UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

 

Filed by the Registrant þ

 

Filed by a Party other than the Registrant o

 

Check the appropriate box:

 

þ  Preliminary Proxy Statement

o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o  Definitive Proxy Statement

o  Definitive Additional Materials

o  Soliciting Material Pursuant to §240.14a-12

 

GENESCO INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

Common stock, per value $1.00 per share, of Genesco Inc. (“Genesco common stock”)

 

 

22,785,523 shares of Genesco common stock (including restricted shares) and 1,143,826 options to purchase Genesco common stock.

 

 

The transaction value was determined based upon the sum of (a) $54.50 per share of 22,785,523 shares of Genesco common stock (including restricted shares); and (b) $54.50 minus weighted average exercise price of $23.34 per share of outstanding options to purchase 1,143,826 shares of Genesco common stock.

 

 

$1,277,452,621.66

 

 

$39,217.80

 

 

 

 

 

 

 

 

 

 

 

GENESCO INC.
Genesco Park, 1415 Murfreesboro Road
Nashville, Tennessee 37217

 

          , 2007

 

Dear Shareholder:

 

On June 17, 2007, the board of directors of Genesco Inc. (“Genesco,” “we,” “us” or “our”) approved, and Genesco entered into, an Agreement and Plan of Merger (the “merger agreement”) with The Finish Line, Inc., an Indiana corporation (“Finish Line”), and Headwind, Inc., a Tennessee corporation and wholly-owned subsidiary of Finish Line (“Merger Sub”). Under the terms of the merger agreement, Merger Sub will be merged with and into Genesco, with Genesco continuing as the surviving corporation (the “merger”). If the merger is completed, the holders of our common stock will be entitled to receive $54.50 in cash, without interest, for each share of Genesco common stock owned by such holders.

 

You will be asked, at a special meeting of our shareholders to be held on          ,           2007, at  .m., local time, to vote on a proposal to approve the merger agreement so that the merger can occur. After careful consideration, our board of directors has approved and adopted the merger agreement and determined that the merger and the merger agreement are advisable, fair to, and in the best interests of Genesco and our shareholders. Our board of directors unanimously recommends that you vote “FOR” the approval of the merger agreement.

 

You will also be asked to approve and adopt articles of amendment (the “charter amendment”) to the restated charter of Genesco, as amended, that would permit the redemption of Genesco’s Employees’ Subordinated Convertible Preferred Stock (the “Employees’ Preferred”) after the completion of the merger at the price per share to be paid to holders of Genesco common stock in the merger, at Genesco’s option as the surviving corporation following the merger. After careful consideration, our board of directors has approved and adopted the charter amendment and determined that the charter amendment is in the best interests of Genesco and our shareholders. Our board of directors unanimously recommends that you vote “FOR” the approval and adoption of the charter amendment.

 

The holders of our preferred stock outstanding upon the completion of the merger will not be entitled to any consideration upon the completion of the merger pursuant to the merger agreement. However, Finish Line has informed us that it intends to redeem all outstanding preferred stock that has not properly converted to common stock prior to the merger in accordance with the redemption provisions of our charter, including the Employees’ Preferred subject to the requisite approval and filing of the proposed charter amendment.

 

The special meeting will be held at Genesco’s executive offices, Genesco Park, 1415 Murfreesboro Road, Nashville, Tennessee. Notice of the special meeting and the related proxy statement are enclosed.

 

The accompanying proxy statement gives you detailed information about the special meeting, the merger agreement and the related transactions, including the merger, and the charter amendment and includes a copy of the merger agreement attached thereto as Annex A and a copy of the charter amendment attached thereto as Annex B. The receipt of cash in exchange for shares of Genesco common stock pursuant to the merger will constitute a taxable transaction to U.S. persons for U.S. federal income tax purposes. We encourage you to read the proxy statement, the merger agreement and the charter amendment carefully. You may also obtain additional information about Genesco from documents filed with the Securities and Exchange Commission.

 

Your vote is very important, regardless of the number of shares you own. We cannot complete the merger unless holders of a majority of the votes represented by the outstanding shares of our common stock and our preferred stock, voting together as a single group, vote to approve the merger agreement. The failure of any shareholder to vote on the proposal to approve the merger agreement will have the same effect as a vote against the merger agreement. The approval and adoption of the charter amendment requires that the votes cast in favor of the amendment by holders of all Genesco capital stock voting together as a single group, excluding Employees’ Preferred, exceed the votes cast against the amendment by such holders and also requires the separate affirmative approval of a majority of the outstanding shares of Employees’ Preferred voting as a group. The failure of any holder of Employees’ Preferred to vote on the charter amendment proposal will have the same effect as a vote against the charter amendment. The approval and adoption of the charter amendment by Genesco’s shareholders is not a condition to the closing of the merger.

 

Whether or not you plan to attend the special meeting, please complete, date, sign and return, as promptly as possible, the enclosed proxy in the accompanying reply envelope, or submit your proxy by telephone or the Internet.

 

Our board of directors and management appreciate your continuing support of Genesco, and we urge you to support the merger and the charter amendment.

Sincerely,

 

Hal N. Pennington

Chairman and Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

 

 

The proxy statement is dated          , 2007, and is first being mailed to shareholders on or about          , 2007.

 

GENESCO INC.
Genesco Park, 1415 Murfreesboro Road
Nashville, Tennessee 37217

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held On          , 2007

 

Dear Shareholder:

 

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Genesco Inc., a Tennessee corporation (“Genesco,” “we,” “us” or “our”), will be held on          ,          , 2007, at  .m., local time, at Genesco’s executive offices, located at, Genesco Park, 1415 Murfreesboro Road, Nashville, Tennessee, for the following purposes:

 

1. To consider and vote on a proposal to approve the Agreement and Plan of Merger (the “merger agreement”), dated as of June 17, 2007, by and among Genesco, The Finish Line, Inc., an Indiana corporation (“Finish Line”), and Headwind, Inc., a Tennessee corporation and a wholly-owned subsidiary of Finish Line (“Merger Sub”), as the merger agreement may be amended from time to time;

 

2. To approve and adopt articles of amendment (the “charter amendment”) to the restated charter of Genesco, as amended, permitting the redemption of Genesco’s Employees’ Subordinated Convertible Preferred Stock (the “Employees’ Preferred”) after the completion of the merger at the price per share to be paid to holders of Genesco common stock in the merger in cash, without interest, at Genesco’s option as the surviving corporation following the merger;

 

3. To approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the merger agreement or the charter amendment; and

 

4. To transact such other business as may properly come before the special meeting and any and all adjourned or postponed sessions thereof.

 

This Notice of Special Meeting of Shareholders and the related proxy statement shall serve to provide to holders of preferred stock any and all notices of the merger required by Genesco’s charter, including, but not limited to, any notice required by Part I, Article Sixth, Part C-I, Section 4(g) and Part I, Article Sixth, Part E, Section 5(f).

 

The record date for the determination of shareholders entitled to notice of and to vote at the special meeting is          , 2007. Accordingly, only shareholders of record as of the close of business on that date will be entitled to notice of and to vote at the special meeting or any adjournment or postponement of the special meeting.

 

We urge you to read the accompanying proxy statement carefully as it sets forth details of the proposed merger and other important information related to the merger agreement and the charter amendment.

 

Please note that space limitations may make it necessary to limit attendance at the special meeting to shareholders. If you attend, please note that you may be asked to present valid picture identification. “Street name” holders will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras, recording devices and other electronic devices will not be permitted at the special meeting.

 

Under Tennessee law, holders of Genesco common stock will have no dissenters’ rights in connection with the proposed merger. However, dissenting holders of Genesco preferred stock who comply with the provisions of Chapter 23 of the Tennessee Business Corporation Act are entitled to dissent from the merger and receive payment of the fair value of their shares of Genesco preferred stock if the merger is consummated. Additionally, dissenting holders of the Employees’ Preferred who comply with the provisions of Chapter 23 of the Tennessee Business Corporation Act are entitled to dissent from the charter amendment and receive payment of the fair value of their shares of Genesco preferred stock if the charter amendment becomes effective. A copy of Chapter 23 of the Tennessee Business Corporation Act is attached as Annex D to the proxy statement. Please see the section entitled “Dissenters’ Rights” in the proxy statement for a summary of the procedures to be followed in asserting these dissenters’ rights. A dissenting shareholder will be entitled to payment only if written notice of intent to demand payment is delivered to Genesco before the vote is taken and the shareholder does not vote in favor of the merger agreement (or the charter amendment, as applicable).

 

By Order of the Board of Directors,

 

 

Roger G. Sisson

Secretary

 

Nashville, Tennessee

          , 2007

 

 

YOUR VOTE IS IMPORTANT! WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY IN THE ACCOMPANYING REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET.

 

 

 

TABLE OF CONTENTS

 

References to “Genesco,” “we,” “our” or “us” in this proxy statement refer to Genesco Inc. and its subsidiaries unless otherwise indicated by context.

 

This Summary Term Sheet, together with the “Questions and Answers About the Special Meeting” beginning on page 7, summarizes selected information in the proxy statement and may not contain all the information important to you. You should carefully read this entire proxy statement and the other documents to which this proxy statement refers you for a more complete understanding of the matters being considered at the special meeting. In addition, this proxy statement incorporates by reference important business and financial information about Genesco. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions in “Where You Can Find More Information” beginning on page 74.

 

 

 

 

See “The Merger Agreement — Treatment of Options and Other Awards” beginning on page 51.

 

 

 

 

 

 

 

 

The merger agreement may be terminated at any time prior to the completion of the merger, whether before or after shareholder approval has been obtained:

 

 

 

 

 

 

 

 

 

 

 

 

See “Questions and Answers About the Special Meeting” beginning on page 7 and “The Special Meeting” beginning on page 13.

 

 

 

 

 

See “The Merger — Financing of the Merger” beginning on page 39.

 

 

 

 

In addition, you must not convert your shares of preferred stock into common stock prior to the merger.

 

A dissenting shareholder will be entitled to payment only if written notice of intent to demand payment is properly delivered to Genesco before the vote on the merger is taken and the shareholder does not vote in favor of the merger. You will not protect your dissenters’ rights by merely voting against the merger agreement. Additionally, under Tennessee law, holders of the Employees’ Preferred will have the right to be paid the “fair value” of their shares with respect to the charter amendment proposal if the charter amendment becomes effective, but only if they comply with the analogous procedures and requirements stated above with respect to the merger agreement proposal; provided, however, that holders of Employees’ Preferred will only be entitled to one payment with respect to their shares. See “Dissenters’ Rights” beginning on page 68 and the text of the Tennessee dissenters’ rights statute reproduced in its entirety as Annex D.

 

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the special meeting. These questions and answers do not address all questions that may be important to you as a Genesco shareholder. You should still carefully read the “Summary Term Sheet” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

 

 

 

 

This proxy statement, and the documents to which we refer you in this proxy statement, contain forward-looking statements based on estimates and assumptions. Forward-looking statements include information concerning possible or assumed future results of operations of Genesco, the expected completion and timing of the merger and other information relating to the merger. There are forward-looking statements throughout this proxy statement, including, without limitation, under the headings “Summary Term Sheet,” “The Merger,” “Charter Amendment,” “Projected Financial Information,” and in statements containing the words “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimates” or other similar expressions. For each of these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 21E of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the actual results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on our business or operations. These forward-looking statements speak only as of the date on which the statements were made and we undertake no obligation to publicly update or revise any forward-looking statements made in this proxy statement or elsewhere as a result of new information, future events or otherwise. In addition to other factors and matters contained or incorporated in this document, we believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements:

 

 

 

Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect our views only as of the date of this proxy statement. We cannot guarantee any future results, levels of activity, performance or achievements. The statements made in this proxy statement represent our views as of the date of this proxy statement, and it should not be assumed that the statements made herein remain accurate as of any future date. Moreover, we assume no obligation to update forward-looking statements or update the reasons that actual results could differ materially from those anticipated in forward-looking statements, except as required by law.

 

Genesco is a Tennessee corporation and is headquartered in Nashville, Tennessee. Our principal offices are located at Genesco Park, 1415 Murfreesboro Road, Nashville, Tennessee and our telephone number is (615) 367-7000. Genesco is a leading retailer of branded footwear and licensed and branded headwear and a wholesaler of branded footwear, with net sales for its fiscal year ended February 3, 2007 (“fiscal year 2007”) of $1.5 billion. During fiscal year 2007, Genesco operated five reportable business segments (not including corporate): Journeys Group, comprised of the Journeys, Journeys Kidz and Shi by Journeys retail footwear chains, catalog and e-commerce operations; Underground Station Group, comprised of the Underground Station and Jarman retail footwear chains and e-commerce operations; Hat World Group, comprised of the Hat World, Lids, Hat Shack, Hat Zone, Head Quarters, Cap Connection and Lids Kids retail headwear chains and e-commerce operations; Johnston & Murphy Group, comprised of Johnston & Murphy retail operations, catalog and e-commerce operations and wholesale distribution; and Licensed Brands, comprised primarily of Dockers^® footwear, sourced and marketed under a license from Levi Strauss & Company. Genesco also designs, sources, markets and distributes footwear under its own Johnston & Murphy brand and under the licensed Dockers^® brand to over 1,000 retail accounts in the United States, including a number of leading department, discount, and specialty stores.

 

For a more detailed description of the business and properties of Genesco, see our Annual Report on Form 10-K for fiscal year 2007, which is incorporated by reference herein, or visit our website at www.genesco.com. Our website address is provided as an inactive textual reference only. The information provided on our website is not part of this proxy statement and is not incorporated by reference. Genesco’s common stock is listed on the NYSE (Symbol: GCO) and the CHX. See “Where You Can Find More Information.”

 

The Finish Line, Inc. (which we refer to as Finish Line) is an Indiana corporation and is headquartered in Indianapolis, Indiana. Finish Line’s principal offices are located at 3308 North Mitthoeffer Road, Indianapolis, Indiana 46235 and its telephone number is (317) 899-1022. Finish Line operates under the Finish Line, Man Alive and Paiva brand names and is one of the largest mall-based specialty retailers in the United States. Finish Line currently operates 694 Finish Line stores in 47 states and online, 93 Man Alive stores in 19 states and 15 Paiva stores in 10 states and online. Finish Line’s common stock is listed on the NASDAQ Global Select Market (Symbol: FINL).

 

For a more detailed description of the business and properties of Finish Line, see its Annual Report on Form 10-K for its fiscal year ended March 3, 2007, or visit its website at www.finishline.com. Finish Line’s website is provided as an inactive textual reference only. The information set forth in the above-referenced Annual Report and the information provided on Finish Line’s website are not part of this proxy statement and are not incorporated by reference.

 

Headwind, Inc. (which we refer to as Merger Sub) is a Tennessee corporation that was formed solely for the purpose of completing the proposed merger. Upon the completion of the proposed merger, Merger Sub will cease to exist and Genesco will continue as the surviving corporation. Merger Sub is wholly-owned by Finish Line and has not engaged in any business except as contemplated by the merger agreement. The principal office address of Merger Sub is Headwind, Inc., c/o The Finish Line, Inc., 3308 North Mitthoeffer Road, Indianapolis, Indiana 46235 and its telephone number is (317) 899-1022.

 

This proxy statement is furnished in connection with the solicitation of proxies by our board of directors in connection with the special meeting of our shareholders relating to the merger and the charter amendment.

 

The special meeting is scheduled to be held as follows:

 

Date:          ,          , 2007

 

Time:    .m., local time

 

Place:  Genesco Park, 1415 Murfreesboro Road, Nashville, Tennessee

 

At the special meeting, you will be asked to vote on a proposal to approve the merger agreement, as the same may be amended from time to time (Proposal No. 1). If our shareholders fail to approve the merger agreement, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, and we encourage you to read it carefully and in its entirety. At the special meeting, you will also be asked to vote on the charter amendment (Proposal No. 2). A copy of the charter amendment is attached as Annex B to this proxy statement, and we encourage you to read it carefully and in its entirety. You will also be asked to approve the adjournment of the special meeting, if necessary, to solicit additional proxies if there

are insufficient votes at the time of the meeting to approve the merger agreement or the charter amendment (Proposal No. 3).

 

We have fixed the close of business on          , 2007 as the record date for the special meeting, and only holders of record of Genesco capital stock on the record date are entitled to vote at the special meeting. On that date, the number of voting shares outstanding and the number of votes entitled to be cast were as follows:

 

 

The presence in person or representation by proxy of shareholders entitled to cast a majority of the votes of all issued and outstanding shares of Genesco capital stock entitled to be voted shall constitute a quorum for the purpose of considering each of the proposals except the charter amendment proposal. A quorum for the charter amendment proposal requires the presence in person or representation by proxy of shareholders entitled to cast (1) a majority of the votes of all issued and outstanding shares of Genesco capital stock, except the Employees’ Preferred, entitled to be voted and (2) a majority of the shares of all issued and outstanding shares of the Employees’ Preferred entitled to vote. Shares of Genesco capital stock represented at the special meeting but not voted, including shares of Genesco capital stock for which proxies have been received but for which shareholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business. In the event that a quorum for the proposal to approve the merger agreement is not present at the special meeting, it is expected that the meeting will be adjourned to solicit additional proxies; provided, however, that in the event a quorum is present with respect to such proposal and there are sufficient votes to approve the merger agreement at the date the special meeting is initially convened, the shareholders will take final action at that meeting to approve the merger agreement, regardless of whether the meeting is adjourned to a later date solely for further consideration of the charter amendment proposal.

