers of the Delaware Guarantors who are directors or officers of Brown Shoe
Company, Inc. or its affiliates may also be entitled to indemnification pursuant to the charter
documents of such companies or under the provisions of agreements with such companies providing
indemnification to them since they serve as directors or officers of the Delaware Guarantors at the
request of Brown Shoe Company, Inc. or its affiliates, as the case may be. Brown Shoe Company, Inc.
maintains a policy of insurance under which the directors and officers of the Delaware Guarantors
are insured, subject to the limits of the policy, against certain losses, as defined in the policy,
arising from claims made against such directors and officers by reason of any wrongful acts, as
defined in the policy, in their respective capacities as directors or officers.
Missouri Corporate Guarantors
Sidney Rich Associates, Inc. and Buster Brown & Co. (collectively, the Missouri Guarantors)
are each a Missouri corporation. Section 351.355(1) of the Revised Statutes of Missouri provides
that a corporation may indemnify a director, officer, employee or agent of the corporation in any
action, suit or proceeding other than an action by or in the right of the corporation, against
expenses (including attorneys fees), judgments, fines and settlement amounts actually and
reasonably incurred by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably
II-2
believed to be in or not opposed to the best interests of the corporation and, with respect to
any criminal action, had no reasonable cause to believe his conduct was unlawful. Section
351.355(2) provides that the corporation may indemnify any such person in any action or suit by or
in the right of the corporation against expenses (including attorneys fees) and settlement amounts
actually and reasonably incurred by him in connection with the defense or settlement of the action
or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, except that he may not be indemnified in respect of any
matter in which he has been adjudged liable for negligence or misconduct in the performance of his
duty to the corporation, unless authorized by the court. Section 351.355(3) provides that a
corporation may indemnify any such person against expenses (including attorneys fees) actually and
reasonably incurred by him in connection with the action, suit or proceeding if he has been
successful in defense of such action, suit or proceeding and if such action, suit or proceeding is
one for which the corporation may indemnify him under Section 351.355(1) or (2). Section 351.355(7)
provides that a corporation shall have the power to give any further indemnity to any such person,
in addition to the indemnity otherwise authorized under Section 351.355, provided such further
indemnity is either (i) authorized, directed or provided for in the articles of incorporation of
the corporation or any duly adopted amendment thereof or (ii) is authorized, directed or provided
for in any by-law or agreement of the corporation which has been adopted by a vote of the
stockholders of the corporation, provided that no such indemnity shall indemnify any person from or
on account of such persons conduct which was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct.
The bylaws of each of the Missouri Guarantors state that the respective Missouri Guarantor
shall indemnify any director, officer, employee or agent against any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or investigative, to
the fullest extent provided by law. Further, the bylaws of each of the Missouri Guarantors state
that the board of directors of the applicable Missouri Guarantor shall have the power to cause such
Missouri Guarantor to purchase and maintain insurance on behalf of any director, officer, employee
or agent against any liability incurred in any such capacity, arising out of his/her status as
such, whether or not such Missouri Guarantor would have the power to indemnify him against such
liability under the provisions of their respective bylaws.
Directors or officers of the Missouri Guarantors who are directors or officers of Brown Shoe
Company, Inc. or its affiliates may also be entitled to indemnification pursuant to the charter
documents of such companies or under the provisions of agreements with such companies providing
indemnification to them since they serve as directors or officers of the Missouri Guarantors at the
request of Brown Shoe Company, Inc. or its affiliates, as the case may be. Brown Shoe Company, Inc.
maintains a policy of insurance under which the directors and officers of the Missouri guarantors
are insured, subject to the limits of the policy, against certain losses, as defined in the policy,
arising from claims made against such directors and officers by reason of any wrongful acts, as
defined in the policy, in their respective capacities as directors or officers.
Pennsylvania Corporate Guarantor
Brown Group Retail, Inc. (Brown Retail) is a Pennsylvania corporation. Sections 1741 and
1742 of the Pennsylvania Business Corporation Law of 1988, as amended (the PBCL) provide that a
business corporation may indemnify directors and officers against liabilities they may incur as
such provided that the particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation, and, with respect to
any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. In
general, the power to indemnify under these sections does not exist in the case of actions against
a director or officer by or in the right of the corporation if the person otherwise entitled to
indemnification shall have been adjudged to be liable to the corporation unless it is judicially
determined that, despite the adjudication of liability but in view of all the circumstances of the
case, the person is fairly and reasonably entitled to indemnification for specified expenses. The
corporation is required to indemnify directors and officers against expenses they actually
II-3
and reasonably incur in defending actions against them in such capacities if they are
successful on the merits or otherwise in the defense of such actions.
