Registration Statement for Securities Offered Pursuant to a Transaction — Form S-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-3 The Men's Wearhouse, Inc. 68 358K
2: EX-5.1 Opinion of Fulbright & Jaworski L.L.P. 2 10K
3: EX-12.1 Computation of Ratio of Earnings to Fixed Charges 1 6K
4: EX-23.1 Consent of Deloitte & Touche LLP 1 6K
As filed with the Securities and Exchange Commission on December 16, 2003
Registration No. 333-
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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THE MEN'S WEARHOUSE, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-1790172
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081
(713) 592-7200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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NEILL P. DAVIS
5803 GLENMONT DRIVE
HOUSTON, TEXAS 77081
(713) 592-7200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
MICHAEL W. CONLON
FULBRIGHT & JAWORSKI L.L.P.
1301 MCKINNEY, SUITE 5100
HOUSTON, TX 77010
(713) 651-5151
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this registration statement becomes effective, subject to
market conditions and other factors.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
[Enlarge/Download Table]
PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT (2) PRICE (2) FEE
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3.125% Convertible Senior Notes due
2023.................................. $130,000,000 (1) 100% (3) $ 130,000,000 (3) $ 10,517
Common Stock, par value $.01 per share
(4) .................................. 3,031,431 (5) N/A N/A N/A
(1) Represents the aggregate principal amount of 3.125% Convertible Senior
Notes due 2023 that we sold on October 21, 2003.
(2) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended.
(3) Exclusive of accrued interest, if any.
(4) The registrants will receive no consideration upon conversion of the
notes. Therefore, pursuant to Rule 457(i), no filing fee is required
with respect to the shares of common stock registered hereby.
(5) Represents the maximum number of shares of common stock initially
issuable upon conversion of the notes registered hereby. For purposes
of estimating the number of shares of common stock to be included in
this registration statement upon conversion of the notes, we calculated
the number of shares of common stock issuable upon conversion of the
notes at the initial conversion price of $42.88, which equals a
conversion rate of 23.3187 shares per $1,000 principal amount of the
notes. In addition to the shares of common stock set forth in the table
above, pursuant to Rule 416 under the Securities Act, we are
registering an indeterminate number of shares of common stock issuable
upon conversion of the notes by means of adjustment of the conversion
price pursuant to the terms of the notes.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING SECURITY HOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 16, 2003
PROSPECTUS
$130,000,000
(MEN'S WEARHOUSE LOGO)
3.125% CONVERTIBLE SENIOR NOTES DUE 2023 AND
THE COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTES
We issued the notes in a private placement in October 2003.
The securities to be offered and sold using this prospectus will be offered and
sold by the selling security holders named in this prospectus or in any
supplement to this prospectus. See "Selling Security Holders" beginning on page
14. We will not receive any of the proceeds from the sale by the selling
security holders of the securities offered by this prospectus.
We will pay cash interest on the notes on October 15 and April 15 of
each year, beginning on April 15, 2004. The notes will mature on October 15,
2023. Beginning on October 15, 2008, we will pay additional contingent interest
on the notes if the average trading price of the notes is above a specified
level during a specified period, as described in this prospectus.
We may redeem all or a portion of the notes on or after October 20,
2008, at 100% of the principal amount of the notes plus any accrued and unpaid
interest, contingent interest and additional amounts, if any. We also have the
right to redeem the notes between October 20, 2006 and October 19, 2008 if the
price of our common stock reaches certain levels, as discussed in this
prospectus.
During certain periods, the notes are convertible by holders into
shares of our common stock initially at a conversion rate of 23.3187 shares of
common stock per $1,000 principal amount of notes, which is equivalent to an
initial conversion price of $42.88 per share of common stock (subject to
adjustment in certain events), under the following circumstances: (1) if the
price of our common stock issuable upon conversion reaches specified thresholds;
(2) if we call the notes for redemption or (3) upon the occurrence of specified
corporate transactions in each case, as described in this prospectus. Upon
conversion of the notes, in lieu of delivering common stock we may, in our
discretion, deliver cash or a combination of cash and common stock.
The notes are general senior unsecured obligations, ranking on a parity
in right of payment with all our existing and future unsecured senior
indebtedness and our other general unsecured obligations, and senior in right of
payment with all our future subordinated indebtedness. The notes will be
effectively subordinated to all of our senior secured indebtedness, and all
indebtedness and liabilities of our subsidiaries. Holders may require us to
purchase all or part of the notes, for cash, at a purchase price of 100% of the
principal amount per note plus accrued and unpaid interest on October 15, 2008,
October 15, 2013 and October 15, 2018 or upon a designated event.
Our common stock is listed on the New York Stock Exchange under the
symbol "MW." On December 12, 2003, the last reported sale price of our common
stock on the New York Stock Exchange was $25.48 per share.
The selling security holders may sell the securities offered by this
prospectus from time to time on any exchange on which the securities are listed
on terms to be negotiated with buyers. They may also sell the securities in
private sales or through dealers or agents. The selling security holders may
sell the securities at prevailing market prices or at prices negotiated with
buyers. The selling security holders will be responsible for any commissions due
to brokers, dealers or agents. We will be responsible for all other offering
expenses. We will not receive any of the proceeds from the sale by the selling
security holders of the securities offered by this prospectus.
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THIS INVESTMENT INVOLVES SIGNIFICANT RISKS. SEE THE "RISK FACTORS" SECTION
BEGINNING ON PAGE 8.
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PRICE: 100% OF THE PRINCIPAL AMOUNT AT ISSUANCE
PLUS ACCRUED INTEREST, IF ANY, FROM OCTOBER 21, 2003
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is December 16, 2003
TABLE OF CONTENTS
[Download Table]
PAGE
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ABOUT THIS PROSPECTUS..................................................... i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER FACTORS....... i
SUMMARY................................................................... 1
THE OFFERING.............................................................. 3
RISK FACTORS.............................................................. 8
RATIO OF EARNINGS TO FIXED CHARGES........................................ 14
NO PROCEEDS............................................................... 14
SELLING SECURITY HOLDERS.................................................. 14
OUR BUSINESS.............................................................. 17
DESCRIPTION OF NOTES...................................................... 22
DESCRIPTION OF CAPITAL STOCK.............................................. 46
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS........................... 47
CERTAIN ERISA CONSIDERATIONS.............................................. 52
PLAN OF DISTRIBUTION...................................................... 55
WHERE YOU CAN FIND MORE INFORMATION....................................... 56
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 56
LEGAL MATTERS............................................................. 56
EXPERTS................................................................... 56
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we
have filed with the Securities and Exchange Commission using a "shelf"
registration process. This means the securities described in this prospectus may
be offered and sold using this prospectus from time to time as described in the
"Plan of Distribution". You should carefully read this prospectus and the
information described under the heading "Where You Can Find More Information".
Under no circumstances should the delivery to you of this prospectus or any
offering or sales made pursuant to this prospectus create any implication that
the information contained in this prospectus is correct as of any time after the
date of this prospectus.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER FACTORS
Certain statements made herein and in other public filings and
releases by the Company contain "forward-looking" information (as defined in the
Private Securities Litigation Reform Act of 1995) that involve risk and
uncertainty. These forward-looking statements may include, but are not limited
to, future capital expenditures, acquisitions (including the amount and nature
thereof), future sales, earnings, margins, costs, number and costs of store
openings, demand for clothing, market trends in the retail clothing business,
currency fluctuations, inflation and various economic and business trends.
Forward-looking statements may be made by management orally or in writing,
including, but not limited to, Management's Discussion and Analysis of Financial
Condition and Results of Operations section and other sections of our filings
with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act") and
the Securities Act.
Actual results and trends in the future may differ materially
depending on a variety of factors including, but not limited to, domestic and
international economic activity and inflation, our successful execution of
internal operating plans and new store and new market expansion plans,
performance issues with key suppliers, severe weather, foreign currency
fluctuations, government export and import policies and legal proceedings.
Future results will also be dependent upon our ability to continue to identify
and complete successful expansions and penetrations into existing and new
markets and our ability to integrate such expansions with our existing
operations.
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SUMMARY
This summary highlights information contained elsewhere in, or
incorporated by reference into, this prospectus about our company. Because it is
a summary, it does not contain all of the information that you should consider
before buying the notes offered hereby. You should read the entire prospectus,
including the Risk Factors section beginning on page 8, and the financial data
and related notes and the documents to which we have referred you, before
deciding to invest in the notes. In this prospectus, unless otherwise specified,
the "Company," "we," "us" and "our" refer to The Men's Wearhouse, Inc., a Texas
corporation, and its wholly owned or controlled subsidiaries.
THE MEN'S WEARHOUSE, INC.
OUR BUSINESS
We are one of the largest specialty retailers of menswear in
the United States and Canada. At November 1, 2003, our U.S. operations included
575 stores in 44 states and the District of Columbia, primarily operating under
the brand names of Men's Wearhouse and K&G, with approximately 25% of our
locations in Texas and California. At November 1, 2003, our Canadian operations
included 114 stores in 10 provinces operating under the brand name of Moores
Clothing for Men. Our net sales and operating income for the fiscal year ended
February 1, 2003 were $1,295.0 million and $69.4 million, respectively. Below is
a brief description of our brands:
Men's Wearhouse
Under the Men's Wearhouse brand, we target middle and
upper-middle income men by offering quality merchandise at everyday low prices.
In addition to value, we believe we provide a superior level of customer
service. Men's Wearhouse stores offer a broad selection of designer, brand name
and private label merchandise at prices we believe are typically 20% to 30%
below the regular prices found at traditional department and specialty stores.
Our merchandise includes suits, sport coats, slacks, business casual,
sportswear, outerwear, dress shirts, shoes and accessories. We concentrate on
business attire that is characterized by infrequent and more predictable fashion
changes. Therefore, we believe we are not as exposed to trends typical of more
fashion-forward apparel retailers, where significant markdowns and promotional
pricing are more common. At November 1, 2003, we operated 504 Men's Wearhouse
stores in 44 states and the District of Columbia.
We also began a tuxedo rental program in selected Men's
Wearhouse stores during 1999. We believe this program generates incremental
business for us without significant incremental personnel or real estate costs
and broadens our customer base by drawing first-time and younger customers into
our stores. We completed the rollout of this program to our Men's Wearhouse
stores during the first quarter of fiscal 2002 and, as of November 1, 2003,
offered tuxedo rentals in substantially all of our Men's Wearhouse stores.
K&G
Under the K&G brand, we target the more price sensitive
customer. The K&G brand was acquired as a result of our combination with K&G
Men's Center, Inc. in June 1999. At November 1, 2003, we operated 71 K&G stores
in 23 states, which includes five stores operating under the name The Suit
Warehouse (four in metropolitan Detroit and one in Ohio). Thirty of the K&G
stores offer ladies' career apparel that is also targeted to the more price
sensitive customer.
We believe that K&G's more basic, value-oriented superstore
approach appeals to certain customers in the apparel market. K&G offers
first-quality, current-season apparel and accessories comparable in quality to
that of traditional department and specialty stores, at everyday low prices we
believe are typically 30% to 70% below the regular prices charged by such
stores. K&G's merchandising strategy emphasizes broad assortments across all
major categories, including tailored clothing, casual sportswear, dress
furnishings, footwear and accessories. This merchandise selection, which
includes brand name as well as private label merchandise, positions K&G to
attract a wide range of customers in each of its markets. As with the Men's
Wearhouse brand, K&G's philosophy of delivering everyday value distinguishes K&G
from other retailers that adopt a more promotional pricing strategy.
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Moores
Under the Moores brand, we target middle and upper-middle
income men in Canada by offering quality merchandise at everyday low prices.
Moores, which was acquired as a result of our combination with Moores Retail
Group Inc. in February 1999, is one of Canada's leading specialty retailers of
menswear, with 114 stores in 10 Canadian provinces at November 1, 2003. Similar
to the Men's Wearhouse stores, Moores stores offer a broad selection of quality
merchandise at prices we believe are typically 20% to 30% below the regular
prices charged by traditional Canadian department and specialty stores. Moores
focuses on conservative, basic tailored apparel that we believe limits exposure
to changes in fashion trends and the need for significant markdowns. Moores'
merchandise consists of suits, sport coats, slacks, business casual, dress
shirts, sportswear, outerwear, shoes and accessories.
In October 2003, we extended our tuxedo rental program to 48
Moores stores and expect to further extend the program to the remainder of the
Moores stores during the next fiscal year.
OUR EXPANSION STRATEGY
Our expansion strategy includes:
- opening additional Men's Wearhouse and K&G stores in new
and existing markets,
- expanding our tuxedo rental program to Moores stores,
- testing opportunities to market complementary products and
services,
- testing expanded, more fashion-oriented merchandise
concepts, and
- identifying strategic acquisition opportunities, including
but not limited to international opportunities.
OUR CORPORATE INFORMATION
The Men's Wearhouse began operations in 1973 as a partnership
and was incorporated under the laws of Texas in May 1974. Our principal
corporate and executive offices are located at 5803 Glenmont Drive, Houston,
Texas 77081-1701 (telephone number 713/592-7200), and at 40650 Encyclopedia
Circle, Fremont, California 94538-2453 (telephone number 510/657-9821),
respectively. Our internet address is www.menswearhouse.com. The information on
our website is not, and you must not consider such information to be, a part of
this prospectus.
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THE OFFERING
This prospectus covers the resale of up to $130,000,000
aggregate principal amount of the notes and the 3,031,431 shares of our common
stock issuable upon conversion of the notes plus an indeterminate number of
shares of our common stock issuable upon conversion of the notes by means of
adjustment of the conversion price pursuant to the terms of the notes. We issued
and sold a total of $130,000,000 aggregate principal amount of the notes on
October 21, 2003 in private placements to Bear, Stearns & Co. Inc., Wachovia
Capital Markets, LLC, J.P. Morgan Securities Inc. and Fleet Securities, Inc.
(the "initial purchasers"). The following summary contains basic information
about the notes and is not intended to be complete. It does not contain all the
information that is important to holders of the notes. For a more complete
understanding of the notes, please refer to the section of this document
entitled "Description of Notes." For purposes of the description of the notes
included in this prospectus, references to "the Company", "Issuer", "us", "we"
and "our" refer only to The Men's Wearhouse, Inc.
Issuer.......................... The Men's Wearhouse, Inc., a Texas
corporation.
Selling Security Holders........ The securities to be offered and sold using
this prospectus will be offered and sold by
the selling security holders named in this
prospectus or in any supplement to this
prospectus. See "Selling Security Holders".
Securities Offered.............. $130,000,000 principal amount at maturity of
3.125% Convertible Senior Notes due 2023.
Issue Price..................... The notes were issued at a price of 100% of
their principal amount, which is $1,000 per
note, plus accrued interest, if any, from
October 21, 2003.
Maturity Date................... October 15, 2023, unless earlier
repurchased, redeemed, or converted.
Ranking......................... The notes are our general senior unsecured
obligations, ranking on parity in right of
payment with all our existing and future
unsecured senior indebtedness, and senior in
right of payment with all our future
subordinated indebtedness. The notes are
effectively subordinated to any of our
secured senior indebtedness to the extent of
the assets securing such indebtedness and to
the claims of all creditors of our
subsidiaries.
Interest........................ 3.125% per annum on the principal amount,
from October 21, 2003, payable semi-annually
in arrears in cash on October 15 and April
15 of each year, beginning April 15, 2004.
Interest will be computed semi-annually on
the basis of a 360-day year comprised of
twelve 30-day months.
Contingent Interest............. We will pay contingent interest to the
holders of the notes during any six-month
period from October 15 to April 14 and from
April 15 to October 14, beginning with the
six-month period commencing October 15,
2008, if the trading price of the notes for
each of the five trading days ending on the
second trading day immediately preceding the
first day of the applicable six-month period
equals or exceeds 120% of the principal
amount of the notes. The amount of
contingent interest payable per note in
respect of any six-month period in which
contingent interest is payable will
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equal 0.25% per annum of the average trading
price of $1,000 principal amount of notes
during the five trading days ending on the
second trading day immediately preceding the
first day of the applicable six-month
interest period.
Conversion Rights............... Holders may convert the notes into shares of
our common stock at an initial conversion
rate of 23.3187 shares of common stock per
$1,000 principal amount of notes
(representing a conversion price of
approximately $42.88 per share), subject to
adjustment, prior to the close of business
on the final maturity date only under the
following circumstances:
(i) during any conversion period commencing
after October 21, 2003, and only during such
conversion period if, on each of at least 20
trading days in the 30 consecutive trading
day period ending on the first trading day
of the conversion period, the closing sale
price of our common stock exceeds 120% of
the conversion price in effect on that 30th
trading day of such period; a "conversion
period" will be the period from and
including the third Friday (or, if that day
is not a trading day, then the next trading
day) in a fiscal quarter to, but not
including, the third Friday (or, if that day
is not a trading day, then the next trading
day) in the immediately following fiscal
quarter; or
(ii) if the notes have been called for
redemption; or
(iii) upon the occurrence of specified
corporate transactions described under
"Description of Notes -- Conversion Rights
-- Conversion Upon Specified Corporate
Transactions."
Upon conversion, we will have the right to
deliver, in lieu of shares of our common
stock, cash or a combination of cash and
shares of our common stock. If we elect to
pay cash in lieu of shares, the payment
amount will be based on the average closing
sale price of our common stock over a 20
consecutive trading day measurement period
beginning on the third trading day following
the conversion date.
On the first date the notes become
convertible under the above circumstances,
we will notify holders in writing of our
method for settling the principal portion of
the notes upon conversion ("principal
conversion settlement election"). This
notification once provided to a holder on
the first date the notes become convertible,
regardless of a holder's decision to
convert, is irrevocable and legally binding
with regard to any conversion of the notes.
As such, the conversion settlement election
made with respect to the principal amount on
that date remains effective if the notes
cease to be convertible for any period but
subsequently become convertible again.
Until the notes are surrendered for
conversion, we will not be required to
notify holders of our method for settling
the
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excess amount of our conversion obligation
relating to the amount of the conversion
value above the principal amount, if any.
Sinking Fund.................... None.
Provisional Redemption.......... On or after October 20, 2006 but prior to
October 20, 2008, upon at least 20 days
notice, we may, at our option and subject to
conditions, redeem for cash, in whole or in
part, the notes at any time at a redemption
price equal to $1,000 per $1,000 principal
amount of notes to be redeemed, plus accrued
and unpaid interest, and additional amounts,
if any, to but excluding the redemption
date. We may exercise this provisional
redemption right only if, on each of at
least 20 trading days within any period of
30 consecutive trading days ending on or
after October 20, 2006 but prior to October
20, 2008, the closing sale price of our
common stock exceeds 140% of the conversion
price in effect on the 30th trading day of
such period. See "Description of Notes--
Provisional Redemption."
Optional Redemption............. On or after October 20, 2008, upon at least
20 days notice, we may redeem for cash, in
whole or in part, the notes at any time at a
redemption price equal to 100% of the
principal amount of notes to be redeemed,
plus accrued and unpaid interest, contingent
interest and additional amounts, if any, to
but excluding the redemption date. See
"Description of Notes-- Optional
Redemption."
Purchase of Notes at
Holder's Option................. Holders may require us to repurchase the
notes for cash on October 15, 2008, October
15, 2013 and October 15, 2018, each of which
we refer to as a "purchase date". In each
case, upon at least five business days'
prior notice we will pay a purchase price
equal to 100% of the principal amount of the
notes plus accrued and unpaid interest,
contingent interest and additional amounts,
if any, to but excluding the purchase date.
See "Description of Notes-- Purchase of
Notes at a Holder's Option" and "Risk
Factors-- We may be unable to repay or
purchase the principal amount of the notes."
Designated Event................ Upon the occurrence of a designated event,
as described in this prospectus, and before
the maturity or redemption of the notes, a
holder may require us to purchase for cash
all or part of its notes at a price equal to
100% of their principal amount plus accrued
and unpaid interest, contingent interest and
additional amounts, if any, to but excluding
the designated event purchase date. See
"Description of the Notes-- Purchase of
Notes at a Holder's Option Upon a Designated
Event" and "Risk Factors-- We may be unable
to repay or purchase the principal amount of
the notes."
No Proceeds..................... We will not receive any proceeds from the
sale by any selling security holder of the
notes or our common stock issuable upon
conversion of the notes.
5
Absence of a Public Market...... The notes are new securities and there is
currently no established market for the
notes. We cannot assure holders of the notes
that any active or liquid market will
develop for the notes. See "Plan of
Distribution."
Trading......................... The notes will not be listed on any
securities exchange or included in any
automated quotation system. However, the
notes issued in the private placements are
eligible for trading in the Private
Offerings, Resale and Trading through
Automated Linkages Market, commonly referred
to as the PORTAL Market. The notes sold
using this prospectus, however, will no
longer be eligible for trading in the Portal
Market
Guarantees...................... None.
Material U.S. Federal Income
Tax Considerations.............. Under the indenture governing the notes, we
have agreed, and by acceptance of a
beneficial interest in a note, each holder
of a note will be deemed to have agreed, to
treat the notes as indebtedness for United
States federal income tax purposes that is
subject to the Treasury regulations
governing contingent payment debt
instruments. For United States federal
income tax purposes, interest income on the
notes will accrue at the rate of 8.0% per
year, compounded semi-annually, which rate
represents our determination of the yield at
which we would have issued, as of the issue
date, a comparable noncontingent,
nonconvertible, fixed-rate debt instrument
with terms and conditions otherwise similar
to the notes. A United States Holder will be
required to accrue interest income on a
constant yield to maturity basis at this
rate (subject to certain adjustments), with
the result that a United States Holder
generally will recognize taxable income
significantly in excess of interest payments
received while the notes are outstanding.