 

If your shares are registered in your name or if you have stock certificates, they will not be voted if you do not vote at the meeting in person or as described below under “— Submission and Revocation of Proxies.” If your shares are held in “street name” through a nominee (such as a bank, broker or other nominee) and you do not provide voting instructions to the nominee that holds your shares, the nominee has the discretionary authority to vote your unvoted shares on certain matters. A “broker non-vote” arises when a broker, financial institution or other holder of record that holds shares in street name does not receive instructions from a beneficial owner and does not have the discretionary authority to vote on a particular item. Under current NYSE rules, brokers have discretionary authority to vote on the proposal regarding adjournment. Under current NYSE rules, brokers do not have discretionary authority to vote on the proposal regarding the merger agreement or the proposal regarding the charter amendment. We encourage you to provide voting instructions to your bank, broker or other nominee. Doing so will ensure that your shares will be voted in the manner you desire.

 

Approval of the merger agreement (Proposal No. 1) requires the affirmative vote of the holders of a majority of the votes represented by the outstanding shares of our common stock and our preferred stock, voting together as a single group. For the proposal to approve the merger agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions and broker non-votes will not be counted as votes cast or shares voting on the proposal to approve the merger agreement, but will count for the purpose of determining whether a

quorum is present. Abstentions and broker non-votes will have the same effect as a vote against the approval of the merger agreement.

 

As of          , 2007, the record date, the directors and executive officers of Genesco held and were entitled to vote, in the aggregate, shares of Genesco common stock, representing approximately  % of the outstanding votes of Genesco capital stock. As of the record date, the directors and executive officers held no shares of Genesco preferred stock. If our directors and executive officers vote their shares in favor of approving the merger agreement, approximately     % of the outstanding votes of Genesco capital stock will have voted for the proposal to approve the merger agreement. This means that additional holders of approximately      votes, or approximately     %, of all votes entitled to be cast at the special meeting would need to vote for the proposal to approve the merger agreement in order for it to be approved.

 

For the proposal to approve and adopt the charter amendment (Proposal No. 2), holders may vote FOR, AGAINST or ABSTAIN. There are two separate voting groups:

 

 

If our directors and executive officers vote their shares in favor of the approval and adoption of the charter amendment, approximately     % of the outstanding votes of Genesco capital stock, excluding the Employees’ Preferred, will have voted for the proposal to approve and adopt the charter amendment. This means that additional holders of approximately      votes, or approximately     %, of all votes entitled to be cast at the special meeting by this voting group would need to vote for the proposal to approve and adopt the charter amendment, in addition to the holders of a majority of all votes entitled to be cast by the Employees’ Preferred, in order for it to be approved and adopted.

 

The outcome of the vote with respect to the charter amendment proposal will not impact the outcome of the vote with respect to the merger agreement, and the approval of either proposal is independent of, and not conditioned upon the approval of, the other proposal. The charter amendment, however, will not take effect unless the merger is consummated. The merger is not contingent upon the approval of the charter amendment.

 

The proposal to adjourn the special meeting (Proposal No. 3), if necessary, to solicit additional proxies to approve the merger agreement or the charter amendment requires that the votes cast in favor of the matter exceed the votes cast against the matter. For the proposal to adjourn the special meeting, if necessary, to solicit additional proxies, you may vote FOR, AGAINST or ABSTAIN. Abstentions and broker non-votes will count for the purpose of determining whether a quorum is present but do not count in the voting results and have no effect on the result of the vote on the adjournment proposal.

 

Shareholders of record may submit proxies by mail. Shareholders who wish to submit a proxy by mail should mark, date, sign and return the proxy card in the envelope furnished. If you hold your shares in your name as a shareholder of record, you may submit a proxy by telephone or electronically through the Internet by following the instructions included with your proxy card. Shareholders who hold shares beneficially through a nominee (such as a bank or broker) may be able to submit a proxy by mail, or by telephone or the Internet if those services are offered by the nominee.

 

Proxies received at any time before the special meeting, and not revoked or superseded before being voted, will be voted at the special meeting. Where a specification is indicated by the proxy, it will be voted in accordance with the specification. If you sign your proxy card without indicating your vote, your shares will be voted “FOR” the approval of the merger agreement, as the same may be amended from time to time, “FOR” the approval and adoption of the charter amendment, and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies, and in accordance with the recommendations of our board of directors on any other matters properly brought before the special meeting for a vote.

 

You have the right to revoke your proxy at any time before the vote taken at the special meeting by taking the following actions:

 

 

Please do not send in your common stock certificates with your proxy card. When the merger is completed, a separate letter of transmittal will be mailed to holders of Genesco common stock that will enable you to receive the merger consideration in exchange for your stock certificates.

 

Holders of Genesco common stock are not entitled to dissenters’ rights under Tennessee law in connection with the merger unless our common stock is delisted from the NYSE and the CHX prior to completion of the merger, which we do not currently anticipate. However, holders of Genesco preferred stock are entitled to dissenters’ rights under Tennessee law in connection with the merger. Holders of the Employees’ Preferred are also entitled to dissenters’ rights under Tennessee law in connection with the charter amendment. With respect to the holders of Genesco preferred stock, Tennessee law permits you to dissent from the merger and to have the fair value of your stock appraised by a court and paid to you in cash. To do this, you must follow certain procedures, including: (1) filing certain notices with us; and (2) refraining from voting your shares in favor of the merger. In addition, you must not convert your shares of preferred stock into Genesco common stock before the merger. If you properly dissent from the merger, your shares of Genesco preferred stock cannot be converted into Genesco common stock prior to the merger and will not be entitled to receive the price per share to be paid to holders of Genesco common stock in the merger. If you properly dissent from the merger, your shares will not be redeemed by the surviving corporation following the merger. Your only right will be to receive the appraised value of your shares in cash. The procedures for holders of Employees’ Preferred to dissent from the charter amendment are substantially similar; provided, however, that holders Employees’ Preferred will in no event be entitled to more than one payment with respect to their shares.

 

A dissenting shareholder will be entitled to payment only if written notice of intent to demand payment is properly delivered to Genesco before the vote on the merger agreement (or the charter amendment, as applicable) is taken and the shareholder does not vote in favor of the merger agreement (or the charter amendment, as applicable). A holder of preferred stock will not protect their dissenters’ rights by merely voting against the merger agreement (or the charter amendment, as applicable). Your failure to follow exactly the procedures specified under Tennessee law will result in the loss of your dissenters’ rights. See “Dissenters’ Rights” beginning on page 68 and the text of the Tennessee dissenters’ rights statute reproduced in its entirety as Annex D.

 

This proxy solicitation is being made and paid for by Genesco on behalf of our board of directors. We have retained Georgeson Inc. to assist in the solicitation. We will pay Georgeson Inc. approximately $20,000 plus out-of-pocket expenses for their assistance. Our directors, officers and employees may also solicit proxies by mail, e-mail, telephone, facsimile or other means of communication. These individuals will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the beneficial owners of shares of Genesco capital stock that the brokers and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses. In addition, we will indemnify Georgeson Inc. against any losses arising out of that firm’s proxy soliciting services on our behalf.

 

We are not currently aware of any business to be acted upon at the special meeting other than the matters discussed in this proxy statement. Under our bylaws, business transacted at the special meeting is limited to the purposes stated in the notice of the special meeting, which is provided at the beginning of this proxy statement. If other matters do properly come before the special meeting, or at any adjournment or postponement of the special meeting, we intend that shares of Genesco capital stock represented by properly submitted proxies will be voted in accordance with the recommendations of our board of directors.

 

If you have more questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please call our proxy solicitor, Georgeson Inc., toll-free at (888) 605-7510 (banks and brokerage firms call collect at (212) 440-9800), or contact Genesco in writing at our principal executive offices at Corporate Secretary, Genesco Inc., 1415 Murfreesboro Road, Nashville, Tennessee 37217, or by telephone at (615) 367-7000.

 

This discussion of the merger is qualified by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

 

On January 19, 2007, our chief executive officer, Hal Pennington, received an unsolicited call from Matthew Serra, the chief executive officer of Foot Locker, Inc. (“Foot Locker”). During this conversation, Mr. Serra indicated that Foot Locker was interested in pursuing a negotiated acquisition of Genesco and that he believed Foot Locker could potentially offer a purchase price of $48.00 to $50.00 per share for our outstanding common stock, subject to satisfactory due diligence. Mr. Pennington informed Mr. Serra that Genesco was committed to its strategic plan and that management believed in the value that could be created for our shareholders by executing this plan.

 

During the week of January 22, 2007, Mr. Pennington contacted each of our board members individually to advise them of the call from Mr. Serra. During the week, one board member received a call from an investment banker indicating that a letter was being prepared by Foot Locker to send to our board outlining a proposal, but we received no such letter.

 

On February 5, 2007, Mr. Pennington received another call from Mr. Serra. Mr. Serra did not discuss a specific proposal on this call and indicated that his purpose was to follow up on his previous conversation of January 19, 2007. Mr. Serra indicated again that Foot Locker intended to pursue a negotiated acquisition of us on a friendly basis. Mr. Pennington told Mr. Serra that his views about such an acquisition had not changed since the prior call. On February 8, 2007, our directors participated in a telephone call conducted by Mr. Pennington for the purpose of advising them of the February 5 call from Mr. Serra.

During the first several weeks of March 2007, various media outlets began reporting on rumors and speculation about a potential tender offer for the outstanding shares of Genesco by Foot Locker. On March 19, 2007, our directors participated in a telephone call conducted by Mr. Pennington for the purpose of informing the board of the media reports and of management’s concerns regarding certain key employees who were anxious about their job security in light of the Foot Locker rumors and speculation. Mr. Pennington told the board that management believed the concerns could be reduced if change-in-control severance agreements were provided for those key employees. He explained that the proposed agreements would be substantially similar to the existing agreements with our executive officers, which are described under “The Merger — Interests of Genesco’s Directors and Executive Officers in the Merger,” provided that these agreements would generally provide for a severance payment equal to an amount calculated for each such employee by multiplying one times the sum of the employee’s base salary, annual bonus and certain employee benefits amounts. It was the consensus of the board members on the call that such agreements would not present a material deterrent to any future acquisition of Genesco and that the execution of such agreements was in the best interests of our shareholders in order to encourage such employees to remain with us during the existing period of uncertainty and in the event an unsolicited takeover attempt was announced. Our board then acted by unanimous written consent, effective March 22, 2007, approving the change-in-control severance agreements for certain key employees.

 

As part of the ongoing evaluation of our business, our board and senior management regularly evaluate our long-term strategic alternatives and prospects for continued operations as an independent company. This evaluation took on renewed emphasis in light of the media speculation and our belief that Foot Locker might make a hostile tender offer for the acquisition of Genesco or otherwise attempt to elect its own slate of directors at our annual meeting of shareholders on June 27, 2007. Accordingly, in a telephone call on March 22, 2007, it was the consensus of participating directors that management should engage Goldman Sachs as our financial advisor to assist us in preparing for any potential acquisition proposal, proxy contest, or any other attempt to acquire control of Genesco. The board also asked management to update the forecasts set forth in management’s annual five-year financial plan to facilitate Goldman Sachs’ financial analysis and to assist the board in evaluating any potential acquisition proposal.

 

On April 4, 2007, Mr. Pennington received a letter setting forth a purportedly confidential proposal from Foot Locker for the acquisition of all of the outstanding shares of common stock of Genesco for $46.00 per share in cash. Mr. Serra called Mr. Pennington immediately before sending the letter, indicating that Foot Locker might be able to “go higher” than the proposed price per share if increased value could be demonstrated through a due diligence process. The proposal set forth in the letter was not subject to any financing condition but was subject to due diligence. Mr. Pennington provided this letter to all of our directors.

 

On April 5, 2007, our directors participated in a telephone call conducted by Mr. Pennington for the purpose of discussing the Foot Locker letter. Representatives of Bass Berry & Sims PLC (“Bass Berry”), our outside corporate counsel, and Goldman Sachs participated on this call. A representative of Bass Berry reviewed the board’s fiduciary duties in considering and responding to the proposal. After discussing the proposal with their legal and financial advisors, it was the consensus of the participating directors that the proposal should be formally considered at a special meeting of our board to be held on April 20, 2007. In preparation for the April 20 board meeting, the board asked Goldman Sachs to review management’s most current financial forecasts and consider our strategic alternatives to enhance shareholder value, including the Foot Locker proposal. Mr. Pennington delivered to Foot Locker on April 5, 2007 a letter confirming receipt of its proposal and indicating that we would provide a response in due course.

 

On April 19, 2007, Mr. Serra sent a letter to Mr. Pennington expressing his disappointment in the lack of a substantive response to his April 4 letter and indicating that Foot Locker was considering disclosing the April 4 and April 19 letters publicly before the market opened on April 20, 2007. Mr. Serra also stated in his letter that Foot Locker would welcome the opportunity to conduct due diligence and might be prepared to increase its offer if increased value could be demonstrated. Lehman Brothers Inc. (“Lehman Brothers”), the financial advisor for Foot Locker, contacted Goldman Sachs that day to discuss the April 19 letter. Goldman Sachs indicated to Lehman Brothers that our board was meeting to consider the proposal on April 20, 2007

and that it was our preference that Foot Locker not disclose the letters until the board held its meeting and we could respond to Mr. Serra’s April 4 letter. Lehman Brothers indicated on that call that it could not commit that Foot Locker would refrain from making the letters public. On the morning of April 20, 2007, Foot Locker made the April 4 and April 19 letters public. On April 20, 2007, we issued a press release announcing that we had received, and that our board intended to consider with the assistance of Goldman Sachs, the Foot Locker proposal set forth in the April 4 letter.

 

On April 20, 2007, Bob Dennis, our president and chief operating officer, received a call from Alan Cohen, the chief executive officer of Finish Line, regarding Finish Line’s potential interest in a business combination transaction. Mr. Dennis referred Mr. Cohen to Goldman Sachs in case Finish Line desired to pursue its interest further.

 

On April 20, 2007, our board met to consider the Foot Locker proposal set forth in the April 4 letter. Representatives of Bass Berry and Goldman Sachs attended the meeting, together with certain members of management. At the meeting, Mr. Pennington discussed the various media articles about a potential acquisition proposal from Foot Locker since the April 5 board call. Mr. Pennington described the discussions between Goldman Sachs and Lehman Brothers, which preceded the public announcement by Foot Locker of its proposal. A representative of Bass Berry reviewed with the board their confidentiality obligations, stock trading limitations and our no-comment and document retention policies, as well as their fiduciary duties and responsibilities in the context of considering the Foot Locker proposal. Management presented an update of financial results for the first fiscal quarter to date and a general business and operating plan update, together with management’s preliminary five-year financial forecasts. This discussion included a detailed explanation of the process thus far undertaken to update the forecasts and certain operational and financial assumptions underlying the forecasts. Management responded to questions regarding the risks and opportunities that may impact management’s forecasts and assumptions and confirmed their belief that the financial forecasts were reasonable financial projections based on currently available information, and that these forecasts were provided to Goldman Sachs for purposes of performing its financial analysis. See “The Merger — Projected Financial Information — Initial Projections” beginning on page 35.

 

At the April 20 board meeting, representatives of Goldman Sachs discussed with our board the retail merger and acquisition market and reported on the discussions they had had with Lehman Brothers in connection with the Foot Locker proposal. They also reviewed with the board the calls they had received from parties other than Foot Locker expressing potential interest in acquiring us. Indications of interest had been received from six private equity financial sponsors. Representatives of Goldman Sachs then discussed their financial analysis of our strategic alternatives. In addition to the Foot Locker and other sale possibilities, these strategic alternatives included a leveraged recapitalization, the sale of a material division or assets, the acquisition of assets, and the execution of our current strategic plan. Representatives of Goldman Sachs discussed the benefits and issues relating to each of the strategic alternatives. They then discussed the Foot Locker proposal in detail, including the discussions with Lehman Brothers, as well as the indications of interest which had been received from other parties. The board and its financial and legal advisors then discussed the possible contents of a response letter to, and potential communication strategies with, Foot Locker and the media, should our board determine to reject the Foot Locker proposal as not in the best interests of our shareholders.

 

At the April 20 board meeting, the board also discussed the strategic alternatives available to us and the next steps we might take to explore further these strategic alternatives. Among the next steps considered was the contacting of the third parties who had indicated to us or to Goldman Sachs an interest in pursuing a business combination transaction with us. The board also evaluated Foot Locker’s April 4 proposal in light of the financial analyses of our other strategic alternatives and in light of the current market price of our common stock. The board determined that while it had confidence in our long-term strategic plan and, accordingly, we were not for sale, it was in the best interests of our shareholders to engage in a feasibility process to gauge the potential interest in a business combination transaction with us and to allow the board to consider in light of that interest the strategic alternatives available to us, including the alternative of remaining an independent public company and executing our long-term strategic plan. After the representatives of Goldman Sachs were excused from the meeting, further discussion ensued and the board unanimously voted to reject the Foot

Locker proposal as not in the best interests of our shareholders. The board then discussed further the general nature of the response letter to Foot Locker and our next steps, and determined to instruct Goldman Sachs to contact the parties who had previously contacted us or Goldman Sachs in order to determine their level of interest in a business combination with us. The board also approved the sharing of confidential information with such parties, subject to the execution of customary confidentiality and standstill agreements, and limited informational meetings with management in order to facilitate this process. Bass Berry noted at this time that management should not discuss personal arrangements during these meetings or otherwise show favoritism to any particular participant and advised that representatives of Goldman Sachs should be present at these meetings.