Section 1713 of the PBCL permits the shareholders to adopt a bylaw provision relieving a
director (but not an officer) of personal liability for monetary damages except where (i) the
director has breached the applicable standard of care, and (ii) such conduct constitutes
self-dealing, willful misconduct or recklessness. The statute provides that a director may not be
relieved of liability for the payment of taxes pursuant to any federal, state or local law or
responsibility under a criminal statute.
Section 1746 of the PBCL grants a corporation broad authority to indemnify its directors,
officers and other agents for liabilities and expenses incurred in such capacity, except in
circumstances where the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
The bylaws of Brown Retail state that Brown Retail shall indemnify any director or officer,
and may indemnify any employee or agent of Brown Retail or any other entity, if requested by Brown
Retail to serve in such capacity, against any claim, liability or expense incurred as a result of
such service, to the maximum extent permitted by law. To the extent that such employee or agent has
been successful in the defense, on the merits or otherwise, of a civil or criminal proceeding
arising out of such service, such employee or agent shall be entitled to such indemnification. The
bylaws also provide that such indemnification shall not be deemed exclusive of any other rights to
which any director, officer, employee or agent of Brown Retail might be entitled, both as to action
in an official capacity and as to action in another capacity while holding such office. The bylaws
further authorize Brown Retail to enter into agreements with any such director, officer, employee
or agent, providing such rights of indemnification as the board of directors deems appropriate,
provided that any such agreement shall not provide for indemnification of such a director or
officer if a judgment or other final adjudication adverse to such director or officer establishes
that his or her acts were committed in bad faith or were the result of active or deliberate
dishonesty and were material to the cause of action adjudicated, or that he or she personally
gained a financial profit or other advantage to which such director or officer was not legally
entitled. Finally, pursuant to its bylaws, Brown Retail may purchase and maintain insurance to
indemnify any such director, officer, employee or agent, to the maximum extent allowed by law,
whether or not Brown Retail would otherwise have the power to indemnify such person.
Directors or officers of Brown Retail who are directors or officers of Brown Shoe Company,
Inc. or its affiliates may also be entitled to indemnification pursuant to the charter documents of
such companies or under the provisions of agreements with such companies providing indemnification
to them since they serve as directors or officers of Brown Retail at the request of Brown Shoe
Company, Inc. or its affiliates, as the case may be. Brown Shoe Company, Inc. maintains a policy of
insurance under which the directors and officers of Brown Retail are insured, subject to the limits
of the policy, against certain losses, as defined in the policy, arising from claims made against
such directors and officers by reason of any wrongful acts, as defined in the policy, in their
respective capacities as directors or officers.
Delaware Limited Liability Company Guarantors
Bennett Footwear Group LLC (Bennett Group) is a Delaware limited liability company. Section
18-108 of the Delaware Limited Liability Company Act provides that, subject to specified standards
and restrictions, if any, as are set forth in the limited liability company agreement, a limited
liability company shall have the power to indemnify and hold harmless any member or manager or
other person from and against any and all claims and demands whatsoever.
The limited liability company agreement of Bennett Group provides that, the limited liability
company, its receiver or its trustee shall indemnify, save harmless, and pay all judgments and
claims against the officers, if any, relating to any liability or damage incurred by reason of any
act performed or omitted to be performed by such officer in connection with the business of the
limited liability company,
II-4
including attorneys fees incurred in connection with the defense of any action based upon
such action or omission, as permitted by law. The attorneys fees may be paid as incurred.
Officers of Bennett Group who are directors or officers of Brown Shoe Company, Inc. or its
affiliates may also be entitled to indemnification pursuant to the charter documents of such
companies or under the provisions of agreements with such companies providing indemnification to
them since they serve as officers of Bennett Group at the request of Brown Shoe Company, Inc. or
its affiliates, as the case may be. Brown Shoe Company, Inc. maintains a policy of insurance under
which the officers of Bennett Group are insured, subject to the limits of the policy, against
certain losses, as defined in the policy, arising from claims made against such officers by reason
of any wrongful acts, as defined in the policy, in their respective capacities as officers.
Canadian Corporate Guarantor
Brown Shoe Company of Canada Ltd (Brown Canada) is a corporation organized under the laws of
Canada. The Canada Business Corporations Act (the Act) provides generally that a corporation may
indemnify a director or officer against all costs, charges and expenses of any civil, criminal,
administrative, investigative or other proceeding to which he or she is made a party by reason of
being a director or officer, where the director or officer acted honestly and in good faith with a
view to the best interests of the corporation and, in the case of a criminal or administrative
action or proceeding enforced by a monetary penalty, the director or officer had reasonable grounds
for believing that his or her conduct was lawful. Where such an officer or director was not judged
by the court or other competent authority to have committed any fault or omitted to do anything he
or she ought to have done, such officer or director is entitled to indemnification from the
corporation for such costs, charges and expenses which were reasonably incurred by the officer or
director in connection with the defense of any civil, criminal, investigative or other proceeding
to which he or she was subject by reason of being a director or officer.