A United States Holder will also recognize
gain or loss on the sale, conversion,
exchange, redemption or retirement of a note
in an amount equal to the difference between
the amount realized on the sale, conversion,
exchange, redemption or retirement of a
note, including the fair market value of our
common stock received, and the United States
Holder's adjusted tax basis in the note. Any
gain recognized on the sale, conversion,
exchange, redemption or retirement of a note
generally will be ordinary interest income;
any loss will be ordinary loss to the extent
of the interest previously included in
income, and thereafter, capital loss. See
"Material U.S. Federal Income Tax
Considerations."
Book-Entry Form................. The notes were issued in book-entry form and
are represented by permanent global
certificates deposited with, or on behalf
of, The Depositary Trust Company, or DTC,
and registered in the name of a nominee of
DTC. Beneficial interests in any of the
notes will be shown on, and transfers will
be effected only through, records maintained
by DTC or its nominee and any such interest
may not be exchanged for
6
certificated securities, except in limited
circumstances. See "Description of Notes--
Form, Denomination and Registration."
New York Stock Exchange Symbol
for our Common Stock............ Our common stock is listed on the New York
Stock Exchange under the symbol "MW."
RISK FACTORS
Investing in the notes involves a number of material risks.
For a discussion of certain risks that should be considered in connection with
an investment in the notes, see "Risk Factors" beginning on page 8 of this
prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
We have computed the ratio of earnings to fixed charges for
each of the following periods on a consolidated basis. References herein to
years are to the Company's 52-week or 53-week fiscal year, which ends on the
Saturday nearest January 31 in the following calendar year. For example,
references to "2003" mean the fiscal year ending January 31, 2004. All fiscal
years for which information is included below had 52 weeks, except 2000 which
had 53 weeks.
[Download Table]
NINE MONTHS
ENDED
NOVEMBER 1,
FISCAL YEAR 2003
-------------------------------- -----------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Ratio of earnings to fixed charges 4.0 4.3 6.2 3.4 3.2 3.0
See "Ratio of Earnings to Fixed Charges" beginning on page 14
of this prospectus.
7
RISK FACTORS
In deciding whether to purchase the notes, you should carefully
consider the risks described below, which could cause our operating results and
financial condition to be materially adversely affected, as well as other
information and data included or incorporated by reference in this prospectus.
RISKS RELATED TO OUR COMPANY
OUR ABILITY TO CONTINUE TO EXPAND OUR MEN'S WEARHOUSE STORES MAY BE LIMITED.
A large part of our growth has resulted from the addition of new Men's
Wearhouse stores and the increased sales volume and profitability provided by
these stores. We will continue to depend on adding new stores to increase our
sales volume and profitability. We believe that our ability to increase the
number of Men's Wearhouse stores in the United States above 550 will be limited.
However, we believe that additional growth opportunities exist through improving
and diversifying the merchandise mix, relocating stores, expanding our K&G brand
and adding complementary products and services. When we enter new markets, we
have to:
- obtain suitable store locations,
- hire personnel,
- establish distribution methods, and
- advertise our brand names and our distinguishing characteristics to
consumers who may not be familiar with them.
We cannot assure you that we will be able to open and operate new
stores on a timely and profitable basis. The costs associated with opening new
stores may negatively affect our profitability. Our expansion strategy may also
be negatively affected by conditions in the commercial real estate market
existing at the time we seek to expand.
CERTAIN OF OUR EXPANSION STRATEGIES MAY PRESENT GREATER RISKS.
Expansion into more fashion-oriented merchandise categories or into
complementary products and services may present greater risks. We are
continuously assessing opportunities to expand complementary products and
services related to our traditional business, such as corporate apparel sales
and retail dry cleaning establishments, as well as concepts that include more
fashion-oriented merchandise. We anticipate that as we explore opportunities in
these areas we will do so on a limited test market basis, so we do not
anticipate that significant resources of the Company would initially be put at
risk. Nevertheless, we may expend both capital and personnel resources on such
business opportunities which may or may not be successful.
OUR BUSINESS IS SEASONAL AND IS AFFECTED BY GENERAL ECONOMIC CONDITIONS.
Like most other retail businesses, our business is seasonal.
Historically, over 30% of our net sales and approximately 45% of our net
earnings have been made during November, December and January. Like other retail
businesses, our operations may be negatively affected by local, regional or
national economic conditions, such as levels of disposable consumer income,
consumer debt, interest rates and consumer confidence. Any economic downturn
might cause consumers to reduce their spending, which could negatively affect
our sales. We cannot assure you that a long economic downturn would not have a
noticeable negative effect on us.
ACTS OF TERRORISM COULD NEGATIVELY IMPACT OUR OPERATING RESULTS AND FINANCIAL
CONDITION.
The continued threat of terrorism and heightened security measures in
response to an act of terrorism may disrupt commerce and undermine consumer
confidence which could negatively impact our sales by causing consumer spending
to decline. Furthermore, an act of terrorism or war, or the threat thereof,
could negatively impact our business by interfering with our ability to obtain
merchandise from vendors or substitute suppliers at similar costs in a timely
manner.
8
SALES IN THE MEN'S TAILORED CLOTHING MARKET GENERALLY HAVE DECLINED OVER THE
PAST SEVERAL YEARS.
According to industry sources, sales in the men's tailored clothing
market generally have declined over the past several years. We believe that this
decline is attributable primarily to: (1) men allocating less of their income to
tailored clothing and (2) certain employers relaxing their dress codes. We
believe that this decrease in sales has contributed, and will continue to
contribute, to a consolidation among retailers of men's tailored clothing.
Despite this overall decline, we have been able to increase our share of the
men's tailored clothing market. We cannot assure you that we will continue to be
able to expand our sales volume or maintain our profitability within our segment
of the retailing industry.
OUR INDUSTRY IS HIGHLY COMPETITIVE.
The men's tailored clothing market is fragmented, and we face intense
competition for customers, access to quality merchandise and suitable store
locations. We compete with specialty men's clothing stores, traditional
department stores, other off-price retailers and manufacturer-owned stores,
independently owned outlet stores and discount operators.
Several of these competitors are part of large department store chains
that have much greater financial, marketing and other resources than we have
available. We cannot assure you that we will be able to compete successfully
with our competitors in the future.
THE LOSS OF, OR DISRUPTION IN, OUR CENTRALIZED DISTRIBUTION CENTER COULD
NEGATIVELY IMPACT OUR BUSINESS AND OPERATIONS.
All merchandise for Men's Wearhouse stores is received into our
centralized distribution center in Houston, Texas, where the inventory is then
processed, sorted and shipped to our stores. We depend in large part on the
orderly operation of this receiving and distribution process, which depends, in
turn, on adherence to shipping schedules and effective management of the
distribution center. Although we believe that our receiving and distribution
process is efficient and well positioned to support our expansion plans, we
cannot assure you that events beyond our control, such as disruptions in
operations due to fire or other catastrophic events, employee matters or
shipping problems, would not result in delays in the delivery of merchandise to
our stores.
Although we maintain business interruption and property insurance, we
cannot assure you that our insurance will be sufficient, or that insurance
proceeds will be timely paid to us, in the event our distribution center is shut
down for any reason or if we incur higher costs and longer lead times in
connection with a disruption at our distribution center.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE EXTREMELY VOLATILE DUE TO MANY
FACTORS.
The market price of our common stock has fluctuated in the past and may
change rapidly in the future depending on news announcements and changes in
general market conditions. The following factors, among others, may cause
significant fluctuations in our stock price:
- news announcements regarding quarterly or annual results of
operations,
- monthly comparable store sales,
- acquisitions,
- competitive developments,
- litigation affecting the Company, or
- market views as to the prospects of the retail industry generally.
9
RIGHTS OF OUR SHAREHOLDERS MAY BE NEGATIVELY AFFECTED IF WE ISSUE ANY OF THE
SHARES OF PREFERRED STOCK WHICH OUR BOARD OF DIRECTORS HAS AUTHORIZED FOR
ISSUANCE.
We have available for issuance 2,000,000 shares of preferred stock, par
value $.01 per share. Our board of directors is authorized to issue any or all
of this preferred stock, in one or more series, without any further action on
the part of shareholders. The rights of our shareholders may be negatively
affected if we issue a series of preferred stock in the future that has
preference over our common stock with respect to the payment of dividends or
distribution upon our liquidation, dissolution or winding up. See "Description
of Capital Stock -- Preferred Stock" on page 46.
OUR SUCCESS SIGNIFICANTLY DEPENDS ON OUR KEY PERSONNEL AND OUR ABILITY TO
ATTRACT AND RETAIN ADDITIONAL PERSONNEL.
Mr. George Zimmer has been very important to our success. Mr. Zimmer is
the Company's Chairman of the Board, Chief Executive Officer and primary
advertising spokesman. The loss of Mr. Zimmer's services could have a
significant negative effect on us.
Also, our continued success and the achievement of our expansion goals
are dependent upon our ability to attract and retain additional qualified
employees as we expand.
FLUCTUATIONS IN EXCHANGE RATES MAY CAUSE US TO EXPERIENCE CURRENCY EXCHANGE
LOSSES.
Moores conducts most of its business in Canadian dollars. The exchange
rate between Canadian dollars and U.S. dollars has fluctuated historically. If
the value of the Canadian dollar against the U.S. dollar weakens, then the
revenues and earnings of our Canadian operations will be reduced when they are
translated to U.S. dollars. Also, the value of our Canadian net assets in U.S.
dollars may decline.
In connection with our direct sourcing program, we may enter into
purchase commitments that are denominated in a foreign currency (primarily the
Euro), which create currency exchange risks. Forward exchange contracts are used
to protect against these risks, but we cannot assure you that currency exchange
losses will not occur.
THERE ARE A VARIETY OF RISKS ASSOCIATED WITH OUR MANUFACTURING BUSINESS
CONDUCTED BY MOORES.
Moores, through its wholly owned subsidiary, Golden Brand Clothing
(Canada) Ltd., manufactures a significant portion of the tailored clothing
offered for sale by our Moores stores. A long interruption in Golden Brand's
ability to manufacture tailored clothing could have a material negative impact
on our Moores operations. We could experience shortages in men's tailored
clothing to sell in our Moores stores if Golden Brand fails to meet its
production goals for any reasons, including labor disputes, delays in production
or machinery breakdowns or repair problems.
There are a variety of risks associated with the manufacturing business
including those associated with labor, machinery maintenance, product scheduling
and delivery systems and obtaining raw materials on a timely basis. Golden
Brand's principal raw material is fabric. Many of Golden Brand's suppliers have
supplied fabric to Golden Brand for more than ten years. If one of the current
suppliers is unable or unwilling to provide fabric, we believe that there are
other suppliers of fabric who could supply fabric to Golden Brand, although we
cannot assure you that it would be at comparable cost. As is normal in the
industry, most of Golden Brand's supply arrangements are seasonal. There could
be a negative effect on the ability of Golden Brand to meet its production goals
if any of the following occurred: an unexpected loss of a supplier of fabric; a
long interruption in shipments from any fabric supplier; an unexpected loss of
any of the suppliers of raw materials other than fabric or other finished goods;
or a long interruption in the shipment of raw materials or finished goods. The
negative effect would be particularly noticeable with regard to Golden Brand's
seasonal or time-sensitive products.
WE ARE SUBJECT TO NUMEROUS REGULATIONS THAT COULD AFFECT OUR OPERATIONS.
We are subject to customs, truth-in-advertising, privacy and other
laws, including consumer protection regulations and zoning and occupancy
ordinances, that regulate retailers generally and/or govern the importation,
10
promotion and sale of merchandise and the operation of retail stores and
warehouse facilities. Although we undertake to monitor changes in these laws, if
these laws change without our knowledge, we could be subject to fines or other
penalties under the controlling regulations, which could have a negative effect
on our business, financial condition and results of operations.
RISKS RELATED TO THE NOTES AND THE OFFERING
WE WILL INCREASE OUR LEVERAGE AS A RESULT OF THE SALE OF THE NOTES.
In connection with the sale of the notes, we have incurred $130 million
of indebtedness. As a result of this indebtedness, our interest payment
obligations will increase. The degree to which we will be leveraged could
adversely affect our ability to obtain further financing for working capital,
acquisitions or other purposes and could make us more vulnerable to industry
downturns and competitive pressures. Our ability to meet our debt service
obligations will be dependent upon our future performance, which will be subject
to the financial, business and other factors affecting our operations, many of
which are beyond our control.
THERE ARE NO RESTRICTIVE COVENANTS IN THE NOTES INDENTURE RELATING TO OUR
ABILITY TO INCUR FUTURE INDEBTEDNESS OR COMPLETE OTHER FINANCIAL TRANSACTIONS.
The indenture governing the notes does not contain any financial or
operating covenants or restrictions on the payment of dividends, the incurrence
of indebtedness, transactions with affiliates, incurrence of liens or the
issuance or repurchase of securities by us or any of our subsidiaries. We
therefore may incur additional debt, including secured indebtedness senior to
the notes, or indebtedness at the subsidiary level to which the notes would be
structurally subordinated. As part of our strategy, we may use proceeds from the
initial sale of the notes to finance potential acquisitions, which may cause us
to incur significant indebtedness to which the notes would be subordinate.
A higher level of indebtedness increases the risk that we may default
on our debt obligations. We cannot assure you that we will be able to generate
sufficient cash flow to pay the interest on our debt or that future working
capital, borrowings or equity financing will be available to pay or refinance
such debt. The indenture contains no covenants or other provisions to afford
protection to holders of the notes upon the occurrence of a designated event
except to the extent described under "Description of Notes -- Purchase of Notes
at a Holder's Option Upon a Designated Event."
WE MAY BE UNABLE TO GENERATE SUFFICIENT CASH FLOW TO SATISFY OUR DEBT SERVICE
OBLIGATIONS.
Our ability to generate cash flow from operations to make interest
payments on the notes will depend on our future performance, which will be
affected by a range of economic, competitive and business factors. We cannot
control many of these factors, including general economic conditions and the
health of the retail industry. If our operations do not generate sufficient cash
flow from operations to satisfy our debt service obligations, we may need to
borrow additional funds to make these payments or undertake alternative
financing plans, such as refinancing or restructuring our debt, or reducing or
delaying capital investments and acquisitions. Additional funds or alternative
financing may not be available to us on favorable terms, or at all. Our
inability to generate sufficient cash flow from operations or obtain additional
funds or alternative financing on acceptable terms could have a material adverse
effect on our business, financial condition and results of operations.
WE MAY BE UNABLE TO REPAY OR PURCHASE THE PRINCIPAL AMOUNT OF THE NOTES.
At maturity, the entire outstanding principal amount of the notes will
become due and payable by us. In addition, on October 15, 2008, October 15, 2013
and October 15, 2018 or if a designated event occurs, as defined in the
indenture, each holder of the notes may require that we purchase all or a
portion of that holder's notes. We cannot assure you that we will have
sufficient funds or will be able to arrange for additional financing to pay the
principal amount or purchase price due. In that case, our failure to repay the
notes at maturity or to purchase any tendered notes would constitute an event of
default under the indenture.
11
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
There is no established trading market for the notes. We have no plans
to list the notes on a securities exchange. Any market-making activity, if
initiated, may be discontinued at any time, for any reason or for no reason,
without notice. If the initial purchasers cease to act as the market makers for
the notes, we cannot assure you another firm or person will make a market in the
notes. If a market were to develop, the notes could trade at prices that may be
lower than their initial offering price depending on many factors, including the
market price of our common stock into which the notes are convertible,
prevailing interest rates, our operating results and the market for similar
securities. The liquidity of any market for the notes will depend upon the
number of holders of the notes, our results of operations and financial
condition, the market for similar securities, the interest of securities dealers
in making a market in the notes and other factors.
WE EXPECT THAT THE TRADING VALUE OF THE NOTES WILL BE SIGNIFICANTLY AFFECTED BY
THE PRICE OF OUR COMMON STOCK.
The market price of the notes is expected to be significantly affected
by the market price of our common stock. This may result in greater volatility
in the trading value of the notes than would be expected for any non-convertible
debt securities we may issue.
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO ALL OF OUR SECURED INDEBTEDNESS
AND ALL INDEBTEDNESS OF OUR SUBSIDIARIES.
The notes are our unsecured senior obligations and are not be
guaranteed by any of our subsidiaries. Accordingly, the notes are effectively
subordinated to all of our current and future secured indebtedness to the extent
of the assets securing the indebtedness.
Our right to receive any distribution of assets of any subsidiary upon
that subsidiary's liquidation, reorganization or otherwise, is subject to the
prior claims of creditors of that subsidiary, except to the extent we are also
recognized as a creditor of that subsidiary. As a result, the notes are
effectively subordinated to the claims of such creditors. We have pledged some
or all of the stock of our subsidiaries to secure our credit agreement.
Therefore, the notes are effectively subordinated to the credit agreement to the
extent of such pledged stock.
THE CONDITIONAL CONVERSION FEATURE OF THE NOTES COULD RESULT IN YOUR RECEIVING
LESS THAN THE VALUE OF THE COMMON STOCK INTO WHICH A NOTE IS CONVERTIBLE.
The notes are convertible into shares of our common stock only if
specified conditions are met. If the specific conditions for conversion are not
met, you will not be able to convert your notes, and you may not be able to
receive the value of the common stock into which the notes would otherwise be
convertible.
OUR REPORTED EARNINGS PER SHARE MAY BE MORE VOLATILE BECAUSE OF THE CONTINGENT
CONVERSION PROVISION OF THE NOTES.
Holders of the notes are entitled to convert the notes into our common
stock (or, at our election, cash or a combination of cash and common stock),
among other circumstances, if the closing sale price of our common stock on each
of at least 20 trading days in the 30 consecutive trading day period ending on
the first trading day of the conversion period exceeds 120% of the then
prevailing conversion price in effect on that 30th trading day. Until this
contingency or another conversion contingency is met, the shares underlying the
notes are not included in the calculation of our basic or diluted earnings per
share. Should any of these contingencies be met, diluted earnings per share
would be expected to decrease as a result of the inclusion of the underlying
shares in our diluted earnings per share calculation. Volatility in our stock
price could cause this common stock price condition to be met in one quarter and
not in a subsequent quarter, increasing the volatility of our diluted earnings
per share.
THE NOTES MAY NOT BE RATED OR MAY RECEIVE A LOWER RATING THAN ANTICIPATED.
We did not seek a rating on the notes and we believe it is unlikely
that the notes will be rated. However, if one or more rating agencies rates the
notes and assigns the notes a rating lower than the rating expected by
investors, or reduces their rating in the future, the market price of the notes
and our common stock could be adversely affected.
12
YOU SHOULD CONSIDER THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF OWNING NOTES.
Under the indenture governing the notes, we agreed, and by acceptance
of a beneficial interest in a note, each holder of a note will be deemed to have
agreed, to treat the notes as indebtedness for United States federal income tax
purposes that is subject to the Treasury regulations governing contingent
payment debt instruments. For United States federal income tax purposes,
interest income on the notes will accrue at the rate of 8.0% per year,
compounded semi-annually, which rate represents our determination of the yield
at which we would have issued, as of the issue date, a comparable noncontingent,
nonconvertible, fixed-rate debt instrument with terms and conditions otherwise
similar to the notes. A United States Holder will be required to accrue interest
income on a constant yield to maturity basis at this rate (subject to certain
adjustments), with the result that a United States Holder generally will
recognize taxable income significantly in excess of interest payments received
while the notes are outstanding.
A United States Holder will also recognize gain or loss on the sale,
conversion, exchange, redemption or retirement of a note in an amount equal to
the difference between the amount realized on the sale, conversion, exchange,
redemption or retirement of a note, including the fair market value of our
common stock received, and the United States Holder's adjusted tax basis in the
note. Any gain recognized on the sale, conversion, exchange, redemption or
retirement of a note generally will be ordinary interest income; any loss will
be ordinary loss to the extent of the interest previously included in income,
and thereafter, capital loss. The material U.S. federal income tax consequences
relevant to persons holding the notes are summarized in this prospectus under
the heading "Material U.S. Federal Income Tax Considerations".
13
RATIO OF EARNINGS TO FIXED CHARGES
We have computed the ratio of earnings to fixed charges for
each of the following periods on a consolidated basis. References herein to
years are to the Company's 52-week or 53-week fiscal year, which ends on the
Saturday nearest January 31 in the following calendar year. For example,
references to "2003" mean the fiscal year ending January 31, 2004. All fiscal
years for which information is included below had 52 weeks, except 2000 which
had 53 weeks.
[Download Table]
NINE MONTHS
ENDED
NOVEMBER 1,
FISCAL YEAR 2003
-------------------------------- -----------
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
Ratio of earnings to fixed charges 4.0 4.3 6.2 3.4 3.2 3.0
For purposes of computing the ratio of earnings to fixed charges,
" earnings" consist of pretax income from continuing operations plus fixed
charges (excluding capitalized interest). "Fixed charges" represent interest
incurred (whether expensed or capitalized), amortization of debt expense, that
portion of rental expense on operating leases deemed to be the equivalent of
interest and dividends on preferred stock.
NO PROCEEDS
The securities to be offered and sold using this prospectus
will be offered and sold by the selling security holders named in this
prospectus or in any supplement to this prospectus. We will not receive any
proceeds from the sale of the securities or conversion of the notes. The shares
of our common stock offered by this prospectus are issuable upon conversion of
the notes.
SELLING SECURITY HOLDERS
On October 21, 2003, we issued and sold a total of
$130,000,000 aggregate principal amount of the notes in private placements to
Bear, Stearns & Co. Inc., Wachovia Capital Markets, LLC, J.P. Morgan Securities
Inc. and Fleet Securities, Inc. (which we refer to as the initial purchasers in
this prospectus). The initial purchasers have advised us that they resold the
notes in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended, to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) in compliance with Rule 144A. The
selling security holders, which term includes their transferees, pledgees,
donees and successors, may from time to time offer and sell pursuant to this
prospectus any and all of the notes and the shares of our common stock issuable
upon conversion of the notes.
The notes and our shares of common stock to be issued upon
conversion of the notes are being registered pursuant to a registration rights
agreement between us and the initial purchasers. In that agreement, we undertook
to file a registration statement with regard to the notes and our shares of
common stock issuable upon conversion of the notes and, subject to certain
exceptions, to keep that registration statement effective for up to two years.