 

On April 23, 2007, Mr. Pennington sent a letter to Mr. Serra indicating that our board was aware of its fiduciary duties to consider an acquisition proposal that fairly values our company and that, after consulting with Goldman Sachs, had unanimously rejected Foot Locker’s April 4 proposal as not being in the best interests of our shareholders. We also issued a press release announcing this response.

 

On April 23, 2007, UBS Securities LLC (“UBS”), Finish Line’s financial advisor, contacted Goldman Sachs to discuss Finish Line’s interest in pursuing a transaction with us.

 

Beginning the week of April 23, 2007 and through May 8, 2009, as directed by our board, Goldman Sachs approached Finish Line and the six potential private equity financial sponsors that had previously indicated a potential interest in considering a transaction with us and provided confidentiality and standstill agreements to each of these potential purchasers. Following execution of confidentiality and standstill agreements by four of the six potential financial sponsor purchasers as well as Finish Line, pursuant to which these parties were subject to a customary “standstill” provision of at least 18 months in duration (during which period these parties were required to refrain, unless specifically requested by us in writing, from seeking to acquire control of us, directly or indirectly, including by tender offer, merger proposal, proxy contest or other attempts to influence or control our board, management or the policies of our company), informational presentations were made by senior members of our management, with the participation of Goldman Sachs, to each of these potential purchasers. Non-public information packages were also distributed to these parties in conjunction with the management presentations.

 

On April 23, 2007 and April 25, 2007, Lehman Brothers contacted Goldman Sachs and indicated Foot Locker’s continuing interest in acquiring us and their interest in meeting with our senior management to discuss their interest. Goldman Sachs indicated to Lehman Brothers that Mr. Pennington would be willing to meet with Mr. Serra solely for this purpose, accompanied by representatives of Lehman Brothers and Goldman Sachs. A meeting was scheduled to occur on May 4, 2007. On April 26, 2007, Lehman Brothers indicated to Goldman Sachs that Foot Locker desired to receive confidential information in connection with its due diligence review and would be willing to execute a confidentiality agreement as a condition to the receipt of this information. Goldman Sachs indicated that any sharing of confidential information would also be subject to the execution by Foot Locker of a customary standstill agreement.

 

On May 2, 2007, our board held a regularly scheduled meeting. Representatives of Goldman Sachs and Bass Berry participated in this meeting, as well as certain members of senior management. At this meeting, senior management reviewed for the board our anticipated financial results for the first quarter. In particular, management discussed the financial performance of our Underground Station retail stores in detail and described a potential plan to close or convert our worst performing urban stores, primarily in our Underground Station chain. Mr. Pennington then reviewed the management presentations that had taken place to date in connection with the board’s instruction to explore the feasibility of the sale alternative. Bass Berry reviewed the board’s fiduciary responsibilities in connection with its consideration of that strategic alternative. Thereafter, representatives of Goldman Sachs discussed their contacts with the interested potential purchasers and possible next steps, including the coordination of second round management presentations with interested potential purchasers. Representatives of Goldman Sachs also discussed other strategic alternatives available to us.

 

On May 4, 2007, Mr. Pennington met with Mr. Serra, together with representatives of Goldman Sachs and Lehman Brothers, to allow Mr. Serra to explain Foot Locker’s interest in acquiring us. No specific terms or prices were discussed at this meeting. Mr. Serra discussed his perception of strategic benefits flowing from

Foot Locker’s proposed acquisition of Genesco. Mr. Pennington agreed that an acquisition would afford benefits to Foot Locker’s shareholders, but noted that his responsibilities as chief executive officer and a director of Genesco were to Genesco’s shareholders. In that regard, Mr. Pennington again advised Mr. Serra that our management had confidence in our strategic plan and its potential to deliver value to our shareholders. He stated that he believed that our board understood its fiduciary duties and would pursue the best interests of Genesco’s shareholders, and that he would promptly report to the board regarding his meeting with Mr. Serra.

 

On May 7, 2007, Finish Line executed a confidentiality and standstill agreement with us as discussed above, which included an 18 month standstill period as well as an agreement to give Finish Line the benefit of any more favorable standstill provisions agreed to by us with other strategic process participants. On May 8, 2007, our senior management conducted its initial management presentation for Finish Line. Representatives of Goldman Sachs attended this meeting.

 

On May 9, 2007, our board met telephonically. Representatives of Goldman Sachs and Bass Berry attended this meeting, as well as certain members of senior management. Management updated the board on the preliminary financial results for the first quarter. Management also presented its plan for closing certain of our worst-performing urban stores, and the financial impact of this plan. Mr. Pennington and Goldman Sachs then reviewed with the board the parties for which management had made presentations and the initial feedback received by Goldman Sachs following these meetings. In this review, Mr. Pennington discussed his meeting with Mr. Serra on May 4. Representatives of Goldman Sachs indicated that they had heard nothing from Lehman Brothers on behalf of Foot Locker since the May 4 meeting with Mr. Serra. They also noted that one private equity financial sponsor indicated that it was not interested in moving forward in the process as result of that party’s concern about whether it was worth the time and expense to commit to this process in light of Foot Locker’s publicly expressed interest, but that the three remaining private equity financial sponsors stated that they would like to move forward and indicated that their preliminary review of value was a per share price in the range of $50.00 to $52.00. They also advised the board that they had received from UBS, on behalf of Finish Line, a positive response from Finish Line following the initial management presentation and its preliminary view of value in excess of $51.00 per share and that UBS had expressed confidence in Finish Line’s ability to finance an all-cash transaction.

 

At the May 9 board meeting, the board discussed the level of interest of each potential purchaser, including Foot Locker, and the strategic alternatives available to us other than a sale transaction. Representatives of Goldman Sachs discussed with the board the strategic alternatives available to us, including various stock repurchase plans and the sale of a material division or assets. The board discussed the various strategic alternatives, as well as the risks associated with each alternative. After the representatives of Goldman Sachs left the call, the board discussed the alternative of moving toward a more definitive indication of interest with one or more of the private equity financial sponsors and Finish Line and a potential process for doing so. The board also expressed an interest in further analysis of the recapitalization alternatives. The board excused management from the meeting and continued in executive session to discuss the matters presented during the meeting. The board determined to ask management to review for presentation at a future meeting its business plan and financial forecasts in light of the recapitalization alternatives to determine if the assumptions continued to be reasonable and appropriate. After further discussion, the board determined to continue to refine and to pursue all strategic alternatives reasonably available to us and instructed Goldman Sachs to contact Foot Locker regarding their signing a confidentiality agreement containing a standstill provision on the same terms as the one signed by Finish Line in order to allow Foot Locker to perform its requested due diligence. In addition, Goldman Sachs was instructed to contact the potential purchasers with a continuing interest to allow them to conduct a more detailed due diligence investigation, including second meetings with management, in order to obtain more definitive indications of interest.

 

On May 10, 2007, Lehman Brothers called Goldman Sachs to discuss the Foot Locker due diligence requests and the need for a confidentiality and standstill agreement with Foot Locker. On May 14, 2007, Lehman Brothers sent a due diligence request list to Goldman Sachs on behalf of Foot Locker and Bass Berry sent the form of confidentiality and standstill agreement to counsel for Foot Locker. Representatives of Bass Berry and Foot Locker’s counsel discussed the terms of the confidentiality and standstill agreement over the next several weeks. Lehman Brothers also contacted Goldman Sachs periodically during this period to express

Foot Locker’s continuing interest in pursuing a transaction and to discuss the terms of the confidentiality and standstill agreement. On May 14, 2007, we opened an electronic data room for all potential purchasers which had executed the confidentiality and standstill agreement.

 

On May 14, 2007, one of the three remaining interested private equity financial sponsor groups withdrew from the process over concern, similar to other potential private equity financial sponsors that had withdrawn previously, about whether it was worth the time and expense to commit further to this process in light of Foot Locker’s publicly expressed interest. Beginning the week of May 21, 2007, senior management conducted its second round of management presentations for the two remaining interested private equity financial sponsor groups as well as with Finish Line.

 

On May 18, 2007, another private financial sponsor executed a confidentiality and standstill agreement for the purpose of partnering, with our consent, with one of the financial sponsors who previously met with management in an effort to facilitate the likelihood of receiving a bid from this combined private equity financial sponsor team, which we refer to as Party X.

 

On May 24, 2007, Mr. Serra sent a letter to Mr. Pennington setting forth a proposal to acquire all of the outstanding common stock of Genesco for $51.00 per share, conditioned upon confirmatory due diligence and the acceptance by us of the form of confidentiality and standstill agreement attached to the letter. The form of confidentiality and standstill agreement proposed by Foot Locker was significantly different from the form Bass Berry previously provided to Foot Locker’s counsel and the form other potential purchasers had executed, and included a limited standstill provision of only three months. The standstill provision contained in the agreements with all other potential purchasers was broader and more restrictive in application and was effective for a period of at least 18 months.

 

On May 29, 2007, our board met at the offices of Bass Berry. Representatives of Goldman Sachs and Bass Berry attended this meeting, as well as certain members of senior management. Bass Berry discussed the board’s fiduciary duties and responsibilities, including those applicable to considering and responding to the May 24 Foot Locker proposal. Mr. Pennington described the terms of Foot Locker’s May 24 proposal and the recent discussions between the respective financial and legal advisors for Foot Locker and Genesco, including with respect to the confidentiality and standstill agreement. Mr. Pennington and representatives of Goldman Sachs then gave an overview of the second round of diligence meetings senior management had conducted over the prior two weeks in accordance with the board’s directive to further explore the feasibility of sale alternatives. Representatives from Goldman Sachs then reviewed their financial analysis of our strategic alternatives. The board discussed with representatives of Goldman Sachs the benefits and issues relating to each of the strategic alternatives, which were generally the same as discussed at the April 20 meeting. During this presentation, management reviewed its revised financial projections, indicating that the revised numbers reflected the most recent information available to management. See “The Merger — Projected Financial Information — Updated Projections” beginning on page 36. The board discussed with representatives of Goldman Sachs how a sale process could be structured in the current context to maximize shareholder value should the board choose to pursue the sale alternative. The Goldman Sachs representatives were excused from the meeting and Bass Berry summarized the board’s fiduciary duties and responsibilities in connection with its determination of how to respond to the May 24 Foot Locker proposal, as well as in connection with its consideration of whether to undertake a formal sale process. After this discussion, the board unanimously determined to instruct Goldman Sachs and Bass Berry, with the assistance of management as appropriate, to help us refine and pursue all available strategic alternatives to maximize shareholder value, including the possible sale of our company. It was also determined that, in order to help ensure a fair and level playing field for all process participants and in light of the potential chilling effect on the process should Foot Locker be allowed to participate without a standstill, Goldman Sachs and Bass Berry were instructed to encourage Foot Locker to participate in the process but that participation was contingent on Foot Locker’s agreement to accept the form of confidentiality and standstill agreement that other potential purchasers had executed, subject to reasonably acceptable modifications of the previously executed forms of confidentiality and standstill agreement (including the board’s agreement to reduce the requested standstill period from 18 months to six months). Additionally, in light of our agreement to give Finish Line the benefit of any more favorable standstill provisions agreed to by us with other strategic process participants, Finish Line’s standstill

agreement would need to be waived if Foot Locker did not have a standstill, which would remove a critical aspect of our board’s ability to control the process and create uncertainty as to whether either of these strategic participants would put their best offer forward as part of the sale process. Goldman Sachs was also instructed to continue to assess and refine, with management’s assistance, our other strategic alternatives so that the board would be fully prepared and informed when and if it was presented with a definitive transaction for approval. The board also discussed with its advisors and management the making of a public announcement regarding the May 24 Foot Locker proposal. Bass Berry advised the board that the next steps would include the distribution of a draft definitive contract for each potential purchaser to respond to and indicated that any negotiated contract would be subject to board approval.

 

On May 30, 2007, our board met telephonically. Representatives of Goldman Sachs and Bass Berry attended this meeting, as well as certain members of senior management. The primary purpose of the meeting was for the board to consider whether to accept or reject Foot Locker’s May 24 proposal to acquire us for $51.00 per share in cash so that we could fully communicate the board’s position with respect to the May 24 Foot Locker proposal, both to the public and to Foot Locker. Bass Berry updated the board on the status of the negotiations regarding the confidentiality and standstill agreement with Foot Locker, indicating that Foot Locker was still not willing to sign the confidentiality and standstill agreement in the form presented, and as proposed to be modified, by us. Bass Berry summarized the modifications from the form executed by other potential purchasers which had been proposed to Foot Locker, including the reduced standstill period. Representatives of Goldman Sachs then discussed the May 24 Foot Locker proposal that Goldman Sachs had previously reviewed with the board and the fact that the board had, at its meeting the prior day, authorized a process to pursue strategic alternatives, including a possible sale of our company, as well as the possibility that this process would lead to a transaction proposal offering a higher price to our shareholders. Goldman Sachs responded to questions during this discussion. Mr. Pennington then reviewed drafts of a proposed press release and a letter to Mr. Serra regarding the board’s decision to reject the May 24 proposal should the board so determine in light of the process authorized at the May 29 board meeting. After responding to questions, Goldman Sachs updated the board on discussions with the remaining process participants, which at that point included Party X and Finish Line, and the next steps which would be taken in this process. Goldman Sachs noted that Finish Line had shown the most interest among the two remaining participants and that Finish Line had indicated that it believed it would be in a position to finalize a proposal within two weeks and was willing to use its best efforts to work with us to meet that timeline. After discussion, the board unanimously determined, after consultation with representatives of Goldman Sachs, to reject the May 24 Foot Locker proposal as not in the best interests of our shareholders, and to instruct management to carry out the communication plans discussed earlier in the meeting.

 

On May 31, 2007, we issued a press release, concurrent with our first quarter earnings release, announcing our receipt of the May 24 Foot Locker proposal, indicating our rejection of the proposal as not in the best interests of our shareholders and announcing the board’s determination to explore, with the assistance of Goldman Sachs, strategic alternatives to maximize shareholder value, including a possible sale of Genesco. Later that day, Foot Locker publicly announced it was no longer pursuing its May 24 proposal. Also on that day, upon the request of Finish Line through UBS, Bass Berry sent an initial form of merger agreement to Gibson Dunn & Crutcher LLP, outside corporate counsel for Finish Line.

 

From the period from June 5, 2007 through June 16, 2007, the respective advisors of Genesco and Finish Line negotiated the terms of the proposed merger agreement as well as the related debt financing commitment letter. Finish Line was also given access during this period to additional documents upon its request and was allowed to meet telephonically with members of our management for purposes of completing their due diligence. Party X was also given additional documents during this period. Documents provided to all parties were generally made available in the electronic data room.

 

On June 11, 2007, Finish Line verbally conveyed through UBS a definitive proposal at $54.00 per share of our common stock in cash and indicated that a financing commitment letter from UBS Loan Finance LLC and UBS Securities LLC was finalized in all material respects. See “The Merger — Financing of the Merger” beginning on page 39. Over the course of the next two days, the representatives of the parties continued to negotiate the terms of the merger agreement, including the price and whether we should reimburse Finish Line

for its expenses in addition to the break-up fee in the event the merger agreement is terminated under certain circumstances, the “company material adverse effect” definition and a related termination right, required consents as a condition to closing, the “knowledge” definition and certain negative operational covenants during the pre-closing period, among other terms, as well as the debt financing commitment letter. On June 13, 2007, Finish Line indicated its best and final offer of $54.50 per share in cash, which increase in price was expressly subject to our agreement to Finish Line’s expense reimbursement proposal, and indicated that it was substantially done with its due diligence and prepared to execute a definitive merger agreement.

 

We and our representatives continued to work with Finish Line to finalize the merger agreement and the debt financing commitment letter over the course of the next two days, which were in substantially final form, subject to the respective board approvals, the night of June 15, 2007. Party X had not provided a definitive proposal or indicated any significant continuing interest through this point and therefore we did not request that Party X submit a final bid for our board’s consideration at the meeting to consider the Finish Line proposal.

 

On June 15, 2007, Messrs. Pennington and Dennis had preliminary general discussions with Alan Cohen, Finish Line’s chief executive officer, regarding potential roles with the combined company, but no specific arrangements or terms were proposed or accepted.