By-Law No. 1 of Brown Canada states that Brown Canada shall indemnify a director or officer
against all costs, charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or
proceeding that is brought with respect to such directors or officers service in such capacity,
if such director or officer acted honestly and in good faith with a view to the best interests of
Brown Canada, and, in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, such director of officer had reasonable grounds for believing that
his conduct was lawful.
Directors or officers of Brown Canada who are directors or officers of Brown Shoe Company,
Inc. or its affiliates may also be entitled to indemnification pursuant to the charter documents of
such companies or under the provisions of agreements with such companies providing indemnification
to them since they serve as directors or officers of Brown Canada at the request of Brown Shoe
Company, Inc. or its affiliates, as the case may be. Brown Shoe Company, Inc. maintains a policy of
insurance under which the directors and officers of Brown Canada are insured, subject to the limits
of the policy, against certain losses, as defined in the policy, arising from claims made against
such directors and officers by reason of any wrongful acts, as defined in the policy, in their
respective capacities as directors or officers.
Item 21. Exhibits.
(a) Exhibits. See Exhibit Index which is incorporated by reference herein.
Item 22. Undertakings.
The following undertakings are made by each of the undersigned registrants:
(a) The undersigned registrant hereby undertakes:
II-5
|
(1) |
|
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: |
|
(i) |
|
To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; |
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(ii) |
|
To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in the
volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration statement; |
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(iii) |
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To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement. |
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(2) |
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That, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof. |
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(3) |
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To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering. |
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(4) |
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If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements required by
Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous
offering. Financial statements and information otherwise required by Section 10(a)(3)
of the Act need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements required
pursuant to this paragraph (a)(4) and other information necessary to ensure that all
other information in the prospectus is at least as current as the date of those
financial statements. |
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(5) |
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That, for the purpose of determining liability under the Securities Act of 1933
to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall
be deemed to be part of and included in the registration statement as of the date it is
first used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement or made
in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement |
II-6
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or prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use. |
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(6) |
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That, for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities of the
undersigned registrant pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the securities are
offered or sold to such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be considered to
offer or sell such securities to such purchaser: |
|
(i) |
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Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424; |
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(ii) |
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Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned registrant or used or referred to by the
undersigned registrant; |
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(iii) |
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The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and |
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(iv) |
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Any other communication that is an offer in the offering made
by the undersigned registrant to the purchaser. |
(b) |
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The undersigned registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the registrants annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plans annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. |
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(c) |
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrants pursuant to the
foregoing provisions, or otherwise, the registrants have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the registrants of
expenses incurred or paid by a director, officer or controlling person of the registrants in
the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue. |
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(d) |
|
The undersigned registrant hereby undertakes to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the registration statement
through the date of responding to the request. |
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(e) |
|
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when it became
effective. |
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
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Brown Shoe Company, Inc.
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By: |
/s/ Mark E. Hood
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Name: |
Mark E. Hood |
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Title: |
Senior Vice President and Chief Financial Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
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Signatures |
|
Title |
|
Date |
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/s/ Diane M. Sullivan
Diane M. Sullivan
|
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President and Chief Executive
Officer (Principal Executive
Officer)
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July 14, 2011 |
|
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/s/ Mark E. Hood
Mark E. Hood
|
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Senior Vice President and Chief
Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
|
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July 14, 2011 |
|
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/s/ Ronald A. Fromm
Ronald A. Fromm
|
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Chairman of the Board of Directors
|
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July 14, 2011 |
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Director
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/s/ Carla C. Hendra
Carla C. Hendra
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Director
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July 14, 2011 |
|
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/s/ Ward M. Klein
Ward M. Klein
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Director
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July 14, 2011 |
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/s/ Steven W. Korn
Steven W. Korn
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Director
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July 14, 2011 |
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/s/ Patricia G. McGinnis
Patricia G. McGinnis
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Director
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July 14, 2011 |
II-8
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Signatures |
|
Title |
|
Date |
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/s/ W. Patrick McGinnis
W. Patrick McGinnis
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Director
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July 14, 2011 |
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/s/ Michael F. Neidorff
Michael F. Neidorff
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Director
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July 14, 2011 |
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/s/ Hal J. Upbin
Hal J. Upbin
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Director
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July 14, 2011 |
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Director
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II-9
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
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Sidney Rich Associates, Inc.