The registration statement to which this prospectus relates is intended to
satisfy our obligations under that agreement.
The selling security holders named below have advised us that
they currently intend to sell the notes and our shares of common stock set forth
below pursuant to this prospectus. Additional selling security holders may
choose to sell notes and our shares of common stock from time to time upon
notice to us. None of the selling security holders named below, has, within the
past three years, held any position, office or other material relationship with
us or any of our predecessors or affiliates, except as noted below in "Plan of
Distribution".
Before a security holder not named below may use this
prospectus in connection with an offering of securities, this prospectus will be
supplemented to include the name and amount of notes and common stock
beneficially owned by the selling security holder and the amount of notes and
common stock to be offered. Any prospectus supplement will also disclose whether
any selling security holder selling in connection with that prospectus
supplement has held any position, office or other material relationship with us
or any of our predecessors or affiliates during the three years prior to the
date of the prospectus supplement.
14
The following table is based solely on information provided by
the selling security holders. This information represents the most current
information provided to us by selling security holders. Some selling security
holders may have reduced or increased their positions in the notes from the
amounts shown below and not yet informed us of this change. In that case, the
amounts shown below may total more or less than $130,000,000 aggregate principal
amount. To the extent the total of the amounts of notes beneficially owned shown
below is less than $130,000,000, the shortfall represents amounts beneficially
owned but not yet reported to us. To the extent such total exceeds $130,000,000,
such total includes duplicative amounts. In no case will more than $130,000,000
aggregate principal amount of notes be sold using this prospectus and all
supplements to this prospectus.
[Enlarge/Download Table]
NUMBER OF NUMBER OF
SHARES OF SHARES OF
AMOUNT OF PERCENTAGE OF COMMON COMMON
NOTES NOTES AMOUNT OF STOCK STOCK THAT MAY
BENEFICIALLY BENEFICIALLY NOTES TO BENEFICIALLY BE
SELLING SECURITY HOLDER OWNED ($) OWNED BE SOLD ($) (1) OWNED (2)(3) SOLD (1)(3)
------------------------------------------ ------------ ------------- --------------- ------------ --------------
McMahan Securities Co. L.P. $ 1,000,000 * $ 1,000,000 23,319 23,319
S.A.C. Capital Associates, LLC 1,000,000 * 1,000,000 200,719 23,319
Clinton Riverside Convertible Portfolio
Limited 4,180,000 3.22% 4,180,000 97,472 97,472
Clinton Multistrategy Master Fund, Ltd. 1,320,000 1.02% 1,320,000 30,781 30,781
KBC Financial Products USA Inc. 875,000 * 875,000 20,404 20,404
Man Convertible Bond Master Fund, Ltd 3,951,000 3.04% 3,951,000 92,132 92,132
St. Thomas Trading, Ltd 10,049,000 7.73% 10,049,000 234,330 234,330
Wachovia Risk Services, Inc. 250,000 * 250,000 5,830 5,830
Wachovia Capital Markets, LLC 13,925,000 10.71% 13,925,000 324,713 324,713
Durango Investments L.P. 2,250,000 1.73% 2,250,000 52,467 52,467
SG Cowen Securities Corp 2,000,000 1.54% 2,000,000 46,637 46,637
National Bank of Canada c/o Putnam
Lovell NBF Securities Inc. 1,500,000 1.15% 1,500,000 34,978 34,978
Pacific Life Insurance Company 500,000 * 500,000 11,659 11,659
OCM Convertible Trust 1,210,000 * 1,210,000 28,216 28,216
Delta Air Lines Master Trust -CV 515,000 * 515,000 12,009 12,009
State Employee's Retirement Fund of the
State of Delaware 560,000 * 560,000 13,058 13,058
Partner Reinsurance Company Ltd. 425,000 * 425,000 9,910 9,910
Chrysler Corporation Master Retirement
Trust 1,210,000 * 1,210,000 28,216 28,216
Motion Picture Industry Health Plan -
Active Member Fund 135,000 * 135,000 3,148 3,148
Motion Picture Industry Health Plan -
Retiree Member Fund 80,000 * 80,000 1,865 1,865
Delta Pilots Disability & Survivorship
Trust - CV 245,000 * 245,000 5,713 5,713
Microsoft Corporation 965,000 * 965,000 22,503 22,503
Qwest Occupational Health Trust 155,000 * 155,000 3,614 3,614
KBC Financial Products USA Inc. 875,000 * 875,000 20,404 20,404
Deutsche Bank Securities Inc. 1,000,000 * 1,000,000 23,319 23,319
Silvercreek II Limited 445,000 * 445,000 10,377 10,377
Silvercreek Limited Partnership 905,000 * 905,000 21,103 21,103
Newport Alternative Income Fund 150,000 * 150,000 3,498 3,498
Consulting Group Capital Markets Funds 200,000 * 200,000 4,664 4,664
Calamos(R) Market Neutral Fund-
Calamos(R) Investment Trust 3,300,000 2.54% 3,300,000 76,952 76,952
Van Kampen Harbor Fund 1,200,000 * 1,200,000 27,982 27,982
Grace Convertible Arbitrage Fund, Ltd. 3,500,000 2.69% 3,500,000 81,615 81,615
DaimlerChrysler Corp Emp. #1 Pension
Plan dtd 4/1/89 2,400,000 1.85% 2,400,000 55,965 55,965
State Street Bank Custodian for GE
Pension Trust 1,655,000 1.27% 1,655,000 38,592 38,592
Franklin and Marshall College 190,000 * 190,000 4,431 4,431
US Bancorp Piper Jaffray 2,000,000 1.54% 2,000,000 46,637 46,637
Morgan Stanley Convertible Securities
Trust 800,000 * 800,000 18,655 18,655
Victus Capital, LP 5,000,000 3.85% 5,000,000 116,594 116,594
Pyramid Equity Strategies Fund 100,000 * 100,000 2,332 2,332
15
[Enlarge/Download Table]
NUMBER OF NUMBER OF
SHARES OF SHARES OF
AMOUNT OF PERCENTAGE OF COMMON COMMON
NOTES NOTES AMOUNT OF STOCK STOCK THAT MAY
BENEFICIALLY BENEFICIALLY NOTES TO BENEFICIALLY BE
SELLING SECURITY HOLDER OWNED ($) OWNED BE SOLD ($) (1) OWNED (2)(3) SOLD (1)(3)
------------------------------------------ ------------ ------------- --------------- ------------ --------------
DB Equity Opportunities Master Portfolio
Ltd 400,000 * 400,000 9,327 9,327
Convertible Securities Fund 67,000 * 67,000 1,562 1,562
Nations Convertible Securities Fund 6,683,000 5.14% 6,683,000 155,839 155,839
UBS AG London Branch 34,500,000 26.54% 34,500,000 804,495 804,495
DKR SoundShare Opportunity Holding
Fund Ltd. 1,000,000 * 1,000,000 23,319 23,319
Bear, Stearns & Co. Inc. 5,205,000 4.00% 5,205,000 121,374 121,374
* Less than 1%
(1) Because a selling security holder may sell all or a portion of
the notes and common stock issuable upon conversion of the
notes pursuant to this prospectus, no estimate can be given as
to the number or percentage of notes and common stock that the
selling security holder will hold upon termination of any
sales.
(2) Includes shares of common stock issuable upon conversion of
the notes.
(3) The number of shares of our common stock issuable upon
conversion of the notes is calculated assuming the conversion
of the full amount of notes held by such holder at the initial
conversion price of $42.88, which equals a conversion rate of
the initial conversion rate of 23.3187 shares per $1,000
principal amount of the notes. This conversion rate is subject
to adjustment as described under "Description of Notes -
Conversion Price Adjustments". Accordingly, the number of
shares of our common stock to be sold may increase or decrease
from time to time. Fractional shares will not be issued upon
conversion of the notes. Cash will be paid instead of
fractional shares, if any.
16
OUR BUSINESS
THE COMPANY
We are one of the largest specialty retailers of menswear in
the United States and Canada. At November 1, 2003, our U.S. operations included
575 stores in 44 states and the District of Columbia, primarily operating under
the brand names of Men's Wearhouse and K&G, with approximately 25% of our
locations in Texas and California. At November 1, 2003, our Canadian operations
included 114 stores in 10 provinces operating under the brand name of Moores
Clothing for Men.
Men's Wearhouse
Under the Men's Wearhouse brand, we target middle and
upper-middle income men by offering quality merchandise at everyday low prices.
In addition to value, we believe we provide a superior level of customer
service. Men's Wearhouse stores offer a broad selection of designer, brand name
and private label merchandise at prices we believe are typically 20% to 30%
below the regular prices found at traditional department and specialty stores.
Our merchandise includes suits, sport coats, slacks, business casual,
sportswear, outerwear, dress shirts, shoes and accessories. We concentrate on
business attire that is characterized by infrequent and more predictable fashion
changes. Therefore, we believe we are not as exposed to trends typical of more
fashion-forward apparel retailers, where significant markdowns and promotional
pricing are more common. At November 1, 2003, we operated 504 Men's Wearhouse
stores in 44 states and the District of Columbia.
We also began a tuxedo rental program in selected Men's
Wearhouse stores during 1999. We believe this program generates incremental
business for us without significant incremental personnel or real estate costs
and broadens our customer base by drawing first-time and younger customers into
our stores. We completed the rollout of this program to our Men's Wearhouse
stores during the first quarter of fiscal 2002 and, as of November 1, 2003,
offered tuxedo rentals in substantially all of our Men's Wearhouse stores.
K&G
Under the K&G brand, we target the more price sensitive
customer. The K&G brand was acquired as a result of our combination with K&G
Men's Center, Inc. in June 1999 in a transaction accounted for as a pooling of
interests (see Note 2 of Notes to Consolidated Financial Statements included in
our most recent Annual Report on Form 10-K, which is incorporated by reference
herein). At November 1, 2003, we operated 71 K&G stores in 23 states, which
includes five stores operating under the name The Suit Warehouse (four in
metropolitan Detroit and one in Ohio). Thirty of the K&G stores offer ladies'
career apparel that is also targeted to the more price sensitive customer.
We believe that K&G's more basic, value-oriented superstore
approach appeals to certain customers in the apparel market. K&G offers
first-quality, current-season apparel and accessories comparable in quality to
that of traditional department and specialty stores, at everyday low prices we
believe are typically 30% to 70% below the regular prices charged by such
stores. K&G's merchandising strategy emphasizes broad assortments across all
major categories, including tailored clothing, casual sportswear, dress
furnishings, footwear and accessories. This merchandise selection, which
includes brand name as well as private label merchandise, positions K&G to
attract a wide range of customers in each of its markets. As with the Men's
Wearhouse brand, K&G's philosophy of delivering everyday value distinguishes K&G
from other retailers that adopt a more promotional pricing strategy.
Moores
On February 10, 1999, we combined with Moores Retail Group
Inc., a privately owned Canadian corporation, in a transaction accounted for as
a pooling of interests (see Note 2 of Notes to Consolidated Financial Statements
included in our most recent Annual Report on Form 10-K, which is incorporated by
reference herein). Moores is one of Canada's leading specialty retailers of
menswear, with 114 stores in 10 Canadian provinces at November 1, 2003. Moores
focuses on conservative, basic tailored apparel. We believe this limits exposure
to
17
changes in fashion trends and the need for significant markdowns. Moores'
merchandise consists of suits, sport coats, slacks, business casual, dress
shirts, sportswear, outerwear, shoes and accessories.
In October 2003, we extended our tuxedo rental program to 48
Moores stores and expect to further extend the program to the remainder of the
Moores stores during the next fiscal year.
Moores distinguishes itself from other Canadian retailers of
menswear by manufacturing a significant portion of the tailored clothing for
sale in its stores. Moores conducts its manufacturing operations through its
wholly owned subsidiary, Golden Brand Clothing (Canada) Ltd., which is the
second largest manufacturer of men's suits and sport coats in Canada. Golden
Brand's manufacturing facility in Montreal, Quebec, includes a cutting room,
fusing department, pant shop and coat shop. At full capacity, the coat shop can
produce 13,000 units per week and the pant shop can produce 23,000 units per
week. As a result of the vertical integration and the related cost savings,
Moores is able to provide greater value to its customer by offering a broad
selection of quality merchandise at everyday low prices, which the Company
believes typically range from 20% to 30% below the regular prices charged by
traditional Canadian department and specialty stores. Beginning in 1999, Golden
Brand also manufactures product for Men's Wearhouse stores.
EXPANSION STRATEGY
Our expansion strategy includes:
- opening additional Men's Wearhouse and K&G stores in new and
existing markets,
- expanding our tuxedo rental program to Moores stores,
- testing opportunities to market complementary products and
services,
- testing expanded, more fashion-oriented merchandise
concepts, and
- identifying strategic acquisition opportunities, including
but not limited to international opportunities.
In general terms, we consider a geographic area served by a
common group of television stations as a single market.
On a limited basis, we have acquired store locations,
inventories, customer lists, trademarks and tradenames from existing menswear
retailers in both new and existing markets. We may do so again in the future. In
the fourth fiscal quarter of 2003, we plan to open an additional 5 new Men's
Wearhouse stores and 2 new K&G stores, to expand and relocate up to 4 existing
Men's Wearhouse stores and to continue expansion in subsequent years. We believe
that our ability to increase the number of Men's Wearhouse stores in the United
States above 550 will be limited. However, we believe that additional growth
opportunities exist through improving and diversifying the merchandise mix,
relocating stores, expanding our K&G brand and adding complementary products and
services.
MERCHANDISING
Our stores offer a broad selection of designer, brand name and
private label men's business attire, including a consistent stock of core items
(such as navy blazers, tuxedos and basic suits). Although basic styles are
emphasized, each season's merchandise reflects current fabric and color trends,
and a small percentage of inventory, accessories in particular, are usually more
fashion oriented. The broad merchandise selection creates increased sales
opportunities by permitting a customer to purchase substantially all of his
tailored wardrobe and accessory requirements, including shoes, at our stores.
Within our tailored clothing, we offer an assortment of styles from a variety of
manufacturers and maintain a broad selection of fabrics, colors and sizes. We
believe that the depth of selection offered provides us with an advantage over
most of our competitors. During fiscal 2002, we also shifted our merchandise mix
in order to increase our offering of opening price point product in our Men's
Wearhouse stores. We believe this shift better aligns our product selection with
the everyday low price value proposition we want to offer our Men's Wearhouse
brand customers.
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The Company's inventory mix includes "business casual"
merchandise designed to meet demand for such products resulting from more
relaxed dress codes in the workplace. This merchandise consists of tailored and
non-tailored clothing (sport coats, casual slacks, knits and woven sports
shirts, sweaters and casual shoes) that complements the existing product mix and
provides opportunity for enhanced sales without significant inventory risk.
We do not purchase significant quantities of merchandise
overruns or close-outs. We provide recognizable quality merchandise at
consistent prices that assist the customer in identifying the value available at
our stores. We believe that the merchandise at Men's Wearhouse and Moores stores
is generally offered 20% to 30% below traditional department and specialty store
regular prices and that merchandise at K&G stores is generally 30% to 70% below
regular retail prices charged by such stores. A ticket is affixed to each item,
which displays our selling price alongside the price we regard as the regular
price of the item at traditional department and specialty stores.
By targeting men's business attire, a category of men's
clothing characterized by infrequent and more predictable fashion changes, we
believe we are not as exposed to trends typical of more fashion-forward apparel
retailers. This allows us to carry basic merchandise over to the following
season and reduces the need for markdowns; for example, a navy blazer or gray
business suit may be carried over to the next season. Our Men's Wearhouse and
Moores stores have an annual sale that starts around Christmas and runs through
the month of January, during which prices on many items are reduced 20% to 50%
off the everyday low prices. This sale reduces stock at year-end and prepares
for the arrival of the new season's merchandise. We also have a similar event in
mid-summer; however, the level of advertising for promotion of the summer event
is lower than that for the year-end event.
During 2000, 2001 and 2002, 59.3%, 56.8% and 56.5%,
respectively, of our total net merchandise sales were attributable to tailored
clothing (suits, sport coats and slacks) and 40.7%, 43.2% and 43.5%,
respectively, were attributable to casual attire, sportswear, shoes, shirts,
ties, outerwear and other.
In addition to accepting cash, checks or nationally recognized
credit cards, we offer our own private label credit card to Men's Wearhouse
customers and, in May 2002, we introduced a private label credit card to our
Moores customers. We have contracted with a third-party vendor to provide all
necessary servicing and processing and to assume all credit risks associated
with our private label credit card program. We believe that the private label
credit card provides us with an important tool for targeted marketing and
presents an excellent opportunity to communicate with our customers. During
2002, our customers used the private label credit card for approximately 18% of
our sales at the Men's Wearhouse brand and approximately 8% of our sales at the
Moores brand.
CUSTOMER SERVICE AND MARKETING
The Men's Wearhouse and Moores sales personnel are trained as
clothing consultants to provide customers with assistance and advice on their
apparel needs, including product style, color coordination, fabric and garment
fit. For example, clothing consultants at Men's Wearhouse stores attend an
intensive training program at our training facility in Fremont, California,
which is further supplemented with weekly store meetings, periodic merchandise
meetings and frequent interaction with multi-unit managers.
We encourage our clothing consultants to be friendly and
knowledgeable and to promptly greet each customer entering the store.
Consultants are encouraged to offer guidance to the customer at each stage of
the decision-making process, making every effort to earn the customer's
confidence and to create a professional relationship that will continue beyond
the initial visit. Clothing consultants are also encouraged to contact customers
after the purchase or pick-up of tailored clothing to determine whether
customers are satisfied with their purchases and, if necessary, to take
corrective action. Store personnel have full authority to respond to customer
complaints and reasonable requests, including the approval of returns,
exchanges, refunds, re-alterations and other special requests, all of which we
believe helps promote customer satisfaction and loyalty.
K&G stores are designed to allow customers to select and
purchase apparel by themselves. For example, each merchandise category is
clearly marked and organized by size, and suits are specifically tagged
"Athletic Fit," "Double-Breasted," "Three Button," etc., as a means of further
assisting customers to easily select their styles and sizes. K&G employees
assist customers with merchandise selection, including correct sizing.
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Each of our stores provides on-site tailoring services to
facilitate timely alterations at a reasonable cost to customers. Tailored
clothing purchased at a Men's Wearhouse store will be pressed and re-altered (if
the alterations were performed at a Men's Wearhouse store) free of charge for
the life of the garment.
Because management believes that men prefer direct and easy
store access, we attempt to locate our stores in regional strip and specialty
retail centers or in freestanding buildings to enable customers to park near the
entrance of the store.
Our total annual advertising expenditures, which were $69.7
million, $61.2 million and $60.1 million in 2000, 2001 and 2002, respectively,
are significant. The Company advertises principally on television and radio,
which we consider the most effective means of attracting and reaching potential
customers, and our advertising campaign is designed to reinforce our various
brands.
PURCHASING AND DISTRIBUTION
We purchase merchandise from approximately 700 vendors. In
2002, no vendor accounted for 10% or more of purchases. Management does not
believe that the loss of any vendor would significantly impact us. While we have
no material long-term contracts with our vendors, we believe that we have
developed an excellent relationship with our vendors, which is supported by
consistent purchasing practices.
We believe we obtain favorable buying opportunities relative
to many of our competitors. We do not request cooperative advertising support
from manufacturers, which reduces the manufacturers' costs of doing business
with us and enables them to offer us lower prices. Further, we believe we obtain
better discounts by entering into purchase arrangements that provide for limited
return policies, although we always retain the right to return goods that are
damaged upon receipt or determined to be improperly manufactured. Finally,
volume purchasing of specifically planned quantities purchased well in advance
of the season enables more efficient production runs by manufacturers who, in
turn, generally pass some of the cost savings back to us.
We purchase a significant portion of our inventory through a
direct sourcing program. In addition to finished product, we purchase fabric
from mills and contract with certain factories for the assembly of the finished
product to be sold in our U.S. and Canadian stores. Arrangements for fabric and
assembly have been with both domestic and foreign mills and factories. During
2000, 2001 and 2002, product procured through the direct sourcing program
represented approximately 28%, 28% and 27%, respectively, of total inventory
purchases for stores operating in the U.S. We expect that purchases through the
direct sourcing program will represent approximately 30% of total U.S. purchases
in 2003. During 2000, 2001 and 2002, our manufacturing operations at Golden
Brand provided 45%, 47% and 43%, respectively, of inventory purchases for Moores
stores and 6%, 5% and 8% during 2000, 2001 and 2002, respectively, of inventory
purchases for Men's Wearhouse stores.
To protect against currency exchange risks associated with
certain firmly committed and certain other probable, but not firmly committed,
inventory transactions denominated in a foreign currency (primarily the Euro),
we enter into forward exchange contracts. In addition, many of the purchases
from foreign vendors are financed by letters of credit.
We have entered into license agreements with a limited number
of parties under which we are entitled to use designer labels such as "Gary
Player(R)" and nationally recognized brand labels such as "Botany(R)" and
"Botany 500(R)" in return for royalties paid to the licensor based on the costs
of the relevant product. These license agreements generally limit the use of the
individual label to products of a specific nature (such as men's suits, men's
formal wear or men's shirts). The labels licensed under these agreements will
continue to be used in connection with a portion of the purchases under the
direct sourcing program described above, as well as purchases from other
vendors. We monitor the performance of these licensed labels compared to their
cost and may elect to selectively terminate any license, as provided in the
respective agreement. We have also purchased several trademarks, including
"Cricketeer(R)," "Joseph & Feiss(R)," "Baracuta(R)," and "Pronto Uomo(R)," which
are used similarly to our licensed labels. Because of the continued
consolidation in the men's tailored clothing industry, we may be presented with
opportunities to acquire or license other designer or nationally recognized
brand labels.