 

On June 16, 2007, our board met telephonically for the primary purpose of receiving an update regarding the results of the Company’s review of its strategic alternatives, including the acquisition proposal from Finish Line. Representatives of Goldman Sachs and Bass Berry attended this meeting, as well as certain members of senior management. A representative of Bass Berry reviewed with the board their applicable fiduciary duties and responsibilities in the context of the present situation. Representatives of Goldman Sachs reviewed the process that we had engaged in to assess our strategic alternatives following Foot Locker’s initial proposal on April 4, 2007, including the contacts made with potential buyers of Genesco and their related due diligence efforts. They indicated that Finish Line was the party in the process that displayed the strongest interest in pursuing a transaction and that among the other initial interested parties only Party X remained potentially interested but that this party was not as actively engaged. Representatives of Goldman Sachs confirmed that they had not received any additional indication of interest from Foot Locker following Foot Locker’s public withdrawal of its May 24 proposal. The board discussed with representatives of Goldman Sachs and Bass Berry the scope and reasonableness of the process conducted by us. The representatives of Goldman Sachs noted that the process was conducted following the public disclosure of the Foot Locker proposal and that Goldman Sachs had contacted all parties who had expressed interest in pursuing a transaction with us. Bass Berry then provided an overview of the terms of the proposed Finish Line merger agreement, and the related proposed debt financing commitment, drafts of which had been previously provided to the board together with a detailed summary prepared by Bass Berry. Members of the board asked questions regarding the foregoing, including with respect to the “fiduciary out” provision, the break-up fee and expense reimbursement provisions, financing conditions, solvency and other matters. Bass Berry indicated that Finish Line would not agree to a transaction without the proposed break-up fee equal to 3.1% of the equity value (or $46 million) together with an agreement to reimburse up to $10 million in documented reasonable expenses of Finish Line in the event the agreement were to be terminated under certain circumstances. Bass Berry indicated that the expense reimbursement provision was negotiated extensively and that Finish Line’s agreement to raise its offer to $54.50 was conditioned on our accepting the expense reimbursement provision. Bass Berry indicated its belief that the terms of the transaction were reasonable under the circumstances in order to attract a proposal which was in the best interests of the shareholders and reflected a reasonable course of action under the circumstances to secure the highest price reasonably available.

 

On June 17, 2007, our board met at the offices of Bass Berry for the primary purpose of considering the Finish Line proposal. Representatives of Goldman Sachs and Bass Berry attended this meeting, as well as certain members of senior management. Following confirmation of the Finish Line board approval of the proposed transaction and their receipt of the executed financing commitment letter, a representative of Bass Berry reviewed with the board their applicable fiduciary duties and responsibilities. Representatives of Goldman Sachs then presented their financial analysis with respect to us, the proposed merger and certain other available alternatives for enhancing shareholder value. See “The Merger — Opinion of Goldman, Sachs & Co.” beginning on page 28 for a description of the presentation of Goldman Sachs. The board

considered the $54.50 per share proposal by Finish Line compared to the potential stock price appreciation assumed (based on management’s assumptions as to future financial performance) with respect to our other available alternatives for enhancing shareholder value (and the execution and other risks associated with each alternative), including a leveraged recapitalization and/or the sale of a material division or assets of the company. Management stated that that they did not believe there was an actionable or otherwise reasonably available company or asset for us to acquire that would create the value associated with the Finish Line proposal.

 

Bass Berry then reviewed in detail the proposed terms of the merger agreement, including the provisions relating to the payment of termination fees and expense reimbursement, the disclosure schedules to the merger agreement, and the debt financing commitment. Following further discussion, the board requested that Goldman Sachs provide its view regarding the fairness from a financial point of view of the $54.50 per share in cash to be received by holders of our common stock pursuant to the proposed merger agreement. Representatives of Goldman Sachs then rendered an oral opinion, subsequently confirmed by delivery of a written opinion dated June 17, 2007, that, as of that date, and subject to the matters and assumptions set forth in the opinion, the $54.50 per share in cash to be received by the holders of outstanding shares of our common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full text of the written opinion of Goldman Sachs, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is attached as Annex C to this proxy statement.

 

The representatives of Goldman Sachs were then excused from the meeting and Mr. Pennington presented the views of management regarding the proposed transaction, concluding with management’s recommendation that the Finish Line proposal be approved. Mr. Pennington then provided the board a current business and financial update. Questions were asked regarding Mr. Pennington’s recommendation and the basis for such recommendation, including as to the viability of other strategic alternatives available to us. At this point, the representatives of management and the non-independent members of the board were excused from the meeting so the independent members of the board could discuss the proposed transaction in executive session. The remaining directors discussed the transaction, the recommendation of management and the presentation by representatives of Goldman Sachs. Management, the non-independent board members and the representatives of Goldman Sachs were then invited to rejoin the meeting. After discussion, the board unanimously adopted and approved the merger agreement and the transactions contemplated by the merger agreement, and unanimously determined that the merger agreement and the transactions contemplated by the merger agreement are advisable and in the best interests of the Company and its shareholders and are fair to our shareholders. Our board further directed management to include in this proxy statement their recommendation that our shareholders vote for the approval of the merger agreement and the consummation of the merger.

 

The merger agreement was executed by the parties on June 17, 2007, following our board meeting. Before the open of the stock market on June 18, 2007, we issued a joint press release with Finish Line announcing the transaction.

 

In reaching its decision to approve the merger agreement and to recommend that our shareholders approve the merger agreement, our board of directors consulted with management, our financial advisor, Goldman Sachs, and our outside corporate legal counsel, Bass Berry. Our board of directors considered a number of factors, including, without limitation, the following potentially positive factors in support of the merger:

 

 

 

 

 

 

The board of directors also considered and balanced against the potentially positive factors the following potentially negative factors concerning the merger:

 

 

During its consideration of the transaction with Finish Line, our board of directors was also aware that some of our directors and executive officers may have interests in the merger that may be different than or in addition to those of our shareholders generally, described under “The Merger — Interests of Directors and Executive Officers in the Merger.”

 

After taking into account all of the factors set forth above, as well as others, the board of directors determined that the potentially positive factors outweighed the potentially negative factors and that the merger agreement and the merger are advisable and fair and in the best interests of Genesco and our shareholders. Our board of directors has unanimously approved the merger agreement and the merger and recommends that our shareholders vote “FOR” the approval of the merger agreement at the special meeting.

 

This discussion of the information and factors considered and given weight by our board of directors is not intended to be exhaustive but is believed to address the material information and factors considered by our board of directors. In view of the number and variety of these factors, our board of directors did not find it practicable to make specific assessments of, or otherwise assign relative weights to, the specific factors and analyses considered in reaching its determination. The determination to approve the merger agreement and the transactions contemplated thereby, including the merger, was made after consideration of all of the factors and analyses as a whole. In addition, individual members of our board of directors may have given different weights to different factors.

 

Goldman Sachs rendered its oral opinion, which was subsequently confirmed in writing, to our board of directors that, as of June 17, 2007, and based upon and subject to the factors and assumptions set forth in the opinion, the $54.50 per share in cash to be received by the holders of the outstanding shares of Genesco common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders.

 

The full text of the written opinion of Goldman Sachs, dated June 17, 2007, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this proxy statement. Goldman Sachs provided its opinion for the information and assistance of the board of directors of Genesco in connection with its consideration of the merger. Goldman Sachs’ opinion is not a recommendation as to how any holder of our common stock should vote with respect to the merger.

 

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

 

Goldman Sachs also held discussions with members of our senior management regarding their assessment of our past and current business operations, financial condition, and future prospects. In addition, Goldman Sachs reviewed the reported price and trading activity for our common stock, compared certain financial and stock market information for Genesco with similar information for certain other companies, the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the footwear, apparel, and retail industries specifically and in other industries generally and performed such other studies and analyses, and considered such other factors, as it considered appropriate.

 

Goldman Sachs relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial, accounting, legal, tax and other information provided to, discussed with or reviewed by it. Goldman Sachs assumed that the internal financial analyses and forecasts for Genesco prepared by our management were reasonably prepared on a basis reflecting the best currently available estimates and judgments of our management. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Genesco or any of our subsidiaries, nor was any evaluation or appraisal of the assets or liabilities of Genesco or any of our subsidiaries furnished to Goldman Sachs. Goldman Sachs did not express any opinion as to the impact of the transaction on the solvency or viability of Genesco or Finish Line or the ability of Genesco or Finish Line to pay its obligations when they come due. Goldman Sachs’ opinion does not address the underlying business decision of Genesco to engage in the transaction or the relative merits of the transaction as compared to any alternative business strategies that might be available to Genesco. Goldman Sachs’ opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion, or June 17, 2007.

 

The following is a summary of the material financial analyses delivered by Goldman Sachs to our board of directors in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the

extent that it is based on market data, is based on market data as it existed on or before June 17, 2007 and is not necessarily indicative of current market conditions.

 

Historical Stock Trading Analysis

 

Goldman Sachs reviewed the historical trading prices for Genesco common stock for the period December 8, 2006 through June 15, 2007 and the period March 8, 2002 to June 15, 2007.

 

In addition, Goldman Sachs analyzed the consideration to be received by the holders of the Company’s common stock pursuant to the merger agreement in relation to the market price of our common stock on June 15, 2007, the last trading day prior to announcement of the transaction, March 9, 2007, the last trading day prior to market speculation that Genesco may be acquired by Foot Locker following a March 8, 2007 Foot Locker conference call during which management of Foot Locker discussed a desire to grow through acquisitions; and the three-month and one-year average closing market prices of our common stock as of March 9, 2007 as well as the 52-week high and low closing prices of our common stock as of March 9, 2007. For purposes of its analysis, Goldman Sachs referred to the closing price per share of our common stock of $36.66 on March 9, 2007 as the “undisturbed price.”

 

This analysis indicated that the price per share to be paid to our common shareholders pursuant to the merger agreement represented:

 

 

Selected Companies Analysis

 

Goldman Sachs reviewed and compared certain financial information for Genesco to corresponding financial information, ratios and public market multiples for the following publicly traded corporations in the footwear and teen retailing industries:

 

 

Based on information it obtained from publicly available filings and median estimates provided by Institutional Brokerage Estimate System (a data service that compiles estimates issued by securities analysts,

referred to as IBES) for Genesco and each of the Footwear Retailers and Teen Retailers listed above, Goldman Sachs calculated and compared:

 

 

The following table presents the results of this analysis:

 

 

 

 

Present Value of Future Stock Price Analysis

 

Goldman Sachs performed an illustrative analysis of the present value of the future share price of Genesco, which is designed to provide an indication of the present value of a theoretical future value of a company’s equity as a function of the company’s estimated future earnings and its assumed price to future earnings per share multiple. For this analysis, Goldman Sachs used the financial projections for Genesco prepared by Genesco’s management. See “The Merger — Projected Financial Information” beginning on page 34. Goldman Sachs first calculated implied per share values for Genesco common stock for the fiscal years 2008-2012 by applying price to forward earnings per share multiples ranging from 13.0x to 16.0x to estimates prepared by Genesco management of fiscal years 2008-2012 earnings per share. Goldman Sachs then calculated present values of the implied per share future equity values for Genesco common stock in 2008 to 2012 discounted to June 17, 2007, using a discount rate of 14.0%, reflecting Genesco’s theoretical cost of

equity capital. This analysis resulted in a range of implied present value of $35.77 to $52.82 per share of Genesco common stock.

 

Discounted Cash Flow Analysis

 

Goldman Sachs performed an illustrative discounted cash flow analysis to determine a range of implied present value per share of Genesco common stock. All cash flows were discounted to February 4, 2007, and terminal values were based upon EBITDA multiples of estimated fiscal year 2012 EBITDA. Goldman Sachs used discount rates ranging from 9.0% to 12.0%, reflecting estimates of the weighted average cost of capital of Genesco, financial forecasts for Genesco prepared by its management and terminal EBITDA multiples ranging from 6.0x to 7.5x based on historical EBITDA multiples for Genesco. This analysis resulted in a range of implied present value of $45.43 to $62.75 per share of Genesco common stock.

 

Using the same set of projections, Goldman Sachs also performed a sensitivity analysis to analyze the effect of increases or decreases in annual sales growth and EBITDA margin from 2007 to 2012. The analysis utilized (i) a range of EBITDA margin in 2012 of 11.5% to 13.5%, (ii) a range of compounded annual sales growth rates of 9.6% to 13.6% for fiscal years 2007 to 2012 and (iii) a terminal EBITDA multiple of 6.75x and discount rate of 10.0%. The compounded annual sales growth rates of 9.6% to 13.6% for fiscal years 2007 to 2012 represent a range of −2.0% to 2.0% change in the annual sales growth assumption of the financial projections provided by the management of Genesco. The range of fiscal 2012 EBITDA margin of 11.5% to 13.5% represented a range of −1.0% to 1.0% change in the fiscal 2012 EBITDA margin estimates provided by the management of Genesco. This resulted in a range of implied present value of $45.93 to $64.75 per share of Genesco common stock.

 

Selected Transactions Analysis

 

Goldman Sachs reviewed publicly available information for the following announced merger or acquisition transactions in the U.S. involving companies in the retail and footwear industries. While none of the companies participating in the selected transactions are directly comparable to Genesco, the companies participating in the selected transactions are companies with operations that, for the purposes of analysis, may be considered similar to certain operations of Genesco. Goldman Sachs calculated and compared the enterprise values as a multiple of the target company’s publicly reported latest twelve months EBITDA prior to announcement of the applicable transaction. For purposes of this analysis, the enterprise value was calculated by adding the announced transaction price for the equity of the target company to the book value of the target company’s net debt based on public information available prior to the announcement of the applicable transaction. The following tables set forth the transactions reviewed (listed by acquirer/target and month and year announced) and the enterprise value multiple of LTM EBITDA for each and the results of the analysis.

 

 

Enterprise Value Multiple of LTM EBITDA

 

 

Goldman Sachs noted that the $54.50 per share of our common stock to be paid in the merger implies a 9.7x multiple of Genesco’s LTM EBITDA.

 

Recapitalization Analysis

 

Goldman Sachs analyzed certain illustrative recapitalization transactions involving Genesco and the theoretical value that our shareholders could receive in such transactions. In the first illustrative transaction, Genesco used $200 million of new debt financings and excess cash to repurchase common stock. The theoretical post-repurchase trading value of our shares was based upon estimated price to earnings ratios of 13.0x to 16.0x and projections for Genesco provided by our management after giving effect to the use of excess cash and the additional leverage. Goldman Sachs then calculated the implied per share future equity values for our common stock from fiscal 2008 to fiscal 2012, and then discounted those values to June 17, 2007 using a discount rate of 14%. This analysis resulted in a range of implied present value of $36.93 to $55.90 per share of our common stock.

 

In the second illustrative recapitalization, the analysis assumed that Genesco used $400 million of new debt financings and excess cash to repurchase common stock. The theoretical post-repurchase trading value of our shares was based upon estimated price to earnings ratios of 13.0x to 16.0x and projections for Genesco provided by our management after giving effect to the use of excess cash and the additional leverage. Goldman Sachs then calculated the implied per share future equity values for our common stock from fiscal 2008 to fiscal 2012, and then discounted those values to June 17, 2007 using a discount rate of 14%. This analysis resulted in a range of implied present value of $37.12 to $59.68 per share of our common stock.

 

In the third illustrative recapitalization, the analysis assumed that Genesco used the after-tax proceeds of a sale of the business and assets of our Johnston & Murphy operating division (the “Johnston & Murphy Group”), $150 million in new debt financings and excess cash to repurchase common stock. The theoretical post-repurchase trading value of our shares was based upon estimated price to earnings ratios of 13.0x to

16.0x and projections for Genesco provided by our management after giving effect to the sale of Johnston & Murphy Group, use of excess cash and the additional leverage. Goldman Sachs then calculated the implied per share future equity values for our common stock from fiscal 2008 to fiscal 2012, and then discounted those values to June 17, 2007 using a discount rate of 14%. This analysis resulted in a range of implied present value of $36.65 to $56.49 per share of our common stock.

 

In the fourth illustrative recapitalization, the analysis assumed that Genesco used the proceeds of a sale of Johnston & Murphy Group, $350 million in new debt financings and excess cash to repurchase common stock. The theoretical post-repurchase trading value of our shares was based upon estimated price to earnings ratios of 13.0x to 16.0x and projections for Genesco provided by our management after giving effect to the sale of Johnston & Murphy Group, use of excess cash and the additional leverage. Goldman Sachs then calculated the implied per share future equity values for our common stock from fiscal 2008 to fiscal 2012, and then discounted those values to June 17, 2007 using a discount rate of 14%. This analysis resulted in a range of implied present value of $36.91 to $60.97 per share of our common stock.

 

Leveraged Buyout Analysis

 

Goldman Sachs performed an illustrative analysis of the range of the price per share of our common stock that an acquirer would theoretically pay if Genesco were acquired in a leveraged buyout transaction that closed as of February 4, 2007 and resold by such acquirer in 2012 at an EBITDA multiple of 6.75x. Assuming, among other things, (i) a sponsor targeted equity return of 20.0%, (ii) a range of EBITDA margin in 2012 of 11.5% to 13.5%, and (iii) a range of compounded annual sales growth rates of 9.6% to 13.6% for fiscal years 2007 to 2012, the analysis resulted in a range of implied values of $42.52 to $54.98 per share of our common stock.

 

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all the analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Genesco, its various businesses or the merger.