|
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By: |
/s/ Mark E. Hood
|
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|
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Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial
Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer
(Principal Executive Officer)
|
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July 14, 2011 |
|
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|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
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|
|
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/s/ Ronald A. Fromm
Ronald A. Fromm
|
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Director
|
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July 14, 2011 |
|
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|
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/s/ Michael I. Oberlander
Michael I. Oberlander
|
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Director
|
|
July 14, 2011 |
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
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Brown Group Retail, Inc.
|
|
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By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer
(Principal Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Ronald A. Fromm
Ronald A. Fromm
|
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Director
|
|
July 14, 2011 |
|
|
|
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/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director
|
|
July 14, 2011 |
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
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Brown Shoe International Corp.
|
|
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By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial
Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer (Principal
Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
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/s/ Ronald A. Fromm
Ronald A. Fromm
|
|
Director
|
|
July 14, 2011 |
|
|
|
|
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/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director
|
|
July 14, 2011 |
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
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Buster Brown & Co.
|
|
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By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer (Principal
Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Ronald A. Fromm
Ronald A. Fromm
|
|
Director
|
|
July 14, 2011 |
|
|
|
|
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/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director
|
|
July 14, 2011 |
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
|
|
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Bennett Footwear Group LLC
By: Brown Shoe Company, Inc., its sole member
|
|
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By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer
(Principal Executive
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Senior Vice
President and Chief
Financial Officer
(Principal Financial
Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
Brown Shoe Company, Inc.
|
|
Member
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
|
|
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Senior Vice President and Chief |
|
|
|
|
Financial Officer |
|
|
|
|
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
|
|
|
|
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American Sporting Goods Corporation
|
|
|
By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial
Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer (Principal
Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Ronald A. Fromm
Ronald A. Fromm
|
|
Director
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director
|
|
July 14, 2011 |
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
|
|
|
|
|
The Basketball Marketing Company, Inc.
|
|
|
By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial
Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer (Principal
Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Ronald A. Fromm
Ronald A. Fromm
|
|
Director
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director
|
|
July 14, 2011 |
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
|
|
|
|
|
Edelman Shoe, Inc.
|
|
|
By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer (Principal
Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Ronald A. Fromm
Ronald A. Fromm
|
|
Director
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director
|
|
July 14, 2011 |
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
|
|
|
|
|
Shoes.com, Inc.
|
|
|
By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer (Principal
Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director and Senior Vice
President and Chief
Financial Officer (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Ronald A. Fromm
Ronald A. Fromm
|
|
Director
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director
|
|
July 14, 2011 |
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned registrant has duly caused
this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis, State of Missouri, on July 14, 2011.
|
|
|
|
|
|
Brown Shoe Company of Canada Ltd
|
|
|
By: |
/s/ Mark E. Hood
|
|
|
|
Name: |
Mark E. Hood |
|
|
|
Title: |
Senior Vice President and Chief Financial
Officer |
|
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Diane M. Sullivan,
Mark E. Hood and Michael I. Oberlander, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution, to sign any amendments (including
post-effective amendments) and supplements to this registration statement (and any additional
registration statement related thereto permitted by Rule 462(b) promulgated under the Securities
Act of 1933), and to file such amendments and any related documents with the Securities and
Exchange Commission, and ratifies and confirms the actions that any such attorney-in-fact and
agents, or their substitutes, may lawfully do or cause to be done under this power of attorney.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities indicated:
|
|
|
|
|
Signatures |
|
Title |
|
Date |
|
|
|
|
|
/s/ Diane M. Sullivan
Diane M. Sullivan
|
|
President and Chief
Executive Officer (Principal
Executive Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Mark E. Hood
Mark E. Hood
|
|
Director, Brown Shoe
International Corp., and
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Ronald A. Fromm
Ronald A. Fromm
|
|
Director, Brown Shoe
International Corp.
|
|
July 14, 2011 |
|
|
|
|
|
/s/ Michael I. Oberlander
Michael I. Oberlander
|
|
Director, Brown Shoe
International Corp.
|
|
July 14, 2011 |
II-19
INDEX TO EXHIBITS
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
3.1
|
|
Restated Certificate of Incorporation of Brown Shoe Company, Inc.