All merchandise for Men's Wearhouse stores is received into
our central warehouse located in Houston, Texas. Merchandise for a store is
picked and then moved to the appropriate staging area for shipping. In addition
to
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the central distribution center in Houston, we have space within certain Men's
Wearhouse stores or separate hub warehouse facilities in the majority of our
markets, which function as redistribution facilities for their respective areas.
Most purchased merchandise for Moores and K&G stores is direct shipped by
vendors to the stores.
We lease and operate 29 long-haul tractors and 62 trailers,
which, together with common carriers, are used to transport merchandise from the
vendors to our distribution facilities and from the distribution facilities to
Men's Wearhouse stores within each market. We also lease or own 80 smaller
van-like trucks, which are used to deliver merchandise locally or within a given
geographic region.
COMPETITION
We believe that the unit demand for men's tailored clothing
has generally declined over the past decade. Our primary competitors include
specialty men's clothing stores, traditional department stores, off-price
retailers and manufacturer-owned and independently owned outlet stores. Over the
past several years market conditions have resulted in consolidation of the
industry. We believe that the principal competitive factors in the menswear
market are merchandise assortment, quality, price, garment fit, merchandise
presentation, store location and customer service.
We believe that strong vendor relationships, our direct
sourcing program and our buying volumes and patterns are the principal factors
enabling us to obtain quality merchandise at attractive prices. We believe that
our vendors rely on our predictable payment record and history of honoring
promises, including our promise not to advertise names of labeled and unlabeled
designer merchandise when requested. Certain of our competitors (principally
department stores) may be larger and may have substantially greater financial,
marketing and other resources than we have and therefore may have certain
competitive advantages.
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DESCRIPTION OF NOTES
The notes were issued under an indenture dated October 21,
2003, between The Men's Wearhouse, Inc., as issuer, and JPMorgan Chase Bank, a
New York state banking organization, as trustee. JPMorgan Chase Bank is also the
paying agent, conversion agent and bid solicitation agent. The notes and the
shares of common stock issuable upon conversion of the notes will be covered by
a registration rights agreement. You may request a copy of the notes and the
registration rights agreement from the trustee.
The following description is a summary of the material
provisions of the notes, the indenture and the registration rights agreement. It
does not purport to be complete. This summary is subject to and is qualified by
reference to all the provisions of the indenture, including the definitions of
certain terms used in the indenture, and to all provisions of the registration
rights agreement. Wherever particular provisions or defined terms of the
indenture or form of note are referred to, these provisions or defined terms are
incorporated in this prospectus by reference. We urge you to read the indenture
because it, and not this description, defines your rights as a holder of the
notes.
As used in this "Description of Notes" section, references to
"The Men's Wearhouse," "we," "our" or "us" refer solely to The Men's Wearhouse,
Inc. and not to our subsidiaries, unless the context otherwise requires.
GENERAL
The notes are senior unsecured indebtedness of The Men's
Wearhouse and rank on a parity with all of our other existing and future senior
unsecured debt. The notes are convertible into common stock in the circumstances
described under "-- Conversion Rights." This conversion right is subject to our
right to deliver, in lieu of our common stock, cash or a combination of cash and
common stock as described under "-- Conversion Procedures -- Payment Upon
Conversion."
The notes are limited to $130,000,000 aggregate principal
amount as the initial purchaser's option was fully exercised. The notes were
issued only in denominations of $1,000 and multiples of $1,000. We use the term
"note" in this prospectus to refer to each $1,000 principal amount of notes. The
notes will mature on October 15, 2023 unless earlier converted, redeemed or
repurchased.
Neither we nor any of our subsidiaries are subject to any
financial covenants under the indenture. In addition, neither we nor any of our
subsidiaries are restricted under the indenture from paying dividends, incurring
debt or issuing or repurchasing our securities.
You are not afforded protection under the indenture in the
event of a highly leveraged transaction or a change in control of The Men's
Wearhouse except to the extent described below under "-- Purchase of Notes at a
Holder's Option" and "-- Purchase of Notes at a Holder's Option Upon a
Designated Event."
The notes bear interest at a rate of 3.125% per annum.
Interest is calculated on the basis of a 360-day year consisting of twelve
30-day months and will accrue from October 21, 2003, or from the most recent
date to which interest has been paid or duly provided for. We will pay
contingent interest under certain circumstances as described under "--
Contingent Interest." We will pay interest, including contingent interest, if
any, on October 15 and April 15 of each year, beginning April 15, 2004, to
record holders at the close of business on the preceding October 1 and April 1,
as the case may be.
The notes will be redeemable by us on or after October 20,
2006, but prior to October 20, 2008, in the circumstances described below under
"-- Provisional Redemption" and by us at any time on or after October 20, 2008,
as described in "-- Optional Redemption."
Holders may require us to purchase the notes on October 15,
2008, October 15, 2013, and October 15, 2018, as described under "-- Purchase of
Notes at a Holder's Option," or at any time upon the occurrence of a designated
event as described under "-- Purchase of Notes at a Holder's Option Upon a
Designated Event."
22
Under the indenture governing the notes, we agreed, and by
acceptance of a beneficial interest in a note, each holder of a note will be
deemed to have agreed, to treat the notes as indebtedness for United States
federal income tax purposes that is subject to the Treasury regulations
governing contingent payment debt instruments. For United States federal income
tax purposes, interest income on the notes will accrue at the rate of 8.0% per
year, compounded semi-annually, which rate represents our determination of the
yield at which we would have issued, as of the issue date, a comparable
noncontingent, nonconvertible, fixed rate debt instrument with terms and
conditions otherwise similar to the notes. A United States Holder will be
required to accrue interest income on a constant yield to maturity basis at this
rate (subject to certain adjustments), with the result that a United States
Holder generally will recognize taxable income significantly in excess of
interest payments received while the notes are outstanding. See "Material U.S.
Federal Income Tax Considerations."
We will maintain an office in the Borough of Manhattan, the
city of New York, where we will pay the principal and premium, if any, on the
notes and you may present the notes for conversion, registration of transfer or
exchange for other denominations, which shall initially be an office or agency
of the trustee. We may pay interest by check mailed to your address as it
appears in the note register, provided that if you are a holder with an
aggregate principal amount in excess of $5 million you will be paid, at your
written election, by wire transfer in immediately available funds.
However, payments to The Depository Trust Company, New York,
New York, which we refer to as DTC, will be made by wire transfer of immediately
available funds to the account of DTC or its nominee.
INTEREST
The notes will bear interest at an annual rate of 3.125% per
year from October 21, 2003. We will pay interest semi-annually in arrears in
cash on October 15 and April 15 of each year, beginning April 15, 2004, to the
holders of record at 5:00 p.m., New York city time, on the preceding October 1
and April 1, respectively. Interest generally will be computed semi-annually on
the basis of a 360-day year comprised of twelve 30-day months.
There are certain exceptions to the preceding sentence:
- In general, we will not pay accrued interest
(including contingent interest) on any notes that are
converted into our common stock. See "-- Conversion
Rights." If a holder of notes converts after a record
date for an interest payment but prior to the
corresponding interest payment date, the holder on
the record date will receive on that interest payment
date accrued interest on those notes, notwithstanding
the conversion of those notes prior to that interest
payment date, because that holder will have been the
holder of record on the corresponding record date.
However, at the time that holder surrenders notes for
conversion, the holder must pay to us an amount equal
to the interest that has accrued and that will be
paid on the related interest payment date. The
preceding sentence does not apply, however, to a
holder that converts notes that are called by us for
redemption after a record date for an interest
payment but prior to the corresponding interest
payment date. Accordingly, if we elect to redeem
notes on a date that is after a record date but prior
to the corresponding interest payment date and a
holder of notes chooses to convert those notes, the
holder will not be required to pay us, at the time
that holder surrenders those notes for conversion,
the amount of interest it will receive on the
interest payment date.
- We will pay interest to a person other than the
holder of record on the record date if we elect to
redeem the notes on a date that is after a record
date but on or prior to the corresponding interest
payment date. In this instance, we will pay accrued
and unpaid interest, contingent interest and
additional amounts, if any, on the notes being
redeemed to, but not including, the redemption date
to the same person to whom we will pay the principal
of those notes.
- We will pay interest to a person other than the
holder of record on the record date if, in connection
with a designated event, we elect a designated event
purchase date that is after a record date but on or
prior to the corresponding interest payment date. In
this instance, we will pay accrued and unpaid
interest, contingent interest and additional amounts,
if any, on the notes being purchased to, but not
including, the designated event purchase date to the
same person to whom we will pay the principal of
those notes.
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At maturity, interest on the definitive notes will be payable
at the principal corporate trust office of the trustee presently located at 4
New York Plaza, Floor 15, New York, New York 10004.
We will also pay additional amounts of interest on the notes
under certain circumstances described below under " -- Registration Rights" and
" -- Contingent Interest."
Interest otherwise payable will cease to accrue on a note upon
its maturity, conversion or purchase by us (including upon a designated event).
Additional amounts may continue to accrue even after conversion if we fail to
comply with certain obligations set forth under " -- Registration Rights."
Except as provided below, we will pay interest on:
- global notes to DTC in immediately available funds;
- any definitive notes having an aggregate principal
amount of $5 million or less by check mailed to the
holders of those notes; and
- any definitive notes having an aggregate principal
amount of more than $5 million by wire transfer in
immediately available funds if requested in writing
by the holders of those notes, otherwise by check
mailed to the holders of these notes.
We will not be required to make any payment on the notes due
on any day which is not a business day until the next succeeding business day.
The payment made on the next business day will be treated as though it were paid
on the original due date and no interest will be payable on the payment date for
the additional period of time.
CONTINGENT INTEREST
Subject to the accrual and record date provisions described
above, we will pay contingent interest to the holders of the notes during any
six-month period from October 15 to April 14 and from April 15 to October 14,
beginning with the six-month period commencing October 15, 2008, if the trading
price of the notes for each of the five trading days ending on the second
trading day immediately preceding the first day of the applicable six-month
period equals or exceeds 120% of the principal amount of the notes.
The amount of contingent interest payable per note in respect
of any six-month period in which contingent interest is payable will equal 0.25%
per annum of the average trading price of $1,000 principal amount of notes
during the five trading days ending on the second trading day immediately
preceding the first day of the applicable six-month interest period.
A "trading day" means a day during which trading in securities
generally occurs on the New York Stock Exchange or, if our common stock is not
listed on the New York Stock Exchange, on the principal other U.S. national or
regional securities exchange on which our common stock is then listed or, if our
common stock is not listed on a U.S. national or regional securities exchange,
on the Nasdaq National Market or, if our common stock is not reported by the
Nasdaq National Market, on the principal other market on which our common stock
is then traded.
The "trading price" of a note on any date of determination
means the average of the secondary market bid quotations per note obtained by
the bid solicitation agent for $5 million principal amount at maturity of notes
at approximately 4:00 p.m., New York city time, on such determination date from
three independent nationally recognized securities dealers we select, provided
that if at least three such bids are not obtained by the bid solicitation agent,
but two bids are obtained by the bid solicitation agent, then the average of the
two bids shall be used, and if only one such bid can reasonably be obtained by
the bid solicitation agent, this one bid shall be used; provided, however, that
if, in our reasonable judgment, the bid quotations are not indicative of the
secondary market value of the notes, then the trading price of a note will equal
(a) the then applicable conversion rate of a note multiplied by (b) the average
closing sale price of our common stock on the five trading days ending on such
determination date, appropriately adjusted.
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The "conversion rate" is the number of shares of common stock
into which each note is then convertible (assuming that the note was convertible
as of such date).
The bid solicitation agent will initially be the trustee. We
may change the bid solicitation agent, but the bid solicitation agent will not
be our affiliate. The bid solicitation agent will solicit bids from securities
dealers that are believed by us to be willing to bid for the notes.
Upon determination that note holders will be entitled to
receive contingent interest during a relevant six-month period, we will issue a
press release, publish such information on our website or through such other
public medium as we may use at that time and notify the trustee.
The record date and payment date for contingent interest, if
any, will be the same as the regular record date and payment date, respectively,
for the semi-annual interest payments on the notes.
We may unilaterally increase the amount of contingent interest
we may pay or pay interest or other amounts we are not obligated to pay, but we
will have no obligation to do so.
RANKING
The notes are our general senior unsecured obligations,
ranking on a parity in right of payment with all our existing and future
unsecured senior indebtedness, and senior in right of payment with all our
future subordinated indebtedness. The notes are effectively subordinated to any
of our secured senior indebtedness to the extent of the assets securing such
indebtedness and to the claims of all creditors of our subsidiaries.
In January 2003, we replaced our existing $125.0 million
revolving credit facility which was scheduled to mature in February 2004 with a
new revolving credit agreement with a group of banks (the "Credit Agreement")
that provides for borrowing of up to $100.0 million through February 4, 2006
(with extensions for up to two years under certain conditions). Advances under
the new Credit Agreement bear interest at a rate per annum equal to, at our
option, the agent's prime rate or the reserve adjusted LIBOR rate plus a varying
interest rate margin. The Credit Agreement also provides for fees applicable to
unused commitments. In addition, in January 2003, we entered into a new credit
facility under which we borrowed Can$62.0 million (US$40.7 million). We used a
portion of the net proceeds from the private placements of the notes to repay
all of our existing indebtedness under the Canadian term credit facility.
The Credit Agreement contains certain restrictive and
financial covenants, including the requirement to maintain a minimum level of
net worth and certain financial ratios. The Credit Agreement also prohibits
payment of cash dividends on our common stock. We are in compliance with the
covenants in the Credit Agreement. We have pledged some or all of the stock of
our subsidiaries to secure the Credit Agreement. Therefore, as noted above, the
notes are effectively subordinated to the Credit Agreement to the extent of such
pledged stock.
CONVERSION RIGHTS
General
A holder may convert all or any portion of such holder's
outstanding notes, subject to the conditions described below, initially at a
conversion rate of 23.3187 shares of common stock per $1,000 principal amount of
the notes. This reflects an initial conversion price of $42.88. The conversion
rate, and thus the conversion price, is subject to adjustment as described
below. A holder may convert notes only in denominations of $1,000 principal
amount and integral multiples thereof.
A holder may surrender notes for conversion prior to the
stated maturity only under the following circumstances:
- during any conversion period commencing after October
21, 2003, and only during such conversion period, if
on each of at least 20 trading days in the period of
30 consecutive trading days ending on the first
trading day of the conversion period, the closing
sale price of our common stock exceeds 120% of the
conversion price in effect on that 30th trading day
of such period; a "conversion period" will be the
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period from and including the third Friday (or, if
that day is not a trading day, then the next trading
day) in a fiscal quarter to, but not including, the
third Friday (or, if that day is not a trading day,
then the next trading day) in the immediately
following fiscal quarter;
- if we have called those notes for redemption; or
- upon the occurrence of the specified corporate
transactions discussed below.
Upon conversion, we will have the right to deliver, in lieu of
shares of our common stock, cash or a combination of cash and shares of our
common stock, as described below under "-- Conversion Procedures -- Payment Upon
Conversion." For a discussion of the U.S. federal income tax consequences of
conversion to a holder, see "Material U.S. Federal Income Tax Considerations."
The conversion agent will, on our behalf, determine if the
notes are convertible and notify the trustee and us accordingly. If a holder has
exercised its right to require us to purchase its notes as described under "--
Purchase of Notes at a Holder's Option Upon a Designated Event," the holder may
convert its notes only if it withdraws its designated event purchase notice
prior to 5:00 p.m., New York city time, on the business day immediately
preceding the applicable purchase date.
We will not issue fractional shares of our common stock upon
the conversion of the notes. Instead, we will pay the cash value of such
fractional shares based upon the closing sale price of our common stock on the
trading day immediately prior to the conversion date.
Conversion Upon Satisfaction of Common Stock Price Condition
A holder will have the right to convert any of its notes
during any conversion period commencing after October 21, 2003, and only during
such conversion period, if the closing sale price of our common stock on each of
at least 20 trading days in the 30 consecutive trading day period ending on the
first trading day of the conversion period is greater than or equal to 120% of
the conversion price in effect on that 30th trading day of such period.
The initial conversion trigger price per share of our common
stock is $51.46. The conversion trigger price reflects the initial conversion
price per share of our common stock multiplied by 120%.
The "closing sale price" of any share of common stock on any
date means the closing sale price of a share of common stock (or if no closing
sale price is reported, the average of the bid and ask prices or, if there is
more than one bid or ask price, the average of the average bid and the average
ask prices) on that date as reported on a national securities exchange or, if
the common stock is not listed on a national securities exchange, as reported by
the Nasdaq National Market system. If our common stock is not listed for trading
on a national securities exchange and not reported by the Nasdaq National Market
on the relevant date, the "closing sale price" will be the last quoted bid for
our common stock in the over-the-counter market on the relevant date as reported
by the National Quotation Bureau or similar organization. If our common stock is
not so quoted, the "closing sale price" will be the average of the midpoint of
the last bid and ask prices for our common stock on the relevant date from each
of at least three nationally recognized independent investment banking firms
selected by us for this purpose.
Conversion Upon Notice of Redemption
A holder will have the right to convert any of its notes that
we have called for redemption at any time prior to 5:00 p.m., New York city
time, on the day that is two business days prior to the redemption date, even if
the notes are not otherwise convertible at such time. If a holder already has
delivered a designated event purchase notice with respect to a note, however,
the holder may not surrender that note for conversion until the holder has
withdrawn the notice in accordance with the indenture.
Conversion Upon Specified Corporate Transactions
A holder will have the right to convert any of its notes in
the event:
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- we distribute to all holders of our common stock
certain rights or warrants entitling them to
subscribe for or purchase, for a period expiring
within 60 days, common stock at less than the closing
sale price of the common stock on the business day
immediately preceding the announcement of such
distribution;
- we elect to distribute to all holders of our common
stock, cash or other assets, debt securities or
certain rights or warrants to purchase our
securities, including the declaration of any cash
dividends, payable quarterly or otherwise, which
distribution has a per share value exceeding 5% of
the closing sale price of the common stock on the
business day immediately preceding the declaration
date for the distribution; or
- a designated event (as defined under "-- Purchase of
Notes at a Holder's Option Upon a Designated Event")
occurs.
In any such event, a holder may convert any of its notes at
any time after we notify holders of such event:
- in the case of a distribution, until the earlier of
5:00 p.m., New York city time, on the business day
immediately preceding the ex-dividend date or the
date of our announcement that the distribution will
not take place; or
- in the case of a designated event, within 35 business
days of the designated event notice.
We will notify holders at least 20 business days prior to the
ex-dividend date for the distribution or within 20 business days following the
occurrence of the designated event, as the case may be. In the case of a
distribution, a holder of notes may not convert any of its notes if, as a holder
of notes, the holder will otherwise participate in the distribution without
conversion.
In addition, if we are party to a consolidation, merger or
binding share exchange pursuant to which our common stock would be converted
into cash, securities or other property, a holder may surrender notes for
conversion at any time from and after the date which is 15 calendar days prior
to date announced by us as the anticipated effective date of the transaction
until 15 calendar days after the actual date of the transaction. If we are a
party to a consolidation, merger or binding share exchange pursuant to which our
common stock is converted into cash, securities or other property, then at the
effective time of the transaction, the right to convert a note into common stock
will be changed into a right to convert the notes into the kind and amount of
cash, securities or other property which the holder would have received if the
holder had converted such notes immediately prior to the transaction. If the
transaction also constitutes a designated event, the holder can require us to
purchase all or a portion of its notes as described under "-- Purchase of Notes
at a Holder's Option Upon a Designated Event."
CONVERSION PROCEDURES
General
We will not issue fractional shares of common stock upon
conversion of the notes. Instead, we will pay the cash value of such fractional
shares based upon the closing sale price of our common stock on the trading day
immediately prior to the conversion date.
Except as provided in the next paragraph, upon conversion, we
will not make any payment or other adjustment for accrued and unpaid interest,
contingent interest and additional amounts, if any, on the notes.
If a holder converts after a record date for an interest
payment but prior to the corresponding interest payment date, that holder will
receive on the interest payment date interest, contingent interest and
additional amounts, if any, accrued and unpaid on those notes, notwithstanding
the conversion of notes prior to the interest payment date, assuming it was the
holder of record on the corresponding record date. However, at the time the
holder surrenders any notes for conversion, it must pay us an amount equal to
the interest, contingent interest and additional amounts, if any, that has
accrued and will be paid on the notes being converted on the interest payment
date. The preceding sentence does not apply to notes that are converted after
being called by us for redemption after a record date for an interest payment
date but prior to the corresponding interest payment. If in such case prior to
the
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redemption date a holder chooses to convert its notes, the holder will not be
required to pay us at the time it surrenders its notes for conversion the amount
of interest, contingent interest and additional amounts, if any, on the notes it
would have received, but for the conversion, on the date that has been fixed for
redemption.
Except as described under "-- Conversion Rate Adjustments," we
will not make any payment or other adjustment for dividends on any common stock
issued upon conversion of the notes.
A holder will not be required to pay any taxes or duties
relating to the issuance or delivery of our common stock if that holder
exercises its conversion rights, but it will be required to pay any tax or duty
which may be payable relating to any transfer involved in the issuance or
delivery of the common stock in a name other than its own. Certificates
representing shares of common stock will be issued or delivered only after all
applicable taxes and duties, if any, payable by such holder have been paid.
Procedures
To convert interests in a global note, a holder must deliver
to DTC the appropriate instruction form for conversion pursuant to DTC's
conversion program.
To convert a definitive note, a holder must:
- complete and manually sign the conversion notice on
the back of the note (or a facsimile thereof);
- deliver the completed conversion notice and the note
to be converted to the specified office of the
conversion agent;
- if required by the conversion agent, furnish
appropriate endorsements and transfer documents;
- pay all funds required, if any, relating to interest
on the note to be converted to which it is not
entitled; and
- pay all taxes or duties, if any, as described in the
preceding paragraph.
The conversion date will be the date on which all of the
foregoing requirements have been satisfied. The notes will be deemed to have
been converted immediately prior to 5:00 p.m., New York city time, on the
conversion date.