 

Goldman Sachs prepared these analyses for purposes of Goldman Sachs providing its opinion to the board of directors as to the fairness from a financial point of view of the $54.50 per share in cash to be received by the holders of the outstanding shares of Genesco common stock pursuant to the merger agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Genesco, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

 

As described above, Goldman Sachs’ opinion to our board of directors was one of many factors taken into consideration by our board in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex C.

 

The merger consideration was determined through arms’-length negotiations between Genesco and Finish Line and was approved by our board of directors. Goldman Sachs provided advice to Genesco during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Genesco or our board of directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

Goldman Sachs and its affiliates, as part of their investment banking business, are continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and other transactions as well as for estate, corporate and other purposes. Goldman Sachs has acted as financial advisor to Genesco in connection with, and has participated in certain of the negotiations leading to, the merger. In addition, Goldman Sachs may provide investment banking services to Genesco and Finish Line in the future. In connection with any such investment banking services Goldman Sachs may receive compensation.

 

Goldman Sachs is a full service securities firm engaged, either directly or through its affiliates, in securities trading, investment management, financial planning and benefits counseling, risk management, hedging, financing and brokerage activities for both companies and individuals. In the ordinary course of these activities, Goldman Sachs and its affiliates may provide such services to Genesco, Finish Line and their respective affiliates, may actively trade the debt and equity securities (or related derivative securities) of Genesco, Finish Line and their respective affiliates for their own account and for the accounts of their customers and may at any time hold long and short positions of such securities.

 

Genesco selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the merger. Pursuant to a letter agreement, dated April 20, 2007, Genesco engaged Goldman Sachs to act as its financial advisor to assist our Board of Directors in their analysis and consideration of our strategic alternatives, including the alternative represented by the proposal made by Foot Locker and a possible merger or sale of all or a portion of Genesco. Pursuant to the terms of this letter agreement, Goldman Sachs is entitled to receive a transaction fee of 1.2% of the aggregate consideration payable in the merger, or approximately $18.5 million, minus an initial fee of $250,000 that became payable upon execution of the engagement letter, with one fourth of the transaction fee payable upon execution of the merger agreement and the remainder of the transaction fee payable upon completion of the merger. Genesco has also agreed to reimburse Goldman Sachs for its reasonable expenses, including attorneys’ fees and disbursements, and to indemnify Goldman Sachs against various liabilities, including certain liabilities under the federal securities laws.

 

Genesco’s senior management does not as a matter of course make public projections as to future performance or earnings beyond the current fiscal year and is especially wary of making projections for extended earnings periods due to the unpredictability of the underlying assumptions and estimates. However, senior management did provide financial forecasts to potential acquirers in connection with their consideration of a possible transaction with Genesco. These projections were also provided to our board of directors and to Goldman Sachs, our financial advisor. We have included a subset of these projections in this proxy statement to give our shareholders access to certain nonpublic information deemed material by our board of directors for purposes of considering and evaluating the merger. The inclusion of these projections should not be regarded as an indication that management, our board of directors, Goldman Sachs, Finish Line or any other recipient of this information considered, or now considers, these projections to be a reliable prediction of future results, and they should not be relied on as such. In addition, as we have only included a subset of the projections in this proxy statement, you are cautioned not to rely on this information as complete in making a decision whether to vote in favor of the merger agreement.

 

Genesco believes the assumptions Genesco’s management used as a basis for the projections were reasonable at the time the projections were prepared, given the information Genesco’s management had at the time. However, the projections do not take into account any circumstances or events occurring after the date they were prepared and you should not assume that the projections will continue to be accurate or reflective of Genesco’s management’s view at the time you consider whether to vote for the merger agreement. Genesco advised the recipients of the projections that its internal financial forecasts, upon which the projections were based, are subjective in many respects and thus susceptible to various interpretations. The projections reflect numerous estimates and assumptions with respect to industry performance, general business, economic, regulatory, market and financial conditions and other matters, including assumed effective interest rates and

effective tax rates consistent with Genesco’s historical levels, all of which are difficult to predict and many of which are beyond Genesco’s control. The projections are also subject to significant uncertainties in connection with changes to Genesco’s business and its financial condition and results of operation, including the factors described under “Special Note Regarding Forward-Looking Statements” beginning on page 11. In addition, the projections reflect projected information regarding Genesco as a stand-alone company, without regard to the Finish Line and do not take into account any of the transactions contemplated by the merger agreement, including the merger and related financing, which may cause actual results to materially differ as well. As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than those contained in the projections; it is expected that there will be differences between actual and projected results. Since the projections cover multiple years, such information by its nature becomes less reliable with each successive year.

 

The financial projections were prepared for internal use and for our board of directors, to assist potential acquirers of Genesco with their due diligence investigations of Genesco and for use by Goldman Sachs in its financial analysis and not with a view toward public disclosure or toward complying with United States generally accepted accounting principles, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Genesco’s independent registered public accounting firm has not examined or compiled any of the financial projections, expressed any conclusion or provided any form of assurance with respect to the financial projections and, accordingly, assumes no responsibility for them.

 

Additionally, since the date of the projections described below, Genesco has made publicly available its actual results of operations for the quarter ended May 5, 2007 (the “Form 10-Q”). You should review the Form 10-Q, which is incorporated into this proxy statement by this reference, to obtain this information. Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the financial projections set forth below. No one has made or makes any representation to any person regarding the validity, reasonableness, accuracy or completeness of the information included in these projections or the ultimate performance of Genesco compared to such information.

 

For the foregoing reasons, as well as the bases and assumptions on which the financial projections were compiled, the inclusion of specific portions of the financial projections in this proxy statement should not be regarded as an indication that such projections will be an accurate prediction of future events, and they should not be relied on as such. Except as required by applicable securities laws, Genesco does not intend to update, or otherwise revise the financial projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.

 

Initial Projections.  In order to facilitate the board of directors’ review of the Foot Locker proposal at its meeting on April 20, 2007, senior management presented a five-year financial forecast to the Company’s board of directors at that meeting (the “Initial Projections”). The Initial Projections were based on the latest operating results available to management. Management advised the board of directors that the Initial Projections were preliminary and that management was still in the process of updating the five-year forecasts. Management also furnished the Initial Projections to Goldman Sachs and these projections were used by Goldman Sachs in preparing certain preliminary financial analyses discussed with our board of directors at its meeting on April 20, 2007. However, Goldman Sachs did not rely upon the Initial Projections in preparing its analyses in connection with rendering its opinion with respect to the fairness, from a financial point of view,

of the consideration to be received by holders of Genesco common stock in the merger. See “The Merger — Background of the Merger” beginning on page 17. A summary of the Initial Projections is set forth below:

 

 

 

 

Updated Projections.  Following the April 20, 2007 meeting of our board of directors, senior management continued to refine its financial forecasts based on the latest operating results and plans available to management. A summary of the updated projections resulting from this process, which we refer to as the “Updated Projections” is set forth below. The Updated Projections were provided to Finish Line. The Updated Projections were also provided to Goldman Sachs for use in preparing certain financial analyses discussed with our board of directors at its meeting on May 29, 2007 and in its presentation to the board of directors on June 17, 2007. The primary differences between the Initial Projections and the Updated Projections relate to the fact that actual results for the first fiscal quarter of 2007 were lower than management’s earlier expectations and the Company’s plan to close or convert up to 57 underperforming stores, primarily in the Underground Station Group, which plan had not been finalized at the time of the April 20 meeting of our board of directors. See “The Merger — Background of the Merger” beginning on page 17.

 

 

 

 

For purposes of rendering its opinion with respect to the fairness, from a financial point of view, of the consideration to be received by holders of Genesco common stock in the merger, Goldman Sachs assumed that the projections prepared by management were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Genesco management. Goldman Sachs did not assist management in the development of any financial projections. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Genesco or any of its subsidiaries, and, Goldman Sachs was not furnished with any evaluation or appraisal of the assets or liabilities of Genesco or any of its subsidiaries. See “The Merger — Opinion of Goldman, Sachs & Co.” beginning on page 28.

 

At the effective time of the merger, Merger Sub will be merged with and into Genesco. In connection with the merger:

 

 

The holders of our preferred stock outstanding upon the completion of the merger will not be entitled to any consideration upon the completion of the merger pursuant to the merger agreement. Each share of Genesco preferred stock issued and outstanding, and not otherwise properly converted to common stock, if applicable, immediately before the merger will remain outstanding following the merger. Finish Line has informed us that it intends to redeem all outstanding shares of redeemable preferred stock following the completion of the merger in accordance with our charter, and that they also intend to redeem the outstanding Employees’ Preferred subject to the requisite approval and filing of the proposed charter amendment (Proposal No. 2). Set forth below for your convenience is a brief discussion of the options available to holders of each class and series of preferred stock in respect of the potential merger. We are not making a recommendation as to whether you should convert your preferred stock, if applicable. You should consult your financial and tax advisors regarding your decision whether to convert your shares of preferred stock in advance of the merger.

 

Subordinated Serial Preferred Stock, Series 1 (the “$2.30 Series 1”).  The outstanding shares of $2.30 Series 1 are both convertible into Genesco common stock by the holder and redeemable by Genesco. Finish Line has informed Genesco that it intends to cause the surviving corporation to call the $2.30 Series 1 shares for redemption following the completion of the merger. Holders who do not convert before the redemption date will receive the redemption consideration of $40.00, plus any accrued and unpaid dividends as of such date. If holders exercise their right to convert into Genesco common stock prior to the closing of the merger, each share of $2.30 Series 1 will convert into 5/6ths of a share of Genesco common stock (which effectively means approximately $45.42 per share assuming a conversion based on the price per share to be paid to holders of Genesco common stock in the merger). Upon conversion, fractional shares of common stock will be cashed out based upon the closing price of Genesco common stock on the NYSE on the conversion date and this may affect the total consideration received as a result of the conversion and merger. If holders exercise their right to convert into merger consideration following the closing of the merger but before the second business day preceding the redemption date, each share of $2.30 Series 1 will convert into approximately $45.42 in cash.

 

Subordinated Serial Preferred Stock, Series 3 (the “$4.75 Series 3”).  The outstanding shares of $4.75 Series 3 are both convertible into Genesco common stock by the holder and redeemable by Genesco. Finish Line has informed Genesco that it intends to cause the surviving corporation to call the $4.75 Series 3 shares for redemption following the completion of the merger. If holders do not convert before the redemption date, they will receive the redemption consideration of $100.00, plus any accrued and unpaid dividends as of such date. If holders exercise their right to convert into Genesco common stock prior to the closing of the merger, each share of $4.75 Series 3 will convert into 2.10526 shares of Genesco common stock (which effectively means approximately $114.74 per share assuming a conversion based on the price per share to be paid to holders of Genesco common stock in the merger). Upon conversion, fractional shares of common stock will be

cashed out based upon the closing price of Genesco common stock on the NYSE on the conversion date and this may affect the total consideration received as a result of the conversion and the merger. If holders exercise their right to convert into merger consideration following the closing of the merger but before the second business day preceding the redemption date, each share of $4.75 Series 3 will convert into approximately $114.74 in cash.

 

Subordinated Serial Preferred Stock, Series 4 (the “$4.75 Series 4”).  The outstanding shares of $4.75 Series 4 are both convertible into Genesco common stock by the holder and redeemable by Genesco. Finish Line has informed Genesco that it intends to cause the surviving corporation to call the $4.75 Series 4 shares for redemption following the completion of the merger. If holders do not convert before the redemption date, they will receive the redemption consideration of $100.00, plus any accrued and unpaid dividends as of such date. If holders exercise their right to convert into Genesco common stock prior to the closing of the merger, each share of $4.75 Series 4 will convert into 1.5151 shares of Genesco common stock (which effectively means approximately $82.57 per share assuming a conversion based on the price per share to be paid to holders of Genesco common stock in the merger). Upon conversion, fractional shares of common stock will be cashed out based upon the closing price of Genesco common stock on the NYSE on the conversion date and this may affect the total consideration received as a result of the conversion and the merger. If holders exercise their right to convert into merger consideration following the closing of the merger but before the second business day preceding the redemption date, each share of $4.75 Series 4 will convert into approximately $82.57 in cash.

 

Subordinated Cumulative Preferred Stock (the “$1.50 Subordinated Cumulative Preferred Stock”).  The outstanding shares of $1.50 Subordinated Cumulative Preferred Stock are redeemable by Genesco but are not convertible into common stock by the holder. Finish Line has informed Genesco that it intends to cause the surviving corporation to call the $1.50 Subordinated Cumulative Preferred Stock shares for redemption following the completion of the merger, such redemption to be effective on the next quarterly dividend payment date following the merger in accordance with Genesco’s charter. On the redemption date holders will receive $30.00 per share of $1.50 Subordinated Cumulative Preferred Stock redeemed, plus any accrued and unpaid dividends as of such date.

 

Employees’ Subordinated Convertible Preferred Stock.  The outstanding shares of Employees’ Preferred are not currently redeemable but are convertible (if fully paid) into either Genesco common stock or $1.50 Subordinated Cumulative Preferred Stock by the holder. If holders exercise their right to convert into Genesco common stock prior to the closing of the merger, each share of Employees’ Preferred will convert into one share of Genesco common stock (which effectively means $54.50 per share assuming a conversion based on the price per share to be paid to holders of Genesco common stock in the merger). If holders exercise their right to convert into merger consideration following the closing of the merger but before the redemption date, each share of Employees’ Preferred will convert into $54.50 in cash. Finish Line has informed Genesco that it may commence a tender offer and consent solicitation for shares of the Employees’ Preferred at the price to be paid per share of Genesco common stock in connection with the merger, or $54.50 per share, net of any unpaid amounts on such shares, that is conditioned on (i) the completion of the merger and (ii) the tendering holders of the Employees’ Preferred granting proxies to vote in favor of the merger and the proposed amendment to Genesco’s charter (Proposal No. 2) to allow for the redemption by Genesco of the Employees’ Preferred after the completion of the merger at the price to be paid per share of Genesco common stock in connection with the merger, or $54.50 per share, net of any unpaid amounts on such shares. Genesco’s board of directors has also agreed, pursuant to the merger agreement, to recommend to our shareholders the approval of the proposed charter amendment. Finish Line has informed Genesco that it intends cause the surviving corporation to call the Employees’ Preferred shares for redemption following the completion of the merger if the charter amendment is adopted and approved by the requisite votes at the special meeting.

 

The tender offer would commence prior to the merger, and the completion of the tender offer would be subject to the completion of the merger, among other conditions that would be set forth in materials that would be filed with the SEC by Finish Line to the extent they choose to commence this tender offer. This proxy statement is not intended to constitute a recommendation about whether a holder of Employees’ Preferred should tender their shares in connection with any such tender offer by Finish Line.

Neither the making of nor completion of the tender offer, nor the approval of Genesco’s shareholders of the charter amendment, is a condition to the closing of the merger for any party.

 

If the merger is completed, Genesco common stock (including the associated preferred share purchase rights) and the Genesco Subordinated Serial Preferred Stock, Series 1 will be delisted from the NYSE and CHX and deregistered under the Exchange Act, as applicable. Genesco will no longer file periodic reports with the SEC on account of these classes and series. Genesco anticipates that it will be required to continue to file periodic reports with the SEC on account of the Employees’ Preferred unless the charter amendment is approved and adopted and the Employees’ Preferred is redeemed or until the number of holders of the Employees’ Preferred otherwise drops below 300.

 

Under the HSR Act and the rules promulgated thereunder by the FTC, the merger cannot be completed until Genesco and Finish Line each file a notification and report form under the HSR Act and the applicable waiting period has expired or been terminated. Genesco and Finish Line each filed notification and report forms under the HSR Act with the FTC and the Antitrust Division of the DOJ on          . If Genesco and Finish Line do not receive a request for additional information, the waiting period will expire at 11:59 p.m. on          , 2007, if not terminated earlier. At any time before or after completion of the merger, notwithstanding any termination of the waiting period under the HSR Act, the Antitrust Division or the FTC could take action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Genesco or Finish Line. At any time before or after the completion of the merger, and notwithstanding any termination of the waiting period under the HSR Act, any state could take action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of Genesco or Finish Line. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

 

While there can be no assurance that the merger will not be challenged by a governmental authority or private party on antitrust grounds, Genesco believes that the merger can be effected in compliance with federal, state and foreign antitrust laws. The term “antitrust laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other Federal, state and foreign statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.

 

In connection with the merger, Finish Line will cause $      million to be paid out to Genesco’s shareholders, including redemption payments made to holders of issued and outstanding preferred stock of Genesco following the merger, $      million to be used to refinance certain existing indebtedness of Genesco, and the remaining funds to be used to pay customary fees and expenses in connection with the proposed merger, the financing arrangements and the related transactions. Funding of the debt financing is subject to the satisfaction of the conditions set forth in the commitment letter pursuant to which the financing will be provided. Finish Line has agreed to use its reasonable best efforts to arrange the debt financing on the terms and conditions set forth in the debt commitment letter. The following arrangements are in place to provide, subject to the satisfaction of the conditions provided in the commitment letter, the necessary financing for the merger and related transactions, including the payment of related transaction costs, charges, fees and expenses:

 

 

 

Debt Financing

 

Debt Commitment Letter

 

Finish Line has received a fully executed debt commitment letter (the “commitment letter”) dated as of June 17, 2007, from UBS Loan Finance LLC (“UBS”) and UBS Securities LLC (“UBSS”). Pursuant to the commitment letter, subject to the conditions set forth therein:

 

 

The debt commitments expire on December 31, 2007. The documentation governing the senior secured credit facilities and the bridge loan facility has not been finalized and, accordingly, the actual terms of such facilities may differ from those described in this proxy statement.