incorporated herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the quarter ended May 5, 2007, and
filed June 5, 2007. |
|
|
|
3.2
|
|
Bylaws of Brown Shoe Company, Inc. as amended through May 26, 2011,
incorporated herein by reference to Exhibit 3.1 to the Companys Form
8-K dated and filed May 26, 2011. |
|
|
|
3.3
|
|
Certificate of Incorporation of Brown Shoe International Corp.,
incorporated herein by reference to Exhibit 3.3 to the Companys Form
S-4 filed May 16, 2005. |
|
|
|
3.4
|
|
Bylaws of Brown Shoe International Corp., incorporated herein by
reference to Exhibit 3.4 to the Companys Form S-4 filed May 16,
2005. |
|
|
|
3.5
|
|
Articles of Incorporation of Sidney Rich Associates, Inc., as
amended, incorporated herein by reference to Exhibit 3.5 to the
Companys Form S-4 filed May 16, 2005. |
|
|
|
3.6
|
|
Bylaws of Sidney Rich Associates, Inc., incorporated herein by
reference to Exhibit 3.6 to the Companys Form S-4 filed May 16,
2005. |
|
|
|
3.7
|
|
Articles of Incorporation of Brown Group Retail, Inc., as amended,
incorporated herein by reference to Exhibit 3.7 to the Companys Form
S-4 filed May 16, 2005. |
|
|
|
3.8
|
|
Bylaws of Brown Group Retail, Inc., incorporated herein by reference
to Exhibit 3.8 to the Companys Form S-4 filed May 16, 2005. |
|
|
|
3.9
|
|
Articles of Incorporation of Buster Brown & Co., as amended,
incorporated herein by reference to Exhibit 3.9 to the Companys Form
S-4 filed May 16, 2005. |
|
|
|
3.10
|
|
Bylaws of Buster Brown & Co., incorporated herein by reference to
Exhibit 3.10 to the Companys Form S-4 filed May 16, 2005. |
|
|
|
3.11
|
|
Certificate of Amalgamation of Brown Shoe Company of Canada Ltd,
incorporated herein by reference to Exhibit 3.11 to the Companys
Form S-4 filed May 16, 2005. |
|
|
|
3.12
|
|
By-laws of Brown Shoe Company of Canada Ltd, incorporated herein by
reference to Exhibit 3.12 to the Companys Form S-4 filed May 16,
2005. |
|
|
|
3.13
|
|
Certificate of Formation of Bennett Footwear Group LLC, incorporated
herein by reference to Exhibit 3.13 to the Companys Form S-4 filed
May 16, 2005. |
|
|
|
3.14
|
|
Amended and Restated Limited Liability Company Agreement of Bennett
Footwear Group LLC, incorporated herein by reference to Exhibit 3.14
to the Companys Form S-4 filed May 16, 2005. |
|
|
|
3.15
|
|
Certificate of Incorporation of American Sporting Goods Corporation. |
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
3.16
|
|
Bylaws of American Sporting Goods Corporation. |
|
|
|
3.17
|
|
Certificate of Incorporation of The Basketball Marketing Company, Inc. |
|
|
|
3.18
|
|
Bylaws of The Basketball Marketing Company, Inc. |
|
|
|
3.19
|
|
Certificate of Incorporation of Edelman Shoe, Inc. |
|
|
|
3.20
|
|
Bylaws of Edelman Shoe, Inc. |
|
|
|
3.21
|
|
Certificate of Incorporation of Shoes.com, Inc. |
|
|
|
3.22
|
|
Bylaws of Shoes.com, Inc. |
|
|
|
4.1a
|
|
Indenture for the 8.75% Senior Notes due 2012 dated April 22, 2005,
among the Company, the subsidiary guarantors set forth therein, and
SunTrust Bank, as trustee, including the form of Global Note attached
thereto, incorporated herein by reference to Exhibit 4.1 to the
Companys Form 8-K dated and filed April 26, 2005. |
|
|
|
4.1b
|
|
Supplemental Indenture for 8.75% Senior Notes, dated October 24,
2007, incorporated herein by reference to Exhibit 4.1b to the
Companys Form 10-K for the year ended February 2, 2008, and filed
March 28, 2008. |
|
|
|
4.1c
|
|
Supplemental Indenture for 8.75% Senior Notes due 2012, dated as of
June 18, 2010, between Edelman Shoe, Inc., the Company and U.S. Bank
National Association, as successor to SunTrust Bank, as trustee,
incorporated herein by reference to Exhibit 4.1 to the Companys Form
10-Q for the quarter ended July 31, 2010, and filed September 7,
2010. |
|
|
|
4.1d
|
|
Supplemental Indenture for 8.75% Senior Notes due 2012, dated as of
February 17, 2011, between American Sporting Goods Corporation, The
Basketball Marketing Company, Inc., the Company and U.S. Bank
National Association, as successor to SunTrust Bank, as trustee,
incorporated herein by reference to Exhibit 4.1d to the Companys
Form 10-K for the year ended January 29, 2011, and filed April 1,
2011. |
|
|
|
4.2
|
|
Indenture for the 7.125% Senior Notes due 2019 dated as of May 11,
2011, among the Company, the subsidiary guarantors set forth therein,
and Wells Fargo Bank, National Association, as trustee, including the
form of Global Note attached thereto, incorporated herein by
reference to Exhibit 4.1 to the Companys Form 8-K dated May 11, 2011
and filed May 13, 2011. |
|
|
|
4.3
|
|
Form of 7.125% Senior Notes due 2019 (included in Exhibit 4.2) |
|
|
|
4.4
|
|
Registration Rights Agreement for the 7.125% Senior Notes due 2019
dated as of May 11, 2011, among Brown Shoe Company, Inc., the
Guarantors, Merrill Lynch, Pierce, Fenner & Smith Incorporated, and