If we elect to settle in common stock only, a certificate for
the number of full shares of common stock into which the notes are converted
(and cash in lieu of fractional shares) will be delivered to such holder,
assuming all of the other requirements have been satisfied by such holder, as
soon as practicable after we issue our notification of our chosen method of
settlement, which we must issue on the date that is three trading days following
receipt of the conversion notice. If we elect to settle in cash or a combination
of cash and common stock, the cash and, if applicable, a certificate for the
number of full-shares of common stock into which the notes are converted (and
cash in lieu of fractional shares) will be delivered to such holder, assuming
all of the other requirements have been satisfied by such holder, on the 31st
trading day following receipt of the conversion notice, unless the holder
submits its conversion notice within 30 trading days prior to maturity.
In the event of a designated event, if a holder has submitted
any or all of its notes for repurchase, a holder's conversion rights on the
notes so subject to repurchase will expire at 5:00 p.m., New York city time, on
the business day immediately preceding the repurchase date, unless we default in
the payment of the repurchase price. If a holder has submitted any note for
repurchase, such note may be converted only if a holder submits a notice of
withdrawal, and if the note is a global note, complies with appropriate DTC
procedures.
To the extent that we have a rights plan in effect upon
conversion of the notes into common stock, a holder will receive, in addition to
the common stock, the rights under the rights plan whether or not the rights
have separated from the common stock at the time of applicable conversion,
subject to limited exceptions. The Company does not currently have a rights
plan.
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Payment Upon Conversion
In lieu of delivery of shares of our common stock, and
pursuant to the procedures described below, we may elect to deliver to holders
surrendering notes either cash, or a combination of cash and shares of our
common stock.
On the first date the notes become convertible under the
circumstances described above in "-- Conversion Rights," we will notify holders
in writing of our method for settling the principal amount of the notes upon
conversion ("principal conversion settlement election"). This notification, once
provided to holders on the date the notes first become convertible, regardless
of any holder's decision to convert, is irrevocable and legally binding with
regard to any conversion of the notes. As such, the conversion settlement
election made on the first date the notes become convertible remains in force if
the notes cease to be convertible but subsequently become convertible again.
Until the notes are surrendered for conversion, we will not be
required to notify holders of our method for settling the excess amount ("excess
amount") of our conversion obligation relating to the amount of the conversion
value (the product of the closing sale price for our common stock on a given day
multiplied by the then current conversion rate) above the principal amount, if
any ("excess conversion obligation").
Conversion On or Prior to 31 Trading Days Prior to Maturity.
If we receive a holder's conversion notice on or prior to the day that is 31
trading days prior to the stated maturity of the notes (the "final notice
date"), the following procedures will apply:
Settlement of our conversion obligation relating to the
principal amount of the notes will be according to the principal conversion
settlement election we will have already made.
- We will notify the holder through the trustee, at any
time on the date that is three trading days following
receipt of the holder's conversion notice (the
"settlement notice period"), of the method we choose
to settle the excess conversion obligation, as
applicable. Specifically we will indicate whether
settlement of the excess conversion obligation will
be 100% in common stock, 100% in cash or in a
combination of cash and common stock. If we elect to
settle the excess conversion obligation in a
combination of cash and common stock, we will specify
the percentage of each obligation to be settled in
cash. We will treat all holders converting on the
same trading day in the same manner. We will not,
however, have any obligation to settle the excess
conversion obligation arising on different trading
days in the same manner. That is, we may choose on
one trading day to settle in common stock only and
choose on another trading day to settle in cash or a
combination of common stock and cash.
- Settlement of 100% in common stock of our conversion
obligation with respect to the principal amount of
the notes and the excess conversion obligation, will
occur as soon as practicable after we notify the
holders that we have chosen this method of
settlement. Settlement of any portion of our
conversion obligation, including the principal amount
and/or excess amount, in cash or in a combination of
common stock and cash will occur on the third trading
day following the final trading day of the 20 trading
day period beginning on the final trading day
following the settlement notice period (the "cash
settlement averaging period").
- Settlement amounts will be computed as follows:
1. If we elect to satisfy our entire conversion
obligation, including principal amount and excess amount, in
shares of common stock (other than with respect to fractional
shares), we will deliver to a holder a number of shares of
common stock, for each $1,000 original principal amount of
notes, equal to the applicable conversion rate.
2. If we elect to satisfy our entire conversion
obligation in cash, including principal amount and excess
amount, we will deliver to a holder, for each $1,000 original
principal amount of notes, cash in an amount equal to the
product of (i) the applicable conversion rate multiplied by
(ii) the average closing sale price of our common stock during
the cash settlement averaging period.
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3. If we elect to satisfy our conversion obligation,
including principal amount and excess amount, in a combination
of cash and stock, we will deliver to a holder, for each
$1,000 original principal amount of notes:
(a) a cash amount ("cash amount") (excluding any cash
in lieu of fraction shares) equal to the sum of:
- the product of (i) $1,000 multiplied by (ii)
the percentage of such principal amount of a
note to be satisfied in cash; plus
- if greater than zero, the product of (i) the
amount of cash that would be paid pursuant
to paragraph number 2 above minus the
aggregate principal amount of the notes
surrendered for conversion, multiplied by
(ii) the percentage of the excess amount to
be satisfied in cash;
and
(b) a number of shares of common stock equal to the
difference between:
- the number of shares that would be issued
pursuant to paragraph number 1 above; minus
- the number of shares equal to the quotient
of (i) the cash amount divided by (ii) the
average closing sale price of our common
stock during the cash settlement averaging
period.
Conversion During 30 Trading Days Prior to Maturity. If we
receive a holder's conversion notice after the "final notice date", the
following procedure will apply:
- Settlement of our conversion obligation relating to
the principal amount of the notes will be according
to the principal conversion settlement election we
will have already made.
- We will notify the holder through the trustee of the
method we choose to settle the excess conversion
obligation in the same manner as set forth above
under "-- Conversion On or Prior to 31 Trading Days
Prior to Maturity," except that we will settle all of
our conversion obligations arising during the 30
trading day period prior to maturity in the same
manner.
- Settlement of 100% in common stock of our conversion
obligation of the principal amount and the excess
amount will occur as soon as practicable after we
notify the holder that we have chosen this method of
settlement. Settlement of any portion of the
conversion obligation, including any portion of the
principal amount or the excess amount, in cash or in
a combination of common stock and cash will occur on
the third trading day following the final trading day
of the cash settlement averaging period described in
the next bullet point.
- The settlement amount will be computed in the same
manner as set forth above under "-- Conversion On or
Prior to 31 Trading Day Prior to Maturity," except
that the "cash settlement averaging period" will be
the 20 trading day period beginning on the date that
is the 23rd trading day prior to the maturity date.
Conversion Rate Adjustments
We will adjust the conversion rate if any of the following
events occur:
1. we issue shares of common stock as a dividend or
distribution to all or substantially all holders of our common stock;
2. we subdivide, combine or reclassify our common stock;
3. we issue to all or substantially all holders of our common
stock certain rights or warrants to purchase our common stock, or securities
convertible into or exchangeable or exercisable for our common stock, for a
period
30
expiring within 60 days at less than the closing sale price of our common stock
on the business day immediately preceding the date of the announcement of such
issuance, provided that the conversion rate will be readjusted to the extent
that such rights or warrants are not exercised prior to the expiration;
4. we distribute to all or substantially all holders of our
common stock shares of our capital stock (other than common stock) or evidences
of our indebtedness or assets, including securities, but excluding:
- dividends or distributions listed in (1) above;
- rights or warrants listed in (3) above;
- dividends and distributions in connection with
reclassification, change, consolidation, merger,
combination, sale or convergence resulting in a
change in the conversion consideration pursuant to
the next succeeding paragraph; and
- cash distributions listed in (6) below;
5. we distribute shares of capital stock of one of our
subsidiaries, with such adjustment, if any, based on the market value of the
subsidiary stock so distributed relative to the market value of our common
stock, in each case over a measurement period following the distribution;
6. we distribute to all or substantially all holders of our
common stock,
(a) on or prior to October 15, 2008, any cash,
including quarterly cash dividends; or
(b) after October 15, 2008, cash, to the extent that
the aggregate cash dividends per share of our common stock in
any twelve month period exceeds the greater of:
- the annualized amount per share of our
common stock of the immediately preceding
quarterly cash dividend on such common stock
to the extent that the preceding quarterly
dividend did not require an adjustment of
the conversion rate pursuant to this clause,
as adjusted to reflect subdivisions or
combinations of our common stock; and
- 5% of the average of the closing sale price
of our common stock during the ten trading
days immediately prior to the declaration of
the dividend;
provided, that if an adjustment is required to be
made under this clause (b) as a result of a distribution that
is a quarterly dividend, the adjustment would be based on the
amount by which the distribution exceeds the amount of the
quarterly cash dividend permitted to be excluded pursuant to
this clause (b); or
7. we or one of our subsidiaries make purchases of our common
stock pursuant to a tender offer or exchange offer for our common stock.
In the event of any:
- reclassification or change of our common stock;
- consolidation, merger or binding share exchange
involving us; or
- sale or conveyance to another person or entity of all
or substantially all of our property or assets;
in which holders of common stock would be entitled to receive
stock, other securities, other property, assets or cash for their common stock,
upon conversion of a noteholder's notes, such noteholder will be entitled to
receive the same type of consideration which such noteholder would have been
entitled to receive if such noteholder had converted the notes into our common
stock immediately prior to any of these events.
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A holder of notes may, in certain circumstances, be deemed to
have received a distribution or dividend subject to U.S. federal income tax as a
result of an adjustment or the nonoccurrence of an adjustment to the conversion
price. See "Material U.S. Federal Income Tax Considerations -- Tax Consequences
to United States Holders -- Constructive Dividends."
To the extent permitted by law, we may, from time to time,
increase the conversion rate for a period of at least 20 days if our board of
directors determines that this increase would be in our best interests. Any such
determination by our board will be conclusive. We would give holders at least 15
days' notice of any increase in the conversion rate. In addition, we may
increase the conversion rate if our board of directors deems it advisable to
avoid or diminish any income tax to holders of common stock resulting from any
distribution of common stock or similar event. We will not be required to make
an adjustment in the conversion rate unless the adjustment would require a
change of at least one percent in the conversion rate. However, we will carry
forward any adjustments that are less than one percent of the conversion rate.
Except as described above in this section, we will not adjust the conversion
rate for any issuance of our common stock or convertible, exchangeable or
exercisable securities or rights to purchase our common stock or convertible,
exchangeable or exercisable securities.
PAYMENT AT MATURITY
At the maturity date, each holder of $1,000 principal amount
of the notes shall be entitled to receive $1,000, and accrued and unpaid
interest, contingent interest and additional amounts, if any, in cash to, but
not including, the maturity date.
SINKING FUND
No sinking fund is provided for the notes.
PROVISIONAL REDEMPTION
On or after October 20, 2006 but prior to October 20, 2008, we
may, at our option and subject to conditions, redeem for cash, in whole or in
part, the notes at any time at a redemption price equal to 100% of the principal
amount of notes to be redeemed, plus accrued and unpaid interest and additional
amounts, if any, to but excluding the redemption date. We may exercise this
provisional redemption right only if, on each of at least 20 trading days within
any period of 30 consecutive trading days ending on or after October 20, 2006
but prior to October 20, 2008, the closing sale price of our common stock
exceeds 140% of the conversion price of the notes on the 30th trading day of
such period. We will provide not less than 20 nor more than 60 days' notice
mailed to each holder of the notes to be redeemed. If the redemption notice is
given and the funds deposited as required, then interest will cease to accrue on
and after the redemption date on the notes or portions of such notes called for
redemption.
OPTIONAL REDEMPTION
On or after October 20, 2008, we may redeem for cash all or a
portion of the notes at any time for a price equal to 100% of the principal
amount of the notes to be redeemed plus accrued and unpaid interest, contingent
interest and additional amounts, if any, to but excluding the redemption date.
We will provide not less than 20 nor more than 60 days' notice mailed to each
holder of the notes to be redeemed. If the redemption notice is given and funds
deposited as required, then interest will cease to accrue on and after the
redemption date on the notes or portions of such notes called for redemption.
PARTIAL REDEMPTION
If we decide to redeem fewer than all of the outstanding notes
(pursuant to either a provisional or optional redemption), the trustee will
select the notes to be redeemed by lot, or on a pro rata basis or by another
method the trustee considers fair and appropriate.
If the trustee selects a portion of a holder's notes for
partial redemption and such holder converts a portion of its notes, the
converted portion will be deemed to be from the portion selected for redemption.
32
PURCHASE OF NOTES AT A HOLDER'S OPTION
Holders have the right to require us to purchase all or a
portion of their notes for cash on October 15, 2008, October 15, 2013 and
October 15, 2018 (each, a "purchase date"). Any note purchased by us on a
purchase date will be paid for in cash. We will be required to purchase any
outstanding notes for which a holder delivers a written purchase notice to the
paying agent. This notice must be delivered during the period beginning at any
time from the opening of business on the date that is 20 business days prior to
the relevant purchase date until the close of business on the fifth business day
prior to the purchase date. If the purchase notice is given and withdrawn during
such period, we will not be obligated to purchase the related notes. Also, as
described in the "Risk Factors" section of this prospectus under the caption "We
may be unable to repay or purchase the principal amount of the notes," we may
not have funds sufficient to purchase notes when we are required to do so.
The purchase price payable will be equal to 100% of the
principal amount of the notes to be purchased plus accrued and unpaid interest,
contingent interest and additional amounts, if any, to, but excluding, the
purchase date.
On or before the 20th business day prior to each purchase
date, we will provide to the trustee, the paying agent and to all holders of the
notes at their addresses shown in the register of the registrar, and to
beneficial owners as required by applicable law, a notice stating, among other
things:
- the purchase price;
- the name and address of the paying agent and the
conversion agent; and
- the procedures that holders must follow to require us
to purchase their notes.
Simultaneously with providing such notice, we will publish a
notice containing this information in a newspaper of general circulation in the
city of New York or publish the information on our web site or through such
other public medium as we may use at that time.
A notice electing to require us to purchase a holder's notes
must state:
- the relevant purchase date;
- if certificated notes have been issued, the
certificate numbers of the notes;
- the portion of the principal amount of notes to be
purchased, in integral multiples of $1,000; and
- that the notes are to be purchased by us pursuant to
the applicable provisions of the notes and the
indenture.
If the notes are not in certificated form, a holder's notice
must comply with appropriate DTC procedures.
No notes may be purchased at the option of holders if there
has occurred and is continuing an event of default other than an event of
default that is cured by the payment of the purchase price of the notes.
A holder may withdraw any purchase notice in whole or in part
by a written notice of withdrawal delivered to the paying agent prior to the
close of business on the business day prior to the purchase date. The notice of
withdrawal must state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the
certificate numbers of the withdrawn notes; and
- the principal amount, if any, which remains subject
to the purchase notice.
If the notes are not in certificated form, a holder's notice
must comply with appropriate DTC procedures.
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A holder must either effect book-entry transfer or deliver the
notes, together with necessary endorsements, to the office of the paying agent
after delivery of the purchase notice to receive payment of the purchase price.
A holder will receive payment promptly following the later of the purchase date
or the time of book-entry transfer or the delivery of the notes. If the paying
agent holds money sufficient to pay the purchase price of the notes on the
business day following the purchase date, then:
- the notes will cease to be outstanding and interest
will cease to accrue (whether or not book-entry
transfer of the notes is made or whether or not the
note is delivered to the paying agent); and
- all other rights of the holder will terminate (other
than the right to receive the purchase price upon
delivery or transfer of the notes).
PURCHASE OF NOTES AT A HOLDER'S OPTION UPON A DESIGNATED EVENT
In the event of a designated event, a holder will have the
right to require us to purchase for cash all or any part of the notes after the
occurrence of a designated event at a purchase price equal to 100% of the
principal amount at issuance plus accrued and unpaid interest, contingent
interest and additional amounts, if any, up to, but excluding, the designated
event purchase date. Notes submitted for purchase must be $1,000 or an integral
multiple thereof.
On or before the 20th calendar day after the occurrence of a
designated event, we will provide to all holders of the notes and the trustee
and paying agent a notice of the occurrence of the designated event and of the
resulting purchase right. Such notice shall state, among other things, the
procedures that holders must follow to require us to purchase the notes and the
date of the designated event.
Simultaneously with providing such notice, we will publish a
notice containing this information in a newspaper of general circulation in the
city of New York or publish the information on our website or through such other
public medium as we may use at that time.
To exercise the purchase right, a holder must deliver, on or
before the 30th business day after the date of our notice of a designated event,
subject to extension to comply with applicable law, the notes to be purchased,
duly endorsed for transfer, together with a written purchase notice and the form
entitled "Form of Designated Event Purchase Notice" on the reverse side of the
notes duly completed, to the paying agent. The purchase notice must state:
- if certificated notes have been issued, the
certificate numbers of the notes;
- the portion of the principal amount of notes to be
purchased, in integral multiples of $1,000; and
- that the notes are to be purchased by us pursuant to
the applicable provisions of the notes and the
indenture.
If the notes are not in certificated form, a holder's notice
must comply with appropriate DTC procedures.
A holder may withdraw any purchase notice (in whole or in
part) by a written notice of withdrawal delivered to the paying agent prior to
the close of business on the business day prior to the designated event purchase
date. The notice of withdrawal shall state:
- the principal amount of the withdrawn notes;
- if certificated notes have been issued, the
certificate numbers of the withdrawn notes; and
- the principal amount, if any, which remains subject
to the purchase notice.
We will be required to purchase the notes no later than 35
business days after the date of our notice of the occurrence of the relevant
designated event subject to extension to comply with applicable law. A holder
will receive payment of the designated event purchase price promptly following
the later of the designated event purchase date or the time of book-entry
transfer or the delivery of the notes. If the paying agent holds cash sufficient
34
to pay the designated event purchase price of the notes on the business day
following the designated event purchase date, then:
- the notes will cease to be outstanding and interest,
contingent interest and additional amounts, if any,
will cease to accrue (whether or not book-entry
transfer of the notes is made or whether or not the
note is delivered to the paying agent); and
- all other rights of the holder will terminate (other
than the right to receive the designated event
purchase price and any previously accrued and unpaid
interest, contingent interest and additional amounts,
if any, upon delivery or transfer of the notes).
A designated event will be deemed to have occurred if any of
the following occurs:
- any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 of the Exchange Act, except that a
person shall be deemed to have beneficial ownership
of all shares that such person has the right to
acquire, whether such right is exercisable
immediately or only after the passage of time),
directly or indirectly, of more than 50% of our total
outstanding voting stock;
- during any period of two consecutive years,
individuals who at the beginning of such period
constituted our board of directors (together with any
new directors whose election to such board or whose
nomination for election by our stockholders, was
approved by a vote of at least 66 2/3% of the
directors then still in office who were either
directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a
majority of such board of directors then in office;
- we consolidate with or merge with or into any person
or convey, transfer, sell, or otherwise dispose of or
lease all or substantially all of our assets to any
person, or any corporation consolidates with or
merges into or with us, in any such event pursuant to
a transaction in which our outstanding voting stock
is changed into or exchanged for cash, securities or
other property, other than any such transaction where
our outstanding voting stock is not changed or
exchanged at all (except to the extent necessary to
reflect a change in our jurisdiction of
incorporation), or where (A) our outstanding voting
stock is changed into or exchanged for (x) voting
stock of the surviving corporation which is not
"disqualified equity interests" or (y) cash,
securities and other property (other than equity
interests of the surviving corporation) and (B) no
"person" or "group" owns immediately after such
transaction, directly or indirectly, more than 50% of
the total outstanding voting stock of the surviving
corporations;
- we are liquidated or dissolved or adopt a plan of
liquidation or dissolution other than in a
transaction which complies with the provisions
described under "-- Consolidation, Merger and Sale of
Assets"; or
- our common stock ceases to be listed on the New York
Stock Exchange or another established national
securities exchange or automated over-the-counter
trading market in the United States.
However, a designated event will not be deemed to have
occurred if either:
(1) the closing sale price of our common stock for each of at
least five trading days within:
- the period of ten consecutive trading days
immediately after the later of the designated event
or the public announcement of the designated event,
in the case of a designated event resulting solely
from a designated event under the first bullet point
above; or
- the period of ten consecutive trading days
immediately preceding the designated event, in the
case of a designated event under the second, third
and fourth bullet points above;
is at least equal to 105% of the quotient where the numerator
is the principal amount and the denominator is the conversion rate in effect on
each of those five trading days; or
35
(2) in the case of a merger or consolidation, at least 95% of
the consideration, excluding cash payments for fractional shares, in the merger
or consolidation constituting the designated event, consists of common stock
traded on a United States national securities exchange or quoted on the Nasdaq
National Market system (or which will be so traded or quoted when issued or
exchanged in connection with such designated event) and as a result of such
transaction or transactions the notes become convertible solely into such common
stock.
For purposes of this designated event definition, "voting
stock" means stock of the class or classes pursuant to which the holders thereof
have the general voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of a corporation
(irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
The definition of designated event includes a phrase relating
to the conveyance, transfer, sale, lease or other disposition of "all or
substantially all" of our assets. There is no precise, established definition of
the phrase "substantially all" under New York law, which governs the indenture
and the notes, or under the laws of Texas, our state of incorporation.
Accordingly, a holder's ability to require us to repurchase its notes as a
result of a conveyance, transfer, sale, lease or other disposition of less than
all of our assets may be uncertain.
Pursuant to the indenture, we will:
- comply with the provisions of Rule 13e-4 and Rule
14e-1, if applicable, under the Exchange Act;
- file a Schedule TO or any successor or similar
schedule if required under the Exchange Act; and
- otherwise comply with all federal and state
securities laws in connection with any offer by us to
purchase the notes upon a designated event.