 

Pursuant to the merger agreement, Finish Line is obligated to use its reasonable best efforts to obtain the debt financing set forth in the debt commitment letter at or prior to the closing of the merger. In the event that any portion of the debt financing becomes unavailable on the terms contemplated in the commitment letter, Finish Line must use its reasonable best efforts to arrange alternative financing from alternative sources on terms not materially less favorable to Finish Line in the aggregate (as determined in the good faith reasonable judgment of Finish Line).

 

Conditions Precedent to the Debt Commitments

 

The availability of the senior secured credit facilities and the bridge loan facility is subject to, among other things, there not having occurred since June 17, 2007 any change or condition that would constitute a company material adverse effect (as defined in the merger agreement), the accuracy in all material respects at the closing date of specified representations of Genesco in the merger agreement, completion of the merger in accordance with the merger agreement in form and substance satisfactory to UBS and the negotiation, and execution and delivery of definitive documentation.

 

Senior Secured Credit Facilities

 

General

 

The borrower under the senior secured credit facilities will be Finish Line and will be guaranteed by each existing and future direct or indirect domestic subsidiary of Finish Line, including the surviving corporation. The senior secured credit facilities will consist of a $690.0 million senior secured term loan facility with a term of seven years and a $450.0 million senior secured revolving credit facility with a term of five years. The revolving credit facility will include provisions for the issuance of letters of credit and swingline loans.

UBSS will act as the sole advisor, arranger and book running manager for the senior secured credit facilities. UBS AG, Stamford Branch (“UBS AG”) will be the sole administrative agent for the senior credit facilities, UBS AG will be the sole collateral agent for the senior secured term loan facility and UBS AG and a financial institution to be designated by UBSS will be the co-collateral agents for the senior secured revolving credit facility.

 

The senior secured revolving credit facility will be an asset-based credit facility with extensions of credit thereunder to be subject to limitations based upon specified percentages of eligible receivables and eligible inventory of Finish Line.

 

Interest Rate and Fees

 

Loans under the senior secured credit facilities are expected to bear interest, at Finish Line’s option, at (1) a rate equal to the London Interbank Offered Rate (“LIBOR”), plus an applicable margin or (2) a rate equal to the higher of (a) the prime rate of UBS and (b) the federal funds effective rate plus 0.50%, plus an applicable margin. After the delivery by Finish Line to the administrative agent of financial statements for the fiscal quarter ending at least six months following the closing date, the applicable margins for borrowings under the term loan facility and the revolving credit facility may be reduced subject to a pricing grid based on excess availability under the senior secured revolving credit facility.

 

In addition, Finish Line will pay commitment fees to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. The commitment fee rate is 0.25% per annum. Finish Line must also pay customary letter of credit commissions and fees under the revolving credit facility.

 

Prepayments and Amortization

 

Finish Line will be permitted to make voluntary prepayments upon prior notice, without premium or penalty (other than LIBOR breakage costs, if applicable). Finish Line will be required to make mandatory prepayments of term loans consisting of (1) net cash proceeds of Finish Line and its subsidiaries received in respect of non-ordinary course asset sales (subject to reinvestment rights and other exceptions), (2) net cash proceeds of Finish Line and its subsidiaries received in respect of issuances of debt or preferred stock (other than permitted debt or preferred stock), (3) net cash proceeds of Finish Line and its subsidiaries received in respect of casualty and condemnation events (subject to reinvestment rights) and (4) a percentage of the excess cash flow (to be defined in a manner to be agreed) of Finish Line and its subsidiaries. Finish Line will also be required to make mandatory prepayments of term loan and the revolving loans based on levels of excess availability under the senior secured revolving credit facility. The term loan will amortize in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the term loan, with the balance payable at the final maturity date.

 

Guarantors

 

All obligations under the senior secured credit facilities will be unconditionally guaranteed by each existing and future direct or indirect domestic subsidiary of Finish Line, including Genesco and its subsidiaries.

 

Security

 

The obligations of Finish Line and the guarantors under the senior secured credit facilities will be secured, subject to permitted liens and other agreed-upon exceptions, and subject to intercreditor arrangements between the revolving credit facility lenders and the term loan facility lenders, by security interests in and liens on (1) all accounts receivable, inventory and deposit accounts of Finish Line and each guarantor and all proceeds thereof, (2) all the capital stock of the surviving corporation and of each of the directly and indirectly owned subsidiaries of Finish Line and each guarantor of such facilities (limited, in the case of foreign subsidiaries, to 65% of the capital stock of first-tier foreign subsidiaries) and (3) substantially all other tangible and intangible assets of Finish Line, Genesco and each other guarantor.

Other Terms

 

The senior secured credit facilities will contain customary representations and warranties and customary affirmative and negative covenants (applicable to Finish Line and its subsidiaries), including, among other things, restrictions on indebtedness, liens, fundamental changes, investments and acquisitions, sales of assets, sale leasebacks, mergers and consolidations, dividends and other distributions, redemptions, prepayments of certain subordinated indebtedness, an excess availability requirement and a minimum fixed charge coverage ratio. The senior secured credit facilities will also include customary events of default, including a change of control to be defined.

 

Debt Securities

 

Finish Line is expected to issue and sell up to $700.0 million in aggregate principal amount of debt securities. The debt securities will not be registered under the Securities Act and may not be offered in the United States absent registration or an applicable exemption from registration requirements. Finish Line is expected to offer the debt securities to “qualified institutional buyers,” as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States in compliance with Regulation S under the Securities Act. The commitment letter, which is described above under “Financing of the Merger — Debt Financing” provides for a new $700.0 million senior bridge facility that will be available in the event that the contemplated offering of debt securities does not take place at the time the merger is completed.

 

Bridge Loan Facility

 

UBS has committed to provide up to $700.0 million in loans to Finish Line under a senior bridge loan facility. The bridge loan facility will be guaranteed by each guarantor of the senior secured credit facilities on a senior unsecured basis.

 

If the bridge loan is not paid in full on or before the first anniversary of the closing date, the bridge loan will automatically convert into a senior term loan maturing on the eighth anniversary of the closing date. Holders of such term loan may choose to exchange such loan for senior exchange notes maturing on the eighth anniversary of the closing date with an equal principal amount and may fix the interest rate on any such exchange notes. Holders of such term loans may also fix the interest rate. Finish Line would be required to register any exchange notes for public sale under a registration statement in compliance with applicable securities laws.

 

The bridge loan facility will bear interest at a floating rate equal to LIBOR plus an initial margin depending on the rating of the bridge loan facility and the lease-adjusted leverage ratio. The margin will increase over time in three-month intervals following an initial six-month period, and will be subject to an annual yield cap.

 

The bridge loan facility will contain covenants that are expected to be generally similar to the covenants in the senior secured facility, with adjustments as may be agreed between Finish Line and the bridge facility lenders.

 

With respect to the term loans and exchange notes (other than fixed rate term loans and exchange notes), Finish Line will be permitted to make voluntary prepayments upon prior notice, at par plus accrued and unpaid interest and other than LIBOR breakage costs, if applicable. With respect to the term loans and exchange notes bearing interest at fixed rates, limited redemption options are available prior to the third anniversary of the closing date. Thereafter, such fixed rate exchange notes and term loans shall be redeemable at Finish Line’s option at a premium coupon based on the date of redemption.

 

Finish Line will be required to prepay the bridge loan facility and to redeem or offer to purchase the exchange notes under certain circumstances, including upon certain incurrence of debt and non-ordinary course asset sales, issuance of debt or equity or with net proceeds from casualty or condemnation events.

 

UBSS will act as sole lead arranger and sole book running manager for the bridge loan facility and UBS AG will act as the sole administrative agent for the bridge loan facility.

 

In considering the recommendations of the board of directors, Genesco’s shareholders should be aware that certain of Genesco’s directors and executive officers have interests in the transaction that may be different from, and/or in addition to, the interests of Genesco’s shareholders generally. Our board of directors was aware of these potential conflicts of interest in reaching its decision to approve the merger agreement and to recommend that our shareholders vote in favor of approving the merger agreement. Except as set forth below, our directors and officers have, to our knowledge, no material interest that differs from your interests generally.

 

Treatment of Equity Awards

 

Upon the completion of the merger, all of our equity compensation awards (including awards held by directors and executive officers) will be subject to the treatment described under “The Merger Agreement — Treatment of Options and Other Awards” beginning on page 51. All of the related cash payments will be subject to applicable withholding taxes.

 

The table below sets forth, as of June 30, 2007 for each of our directors and executive officers (before any deduction for applicable withholding taxes): the aggregate number of stock options held by each director and executive officer, including those that will vest upon the completion of the merger; the cash payment that will be made in respect of the foregoing stock options upon the completion of the merger (based on the exercise price of the options); the aggregate number of restricted shares held by each director and executive officer that have restrictions that will lapse upon completion of the merger; and the aggregate cash payment that will be made in respect of the foregoing restricted shares upon the completion of the merger.

 

 

 

 

Change in Control Severance and Retention Arrangements

 

All of the executive officers have employment protection agreements that will become effective upon shareholder approval of the merger agreement (the “effective time”) and have a term ending on the third anniversary of the effective time unless the executive is earlier terminated in accordance with the agreement or retires. These agreements have the following provisions, which may or will be triggered following the completion of the merger, as applicable:

 

 

 

 

 

 

 

The executive officers are also entitled to certain payments under the general severance plan, however, amounts payable under the employment protection agreements are to be reduced by any amount received under the general severance plan.

 

The following table shows the amount of the Severance Payment payable to each of the executive officers, based on compensation and benefit levels in effect on June 30, 2007 and assuming the merger is completed on December 31, 2007, and the executive’s employment terminates effective December 31, 2007 under circumstances that entitle him to the maximum potential Severance Payment immediately thereafter. The table also shows the estimated value of tax reimbursement expected to be due under Section 4999 of the Internal Revenue Code and the employment protection agreement in respect of these severance payments together with the other payments indicated above, including those with respect to the accelerated outstanding equity awards upon the completion of the merger.

 

 

It is currently anticipated that Mr. Pennington will not be retained to continue his role as chairman and chief executive officer of the surviving corporation following the merger or otherwise in a formal capacity. The Severance Payments will be made at the closing of the merger for Mr. Pennington and any other executive who is not retained by Finish Line following the completion of the merger.

 

New Management Arrangements

 

As of the date of this proxy statement, no member of our senior management has entered into any amendments or modifications to existing employment agreements or arrangements with us in connection with the merger. Finish Line has informed us that it currently intends to retain certain members of our existing senior management team with the surviving corporation after the merger is completed, and that it anticipates that           will serve as          . Certain members of senior management currently are engaged in discussions with representatives of Finish Line regarding revised terms of employment that would become effective at or after the closing of the merger. As of the date of this proxy statement, no member of our senior management has entered into any agreement, arrangement or understanding with Finish Line, Merger Sub or their affiliates regarding employment with the surviving corporation. Although we believe certain members of our management team are likely to enter into new arrangements with Finish Line, Merger Sub or their affiliates regarding employment with the surviving corporation, these matters are subject to further

negotiations and discussion and no terms or conditions have been finalized. The new arrangements are currently expected to be entered into at or prior to the completion of the merger. In addition, it is possible that one or more of our executive officers could be invited to join the board of directors of the surviving corporation and/or Finish Line following the merger.

 

Benefit Arrangements with Surviving Corporation

 

The commitments by Finish Line with respect to benefit arrangements are described below under “The Merger Agreement — Employee Benefits” beginning on page 63.

 

Indemnification and Insurance

 

See “The Merger Agreement — Indemnification and Insurance” beginning on page 64.

 

The following is a summary of certain material U.S. federal income tax consequences of the merger to holders of Genesco common stock whose shares of Genesco common stock are converted into the right to receive cash pursuant to the merger. This summary does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our shareholders. For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of shares of Genesco common stock that is, for U.S. federal income tax purposes:

 

 

A “non-U.S. holder” is a person (other than a partnership) that is not a U.S. holder.

 

If a partnership holds Genesco common stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. A partner of a partnership holding Genesco common stock should consult its tax advisor.

 

This discussion is based on current law, which is subject to change, possibly with retroactive effect. It applies only to holders that are beneficial owners who hold shares of Genesco common stock as capital assets, and may not apply to shares of Genesco common stock received in connection with the exercise of employee stock options or otherwise as compensation, holders who hold an equity interest, directly or indirectly, in Finish Line or the surviving corporation after the merger, or to certain types of beneficial owners who may be subject to special rules (such as insurance companies, banks, tax-exempt organizations, financial institutions, broker-dealers, partnerships, S corporations or other pass-through entities, mutual funds, traders in securities who elect the mark-to-market method of accounting, holders subject to the alternative minimum tax, shareholders that have a functional currency other than the U.S. dollar, or holders who hold Genesco common stock as part of a hedge, straddle or a constructive sale or conversion transaction). This discussion does not address the receipt of cash in connection with the cancellation of shares of restricted stock or options to purchase shares of Genesco common stock, or any other matters relating to equity compensation or benefit plans. This discussion also does not address any aspect of state, local or foreign tax laws.

 

U.S. Holders

 

The exchange of shares of Genesco common stock for cash pursuant to the merger will be a taxable transaction to U.S. holders for U.S. federal income tax purposes. In general, a U.S. holder whose shares of Genesco common stock are converted into the right to receive cash pursuant to the merger will recognize

capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received in exchange for the shares (determined before the deduction of any applicable withholding taxes) and the U.S. holder’s adjusted tax basis in the shares. Gain or loss will be determined separately for each block of shares (i.e., shares acquired at the same cost in a single transaction). The gain or loss generally will be long-term capital gain or loss provided that a U.S. holder’s holding period for the shares is more than 12 months at the time of the completion of the merger. Long-term capital gains of individuals are eligible for reduced rates of taxation. There are limitations on the deductibility of capital losses. U.S. holders who claim a loss that exceeds certain thresholds may be required to file a disclosure statement with the Internal Revenue Service.

 

Backup withholding of tax (currently at a rate of 28%) may apply to cash payments to which a non-corporate U.S. holder is entitled under the merger agreement, unless the holder or other payee (i) is an entity that is exempt from backup withholding (generally including corporations, tax-exempt organizations and certain qualified nominees) and, when required, provides appropriate documentation to that effect, (ii) provides a taxpayer identification number (social security number, in the case of individuals, or employer identification number, in the case of other shareholders), certifies that the number is correct and that the holder has not been notified by the Internal Revenue Service that it is subject to backup withholding due to underreporting of interest or dividends, and otherwise complies with applicable requirements of the backup withholding rules. Each U.S. holder should complete and sign the Substitute Form W-9 included as part of the letter of transmittal and return it to the paying agent in order to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the paying agent.

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowable as a refund or a credit against a U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service.

 

Cash received pursuant to the merger will also be subject to information reporting under certain circumstances unless an exemption applies.

 

Special Considerations of Holders of Preferred Stock

 

As discussed above in “The Merger — Preferred Stock” beginning on page 37, holders of preferred stock are not directly affected by the merger. Any holder of preferred stock who converts a share of preferred stock into Genesco common stock pursuant to the terms of the preferred stock prior to the merger generally should be treated as any other holder of Genesco common stock with respect to the converted shares, and the material U.S. federal income tax consequences to the exchange of the common stock for the right to receive cash in the merger generally should be as set forth above. Holders of preferred stock who exercise their right to convert their preferred stock into the merger consideration following the closing of the merger generally should recognize gain or loss for U.S. federal income tax purposes in a similar manner as if they had converted their preferred stock into common stock and exchanged their common stock for the right to receive cash in the merger.

 

Holders of preferred stock who dispose of their preferred stock pursuant to the proposed tender offer by Finish Line prior to the merger, or redemption following the merger (both as described above in “the Merger — Preferred Stock — Employees’ Subordinated Convertible Preferred Stock), generally should recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received (including amounts otherwise paid on behalf of the holder) in exchange for the shares (determined before the deduction of any applicable withholding taxes) and the holder’s adjusted tax basis in the shares.

 

In the event that the charter amendment is not approved and adopted, and a holder of Employees’ Preferred converts a portion but not all of the shares of the Employees’ Preferred owned by such holder into merger consideration after the consummation of the merger, the tax consequences to the holder may be different than those described above. Holders of all outstanding classes and series of preferred stock should consult their own tax advisors.

Non-U.S. Holders

 

Any gain realized on the receipt of cash pursuant to the merger by a non-U.S. holder generally will not be subject to U.S. federal income tax unless:

 

 

An individual non-U.S. holder described in the first bullet point immediately above will be subject to tax on the net gain derived from the merger under regular graduated U.S. federal income tax rates. An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the merger, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States. If a non-U.S. holder that is a foreign corporation falls under the first bullet point immediately above, it will be subject to tax on its net gain in the same manner as if it were a U.S. person as defined under the Code and, in addition, may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.