J.P. Morgan Securities LLC, as initial purchasers, incorporated by
reference to Exhibit 10.1 to Brown Shoe Company, Inc.s Form 8-K
dated May 11, 2011 and filed May 13, 2011. |
|
|
|
5.1
|
|
Opinion of Bryan Cave LLP. |
|
|
|
5.2
|
|
Opinion of Cozen OConnor. |
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
5.3
|
|
Opinion of McMillan L.L.P. |
|
|
|
10.1a
|
|
Third Amended and Restated Credit Agreement, dated as of January 7,
2011 (the Credit Agreement), among the Company, as lead borrower
for itself and on behalf of certain of its subsidiaries, and Bank of
America, N.A., as lead issuing bank, administrative agent and
collateral agent, Wells Fargo Bank, National Association, as an
issuing bank, Wells Fargo Capital Finance, LLC, as syndication agent,
Bank of America, N.A. and JPMorgan Chase Bank, N.A., as
co-documentation agents, and the other financial institutions party
thereto, as lenders, as incorporated herein by reference to Exhibit
10.1 to the Companys Form 8-K dated and filed January 7, 2011. |
|
|
|
10.1b
|
|
First Amendment to Third Amended and Restated Credit Agreement and
Confidential Side Letter, dated February 17, 2011, by and among Brown
Shoe Company, Inc., as lead borrower for itself and on behalf of
certain of its subsidiaries, and Bank of America, N.A., as lead
issuing bank, administrative agent and collateral agent, Wells Fargo
Bank, National Association, as an issuing bank, Wells Fargo Capital
Finance, LLC, as syndication agent, Bank of America, N.A. and
JPMorgan Chase Bank, N.A., as co-documentation agents, and the other
financial institutions party thereto, as lenders, as incorporated
herein by reference to Exhibit 10.2 to the Companys Form 8-K dated
and filed February 17, 2011. |
|
|
|
10.2*
|
|
Summary of non-employee director compensation, incorporated herein by
reference to Exhibit 10.2 to the Companys Form 10-Q for the quarter
ended May 1, 2010, and filed June 8, 2010. |
|
|
|
10.3*
|
|
Summary of compensatory arrangements for the named executive officers
of the Company, incorporated herein by reference to Exhibit 10.1 to
the Companys Form 8-K dated March 4, 2009, and filed March 10, 2009,
and Exhibit 10.2 to the Companys Form 10-Q for the quarter ended
July 31, 2010, and filed September 7, 2010. |
|
|
|
10.4a*
|
|
Incentive and Stock Compensation Plan of 1999, incorporated herein by
reference to Exhibit 2 to the Companys definitive proxy statement
dated and filed April 26, 1999. |
|
|
|
10.4b*
|
|
Amendment to Incentive and Stock Compensation Plan of 1999, dated May
27, 1999, incorporated herein by reference to Exhibit 10(e)(i) to the
Companys Form 10-K for the year ended January 29, 2000, and filed
April 19, 2000. |
|
|
|
10.4c*
|
|
First Amendment to the Incentive and Stock Compensation Plan of 1999,
dated January 7, 2000, incorporated herein by reference to Exhibit
10(e)(ii) to the Companys Form 10-K for the year ended January 29,
2000 and filed April 19, 2000. |
|
|
|
10.5a(1)*
|
|
Brown Shoe Company, Inc. Incentive and Stock Compensation Plan of
2002, as Amended and Restated as of May 22, 2008, incorporated herein
by reference to Exhibit A to the Companys definitive proxy statement
dated and filed April 11, 2008. |
|
|
|
10.5a(2)*
|
|
Brown Shoe Company, Inc. Incentive and Stock Compensation Plan of
2011, incorporated herein by reference to Exhibit A to the Companys
definitive proxy materials filed with the Securities and Exchange
Commission on Schedule 14A on April 15, 2011. |
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
10.5b(1)*
|
|
Form of Incentive Stock Option Award Agreement (for grants commencing
May 2008) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.5b(1) to the Companys Form 10-K for the year ended
January 31, 2009, and filed March 31, 2009. |
|
|
|
10.5b(2)*
|
|
Form of Incentive Stock Option Award Agreement (for grants prior to
May 2008) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.4 to the Companys Form 10-Q for the quarter ended July
31, 2004, and filed September 8, 2004. |
|
|
|
10.5c(1)*
|
|
Form of Non-Qualified Stock Option Award Agreement (for grants
commencing May 2008) under the Brown Shoe Company, Inc. Incentive and
Stock Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.5c(1) to the Companys Form 10-K for the year ended
January 31, 2009, and filed March 31, 2009. |
|
|
|
10.5c(2)*
|
|
Form of Non-Qualified Stock Option Award Agreement for awards issued
prior to May 2008 under the Brown Shoe Company, Inc. Incentive and
Stock Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.3 to the Companys Form 10-Q for the quarter ended July
31, 2004, and filed September 8, 2004. |
|
|
|
10.5d(1)*
|
|
Form of Restricted Stock Agreement (for employee grants commencing
2008) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.5d(1) to the Companys Form 10-K for the year ended
January 31, 2009, and filed March 31, 2009. |