This designated event purchase feature may make more difficult
or discourage a takeover of us and the removal of incumbent management. However,
we are not aware of any specific effort to accumulate shares of our capital
stock with the intent to obtain control of us by means of a merger, tender
offer, solicitation or otherwise. In addition, the designated event purchase
feature is not part of a plan by management to adopt a series of anti-takeover
provisions. Instead, the designated event purchase feature is a result of
negotiations between us and the initial purchasers.
We could, in the future, enter into certain transactions,
including recapitalizations, that would not constitute a designated event but
would increase the amount of debt outstanding or otherwise adversely affect a
holder. Neither we nor our subsidiaries are prohibited under the indenture from
incurring additional debt. The incurrence of significant amounts of additional
debt could adversely affect our ability to service our debt, including the
notes.
If a designated event were to occur, we may not have
sufficient funds to pay the designated event purchase price for the notes
tendered by holders. In addition, we currently have outstanding indebtedness and
we may in the future incur debt that has similar designated event provisions
that permit holders of this debt to accelerate or require us to purchase this
debt upon the occurrence of events similar to a designated event. Our failure to
repurchase the notes upon a designated event will result in an event of default
under the indenture.
CONSOLIDATION, MERGER AND SALES OF ASSETS
The indenture provides that we may not consolidate with or
merge into any other person or convey, transfer, sell, lease or otherwise
dispose of all or substantially all of our properties and assets to another
person unless, among other things:
- the resulting, surviving or transferee person is
organized and existing under the laws of the United
States, any state thereof or the District of
Columbia;
- such person assumes all of our obligations under the
notes and the indenture under a supplemental
indenture in a form reasonably satisfactory to the
trustee;
- we or such successor is not then or immediately
thereafter in default under the indenture; and
36
- if a supplemental indenture is to be executed in
connection with such consolidation, merger or
disposition, we have delivered to the trustee an
officers' certificate and an opinion of counsel with
respect thereto as provided for in the indenture.
Upon any such consolidation, merger or disposition in
accordance with the foregoing, the successor corporation formed by such
consolidation or share exchange or into which we are merged or which such person
formed by such consolidation or share exchange or to which such conveyance,
sale, lease, transfer or other disposition is made will succeed to, and be
substituted for, and may exercise our right and power, under the indenture with
the same effect as if such successor had been named as us in the indenture, and
thereafter (except in the case of a sale, transfer, lease, conveyance or other
disposition) the predecessor corporation will be relieved of all further
obligations and covenants under the indenture and the notes.
EVENTS OF DEFAULT
Each of the following constitutes an event of default under
the indenture:
- our failure to pay principal amount of the notes when
due and payable, whether at maturity or upon
acceleration;
- our failure to pay any accrued unpaid interest,
contingent interest and additional amounts on the
notes, if any, when due and payable, and continuance
of such default for a period of 30 days;
- our failure to convert notes upon exercise of a
holder's conversion right in accordance with the
terms of the indenture;
- our failure to redeem notes after we have exercised
either our provisional or optional redemption option;
- our failure to purchase all or any part of the notes
in accordance with the provisions of " -- Purchase of
Notes at a Holder's Option" or " -- Purchase of Notes
at a Holder's Option Upon a Designated Event";
- our failure to provide notice in the event of a
designated event;
- our failure to perform or observe any other term,
covenant or agreement contained in the notes or the
indenture for a period of 30 days after written
notice of such failure, provided that such notice
requiring us to remedy the same shall have been given
to us by the trustee or to us and the trustee by the
holders of at least 25% in aggregate principal amount
of the notes then outstanding;
- our default under any credit agreement, mortgage,
indenture or instrument under which there may be
issued or by which there may be secured or evidenced
any indebtedness of us or any of our subsidiaries for
money borrowed whether such indebtedness now exists,
or is created after the date of the indenture, which
default:
1. involves the failure to pay the principal of or any premium
or interest on such indebtedness when such indebtedness becomes due and payable
at the stated maturity thereof, and such default continues after any applicable
grace period, or
2. results in the acceleration of such indebtedness prior to
its stated maturity, and
in each case, the principal amount of any such indebtedness,
together with the principal amount of any other such indebtedness so unpaid at
its stated maturity or the stated maturity of which has been so accelerated,
aggregates $10 million or more;
- there is a failure by us or any of our subsidiaries
to pay final judgments not covered by insurance
aggregating in excess of $5.0 million, which
judgments are not paid, discharged or stayed for a
period of 60 days; and
37
- certain events of bankruptcy, insolvency, liquidation
or similar reorganization with respect to us or any
of our significant subsidiaries.
The indenture provides that the trustee shall, within 90 days
of the occurrence of a default known to the trustee (or within 15 days after it
is known to the trustee, if later), give to the registered holders of the notes
notice of all uncured defaults known to it, but the trustee shall be protected
in withholding such notice if it, in good faith, determines that the withholding
of such notice is in the best interest of such registered holders, except in the
case of a default under the first, second, fourth or fifth bullets above.
If certain events of default specified in the last bullet
point above shall occur with respect to us and be continuing, then automatically
the principal amount of the notes plus accrued and unpaid interest, contingent
interest and additional amounts, if any, through such date shall become
immediately due and payable. If any other event of default shall occur and be
continuing (the default not having been cured or waived as provided under " --
Modification and Waiver" below), the trustee or the holders of at least 25% in
aggregate principal amount of the notes then outstanding may declare the notes
due and payable at the principal amount of the notes plus accrued and unpaid
interest, contingent interest and additional amounts, if any, and thereupon the
trustee may, at its discretion, proceed to protect and enforce the rights of the
holders of notes by appropriate judicial proceedings. Such declaration
accelerating the notes and the amounts due thereunder may be rescinded or
annulled with the written consent of the holders of a majority in aggregate
principal amount of the notes then outstanding upon the conditions provided in
the indenture.
The indenture contains a provision entitling the trustee,
subject to the duty of the trustee during default to act with the required
standard of care, to be indemnified by the holders of notes before proceeding to
exercise any right or power under the indenture at the request of such holders.
The indenture provides that the holders of a majority in aggregate principal
amount of the notes then outstanding, through their written consent, may direct
the time, method and place of conducting any proceeding for any remedy available
to the trustee or exercising any trust or power conferred upon the trustee.
Except with respect to a default in the payment of the
principal of, premium, if any, or any accrued and unpaid interest, contingent
interest and additional amounts, if any, on any note, redemption price or
designated event purchase price of any note, or in respect of a failure to
convert any note into common stock as required, or in respect of a covenant or
provision which under the indenture cannot be modified or amended without the
consent of the holder of each note outstanding, the holders of not less than a
majority in aggregate principal amount of the notes outstanding may on behalf of
the holders of all the notes waive any past default under the indenture and
rescind any acceleration with respect to the notes and its consequences if (1)
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction and (2) all existing events of default, other than the
nonpayment of the principal of and interest on the notes that have become due
solely by such declaration of acceleration, have been cured or waived.
We will be required to furnish annually to the trustee a
statement as to the fulfillment of our obligations under the indenture and as to
any default in the performance of such obligations.
MODIFICATION AND WAIVER
Changes Requiring Approval of Each Affected Holder
The indenture (including the terms and conditions of the
notes) cannot be modified or amended without the written consent or the
affirmative vote of the holder of each note affected by such change (in addition
to the written consent or the affirmative vote of the holders of at least a
majority in aggregate principal amount of the notes at the time outstanding) to:
- change the maturity of any note or the payment date of any
installment of interest, contingent interest or additional
amounts, if any, payable on any notes;
- reduce the principal amount, redemption price or purchase
price of, or interest, contingent interest, or additional
amounts, if any, on, any note;
38
- change the currency of payment of principal, redemption price
or purchase price of, or interest, contingent interest or
additional amounts, if any, on, any note;
- impair or adversely effect the manner of calculation or rate
of accrual of interest or additional amounts, if any, on any
note;
- impair the right to institute suit for the enforcement of any
payment on or with respect to, or conversion of, any note;
- modify our obligation to maintain a paying agent in the city
of New York;
- impair or adversely affect the conversion rights or purchase
rights of any holders of notes;
- modify the redemption provisions of the indenture in a manner
adverse to the holders of notes;
- reduce the percentage in aggregate principal amount of notes
outstanding necessary to modify or amend the indenture; or
- reduce the percentage in aggregate principal amount of notes
outstanding necessary to waive past defaults.
Changes Requiring Majority Approval
The indenture (including the terms and conditions of the
notes) may be modified or amended, subject to the provisions described above,
with the written consent of the holders of at least a majority in aggregate
principal amount of the notes at the time outstanding.
Changes Requiring No Approval
The indenture (including the terms and conditions of the
notes) may be modified or amended by us and the trustee, without the consent of
the holder of any note, to, among other things:
- add to our covenants for the benefit of the holders
of notes;
- surrender any right or power conferred upon us;
- provide for conversion rights of holders of notes if
any reclassification or change of our common stock or
any consolidation, merger or sale of all or
substantially all of our assets occurs;
- provide for the assumption of our obligations to the
holders of notes in the case of a merger,
consolidation, conveyance, transfer, sale, lease or
other disposition;
- increase the conversion rate, provided that the
increase will not adversely affect the interests of
the holders of notes;
- comply with the requirements of the SEC in order to
effect or maintain the qualification of the indenture
under the Trust Indenture Act of 1939, as amended;
- make any changes or modifications necessary in
connection with the registration of the notes under
the Securities Act as contemplated in the
registration rights agreement; provided that such
change or modification does not, in the good faith
opinion of our board of directors, adversely affect
the interests of the holders of notes in any material
respect;
- cure any ambiguity or correct or supplement any
inconsistent or otherwise defective provision
contained in the indenture or make any other
provision with respect to matters or questions
arising under the indenture which we may deem
necessary or desirable and which shall not be
inconsistent with provisions of the indenture;
provided that such modification or amendment does
not, in the good
39
faith opinion of our board of directors, adversely
affect the interests of the holders of notes in any
material respect;
- to evidence the succession of another person to us or
any other obligor upon the notes, and the assumption
by any such successor of the covenant of us or such
other obligor under the indenture and in the notes,
in each case in compliance with the provisions of the
indenture;
- to evidence and provide the acceptance of the
appointment of a successor trustee under the
indenture; or
- add or modify any other provisions with respect to
matters or questions arising under the indenture
which we and the trustee may deem necessary or
desirable and which will not adversely affect the
interests of the holders of notes.
The holders of a majority in aggregate principal amount of the
notes outstanding may waive compliance with certain provisions of the indenture
relating to the notes, unless (1) we fail to pay principal or interest,
contingent interest and any other additional amounts, if any, or on any note
when due, (2) we fail to convert any note into common stock as required by the
indenture, or (3) we fail to comply with any of the provisions of the indenture
that would require the consent of the holder of each outstanding note.
Any notes held by us or by any person directly or indirectly
controlling or controlled by or under direct or indirect common control with us
shall be disregarded (from both the numerator and denominator) for purposes of
determining whether the holders of a majority in principal amount of the
outstanding notes have consented to a modification, amendment or waiver of the
terms of the indenture.
REGISTRATION RIGHTS
We and the initial purchasers entered into a registration
rights agreement for the benefit of the holders of the notes. Pursuant to the
registration rights agreement, we will, at our expense use our reasonable best
efforts to keep the shelf registration statement of which this prospectus is a
part effective until the earliest of:
- two years after the last date of original issuance of
any of the notes;
- the date on which the holders of the notes and common
stock issuable upon conversion of the notes are able
to sell all such securities immediately without
restriction in accordance with provisions of Rule
144(k) under the Securities Act;
- the date when all of the notes and common stock
issuable upon conversion of the notes of those
holders that complete and deliver the selling
security holder election and questionnaire described
below are registered under the shelf registration
statement of which this prospectus is a part and
disposed of in accordance with such shelf
registration statement; and
- the date when all of the notes and common stock
issuable upon conversion of the notes have ceased to
be outstanding (whether as a result of repurchase and
cancellation, conversion or otherwise).
We have filed the registration statement of which this
prospectus is a part to meet our obligations under the registration rights
agreement. We delivered a notice and questionnaire to each holder on October 30,
2003, which was to be completed and delivered by each holder interested in
selling their notes and conversion shares pursuant to the initial registration
statement of which this prospectus is a part. In order to sell the notes and
conversion shares upon effectiveness of the initial registration statement, of
which this prospectus is a part, a holder must have completed and delivered the
questionnaire to us by the 20th day after receipt of the questionnaire. We
agreed in the registration rights agreement to give notice to all holders of the
filing and effectiveness of the registration statement.
After effectiveness of the initial shelf registration
statement, of which this prospectus is a part, upon our receipt of a completed
and signed election and questionnaire from a holder, we will prepare and file
(a) a prospectus supplement as soon as practicable or (b) if required, a
post-effective amendment to the shelf registration statement, of which this
prospectus is a part, or an additional shelf registration statement as soon as
reasonably practicable after
40
the end of each fiscal quarter. Accordingly, each holder that submits a
completed and signed election and questionnaire after the initial deadline may
be named as a selling security holder in the registration statement of which
this prospectus is a part and may deliver a prospectus in connection with the
resale of such holder's notes or common stock issued upon conversion of the
notes. If a holder does not complete and deliver a questionnaire or provide the
additional information we may reasonably request as a result of an SEC request
or requirement, such holder will not be named as a selling security holder in
the prospectus and will not be permitted to sell its notes and conversion shares
pursuant to the registration statement.
We cannot assure the holders of the notes that we will be able
to maintain an effective and current registration statement as required. The
absence of such a registration statement may limit the holder's ability to sell
such notes and/or shares of common stock issuable upon conversion of such notes
or adversely affect the price at which such securities can be sold.
We will:
- provide to each holder for whom a shelf registration
statement was filed copies of the prospectus that is
a part of such shelf registration statement;
- notify each such holder when a shelf registration
statement has become effective; and
- take certain other actions as are required to permit
unrestricted resales of the notes and common stock
issuable upon conversion of the notes.
Each holder who sells securities pursuant to the shelf
registration statement generally will be:
- required to be named as a selling security holder in
the related prospectus;
- required to deliver a prospectus to the purchaser;
- subject to certain of the civil liability provisions
under the Securities Act in connection with the
holder's sales; and
- bound by the provisions of the registration rights
agreement that are applicable to the holder
(including certain indemnification rights and
obligations).
We may suspend the holders' use of the prospectus for a period
not to exceed 30 calendar days (subject, in certain circumstances to an
extension to 45 days) in any 90 calendar day period, and not to exceed an
aggregate of 120 calendar days in any 360 calendar day period, if:
- the prospectus would, in our judgment, contain a
material misstatement or omission as a result of an
event that has occurred and is continuing; and
- we determine in good faith that the disclosure of
this material non-public information would have a
material adverse effect on us and our subsidiaries
taken as a whole.
However, if the disclosure relates to a previously undisclosed
proposed or pending material business transaction, the disclosure of which would
impede our ability to consummate such transaction, we may extend the suspension
period from 30 calendar days to 45 calendar days. We need not specify the nature
of the event giving rise to a suspension in any notice to holders of the notes
of the existence of such a suspension.
Upon the resale of notes or common stock issued upon
conversion of the notes, each selling security holder will be required to
deliver a notice of such sale to the trustee and us. The notice will, among
other things:
- identify the sale as a transfer pursuant to the shelf
registration statement;
- certify that the prospectus delivery requirements, if
any, of the Securities Act have been complied with;
and
41
- certify that the selling security holder and the
aggregate principal amount of the notes and/or number
of shares of our common stock owned by such holder
are identified in the related prospectus in
accordance with the applicable rules and regulations
under the Securities Act.
If:
- the initial shelf registration statement, of which
this prospectus is a part, has not been declared
effective by the SEC on or prior to 180 calendar days
after October 21, 2003
- the shelf registration statement is filed and
declared effective but thereafter ceases to be
effective or usable in connection with resales of
notes and common stock issuable upon conversion of
the notes and we do not cause the shelf registration
statement to become effective or usable within five
business days by filing a post-effective amendment,
prospectus supplement or report pursuant to the
Exchange Act;
- if applicable, we do not terminate the suspension
period by the 30th or 45th calendar day, as the case
may be, or a suspension period exceeds an aggregate
of 120 calendar days in any 360 calendar day period;
or
- subsequent to the effectiveness of the initial
registration statement, of which this prospectus is a
part, we shall fail to comply with our obligation to
name in the prospectus, as a selling security holder,
a holder of notes and common stock issuable upon
conversion of the notes who has returned a completed
and signed election and questionnaire;
each such event referred to in the bullet points above being
referred to as a "registration default," then additional interest will accrue on
the notes from and including the calendar day following the registration default
to but excluding the earlier of (1) the calendar day on which all registration
defaults have been cured and (2) the date of the shelf registration statement is
no longer required to be kept effective. Additional interest will be paid
semi-annually in arrears, with the first semi-annual payment due on the first
interest payment date following the date on which such additional interest
begins to accrue, and will accrue on the notes at a rate per year equal to 0.25%
for the first 90 calendar day period and to 0.50% thereafter of the principal
amount of such notes. If a holder converts some or all of its notes into common
stock during the occurrence of a registration default, the holder will not be
entitled to receive additional interest on such common stock, but will receive
103% of the number of shares of our common stock the holder receives upon
conversion (except to the extent we elect to deliver cash upon conversion).
While holders of notes have the right to specifically enforce our registration
obligations, we will have no other liability for monetary damages with respect
to any of our registration obligations.
FORM, DENOMINATION AND REGISTRATION
Denomination and Registration
The notes are issued in fully registered form, without
coupons, in denominations of $1,000 principal amount and integral multiples
thereof.
Global Notes
Notes are evidenced by one or more global notes deposited with
the trustee as custodian for DTC, and registered in the name of Cede & Co. as
DTC's nominee.
Record ownership of the global notes may be transferred, in
whole or in part, only to another nominee of DTC or to a successor of DTC or its
nominee, except as set forth below. A holder may hold its interests in the
global notes directly through DTC if such holder is a participant in DTC, or
indirectly through organizations which are direct DTC participants if such
holder is not a participant in DTC. Transfers between direct DTC participants
will be effected in the ordinary way in accordance with DTC's rules and will be
settled in same-day funds. Holders may also beneficially own interests in the
global notes held by DTC through certain banks, brokers, dealers, trust
companies and other parties that clear through or maintain a custodial
relationship with a direct DTC participant, either directly or indirectly.
42
So long as Cede & Co., as nominee of DTC, is the registered
owner of the global notes, Cede & Co. for all purposes will be considered the
sole holder of the global notes. Except as provided below, owners of beneficial
interests in the global notes:
- will not be entitled to have certificates registered
in their names;
- will not receive or be entitled to receive physical
delivery of certificates in definitive form; and
- will not be considered holders of the global notes.
The laws of some states require that certain persons take
physical delivery of securities in definitive form. Consequently, the ability of
an owner of a beneficial interest in a global security to transfer the
beneficial interest in the global security to such persons may be limited.
We will wire, through the facilities of the trustee, payments
of principal, accrued interest, contingent interest and additional amounts, if
any, on the global notes to Cede & Co., the nominee of DTC, as the registered
owner of the global notes. None of the Company, the trustee or any paying agent
will have any responsibility or be liable for paying amounts due on the global
notes to owners of beneficial interests in the global notes.
It is DTC's current practice, upon receipt of any payment of
principal, accrued interest, contingent interest and additional amounts, if any,
on the global notes, to credit participants' accounts on the payment date in
amounts proportionate to their respective beneficial interests in the notes
represented by the global notes, as shown on the records of DTC, unless DTC
believes that it will not receive payment on the payment date. Payments by DTC
participants to owners of beneficial interests in notes represented by the
global notes held through DTC participants will be the responsibility of DTC
participants, as is now the case with securities held for the accounts of
customers registered in "street name."
If a holder would like to convert its notes pursuant to the
terms of the notes, the holder should contact its broker or other direct or
indirect DTC participant to obtain information on procedures, including proper
forms and cut-off times, for submitting those requests.
Because DTC can only act on behalf of DTC participants, who in
turn act on behalf of indirect DTC participants and other banks, a holder's
ability to pledge its interest in the notes represented by global notes to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate.
DTC has advised us that it will take any action permitted to
be taken by a holder of notes, including, without limitation, the presentation
of notes for conversion as described below, only at the direction of one or more
direct DTC participants to whose account with DTC interests in the global notes
are credited and only for the principal amount of the notes for which directions
have been given.
DTC has advised us that DTC is:
- a limited purpose trust company organized under the
laws of the State of New York;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the
Uniform Commercial Code; and
- a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act.
DTC was created to hold securities for DTC participants and to
facilitate the clearance and settlement of securities transactions between DTC
participants through electronic book-entry changes to the accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations,
such as the initial purchasers of the notes. Certain DTC participants or their
representatives, together with other
43
entities, own DTC. Indirect access to the DTC system is available to others such
as banks, brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order
to facilitate transfers of interests in the global notes among DTC participants,
it is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. If (a) DTC is at any time
unwilling or unable to continue as depositary or if at any time ceases to be a
"clearing agency" registered under the Exchange Act and a successor depositary
is not appointed by us within 90 days or (b) an event of default under the
indenture occurs and is continuing and the registrar has received a request from
DTC that the notes be issued in definitive registered form, we will cause notes
to be issued in definitive registered form in exchange for the global notes.
None of The Men's Wearhouse, the trustee or any of their respective agents will
have any responsibility for the performance by DTC or direct or indirect DTC
participants of their obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records relating
to or payments made on account of beneficial ownership interests in global
notes.
According to DTC, the foregoing information with respect to
DTC has been provided to its participants and other members of the financial
community for information purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
Transfer and Exchange
A holder may transfer or exchange the notes in accordance with
the indenture. No service charge will be made for any registration of transfer
or exchange of notes, but we may require payment of a sum sufficient to cover
any tax, assessment or other governmental charge payable in connection
therewith. We are not required to transfer or exchange any note in respect of
which a designated event purchase notice has been given and not withdrawn by the
holder thereof.