 

A non-U.S. holder will be subject to substantial limitations on its ability to claim a loss as a result of the merger. Non-U.S. holders who claim a loss that exceeds certain thresholds may be required to file a disclosure statement with the Internal Revenue Service. Non-U.S. holders should consult their own tax advisors regarding the tax consequences of the merger.

 

Genesco believes that it is not and has not been a “United States real property holding corporation” for U.S. federal income tax purposes.

 

Backup withholding (currently at a rate of 28%) may apply to the cash received by a non-corporate shareholder pursuant to the merger, unless the shareholder or other payee certifies under penalty of perjury that it is a non-U.S. holder in the manner described in the letter of transmittal (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person as defined under the Code) or otherwise establishes an exemption in a manner satisfactory to the paying agent. Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner. Cash received in the merger will also be subject to information reporting, unless an exemption applies.

 

The U.S. federal income tax consequences set forth above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each holder should consult the holder’s tax advisor regarding the applicability of the rules discussed above to the holder and the particular tax effects to the shareholder of the merger in light of the holder’s particular circumstances, including the application of state, local and foreign tax laws, and, if applicable, the tax consequences of the receipt of cash in connection with the cancellation of restricted shares or options to purchase shares of Genesco common stock, including the transactions described in this proxy statement relating to our other equity compensation and benefit plans.

 

 

There are no material relationships between Finish Line and Merger Sub or any of their respective affiliates, on the one hand, and Genesco or any of our affiliates, on the other hand, other than in respect of the merger agreement.

 

We are aware of one asserted class action lawsuit related to the proposed merger filed against us. On April 24, 2007, a purported class action lawsuit styled Maxine Phillips, on Behalf of Herself and All Others Similarly Situated v. Genesco, Inc., Hal N. Pennington, James S. Beard, Leonard L. Berry, William F. Blaufuss, Jr., James W. Bradford, Robert V. Dale, Matthew C. Diamond, Marty G. Dickens, Ben T. Harris, Kathleen Mason, William A Williamson, Jr., and Robert J. Dennis, was filed in the Chancery Court for the State of Tennessee, Twentieth Judicial District of Nashville (Case No. 07-905-III). The complaint alleges, among other things, that the individual defendants (officers and directors of Genesco) refused to properly consider an initial offer made by Foot Locker to purchase Genesco. Plaintiff asserts that, instead of attempting to negotiate with Foot Locker to obtain the highest price reasonably available for Genesco and its shareholders, the individual defendants initially refused to respond to the offer, and subsequently rejected the offer without allowing for the possibility of further negotiations or solicitation of a higher purchase price from Foot Locker or other potential buyers. The complaint seeks an order certifying a class, a declaration that the defendants have breached their fiduciary and other duties, and an order requiring the defendants to implement a procedure or process to obtain the highest possible price for shareholders including, but not limited to, reasonable negotiations with Foot Locker. Plaintiff also seeks her costs and attorneys’ fees. The individual defendants and Genesco have not yet filed an answer to the complaint.

 

Immediately prior to the execution of the merger agreement, the Amended and Restated Rights Agreement, dated August 28, 2000, between Genesco and Computershare Trust Company, N.A., as successor to First Chicago Trust Company of New York (the “Rights Agreement”), was amended to render the shareholder rights inapplicable to both the merger agreement and the completion of transactions contemplated under the merger agreement.

 

We estimate that we will incur, and will be responsible for paying, transaction-related fees and expenses, consisting primarily of financial, legal, accounting and tax advisory fees, SEC filing fees and other related charges, totaling approximately $      million. This amount includes the following estimated fees and expenses:

 

 

This section of the proxy statement describes the material provisions of the merger agreement but does not purport to describe all of the terms of the merger agreement. The following summary is qualified in its entirety by reference to the complete text of the merger agreement, which is attached as Annex A to this proxy statement and incorporated into this proxy statement by reference. We urge you to read the full text of the merger agreement because it is the legal document that governs the merger. It is not intended to provide you with any other factual information about us. Such information can be found elsewhere in this proxy statement and in the public filings we make with the SEC, as described in the section entitled “Where You Can Find More Information” below.

 

The merger agreement provides for the merger of Merger Sub with and into Genesco upon the terms, and subject to the conditions, of the merger agreement. The merger will be effective at the time the articles of merger are filed with the Secretary of State of the State of Tennessee (or at a later time, if agreed upon by the parties and specified in the articles of merger). We expect to complete the merger as promptly as practicable after meeting the conditions precedent to the merger, including that our shareholders approve the merger agreement.

 

As the surviving corporation, Genesco will continue to exist following the merger. Upon completion of the merger, the directors of Merger Sub will be the initial directors of the surviving corporation and the officers of Genesco will be the initial officers of the surviving corporation. All officers of the surviving corporation will hold their positions until their successors are duly elected and qualified or until the earlier of their resignation or removal.

 

Genesco or Finish Line may terminate the merger agreement prior to the completion of the merger in some circumstances, whether before or after the approval of the merger agreement by shareholders. Additional details on termination of the merger agreement are described in “— Termination of the Merger Agreement.”

 

Each share of Genesco common stock issued and outstanding immediately before the merger will automatically be cancelled and will cease to exist and will be converted into the right to receive $54.50 in cash, without interest and less any applicable withholding taxes, other than:

 

 

After the merger is effective, each holder of a certificate representing shares of Genesco common stock will no longer have any rights with respect to such shares, except for the right to receive the merger consideration.

 

The holders of our preferred stock outstanding upon the completion of the merger will not be entitled to any consideration upon the completion of the merger pursuant to the merger agreement. Each share of Genesco preferred stock issued and outstanding, and not otherwise properly converted to common stock if applicable, immediately before the merger will remain outstanding following the merger. Finish Line has informed us that it intends to redeem all outstanding shares of redeemable preferred stock following the completion of the merger in accordance with our charter, and that they also intend to redeem the outstanding Employees’ Preferred subject to the requisite approval and filing of the proposed charter amendment (Proposal No. 2). Finish Line has also informed us that it may commence a tender offer and consent

solicitation for shares of the Employees’ Preferred at the price to be paid per share of Genesco common stock in the merger, $54.50 per share, net of any unpaid amounts on such shares. This tender offer would commence prior to the merger, and the completion of the tender offer would be subject to the completion of the merger, among other conditions that would be set forth in materials that would be filed with the SEC by Finish Line to the extent they choose to commence this tender offer. The completion of the tender offer would not be a condition to the closing of the merger. This proxy statement is not intended to constitute a recommendation about whether a holder of Employees’ Preferred should tender their shares in connection with any such tender offer by Finish Line. See “The Merger — Preferred Stock” beginning on page 37, for further discussion of the treatment and rights of Genesco preferred stock in connection with the merger.

 

Upon the completion of the merger, all outstanding options to acquire Genesco common stock under our equity incentive plans will become fully vested and immediately exercisable, and each option not exercised prior to the merger will be cancelled and converted into the right to receive a cash payment equal to the number of shares of Genesco common stock underlying the option multiplied by the amount by which $54.50 exceeds the exercise price for each share of Genesco common stock underlying the option, without interest and less any applicable withholding taxes. Additionally, restrictions applicable to all shares of restricted stock will, in connection with the merger, lapse and those shares will be cancelled and converted into the right to receive a cash payment equal to the number of outstanding restricted shares, multiplied by $54.50, without interest and less any applicable withholding taxes.

 

The effect of the merger upon our employee stock purchase plan and certain other employee benefit plans is described below under “— Employee Benefits” beginning on page 63.

 

The 4.125% Convertible Subordinated Debentures due 2023 (the “Convertible Debentures”) issued by us and under that certain indenture dated as of June 24, 2003, between us and The Bank of New York (the “Indenture”), and outstanding immediately prior to the effective time of the merger, by virtue of the merger and the terms of the Indenture and a supplemental indenture required to be entered into upon the merger under the terms of the Indenture (the “Supplemental Indenture”), will not be convertible at or after the effective time of the merger into shares of our common stock, and following the effective time of the merger, the Convertible Debentures will be convertible, pursuant to the terms of the Indenture and the Supplemental Indenture, into cash in an amount equal to the product of (i) $54.50 (the per share price to be paid for Genesco’s common stock in the merger) and (ii) the number of shares of our common stock into which the Convertible Debentures could have been converted as of the effective time of the merger, including fractional shares. Finish Line has agreed pursuant to the merger agreement that it shall, and shall cause the surviving corporation to, at all times from and after the effective time of the merger maintain sufficient funds to satisfy its obligations to holders of Convertible Debentures upon the conversion thereof as described above.

 

Before the merger, Finish Line will designate a paying agent reasonably acceptable to us to make payment of the merger consideration as described above. At or prior to the effective time of the merger, Finish Line will deposit, or cause to be deposited, in trust with the paying agent the funds necessary to pay the merger consideration to the applicable shareholders.

 

Upon the completion of the merger and the settlement of any transfers that occurred prior to the effective time, we will close our common stock ledger. After that time, there will be no further transfer of shares of Genesco common stock.

 

As soon as reasonably practicable after the completion of the merger, the surviving corporation will send, or cause the paying agent to send, to all common stock holders a form of letter of transmittal and instructions advising how to surrender their common stock certificates in exchange for the merger consideration. The paying agent will pay common stock holders their merger consideration after they have (1) surrendered their

common stock certificates to the paying agent and (2) provided to the paying agent their signed letter of transmittal and any other items specified by the letter of transmittal. Interest will not be paid or accrue in respect of the merger consideration. The surviving corporation will reduce the amount of any merger consideration paid to common stock holders by any applicable withholding taxes. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY.

 

If any cash deposited with the paying agent is not claimed within one year following the effective time of the merger, the cash will be returned to the surviving corporation upon demand subject to any applicable unclaimed property laws. Any unclaimed amounts remaining immediately prior to when the amounts would escheat to or become property of any governmental authority will be returned to the surviving corporation free and clear of any prior claims or interest thereto.

 

If the paying agent is to pay some or all of your merger consideration to a person other than you, as the registered owner of a common stock certificate, you must have your certificates properly endorsed or otherwise in proper form for transfer, and you must pay any transfer or other taxes payable by reason of the transfer or establish to Finish Line’s satisfaction that the taxes have been paid or are not required to be paid.

 

The transmittal instructions will tell you what to do if you have lost your certificate, or if it has been stolen or destroyed. You will have to provide an affidavit to that fact and, if required by the surviving corporation, post a bond in an amount that the surviving corporation reasonably directs as indemnity against any claim that may be made against it in respect of the certificate.

 

The merger agreement contains representations and warranties made by us to Finish Line and Merger Sub and representations and warranties made by Finish Line and Merger Sub to us. The assertions embodied in those representations and warranties were made solely for purposes of the merger agreement and may be subject to important qualifications and limitations agreed by the parties in connection with negotiating its terms (including exceptions described in the confidential disclosure schedules to the merger agreement). Moreover, some of those representations and warranties may not be accurate or complete as of any particular date because they are subject to a contractual standard of materiality or material adverse effect different from that generally applicable to public disclosures to shareholders or used for the purpose of allocating risk between the parties to the merger agreement rather than establishing matters of fact. For the foregoing reasons, you should not rely on the representations and warranties contained in the merger agreement as statements of factual information.

 

In the merger agreement, Genesco, Finish Line and Merger Sub each made representations and warranties relating to, among other things:

 

 

In the merger agreement, Finish Line and Merger Sub also each made representations and warranties relating to solvency, the availability of the funds necessary to perform its obligations under the merger agreement, and the operations of Finish Line and Merger Sub.

 

Genesco also made representations and warranties relating to, among other things:

 

 

Many of Genesco’s representations and warranties are qualified by a material adverse effect standard. For purposes of the merger agreement, “material adverse effect” on Genesco (a “Company Material Adverse Effect”), is defined to mean:

 

 

 

We have agreed in the merger agreement that, until the completion of the merger (or the termination of the merger agreement), except as expressly contemplated by the merger agreement or consented to in writing by Finish Line (which consent shall not be unreasonably withheld, conditioned or delayed) or required by applicable law, we and each of our subsidiaries will:

 

 

 

 

We have also agreed that, until the completion of the merger, except as expressly contemplated or permitted by the merger agreement or consented to in writing by Finish Line (which consent shall not be unreasonably withheld, conditioned or delayed), we will not, and will not permit any of our subsidiaries to:

 

 

 

 

 

 

Notwithstanding the foregoing, nothing contained in the merger agreement shall give Finish Line, directly or indirectly, the right to control or direct Genesco’s or Genesco’s subsidiaries’ operations prior to the effective time of the merger; prior to the effective time of the merger, each of Genesco and Finish Line shall exercise, consistent with the terms and conditions of the merger agreement, complete control and supervision over its and its subsidiaries’ respective operations; and no consent of Finish Line shall be required with respect to any matter set forth above or elsewhere in the merger agreement to the extent the requirement of such consent would be inconsistent with applicable law.

 

Upon the terms and subject to the conditions set forth in the merger agreement, each of the parties to the merger agreement has agreed to use its reasonable efforts to take, or cause to be taken, all actions, to file, or cause to be filed, all documents, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective the merger, including: (1) the taking of all acts necessary to satisfy the conditions necessary for the completion of the merger; (2) the obtaining of all necessary actions or non-actions, expirations of all necessary waiting periods, waivers, consents, clearances, approvals, orders and authorizations from governmental entities and any other third parties; (3) the defending of any suits, claims, actions, investigations or proceedings, whether judicial or administrative, challenging the merger agreement or the completion of the merger; and (4) the execution or delivery of any additional instruments necessary to consummate the merger.

 

Finish Line has agreed to use its reasonable best efforts to arrange the debt financing to fund the proposed merger and related transactions contemplated by the debt financing commitment executed in connection with the merger agreement and to cause its financing sources to fund the financing required to consummate the proposed merger. Genesco has agreed to cooperate in connection with the financing. See “The Merger — Financing of the Merger” for a description of the financing arranged by Finish Line to fund the proposed merger and related transactions.

 

In the event any portion of the debt financing becomes unavailable, Finish Line has also agreed to use its reasonable best efforts to arrange to obtain alternative financing on terms and conditions not materially less

favorable to Finish Line in the aggregate (as determined in Finish Line’s good faith reasonable judgment) than those contemplated by the debt financing commitments as promptly as practicable following the occurrence of the event, but no later than the closing.

 

Conditions to Each Party’s Obligations.  Each party’s obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

 

Conditions to Finish Line’s and Merger Sub’s Obligations.  The obligations of Finish Line and Merger Sub to complete the merger are subject to the satisfaction or waiver of the following additional conditions:

 

 

Conditions to Genesco’s Obligations.  Our obligation to complete the merger is subject to the satisfaction or waiver of the following further conditions:

 

 

If a failure to satisfy one of these conditions to the merger is not considered by our board of directors to be material to our shareholders, our board of directors may waive compliance with that condition. Our board of directors is not aware of any condition to the merger that cannot be satisfied. After the merger agreement has been approved by our shareholders, among other limitations, the merger consideration cannot be changed and the merger agreement cannot be altered in a manner adverse to our shareholders without re-submitting the revisions to our shareholders for their approval.

 

The merger agreement provides that neither we nor our representatives (as defined in the merger agreement) will directly or indirectly:

 

 

 

However, Genesco may (and may authorize and permit its representatives to) at any time prior to the approval of the merger agreement by its shareholders, in response to an unsolicited takeover proposal (defined below) that is made after the date of the merger agreement and that is a superior proposal (defined below), if its board of directors determines in good faith (after receiving advice of outside counsel) that doing so would be in the best interests of Genesco and Genesco’s shareholders and that the failure to take that action is or would be inconsistent with its board of directors’ fiduciary duties to our shareholders under applicable law and after giving Finish Line oral and written notice (including the material terms of the inquiry, offer, proposal or request, and, in the case of written materials provided to Genesco, copies or written summaries of the written materials) within 48 hours after receiving the proposal:

 

 

In addition, we have agreed that, except as described below under “— Recommendation Withdrawal/Termination in Connection with a Superior Proposal and Third Party Tender Offers,” neither our board of directors nor any of its committees will:

 

 

 

For purposes of these restrictions, an “acquisition proposal” means any transaction or proposed transaction or series of related transactions involving:

 

 

For purposes of these restrictions, a “takeover proposal” means any acquisition proposal or inquiry (other than the transactions contemplated by the merger agreement) that is reasonably likely to lead to an acquisition proposal that:

 

 

For purposes of these restrictions, a “superior proposal” means any takeover proposal:

 

 

Our board of directors may also, at any time prior to the approval of the merger agreement by our shareholders, withdraw or modify, or publicly propose to withdraw or modify, in a manner adverse to Finish Line, the approval or recommendation of our board of directors of the merger agreement or the merger or announce that it has resolved to take that action or terminate the merger agreement and enter into a definitive agreement with respect to a superior proposal if our board of directors concludes in good faith (after consultation with our financial advisor and outside legal counsel) that failure to do so would be inconsistent with its obligations to comply with its fiduciary duties under applicable law, and only after (i) we give written notice to Finish Line and Merger Sub at least three business days in advance of such action of the superior proposal and the material terms and conditions of the superior proposal, and (ii) we pay to Finish Line the termination fees and expenses described in “— Termination Fees.”