|
|
|
10.5d(2)*
|
|
Form of Restricted Stock Agreement (for employee grants in 2006 and
2007) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.6 to the Companys Form 8-K dated and filed March 8, 2006. |
|
|
|
10.5d(3)*
|
|
Form of Restricted Stock Agreement (for employee grants in 2002
through 2005) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.5 to the Companys Form 10-Q for the quarter ended July
31, 2004, and filed September 8, 2004. |
|
|
|
10.5e*
|
|
Form of Restricted Stock Award Agreement for non-employee director
awards (for grants commencing May 2008) under the Brown Shoe Company,
Inc. Incentive and Stock Compensation Plan of 2002, incorporated
herein by reference to Exhibit 10.5e to the Companys Form 10-K for
the year ended January 31, 2009, and filed March 31, 2009. |
|
|
|
10.5f(1)*
|
|
Form of Performance Unit Award Agreement (for 2008-2010 performance
period) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.1 to the Companys Form 10-Q for the quarter ended October
30, 2010, and filed December 7, 2010. |
|
|
|
10.5f(2)*
|
|
Amendment to Performance Unit Award Agreement (for 2008-2010
performance period) under the Brown Shoe Company, Inc. Incentive and
Stock Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.4 to the Companys Form 8-K dated March 4, 2009, and filed
March 10, 2009. |
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
10.5f(3)*
|
|
Form of Performance Award Agreement (for 2009-2011 performance
period) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.2 to the Companys Form 10-Q for the quarter ended October
30, 2010, and filed December 7, 2010. |
|
|
|
10.5f(4)*
|
|
Form of Performance Award Agreement (for 2010-2012 performance
period) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.3 to the Companys Form 10-Q for the quarter ended October
30, 2010, and filed December 7, 2010. |
|
|
|
10.5g(1)*
|
|
Form of Performance Share Award Agreement (for 2007-2009 performance
period) under the Brown Shoe Company, Inc. Incentive and Stock
Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.5f to the Companys Form 10-K for the year ended January
28, 2006, and filed April 10, 2006. |
|
|
|
10.5g(2)*
|
|
Amendment to Performance Share Award Agreement (for 2007-2009
performance period) under the Brown Shoe Company, Inc. Incentive and
Stock Compensation Plan of 2002, incorporated herein by reference to
Exhibit 10.6 to the Companys Form 8-K dated March 4, 2009, and filed
March 10, 2009. |
|
|
|
10.6a*
|
|
Form of Non-Employee Director Restricted Stock Unit Agreement between
the Company and each of its Non-Employee Directors (for grants
commencing in 2008), incorporated herein by reference to Exhibit 10.2
to the Companys Form 10-Q for the quarter ended August 2, 2008, and
filed September 10, 2008. |
|
|
|
10.6b*
|
|
Form of Non-Employee Director Restricted Stock Unit Agreement between
the Company and each of its Non-Employee Directors (for grants prior
to 2008), incorporated herein by reference to Exhibit 10(u) to the
Companys Form 10-K for the year ended January 29, 2005, and filed
April 1, 2005. |
|
|
|
10.7*
|
|
Brown Shoe Company, Inc. Deferred Compensation Plan for Non-Employee
Directors, as amended and restated as of January 1, 2009,
incorporated herein by reference to Exhibit 10.2a to the Companys
Form 10-Q for the quarter ended November 1, 2008, and filed December
9, 2008. |
|
|
|
10.8*
|
|
Brown Shoe Company, Inc. Supplemental Executive Retirement Plan
(SERP), conformed and restated as of December 2, 2008, incorporated
herein by reference to Exhibit 10.3 to the Companys Form 10-Q for
the quarter ended November 1, 2008, and filed December 9, 2008. |
|
|
|
10.9*
|
|
Brown Shoe Company, Inc. Deferred Compensation Plan, incorporated
herein by reference to Exhibit 4.1 to the Companys Registration
Statement on Form S-8 filed December 11, 2007. |
|
|
|
10.10*
|
|
Brown Shoe Company, Inc. Non-Employee Director Share Plan (2009),
incorporated herein by reference to Exhibit 10.1 to the Companys
Form 10-Q for the quarter ended November 1, 2008, and filed December
9, 2008. |
|
|
|
10.11a*
|
|
Severance Agreement, effective April 1, 2006, between the Company and
Ronald A. Fromm, incorporated herein by reference to Exhibit 10.1 to
the Companys Form 8-K dated and filed April 6, 2006. |
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
10.11b*
|
|
Amendment letter dated December 18, 2009, to the Severance Agreement
(April 1, 2006), between the Company and Ronald A. Fromm, as
incorporated herein by reference to Exhibit 10.3 to the Companys
Form 10-Q for the quarter ended July 31, 2010, and filed September 7,
2010. |
|
|
|
10.12*
|
|
Severance Agreement, effective April 1, 2006, between the Company and
Richard M. Ausick, incorporated herein by reference to Exhibit 10.4
to the Companys Form 10-Q for the quarter ended July 31, 2010, and