SATISFACTION AND DISCHARGE
We may satisfy and discharge our obligations under the
indenture by delivering to the trustee for cancellation all outstanding notes or
by depositing with the paying agent or the conversion agent, as the case may be,
after the notes have become due and payable, whether at maturity, any redemption
date, any purchase date, or upon conversion or otherwise, cash or common stock
(as applicable under the terms of the indenture) sufficient to pay all of the
outstanding notes and paying all other sums payable under the indenture. Such
discharge is subject to terms contained in the indenture.
GOVERNING LAW
The indenture and the notes are governed by, and construed in
accordance with, the laws of the State of New York.
TRUSTEE, TRANSFER AGENT AND REGISTRAR
JPMorgan Chase Bank, as trustee, has been appointed by us as
paying agent, conversion agent, bid solicitation agent, registrar and custodian
with regard to the notes. JPMorgan Chase Bank or its affiliates may from time to
time in the future provide banking and other services to us in exchange for a
fee.
American Stock Transfer & Trust Company is the transfer agent
and registrar for our common stock.
CALCULATIONS IN RESPECT OF NOTES
We or our agents are responsible for making all calculations
called for under the notes. These calculations include, but are not limited to,
determination of the market price of our common stock. We or our agents will
make all these calculations in good faith and, absent manifest error, our and
their calculations will be final and binding on holders of notes. We or our
agents will provide a schedule of these calculations to the trustee, and the
trustee is entitled to conclusively rely upon the accuracy of these calculations
without independent verification.
44
REPURCHASE AND CANCELLATION OF NOTES
We may, to the extent permitted by law, repurchase notes in
the open market or by tender offer at any price or by private agreement. Any
notes purchased by us, to the extent permitted by law, may be reissued or resold
or may, at our option, be surrendered to the trustee for cancellation. Any notes
surrendered for cancellation may not be reissued or resold and will be promptly
cancelled.
All notes surrendered for payment, redemption, registration of
transfer or exchange or conversion shall, if surrendered to any person other
than the trustee, be delivered to the trustee. All notes delivered to the
trustee shall be cancelled promptly by the trustee. No notes shall be
authenticated in exchange for any notes cancelled as provided in the indenture.
REPLACEMENT OF NOTES
We will replace mutilated, destroyed, stolen or lost notes at
expense of the holder upon delivery to the trustee of the mutilated notes, or
evidence of the loss, theft or destruction of the notes satisfactory to us and
the trustee. In the case of a lost, stolen or destroyed note, indemnity
satisfactory to the trustee and us may be required at the expense of the holder
of such note before a replacement note will be issued.
45
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of
common stock, par value $.01 per share, and 2,000,000 shares of preferred stock,
par value $.01 per share. As of December 12, 2003, there were 37,131,270 shares
of our common stock outstanding.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per
share in the election of directors and on all other matters submitted to a vote
of shareholders. Such holders do not have the right to cumulate their votes in
the election of directors. Holders of Common Stock have no redemption or
conversion rights and no preemptive or other rights to subscribe for securities
of the Company. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share equally and ratably in
all of the assets remaining, if any, after satisfaction of all debts and
liabilities of the Company, and the preferential rights of any series of
Preferred Stock then outstanding. The shares of Common Stock outstanding are
fully paid and non-assessable.
Holders of Common Stock have an equal and ratable right to
receive dividends, when, as and if declared by the board of directors out of
funds legally available therefor and only after payment of, or provision for,
full dividends on all outstanding shares of any series of Preferred Stock and
after the Company has made provision for any required sinking or purchase funds
for any series of Preferred Stock. Our Credit Agreement prohibits the payment of
cash dividends on the Common Stock.
PREFERRED STOCK
The Preferred Stock may be issued, from time to time in one or
more series, and the board of directors, without further approval of the
shareholders, is authorized to fix the dividend rights and terms, redemption
rights and terms, liquidation preferences, conversion rights, voting rights and
sinking fund provisions applicable to each such series of Preferred Stock. If
the Company issues a series of Preferred Stock in the future that has voting
rights or preference over the Common Stock with respect to the payment of
dividends and upon the Company's liquidation, dissolution or winding up, the
rights of the holders of Common Stock offered hereby may be adversely affected.
The issuance of shares of Preferred Stock could be utilized,
under certain circumstances, in an attempt to prevent an acquisition of the
Company. We have no present intention to issue any shares of Preferred Stock.
LIMITATION OF DIRECTOR LIABILITY
The Restated Articles of Incorporation of the Company contain
a provision that limits the liability of the Company's directors as permitted
under Texas law. The provision eliminates the liability of a director to the
Company or its shareholders for monetary damages for negligent or grossly
negligent acts or omissions in the director's capacity as a director. The
provision does not affect the liability of a director (i) for breach of his duty
of loyalty to the Company or to its shareholders, (ii) for acts or omissions not
in good faith or that involve intentional misconduct or a knowing violation of
law, (iii) for acts or omissions for which the liability of a director is
expressly provided by an applicable statute, or (iv) in respect of any
transaction from which a director received an improper personal benefit.
Pursuant to the Restated Articles of Incorporation, the
liability of directors will be further limited or eliminated without action by
shareholders if Texas law is amended to further limit or eliminate the personal
liability of directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is
American Stock Transfer & Trust Company.
46
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal
income tax considerations relevant to persons holding the notes and our common
stock into which the notes may be converted. This discussion applies only to
holders that:
- are initial holders who purchased the notes at the
"issue price" (as defined below); and
- hold the notes and our common stock as capital
assets.
This discussion does not describe all of the tax
considerations that may be relevant to a subsequent purchaser of notes or to a
holder in light of its particular circumstances or to holders subject to special
rules, such as:
- certain financial institutions;
- insurance companies;
- tax-exempt organizations;
- dealers and certain traders in securities;
- persons holding the notes or our common stock as part
of a "straddle", "hedge", "conversion" or similar
transaction;
- United States Holders (as defined below) whose
functional currency is not the U.S. dollar;
- certain former citizens or residents of the United
States;
- partnerships or other entities classified as
partnerships for U.S. federal income tax purposes;
and
- persons subject to the alternative minimum tax.
This discussion is based on the Internal Revenue Code of 1986,
as amended (the "Code"), administrative pronouncements, judicial decisions and
final, temporary and proposed Treasury regulations, changes to any of which
subsequent to the date of this prospectus may affect the tax consequences
described herein, possibly with retroactive effect. This discussion does not
describe any tax consequences arising out of the tax laws of any state, local or
foreign jurisdiction, or any possible applicability of the U.S. federal gift or
estate tax laws.
THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND
DOES NOT CONSTITUTE LEGAL ADVICE TO ANY HOLDER. HOLDERS OF THE NOTES ARE URGED
TO CONSULT THEIR TAX ADVISERS WITH REGARD TO THE APPLICATION OF THE U.S. FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
CLASSIFICATION OF THE NOTES
The notes will be treated as indebtedness for U.S. federal
income tax purposes. Under the indenture governing the notes, we agreed, and by
acceptance of a beneficial interest in a note, each holder of a note has been
deemed to have agreed, to treat the notes as indebtedness for U.S. federal
income tax purposes that is subject to the Treasury regulations governing
contingent payment debt instruments (the "contingent payment debt regulations").
Pursuant to the terms of the indenture, we and every holder have agreed (in the
absence of an administrative determination or judicial ruling to the contrary)
to be bound by our application of the contingent payment debt regulations to the
notes, including our determination of the projected payment schedule (as
described below) and the rate at which interest will be deemed to accrue on the
notes for U.S. federal income tax purposes.
The IRS has issued a ruling addressing the U.S. federal income
tax classification and treatment of instruments similar, although not identical,
to the notes, and concluded that the instruments addressed in that
47
published guidance were subject to the contingent payment debt regulations. In
addition, the IRS clarified various aspects of the potential applicability of
certain other provisions of the Code to the instruments addressed in that
published guidance. However, the ruling is limited to its particular facts, and,
the proper application of the contingent payment debt regulations to the notes
is uncertain in a number of respects, and no assurance can be given that the IRS
will not assert that the notes should be treated differently. A different
treatment of the notes could significantly affect the amount, timing and
character of income, gain or loss with respect to an investment in the notes.
Accordingly, holders are urged to consult their tax advisers regarding the U.S.
federal income tax consequences of holding the notes as well as with respect to
any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction, and the possible effects of changes in tax laws.
The remainder of this discussion assumes that the notes will
be treated as indebtedness subject to the contingent payment debt regulations as
described above.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a
beneficial owner of a note or our common stock that is for U.S. federal income
tax purposes:
- a citizen or resident of the United States;
- a corporation, or other entity taxable as a
corporation for U.S. federal income tax purposes,
created or organized in or under the laws of the
United States or of any political subdivision
thereof;
- an estate, the income of which is includable in gross
income for U.S. federal income tax purposes
regardless of its source; or
- a trust if a U.S. court is able to exercise primary
supervision over administration of the trust and one
or more U.S. persons have the authority to control
all substantial decisions of the trust.
Interest Accruals on the Notes
Under the contingent payment debt regulations, a United States
Holder, regardless of its method of accounting for U.S. federal income tax
purposes, will be required to accrue interest income on the notes on a constant
yield basis at an assumed yield (the "comparable yield") determined at the time
of issuance of the notes. Accordingly, United States Holders generally will be
required to include interest in income, in each year prior to maturity, in
excess of the interest payments on the notes. The comparable yield for the notes
is based on the yield at which we would have issued, as of the issue date, a
nonconvertible fixed rate debt instrument with no contingent payments, but with
terms and conditions otherwise similar to those of the notes. We have determined
the comparable yield to be 8.0%, compounded semi-annually.
Solely for purposes of determining the amount of interest
income that a United States Holder will be required to accrue, we have
constructed a "projected payment schedule" in respect of the notes representing
a series of payments the amount and timing of which would produce a yield to
maturity on the notes equal to the comparable yield. The projected payment
schedule includes estimates for certain payments of contingent interest and an
estimate for a payment at maturity, taking into account the conversion feature.
Holders that wish to obtain the projected payment schedule may do so by
submitting a written request for such information to The Men's Wearhouse, Inc.,
5803 Glenmont Drive, Houston, Texas 77081, Attention: Claudia A. Pruitt.
NEITHER THE COMPARABLE YIELD NOR THE PROJECTED PAYMENT
SCHEDULE CONSTITUTES A PROJECTION OR REPRESENTATION BY US REGARDING THE ACTUAL
AMOUNT THAT WILL BE PAID ON THE NOTES, OR THE VALUE AT ANY TIME OF THE COMMON
STOCK INTO WHICH THE NOTES MAY BE CONVERTED. For U.S. federal income tax
purposes, a United States Holder is required under the contingent payment debt
regulations to use the comparable yield and the projected payment schedule
established by us in determining interest accruals and adjustments in respect of
a note, unless such United States Holder timely discloses and justifies the use
of a different comparable yield and projected payment schedule to the IRS.
Pursuant to the terms of the indenture, we and every United States Holder have
agreed (in the absence of an administrative determination or judicial ruling to
the contrary) to be bound by our determination of the comparable yield and
projected payment schedule.
48
It is possible that the IRS could challenge the specific yield
and projected payment schedule. The yield, if redetermined as a result of such a
challenge, could be greater or less than the comparable yield provided by us,
and the projected payment schedule could differ materially from the projected
payment schedule we have provided. In such case, the taxable income of a holder
arising from the ownership, sale, exchange, conversion, redemption or retirement
of a note could be increased or decreased.
Based on the comparable yield and the issue price of the
notes, a United States Holder of a note (regardless of its accounting method)
will be required to accrue interest as the sum of the daily portions of interest
on the notes for each day in the taxable year on which the United States Holder
holds the note, adjusted upward or downward to reflect the difference, if any,
between the actual and projected amount of any contingent payments on the notes
(as set forth below). The issue price of the notes is the first price at which a
substantial amount of the notes were sold to the public, excluding sales to bond
houses, brokers or similar persons or organizations acting in the capacity as
underwriters, placement agents or wholesalers (the "issue price").
The daily portions of interest in respect of a note are
determined by allocating to each day in an accrual period the ratable portion of
interest on the note that accrues in the accrual period. The amount of interest
on a note that accrues in an accrual period is the product of the comparable
yield on the note (adjusted to reflect the length of the accrual period) and the
adjusted issue price of the note as of the beginning of the accrual period. The
adjusted issue price of a note at the beginning of the first accrual period will
equal its issue price and for any accrual periods thereafter will be (x) the sum
of the issue price of such note and any interest previously accrued thereon
(disregarding any positive or negative adjustments described below) minus (y)
the amount of any projected payments on the notes for previous accrual periods.
In addition to the interest accrual discussed above, a United
States Holder will be required to recognize interest income equal to the amount
of the excess of actual payments over projected payments (a "positive
adjustment") in respect of a note for a taxable year. For this purpose, the
payments in a taxable year include the fair market value of property (including
our common stock) received in that year. If a United States Holder receives
actual payments that are less than the projected payments in respect of a note
for a taxable year, the United States Holder will incur a "negative adjustment"
equal to the amount of such difference. This negative adjustment will (i) first
reduce the amount of interest in respect of the note that a United States Holder
would otherwise be required to include in income in the taxable year and (ii) to
the extent of any excess, give rise to an ordinary loss equal to that portion of
such excess that does not exceed the excess of (A) the amount of all previous
interest inclusions under the note over (B) the total amount of the United
States Holder's net negative adjustments treated as ordinary loss on the note in
prior taxable years. A net negative adjustment is not subject to the two percent
floor limitation imposed on miscellaneous deductions under Section 67 of the
Code. Any negative adjustment in excess of the amounts described in (i) and (ii)
will be carried forward to offset future interest income in respect of the notes
or, if there is a negative adjustment carryforward on the note in a taxable year
in which the note is sold, converted, exchanged, redeemed or retired, to reduce
the amount realized on a sale, conversion, exchange, redemption or retirement of
the notes.
Amounts treated as interest under the contingent payment debt
regulations are treated as original issue discount for all purposes of the Code.
Sale, Conversion, Exchange, Redemption or Retirement of the Notes
Upon a sale, conversion, exchange, redemption or retirement of
a note for cash or our common stock, a United States Holder will generally
recognize gain or loss equal to the difference between the amount realized on
the sale, conversion, exchange, redemption or retirement (including the fair
market value of our common stock received, if any) and such United States
Holder's adjusted tax basis in the note. A United States Holder's adjusted tax
basis in a note will generally be equal to the United States Holder's purchase
price for the note, increased by any interest income previously accrued by the
United Stated Holder (determined without regard to any positive or negative
adjustments to interest accruals described above) and decreased by the amount of
any projected payments previously made on the notes to the United States Holder.
A United States Holder generally will treat any gain as interest income and any
loss as ordinary loss to the extent of the excess of previous interest
inclusions over the total negative adjustments previously taken into account as
ordinary loss, and the balance as capital loss. The deductibility of capital
losses is subject to limitations. A United States Holder who sells the notes at
a loss that meets
49
certain thresholds may be required to file a disclosure statement with the IRS
under recently promulgated Treasury regulations.
A United States Holder's tax basis in our common stock
received upon a conversion of a note will equal the then current fair market
value of such common stock. The United States Holder's holding period for the
common stock received will commence on the day immediately following the date of
conversion.
Constructive Dividends
If at any time we increase the conversion rate, either at our
discretion or pursuant to the anti-dilution provisions, the increase may be
deemed to be the payment of a taxable dividend to the United States Holders of
the notes.
Generally, a reasonable increase in the conversion rate in the
event of stock dividends or distributions of rights to subscribe for our common
stock will not be a taxable dividend.
Taxation of Distributions on Common Stock
Distributions paid on our common stock received upon
conversion of a note, other than certain pro rata distributions of common
shares, will be treated as a dividend to the extent paid out of current or
accumulated earnings and profits (as determined under U.S. federal income tax
principles) and will be includible in income by the United States Holder and
taxable as ordinary income when received. If a distribution exceeds our current
and accumulated earnings and profits, the excess will be first treated as a
tax-free return of the United States Holder's investment, up to the United
States Holder's tax basis in the common stock. Any remaining excess will be
treated as a capital gain. Under recently enacted legislation, dividends
received by noncorporate United States Holders on common stock may be subject to
U.S. federal income tax at lower rates than other types of ordinary income if
certain conditions are met. United States Holders should consult their own tax
advisers regarding the implications of this new legislation in their particular
circumstances.
Sale or Other Disposition of Common Stock
Gain or loss realized by a United States Holder on the sale or
other disposition of our common stock received upon conversion of a note will be
capital gain or loss for U.S. federal income tax purposes, and will be long-term
capital gain or loss if the United States Holder held the common stock for more
than one year. The amount of the United States Holder's gain or loss will be
equal to the difference between the United States Holder's tax basis in the
common stock disposed of and the amount realized on the disposition. A United
States Holder who sells the stock at a loss that meets certain thresholds may be
required to file a disclosure statement with the IRS under recently promulgated
Treasury regulations.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means a
beneficial owner of a note or our common stock that is, for U.S. federal income
tax purposes:
- an individual who is classified as a nonresident
alien for U.S. federal income tax purposes;
- a foreign corporation; or
- a foreign estate or trust.
Payments on Notes
All payments on the notes made to a Non-United States Holder,
including a payment in our common stock or cash pursuant to a conversion,
exchange, redemption or retirement and any gain realized on a sale of the notes,
will be exempt from U.S. federal income and withholding tax, provided that:
50
- the Non-United States Holder does not own, actually
or constructively, 10% or more of the total combined
voting power of all classes of our stock entitled to
vote and is not a controlled foreign corporation
related, directly or indirectly, to us through stock
ownership and is not a bank receiving certain types
of interest;
- the certification requirement described below has
been fulfilled, prior to payment, with respect to the
Non-United States Holder;
- such payments are not effectively connected with the
conduct by such Non-United States Holder of a trade
or business in the United States; and
- in the case of gain realized on the sale, conversion,
exchange, redemption or retirement of the notes we
are not, and have not been within the shorter of the
five-year period preceding such sale, conversion,
exchange, redemption or retirement and the period the
Non-United States Holder held the notes, a U.S. real
property holding corporation. We believe that we are
not, and do not anticipate becoming, a U.S. real
property holding corporation for U.S. federal income
tax purposes.
However, if a Non-United States Holder were deemed to have
received a constructive dividend (see " -- Tax Consequences to United States
Holders -- Constructive Dividends" above), the Non-United States Holder
generally will be subject to United States withholding tax at a 30% rate,
subject to reduction by an applicable treaty, on the taxable amount of the
dividend. A Non-United States Holder who is subject to withholding tax under
such circumstances should consult his own tax adviser as to whether it can
obtain a refund for all or a portion of the withholding tax.
The certification requirement referred to above will be
fulfilled if, prior to payment, the beneficial owner of a note certifies on IRS
Form W-8BEN, under penalties of perjury, that it is not a U.S. person and
provides its name and address.
If a Non-United States Holder of a note is engaged in a trade
or business in the United States, and if payments on the note are effectively
connected with the conduct of this trade or business, the Non-United States
Holder, although exempt from U.S. withholding tax, will generally be taxed in
the same manner as a United States Holder (see "Tax Consequences to United
States Holders" above), except that the Non-United States Holder will be
required to provide a properly executed IRS Form W-8ECI in order to claim an
exemption from withholding tax. These Non-United States Holders should consult
their own tax advisers with respect to other tax consequences of the ownership
of the notes, including the possible imposition of a 30% branch profits tax.
Distributions on Common Stock
Dividends paid to a Non-United States Holder of our common
stock generally will be subject to U.S. withholding tax at a 30% rate, subject
to reduction under an applicable treaty. In order to obtain a reduced rate of
withholding, a Non-United States Holder will be required to provide a properly
executed IRS Form W-8BEN certifying its entitlement to benefits under a treaty.
A Non-United States Holder who is subject to withholding tax under such
circumstances should consult his own tax adviser as to whether he can obtain a
refund for all or a portion of the withholding tax.
If a Non-United States Holder of our common stock is engaged
in a trade or business in the United States, and if the dividends are
effectively connected with the conduct of this trade or business, the Non-United
States Holder, although exempt from U.S. withholding tax, will generally be
taxed in the same manner as a United States Holder (see " -- Tax Consequences to
United States Holders" above), except that the Non-United States Holder will be
required to provide a properly executed IRS Form W-8ECI in order to claim an
exemption from withholding tax. These Non-United States Holders should consult
their own tax advisers with respect to other tax consequences of the ownership
of our common stock, including the possible imposition of a 30% branch profits
tax.
Sale or Other Disposition of Common Stock
A Non-United States Holder generally will not be subject to
U.S. federal income and withholding tax on gain realized on a sale or other
disposition of the common stock received upon a conversion of a note, unless:
51
- the gain is effectively connected with the conduct by
such Non-United States Holder of a trade or business
in the United States;
- in the case of a Non-United States Holder who is a
nonresident alien individual, the individual is
present in the United States for 183 or more days in
the taxable year of the disposition and certain other
conditions are met; or
- we are or have been a U.S. real property holding
corporation at any time within the shorter of the
five-year period preceding such sale, exchange or
disposition and the period the Non-United States
Holder held the common stock. We believe that we are
not, and do not anticipate becoming, a U.S. real
property holding corporation for United States
federal income tax purposes.
If a Non-United States Holder of our common stock is engaged
in a trade or business in the United States, and if the gain on the common stock
is effectively connected with the conduct of this trade or business, the
Non-United States Holder will generally be taxed in the same manner as a United
States Holder (see " -- Tax Consequences to United States Holders" above). These
Non-United States Holders should consult their own tax advisers with respect to
other tax consequences of the disposition of the common stock, including the
possible imposition of a 30% branch profits tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns may be filed with the IRS in connection
with payments on the notes, the common stock and the proceeds from a sale or
other disposition of the notes or the common stock. In addition, copies of these
information returns also may be made available under the provisions of a
specific treaty or other agreement to the tax authorities of the country in
which the Non-United States Holder resides. A United States Holder may be
subject to United States backup withholding tax on these payments if it fails to
provide its taxpayer identification number to the paying agent and comply with
certification procedures or otherwise establish an exemption from backup
withholding. A Non-United States Holder may be subject to United States backup
withholding tax on these payments unless the Non-United States Holder complies
with certification procedures to establish that it is not a U.S. person. The
certification procedures required of Non-United States Holders to claim the
exemption from withholding tax on certain payments on the notes, described
above, will satisfy the certification requirements necessary to avoid the backup
withholding tax as well. The amount of any backup withholding from a payment
will be allowed as a credit against the holder's U.S. federal income tax
liability and may entitle the holder to a refund, provided that the required
information is timely furnished to the IRS.