 

Nothing described above limits our ability to take and disclose a position recommending rejection with respect to any tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act, or from making any similar disclosure to our shareholders with respect to any takeover proposal, if in any such case Genesco’s board of directors determines in good faith (after consultation with its outside legal counsel) that it is required to do so under applicable law.

 

The merger agreement may be terminated at any time prior to the completion of the merger, whether before or after our shareholders have approved the merger agreement:

 

 

 

 

 

 

 

Genesco has agreed to pay Finish Line a termination fee of $46 million and reimburse Finish Line’s reasonable, actual and documented out-of-pocket expenses and fees (including reasonable attorneys’ fees), up to a limit of $10 million, if:

 

 

 

Solely for purposes of determining whether a tail fee payment is payable by us, an “acquisition proposal” is generally:

 

 

 

Genesco has agreed to pay Finish Line a termination fee of $46 million if Genesco or Finish Line terminates the merger agreement because the merger has not been consummated by December 31, 2007, and:

 

 

Genesco has also agreed to reimburse Finish Line’s reasonable, actual and documented out-of-pocket expenses and fees (including reasonable attorneys’ fees), up to a limit of $10 million, if Genesco or Finish Line terminates the merger agreement because Genesco’s shareholders fail to approve the merger agreement at a duly held meeting.

 

The surviving corporation has agreed to pay to each employee who continues as an employee of Genesco and its subsidiaries, as the surviving corporation, during the benefits continuation period (one year from the date the articles of merger are filed with the Secretary of State of the State of Tennessee) salary, wages, cash incentive opportunities, severance, medical benefits and other welfare benefit plans programs and arrangements (with the exception of any equity compensation programs or defined benefit plans) which are at least comparable in the aggregate to those provided by us prior to the closing of the merger; provided, that with respect to continuing employees who are subject to employment agreements or change in control agreements that have not been superseded by agreements with Finish Line, the surviving corporation shall expressly assume such agreements, and fulfill all obligations under such agreements. During the benefits continuation period, the surviving corporation has agreed to pay, subject to the terms and conditions as it shall establish and the terms of applicable employment agreements, any continuing employee whose employment is involuntarily terminated without cause by Finish Line, the surviving corporation or any of their subsidiaries an amount of severance pay in cash equal to the amount of cash severance pay that would have been payable to the continuing employee under the terms of the severance policy applicable to the continuing employee immediately prior to the date of the merger agreement or, if applicable, the continuing employee’s employment agreement.

 

The merger agreement also provides that the surviving corporation shall:

 

 

Under the merger agreement, we are also required to terminate our Amended and Restated Genesco Employee Stock Purchase Plan dated August 24, 2005 (the “ESPP”) (including all offering periods in progress), immediately prior to the effective time of the merger agreement (or another date prior to the effective time of the merger agreement designated by us for administrative convenience) and ensure that there are no outstanding rights of participants under the ESPP following its termination as of the effective time of the merger (or such other date designated by us). With respect to persons participating in the ESPP on the date on which the offering period under the ESPP is deemed to cease (and who have not withdrawn from or otherwise ceased participation in the ESPP prior to that date), all salary amounts withheld on behalf of such participants as of the effective time of the merger agreement (or earlier date designated by us, as described in the previous sentence) will be deemed to have been used to purchase Genesco common stock under the terms of he ESPP, using the effective time of the merger agreement (or such other date designated by us) as the last date of the applicable offering period under the ESPP, and converted into the right to receive, effectively, a cash payment equal to (i) the number of shares deemed purchased under the ESPP multiplied by $54.50, plus (ii) any salary deferrals which remain due to the limitations under the ESPP regarding the purchase of fractional shares.

 

The merger agreement provides that the charter and/or bylaws of the surviving corporation shall contain provisions with respect to indemnification not less favorable than those set forth in our charter and bylaws as of the date the merger agreement was signed, and the provisions may not be amended, repealed or otherwise modified for a period of six years from the effective time of the merger in any manner that would adversely affect the rights under those provisions of individuals who at, or prior to, the effective time of the merger were directors or officers of Genesco.

 

In addition, the merger agreement provides that Genesco shall, for a period of six years after the effective time of the merger, to the fullest extent permitted and not otherwise prohibited under applicable law or under our charter, bylaws or any applicable indemnification agreements, and regardless of whether the merger becomes effective, indemnify, defend and hold harmless, and, after the effective time of the merger, the surviving corporation shall, and Finish Line shall cause the surviving corporation to, to the extent indemnified as of the date of the merger agreement by Genesco pursuant to Genesco’s charter, bylaws and/or indemnification agreements in effect on the date hereof or under applicable law, indemnify, defend and hold harmless each present and former director or officer of Genesco or any of Genesco’s subsidiaries against any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any action, whether civil, criminal, administrative or investigative, arising out of or pertaining to (x) the fact that the person is or was an officer, director, employee, agent or other fiduciary of Genesco or any of Genesco’s subsidiaries prior to the effective time of the merger or (y) the merger agreement or with respect to the transactions contemplated by the merger agreement, whether in any case asserted or arising before or after the effective time of the merger. The surviving corporation has agreed to, and Finish Line has agreed to cause the surviving corporation to, advance to the party his or her legal expenses within 20 days after receipt by the surviving corporation of a written request for such advance (including the cost of any investigation and preparation incurred in connection therewith); provided that any person to whom expenses are advanced provides an undertaking, to the extent then required by the Tennessee Business Corporation Act (the “TBCA”), to repay the advances if it is finally judicially determined that the person is not entitled to indemnification.

 

The merger agreement also provides that Finish Line shall, and Finish Line shall cause the surviving corporation to, honor and fulfill in all respects the obligations of Genesco pursuant to indemnification

agreements with Genesco’s directors, officers, employees or agents existing at or prior to the effective time of the merger to the fullest extent permitted by applicable law or under the relevant charter or bylaws.

 

The merger agreement further provides that the surviving corporation shall obtain a “tail” insurance policy from an insurance carrier with the same or better credit rating as Genesco’s current insurance carrier with respect to directors’ and officers’ liability insurance that provides coverage for the six years following the effective time of the merger at least comparable in amount and scope to the coverage provided under Genesco’s directors and officers insurance policy in effect as of the effective time of the merger for the individuals who are or were directors and officers of Genesco for claims arising from facts or events occurring prior to the effective time of the merger. If Genesco is unable to obtain the “tail” insurance policies, for an amount equal to or less than 200% of the current annual premiums paid by Genesco, Genesco shall be entitled to obtain as much comparable “tail” insurance as possible for an amount equal to that specified amount.

 

The parties may amend the merger agreement at any time; provided, however, that after Genesco’s shareholders approve the merger agreement, there shall be no amendment that by law requires further approval by Genesco’s shareholders without such approval having been obtained. All amendments to the merger agreement must be in writing signed by us, Finish Line and Merger Sub.

 

At any time before the completion of the merger, each of the parties to the merger agreement may, by written instrument:

 

 

Our board of directors unanimously recommends that you vote “FOR” the approval of the merger agreement.

CHARTER AMENDMENT
(PROPOSAL NO. 2)

 

On June 17, 2007, as required pursuant to the merger agreement, our board of directors approved and adopted, and recommended that Genesco’s shareholders approve and adopt, the charter amendment. Our board of directors believes that it is in the best interest of Genesco and its shareholders to amend Genesco’s charter as proposed. If Genesco’s shareholders approve this proposal, the charter amendment will become effective upon the filing of articles of amendment with the Secretary of State of the state of Tennessee, which filing is expected to take place as soon as reasonably practicable after the effective time of the merger. However, we will not file the charter amendment in the event the merger is not completed. The following discussion of the proposed charter amendment is qualified in its entirety by reference to the full text of the charter amendment set forth on Annex B.

 

The proposed charter amendment will provide Genesco with the ability to redeem all of the outstanding Employees’ Preferred in cash at the price per share to be paid to holders of Genesco common stock in the merger (without interest or dividends), or $54.50, subject to, and following the completion of, the merger. This redemption would include shares that are not fully paid, but the amount outstanding and payable on such shares would be withheld from the redemption price for such shares and applied to the unpaid balance on such shares. Currently, fully paid Employees’ Preferred shares are convertible at the option of the holder into one share of Genesco common stock or one share of Genesco Subordinated Cumulative Preferred Stock. Shares that are not fully paid are not currently convertible. Each of our other outstanding classes and series of preferred stock are currently redeemable by Genesco in accordance with our existing charter. If the charter amendment is adopted and approved, the Employees’ Preferred would also be subject to redemption at the option of Genesco, as the surviving corporation, subject to, and following, the effective time of the merger. Finish Line informed us that it intends to cause the surviving corporation to redeem all outstanding preferred stock that has not properly converted to common stock prior to the merger. The charter amendment does not provide for any other conditions that must be met before the Employees’ Preferred can be redeemed by Genesco, other than the notice and procedural requirements described below.

 

The proposed notice and procedural provisions for the redemption of the Employees’ Preferred are substantially similar to those of the other outstanding classes and series of preferred stock, with the exception that the charter amendment does not allow for Genesco to redeem less than all of the outstanding shares of Employees’ Preferred. Notice is required to be mailed and published 30 to 60 days prior to the date fixed for redemption. Following this redemption date, unless Genesco is in default in the payment of the redemption price, the shares called for redemption will cease to be outstanding and the holders of Employees’ Preferred will cease to be shareholders with respect to the Employees’ Preferred and will have no interest or claim against Genesco other than to receive the redemption price on the redemption date, without interest or dividends, upon surrender of their stock certificates with any necessary endorsement. The charter amendment also provides for the establishment of a trust, if desired, to pay the redemption obligations of Genesco, subject to certain conditions.

 

We are recommending that you approve and adopt the proposed charter amendment because we agreed to do so in connection with our negotiation of the merger agreement. Approving and adopting the charter amendment will permit Finish Line to deregister the Employees’ Preferred under Section 12(g) of the Exchange Act and to maintain a streamlined capital structure following the completion of the merger. We believe the potential benefits of the proposed charter amendment also include, among others, the following:

 

 

 

Our board of directors unanimously recommends that you vote “FOR” the approval and adoption of the charter amendment.

 

Under Tennessee law, if you are a holder of Genesco preferred stock and do not vote in favor of the merger agreement you have the right to seek an appraisal of the fair value of your Genesco preferred stock and to receive a cash payment of such fair value. Genesco shareholders electing to exercise dissenters’ rights must comply with the provisions of Chapter 23 of the TBCA in order to perfect their rights. Genesco will require strict compliance with the statutory procedures. A copy of Chapter 23 of the TBCA is attached as Annex D to this proxy statement. Under Tennessee law, holders of Genesco common stock do not have dissenters’ rights unless our common stock is delisted from the NYSE and the CHX prior to completion of the merger.

 

The following is intended as a brief summary of the material provisions of the Tennessee statutory procedures required to be followed by a shareholder in order to dissent from the merger and perfect the shareholder’s appraisal rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Chapter 23 of the TBCA, the full text of which appears as Annex D to this proxy statement.

 

Holders of Genesco preferred stock who do not want to accept the merger consideration, who do not vote in favor of (or who abstain from voting on) the merger agreement, and who perfect their dissenters’ rights by complying with the provisions of Chapter 23 of the TBCA, will have the right to receive cash payment for the “fair value” of their preferred stock.

 

In order to be eligible to exercise the right to dissent, a shareholder must file with Genesco a written objection to the merger, stating that the shareholder intends to dissent if the merger is effected. Such statement must be filed before the vote is taken at the special meeting, and it must be addressed as follows: Corporate Secretary, Genesco Inc., 1415 Murfreesboro Road, Nashville, Tennessee 37217. It is not necessary for a dissenting shareholder to vote against the merger agreement to preserve dissenters’ rights; however, such rights will be lost if the shareholder votes in favor of the merger agreement.

 

If the merger agreement is approved, Genesco will deliver a written notice to dissenting shareholders no later than ten days after approval of the merger agreement, unless the merger agreement is terminated and abandoned. The notice will set forth where the dissenting shareholders’ payment demands must be sent and where and when stock certificates must be deposited. The notice will also supply a form for dissenting shareholders to use in demanding payment. A dissenting shareholder must deliver his payment demand to Genesco no later than the date set forth in such notice, which date may not be fewer than one nor more than two months after the written notice is delivered. Merely abstaining from or voting against the merger will not satisfy the two requirements that the shareholder (i) object in writing to the merger and (ii) file a written demand for payment within such two-month period. Failure of a shareholder to take the required action during the two-month period binds such shareholder to the terms of the merger and precludes exercise of dissenters’ rights.

 

Within the two-month period, a dissenting shareholder must submit the shareholder’s stock certificates representing the shareholder’s shares of Genesco preferred stock to Genesco in accordance with the terms of notice of Genesco. As soon as practicable after the merger is effected, or upon receipt of a dissenting shareholder’s payment demand, whichever is later, Genesco shall pay each dissenting shareholder the fair value of the shareholder’s shares, plus accrued interest.

 

If a dissenting shareholder believes that the amount paid by Genesco is less than the fair value of the shares or that interest due was incorrectly calculated, the dissenting shareholder must, within one month after Genesco has made payment to the dissenting shareholder, demand payment of the shareholder’s estimate of the fair value. If a demand for payment remains unsettled, Genesco must commence a suit in a court having equity jurisdiction located in Davidson County, Tennessee, within two months after receiving the dissenting shareholder’s payment demand. All dissenting shareholders will be made a party to the proceeding and will be served with a copy of the petition. The court shall determine the dissenting shareholder’s right to receive payment or the fair value of his shares or both. The costs and expenses of such proceedings shall be assessed against Genesco unless the court shall find the actions of a dissenting shareholder who is party to the suit to

be arbitrary, vexatious or not in good faith. If Genesco fails to bring such a suit within such time, it shall pay each dissenting shareholder whose demand remains unsettled the amount demanded.

 

Section 48-23-101 of the TBCA provides that the “fair value” of a dissenter’s shares shall be determined immediately before the effectuation of the merger, “excluding any appreciation or depreciation of shares in anticipation of the corporate action.” The value so determined could be more or less than the redemption value of the Genesco preferred stock or the merger consideration that would be received if the Genesco preferred stock were converted into common stock before the merger or converted into the merger consideration after the merger.

 

Any holder of Genesco preferred stock contemplating the exercise of dissenters’ rights should carefully review Chapter 23 of the TBCA, a copy of which is attached to this proxy statement as Annex D. A shareholder who fails to comply with all requirements of such Chapter 23 will forfeit such holder’s dissenters’ rights and, following the completion of the merger, will likely have their Genesco preferred stock redeemed by Genesco, as the surviving corporation. See “The Merger — Preferred Stock” beginning on page 37.

 

A dissenting shareholder must not convert the shareholder’s Genesco preferred stock into common stock before the merger or into the merger consideration after the merger. Conversion of a dissenting shareholder’s Genesco preferred stock into common stock before the merger or into the merger consideration after the merger will result in the loss of the shareholder’s dissenters’ rights, and the shareholder will be entitled only to the merger consideration.

 

Under Tennessee law, holders of the Employees’ Preferred who do not vote in favor of the approval and adoption of the charter amendment will also have the right to dissent, if the amendment becomes effective, subject to substantially similar requirements and procedures to those described above; provided, however, that holders of Employees’ Preferred will in no event be entitled to more than one payment with respect to their shares.

 

In view of the complexity of Chapter 23, holders of Genesco preferred stock who may wish to pursue dissenters’ rights should consult their legal advisors. The above summary is qualified in its entirety by reference to Chapter 23 of the TBCA, a copy of which is reprinted in full as Annex D to this proxy statement.

 

Genesco’s common stock is listed on the NYSE (Symbol: GCO) and the CHX. The following table sets forth for the periods indicated the high and low sales prices of the common stock as shown in the New York Stock Exchange Composite Transactions listed in the Wall Street Journal:

 

The closing sale price of Genesco common stock on the NYSE on June 15, 2007, the last trading day prior to the announcement of the merger, was $49.60 per share. The $54.50 per share to be paid for each share of Genesco common stock pursuant to the merger represents a premium of 48.7% to the closing price reported by the NYSE on March 9, 2007, the last trading day prior to market speculation about potential interest by Foot Locker, Inc. in an acquisition of Genesco, a premium of 37.7% to the average closing price reported by the NYSE for the three months prior to March 9, 2007, and a premium of 50.0% to the average closing price reported by the NYSE for the one year prior to March 9, 2007. On          , 2007, the most recent practicable date before this proxy statement was printed, the closing price for Genesco common stock as reported by the NYSE was $      per share. You are encouraged to obtain current market quotations for Genesco common stock in connection with voting your shares.

 

Genesco has not paid cash dividends in respect of its common stock since 1973. Genesco’s ability to pay cash dividends in respect of its common stock is subject to various restrictions, including that we are currently restricted by the merger agreement from paying cash dividends on our common stock.

 

The following table sets forth, as of the dates indicated below, the ownership of the entities which, according to the most recent SEC filings and amendments thereto, as applicable, own beneficially more than 5% of Genesco’s common stock and the entities which, according to Genesco’s stock transfer records, own more than 5% of any of the other outstanding classes and series of our preferred stock.