filed September 7, 2010. |
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10.13*
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|
Severance Agreement, effective April 1, 2006, between the Company and
Diane M. Sullivan, incorporated herein by reference to Exhibit 10.5
to the Companys Form 8-K dated and filed April 6, 2006. |
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10.14*
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|
Severance Agreement, effective October 30, 2006, between the Company
and Mark E. Hood, incorporated herein by reference to Exhibit 10.6 to
the Companys Form 8-K dated and filed October 30, 2006. |
|
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10.15*
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|
Severance Agreement, effective April 1, 2009, between the Company and
Mark D. Lardie, as incorporated herein by reference to Exhibit 10.5
to the Companys Form 10-Q for the quarter ended July 31, 2010 and
filed September 7, 2010. |
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10.16*
|
|
Form of Amendment letter dated December 18, 2009, to the Severance
Agreements between the Company and each of: Richard M. Ausick, Mark
E. Hood, Mark D. Lardie and Diane M. Sullivan, as incorporated herein
by reference to Exhibit 10.6 to the Companys Form 10-Q for the
quarter ended July 31, 2010, and filed September 7, 2010. |
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10.17*
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|
Employment Agreement, dated January 7, 2011, between Ronald A. Fromm
and the Company, as incorporated herein by reference to Exhibit 10.1
to the Companys Form 8-K dated and filed January 10, 2011. |
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10.18
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|
Stock Purchase Agreement, dated February 17, 2011, by and among Brown
Shoe Company, Inc., Brown Shoe Netherlands B.V., American Sporting
Goods Corporation, the sellers named therein and Jerome A. Turner, in
his capacity as representative incorporated herein by reference to
Exhibit 10.1 to the Companys Form 8-K dated and filed February 17,
2011. |
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12.1
|
|
Calculation of Ratio of Earnings to Fixed Charges. |
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21.1
|
|
List of Subsidiaries of Brown Shoe Company, Inc. |
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23.1
|
|
Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm of Brown Shoe Company, Inc. |
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23.2
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Consent of Ernst & Young LLP, Independent Registered Public
Accounting Firm of American Sporting Goods Corporation. |
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23.3
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|
Consent of BDO USA, LLP, Independent Registered Public Accounting
Firm of American Sporting Goods Corporation. |
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23.4
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|
Consent of Shanghai Zhonghua, Independent Registered Public
Accounting Firm of ASG Asia Investments Company Limited. |
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|
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Exhibit |
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|
Number |
|
Description of Exhibit |
|
|
|
23.5
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|
Consent of Bryan Cave LLP (included in Exhibit 5.1). |
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23.6
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Consent of Cozen OConnor (included in Exhibit 5.2). |
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23.7
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|
Consent of McMillan L.L.P. (included in Exhibit 5.3). |
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24.1
|
|
Powers of Attorney executed by certain of the officers and directors
of the registrants (included in signature pages). |
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25.1
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|
Form T-1, Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of Wells Fargo Bank, National Association, as
Trustee under the Indenture. |
|
|
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99.1
|
|
Form of Letter of Transmittal. |
|
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99.2
|
|
Form of Notice of Guaranteed Delivery. |
|
|
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99.3
|
|
Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees. |
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99.4
|
|
Form of Letter to Clients. |
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* |
|
Denotes management contract or compensatory plan arrangements. |