CERTAIN ERISA CONSIDERATIONS
The following is a summary of certain considerations
associated with the purchase, ownership and disposition of the notes by employee
benefit plans that are subject to Title I of the U.S. Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), plans (including individual
retirement accounts) that are subject to Section 4975 of the Code, and entities
whose underlying assets are considered to include "plan assets" of such plans
(each, a "plan").
GENERAL FIDUCIARY MATTERS
ERISA imposes certain duties on persons who are fiduciaries of
a plan subject to Title I of ERISA (an "ERISA plan"). Under ERISA, any person
who exercises any authority or control over the management or disposition of the
assets of an ERISA plan, or who renders investment advice for a fee or other
compensation to such ERISA plan, is generally considered to be a fiduciary of
such ERISA plan.
In considering the purchase of notes to be held as the assets
of any plan, a fiduciary should determine whether the investment in the notes is
in accordance with the documents and instruments governing the plan and the
applicable provisions of ERISA, including, without limitation, the prudence,
diversification, delegation of control and prohibited transaction provisions of
ERISA.
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PROHIBITED TRANSACTION ISSUES
Section 406 of ERISA and Section 4975 of the Code prohibit
plans from engaging in specified transactions involving plan assets with persons
who are "parties in interest," within the meaning of ERISA or "disqualified
persons," within the meaning of Section 4975 of the Code, unless an exemption is
available. A disqualified person that engages in a non-exempt prohibited
transaction may be subject to excise taxes and other penalties and liabilities
under Section 4975 of the Code, and the fiduciary of the ERISA plan that engages
in a non-exempt prohibited transaction may be subject to penalties and
liabilities under ERISA.
Whether or not any of our underlying assets are deemed to be
"plan assets," as described below, the purchase and holding of the notes by an
ERISA plan with respect to which we or the initial purchasers are considered a
party in interest or a disqualified person may constitute or result in a direct
or indirect prohibited transaction under Section 406 of ERISA and/or Section
4975 of the Code, unless the notes are acquired and held in accordance with an
applicable statutory, class or individual prohibited transaction exemption. In
this regard, the U.S. Department of Labor (the "DOL") has issued prohibited
transaction class exemptions, or "PTCEs," that may apply to the purchase and
holding of the notes. These class exemptions include, without limitation, PTCE
91-38 regarding bank collective investment funds, PTCE 90-1 regarding insurance
company pooled separate accounts, PTCE 84-14 regarding transactions determined
by independent qualified professional asset managers, PTCE 95-60 regarding life
insurance company general accounts and PTCE 96-23 regarding transactions
determined by in-house asset managers. There can be no assurance that all of the
conditions of any such exemptions will be satisfied.
Under a "look-through" rule set forth in the Department of
Labor's plan asset regulations (29 C.F.R. 2510.3-101), a pro rata portion of the
assets of an entity will be treated as "plan assets" of any plan that acquires
an equity interest in such entity unless an exception applies. Such look-through
rule does not apply to "operating companies" or "publicly offered securities,"
in each case as described in such plan asset regulations, and the issuer
believes it presently qualifies as an "operating company" and its outstanding
shares of common stock currently qualify as "publicly offered securities." The
issuer expects to continue to qualify as an operating company and its common
stock to qualify as publicly offered securities, but no assurances can be
provided that the issuer or its common stock will be able to so qualify at all
times in the future. Fiduciaries and other persons considering the purchase of
notes with the assets of any plans should consider the risks that the issuer
will not be able to continue to qualify as an operating company or its common
stock as publicly offered securities.
In addition, the issuer is a party in interest and
disqualified person with respect to plans directly covering employees of the
issuer or any subsidiary thereof, but the issuer is not aware that it provides
services to or is otherwise a "party in interest" or "disqualified person" with
respect to any other plans. However, the issuer does not monitor whether the
persons to which it provides services are plans, and accordingly there are no
assurances that the issuer might not be a party in interest or disqualified
person subject to the prohibited transaction provisions of ERISA or Section 4975
of the Code with respect to any plans besides those plans directly covering its
own employees. Fiduciaries and other persons considering the purchase of notes
with the assets of any plan should determine whether the issuer is or is likely
to become a party in interest or disqualified person with respect to such plan.
It is anticipated that the issuer will qualify as an
"operating company" and/or the common stock issuable upon conversion of the
notes will constitute "publicly offered securities," each within the meaning of
the plan asset regulations, although no assurances can be given in this regard.
PLAN ASSET CONSEQUENCES
If our assets were deemed to be "plan assets" under ERISA,
this would result, among other things, in (i) the application of the prudence
and other fiduciary responsibility standards of ERISA to investments made by us,
and (ii) the possibility that certain transactions in which we might engage
would constitute "prohibited transactions" under ERISA and Section 4975 of the
Code.
REPRESENTATION
Accordingly, by acceptance of the notes (or any interest
therein) or the common stock issuable upon conversion of the notes (or any
interest therein), each purchaser and subsequent transferee of the notes will be
53
deemed to have represented and warranted either that (i) for the entire period
during which such purchaser or transferee holds its interest in the notes, or
the common stock issuable upon conversion of the notes, no portion of the assets
used by such purchaser or transferee to acquire and hold its interest in the
notes or common stock issuable upon conversion of the notes constitute assets of
any plan or (ii) the acquisition and holding of the notes (or any interest
therein) or the common stock issuable upon conversion of the notes (or any
interest therein) by such purchaser or transferee will not constitute a non-
exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the
Code or a violation of any applicable similar laws.
The foregoing discussion is general in nature and is not
intended to be all-inclusive. Due to the complexity of these rules and the
penalties that may be imposed upon persons involved in non-exempt prohibited
transactions, it is particularly important that fiduciaries, or other persons
considering purchasing notes or common stock issuable upon conversion of the
notes on behalf of, or with the assets of, any plan, consult with their counsel
to determine whether such plan is subject to Title I of ERISA, Section 4975 of
the Code or any similar laws.
GOVERNMENTAL AND CHURCH PLANS
Governmental plans, some church plans and non-U.S. plans,
while not subject to the fiduciary responsibility or prohibited transaction
provisions of ERISA or Section 4975 of the Code, may be subject to federal,
state or other laws that are very similar to such provisions of ERISA and the
Code. If you are a fiduciary of a governmental plan, church plan or non-U.S.
plan, you should consult with counsel before purchasing any notes.
54
PLAN OF DISTRIBUTION
The securities to be offered and sold using this prospectus
are being registered to permit public secondary trading of these securities by
the selling security holders from time to time after the date of this
prospectus. We will not receive any of the proceeds from the sale by the selling
security holders of the securities offered by this prospectus. The aggregate
proceeds to the selling security holders from the sale of the notes or the
common stock issuable upon conversion of the notes will be the purchase price of
the notes or the common stock issuable upon conversion of the notes less any
discounts and commissions. A selling security holder reserves the right to
accept and, together with its agents, to reject, any proposed purchases of notes
or common stock to be made directly or through agents.
The notes and the common stock issuable upon conversion of the
notes may be sold from time to time to purchasers directly by the selling
security holders and their successors, which includes their transferees, pledges
or donees or their successors, or through underwriters, broker-dealers or agents
who may receive compensation in the form of discounts, concessions or
commissions from the selling security holders or the purchasers of the notes and
the common stock issuable upon conversion of the notes. These discounts,
concessions or commissions may be in excess of those customary in the types of
transactions involved.
The selling security holders and any underwriters,
broker-dealers or agents who participate in the distribution of the notes and
the common stock issuable upon conversion of the notes may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended. As
a result, any profits on the sale of the notes and the common stock issuable
upon the conversion of the notes by selling security holders and any discounts,
commissions or concessions received by any such broker-dealers or agents may be
deemed to be underwriting discounts and "underwriters" within the meaning of the
Securities Act will be subject to prospectus delivery requirements of the
Securities Act. If the selling security holders were deemed to be underwriters,
the selling security holders may be subject to certain statutory liabilities of
the Securities Act and the Securities Exchange Act of 1934, as amended. If the
notes and the common stock issuable upon conversion of the notes are sold
through underwriters, broker-dealers or agents the selling security holders will
be responsible for underwriting discounts or commissions or agent's commissions.
We estimate that our share of the total expenses of this offering will be
approximately $395,000.
The initial purchasers and their affiliates have engaged in,
and may in the future engage in, investment banking and other commercial
dealings with us. The initial purchasers have received customary fees and
commissions for these transactions.
Sheldon I. Stein, a Senior Managing Director of Bear, Stearns
& Co. Inc., is a member of our board of directors and is a member of each of the
audit, compensation and nominating and corporate governance committees of our
board of directors. As of December 12, 2003, Mr. Stein was the beneficial owner
of 19,718 shares of our common stock, including 18,000 shares that may be
acquired upon the exercise of stock options and 1,718 shares held by Mr. Stein's
sons.
JPMorgan Chase Bank, an affiliate of J.P. Morgan Securities
Inc., Wachovia Bank, National Association, an affiliate of Wachovia Capital
Markets, LLC, and Fleet National Bank, an affiliate of Fleet Securities, Inc.,
are lenders under our revolving credit facility. As of November 1, 2003, we had
no borrowings outstanding under our revolving credit facility. JPMorgan Chase
Bank, an affiliate of J.P. Morgan Securities Inc., Wachovia Bank, National
Association, an affiliate of Wachovia Capital Markets, LLC, and Fleet National
Bank, an affiliate of Fleet Securities, Inc., are lenders under our term credit
facility which was repaid using a portion of the net proceeds from the private
placements of the notes. J.P. MORGAN SECURITIES INC. ACTED AS BOOK-RUNNER AND
CO-LEAD ARRANGER FOR EACH OF OUR CREDIT FACILITIES. SEE "DESCRIPTION OF NOTES --
RANKING." IN ADDITION, JPMORGAN CHASE BANK, AN AFFILIATE OF J.P. MORGAN
SECURITIES INC., IS SERVING AS THE TRUSTEE FOR THE NOTES AND WILL RECEIVE
CUSTOMARY FEES AND EXPENSE REIMBURSEMENTS IN CONNECTION THEREWITH.
55
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy
statements and other information with the SEC. You may read and copy materials
that we have filed with the SEC at the SEC's public reference room located at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the SEC
at 1-800- SEC-0330 for further information on the public reference room. Our SEC
filings also are available to the public on the SEC's web site at www.sec.gov,
which contains reports, proxies and information statements and other information
regarding issuers that file electronically.
We have agreed that if, at any time that the notes are
"restricted securities" within the meaning of the Securities Act and we are not
subject to the information reporting requirements of the Exchange Act, we will
furnish to holders of the notes and to prospective purchasers designated by them
the information required to be delivered pursuant to Rule 144(d)(4) under the
Securities Act to permit compliance with Rule 144A in connection with resales of
the notes.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus "incorporates by reference" information that
we have filed with the SEC under the Exchange Act, which means that we are
disclosing important information to you by referring you to those documents. Any
statement contained in this prospectus or in any document incorporated or deemed
to be incorporated by reference into this prospectus will be deemed to be
modified or superseded for purposes of this prospectus to the extent that a
statement contained in this prospectus or any subsequently filed document which
also is, or is deemed to be incorporated by reference into this prospectus
modifies or supersedes that statement. Any statement so modified or superseded
will not be deemed, except as so modified or superseded, to constitute a part of
this prospectus. We incorporate by reference the following documents listed
below and any future filings made with the SEC under Sections 13(a), 13(c), 14,
or 15(d) of the Exchange Act (other than Current Reports furnished under Items 9
or 12 of Form 8-K), until the initial purchasers sell all of the notes:
- Our Annual Report on Form 10-K of the fiscal year
ended February 1, 2003;
- Our Quarterly Reports on Form 10-Q for the fiscal
quarters ended May 3, 2003, August 2, 2003 and
November 1, 2003; and
- Our Current Reports on Form 8-K filed on October 14,
2003, October 16, 2003, and October 21, 2003.
You may request a copy of these filings and of the form of the
indenture, notes and registration rights agreement at no cost, by writing or
telephoning us at the following address:
The Men's Wearhouse, Inc.
5803 Glenmont Drive
Houston, Texas 77081
Attn: Claudia A. Pruitt
(713) 592-7200
LEGAL MATTERS
The validity of the notes offered hereby and of the shares of
common stock issuable upon the conversion thereof and certain other legal
matters will be passed upon for us by Fulbright & Jaworski L.L.P., Houston,
Texas. Michael W. Conlon, a partner in the firm of Fulbright & Jaworski L.L.P.,
is the Secretary of the Company.
EXPERTS
The consolidated financial statements incorporated in this
prospectus by reference from our Annual Report on Form 10-K for the year ended
February 1, 2003 have been audited by Deloitte & Touche LLP, independent
56
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
57
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in
connection with the distribution of the securities covered by the registration
statement of which this prospectus is a part . We will bear all of these
expenses.
[Download Table]
Registration fee under the Securities Act $ 10,517
Printing and engraving expenses * 92,000
Legal fees and expenses* 200,000
Accounting fees and expenses* 92,000
Miscellaneous* 483
---------
Total $ 395,000
=========
* Estimated solely for the purpose of this Item. Actual expenses may be more or
less.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Restated Articles of Incorporation, as amended, and Bylaws
of The Men's Wearhouse together provide that directors shall not be personally
liable to the Company or it's stockholders for monetary damages for an act or
omission in a director's capacity as a director, except for liability for (i) a
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) an act or omission not in good faith that constitutes a breach of duty of
such director to the Company or an act or omission that involves intentional
misconduct or a knowing violation of the law; (iii) a transaction from which
such director received an improper benefit, whether or not the benefit resulted
from an action taken within the scope of the director's office; or (iv) an act
or omission for which the liability of a director is expressly provided by an
applicable statute. The Restated Articles of Incorporation, as amended, and
Bylaws of the Company also provide that if the Texas Business Corporation Act
(the "TBCA"), the Texas Miscellaneous Corporation Laws Act or any other
applicable Texas statute is amended to authorize further elimination or
limitation of the personal liability of the directors, then the liability of
Company's directors shall be eliminated or limited to the fullest extent
permitted by such statute(s), as so amended.
TBCA Article 2.02-1 provides that the Company may indemnify
certain persons, including any person who was, is or is threatened to be made a
named defendant or respondent in an action, suit or proceeding because the
person is or was a director or officer, against judgments, penalties (including
excise and similar taxes), fines, settlements and reasonable expenses (including
court costs and attorneys' fees) actually incurred by the person in connection
with the action, suit or proceeding. The Company is required by Article 2.02-1
to indemnify a director or officer against reasonable expenses (including court
costs and attorneys' fees) incurred by him in connection with an action, suit or
proceeding in which he is a named defendant or respondent because he is or was a
director or officer if he has been wholly successful, on the merits or
otherwise, in the defense of the action, suit or proceeding. Article 2.02-1
provides that indemnification pursuant to its provisions is not exclusive of
other rights of indemnification to which a person may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors, or otherwise.
ITEM 16. EXHIBITS
[Download Table]
EXHIBIT
NO. DESCRIPTION
--- -----------
3.1 -- Restated Articles of Incorporation (incorporated by reference
from Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 30, 1994).
3.2 -- By-laws, as amended (incorporated by reference from Exhibit 3.2
to the Company's Annual Report on Form 10-K for the fiscal year
ended February 1, 1997).
3.3 -- Articles of Amendment to the Restated Articles of Incorporation
(incorporated by reference from Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 31,
1999).
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[Download Table]
4.1 -- Restated Articles of Incorporation (included as Exhibit 3.1).
4.2 -- By-laws (included as Exhibit 3.2).
4.3 -- Form of Common Stock certificate (incorporated by reference from
Exhibit 4.3 to the Company's Registration Statement on Form S-1
(Registration No. 33-45949)).
4.4 -- Articles of Amendment to the Restated Articles of Incorporation
(included as Exhibit 3.3).
4.5 -- Revolving Credit Agreement dated as of January 29, 2003, among
the Company and JPMorgan Chase Bank and the Banks listed therein
(incorporated by reference from Exhibit 4.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 1,
2003).
4.6 -- Term Sheet Agreement dated as of January 29, 2003 evidencing the
uncommitted CAN$10 million facility of National City Bank, Canada
Branch to Golden Brand Clothing (Canada) Ltd. (incorporated by
reference from Exhibit 4.7 to the Company's Annual Report on Form
10-K for the fiscal year ended February 1, 2003).
4.7 -- Indenture (including form of note) dated October 21, 2003 among
The Men's Wearhouse and JPMorgan Chase Bank, as trustee, relating
to The Men's Wearhouse's 3.125% Convertible Senior Notes due 2023
(incorporated by reference from Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
November 1, 2003).
4.8 -- Registration Rights Agreement dated October 21, 2003 among The
Men's Wearhouse and Bear, Stearns & Co. Inc., Wachovia Capital
Markets, LLC, J.P. Morgan Securities Inc., Fleet Securities, Inc.
(incorporated by reference from Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
November 1, 2003).
4.9 -- First Amendment to Revolving Credit Agreement, dated October 13,
2003 among the Company, JPMorgan Chase Bank and the Banks listed
therein (incorporated by reference from Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 1, 2003).
5.1 -- Opinion of Fulbright & Jaworski L.L.P. regarding the legality of
the securities to be offered hereby. (filed herewith)
12.1 -- Computation of ratio of earnings to fixed charges. (filed
herewith)
23.1 -- Consent of Deloitte & Touche LLP, independent auditors. (filed
herewith)
23.2 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1)
24.1 -- Powers of Attorney (included on the signature pages hereto).
25.1 -- Statement of Eligibility and Qualification of Trustee under the
Trust Indenture Act of 1939, as amended, on Form T-1
(incorporated by reference from Exhibit 25.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
November 1, 2003).
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act;
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(b) To reflect in the prospectus any facts or events
arising after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
the prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(c) To include any material information with respect to
the plan of distribution not previously disclosed in this registration statement
or any material change to the information in this registration statement;
provided, however, that paragraphs A(l)(a) and A(l)(b) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each of the post-effective amendments shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, the filing of our annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or otherwise,
that registrant has been advised that in the opinion of the SEC that
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against any liability (other than the payment by a registrant of expenses
incurred or paid by a director, officer, or controlling person of a registrant
in the successful defense of any action, suit or proceeding) is asserted by a
director, officer, or controlling person in connection with the securities being
registered, that registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of the issue.
D. The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus or any
prospectus supplement filed as part of this registration statement in reliance
on Rule 430A and contained in a form of prospectus or prospectus supplement
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus or prospectus supplement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
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E. The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act (the "Act") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
each registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Houston, State of Texas, on the 16 day of
December, 2003.
THE MEN'S WEARHOUSE, INC.
By: /s/ Neill P. Davis
------------------------------------
Neill P. Davis
Executive Vice President and Chief
Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints George Zimmer and David Edwab,
or either of them, severally, as his/her attorney-in-fact and agent, with full
power of substitution and resubstitution, for him/her and in his/her name,
place, and stead, in any and all capacities, to sign any and all post-effective
amendments to this registration statement, and to file the same with all
exhibits hereto, and all other documents in connection herewith, with the
Commission, granting unto said attorney-in-fact and agent, and either of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 16 day of December, 2003.
[Enlarge/Download Table]
SIGNATURE TITLE
--------- -----
/s/George Zimmer Chairman of the Board of Directors and Chief
------------------------------------ Executive Officer (principal executive officer)
George Zimmer
/s/Neill P. Davis Executive Vice President, Chief Financial Officer and
------------------------------------ Principal Financial Officer
Neill P. Davis
/s/Diana M. Wilson
------------------------------------ Vice President and Principal Accounting Officer
Diana M. Wilson
/s/David H. Edwab
------------------------------------ Vice Chairman of the Board of Directors
David H. Edwab
/s/Sheldon I. Stein
---------- ------------------------- Director
Sheldon I. Stein
/s/Michael L. Ray
------------------------------------ Director
Michael L. Ray, Ph.D.
/s/Rinaldo S. Brutoco
------------------------------------ Director
Rinaldo S. Brutoco
/s/Kathleen Mason
------------------------------------ Director
Kathleen Mason
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EXHIBIT INDEX
[Download Table]
EXHIBIT
NO. DESCRIPTION
--- -----------
3.1 -- Restated Articles of Incorporation (incorporated by reference
from Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 30, 1994).
3.2 -- By-laws, as amended (incorporated by reference from Exhibit 3.2
to the Company's Annual Report on Form 10-K for the fiscal year
ended February 1, 1997).
3.3 -- Articles of Amendment to the Restated Articles of Incorporation
(incorporated by reference from Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 31,
1999).
4.1 -- Restated Articles of Incorporation (included as Exhibit 3.1).
4.2 -- By-laws (included as Exhibit 3.2).
4.3 -- Form of Common Stock certificate (incorporated by reference from
Exhibit 4.3 to the Company's Registration Statement on Form S-1
(Registration No. 33-45949)).
4.4 -- Articles of Amendment to the Restated Articles of Incorporation
(included as Exhibit 3.3).
4.5 -- Revolving Credit Agreement dated as of January 29, 2003, among
the Company and JPMorgan Chase Bank and the Banks listed therein
(incorporated by reference from Exhibit 4.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended February 1,
2003).
4.6 -- Term Sheet Agreement dated as of January 29, 2003 evidencing the
uncommitted CAN$10 million facility of National City Bank, Canada
Branch to Golden Brand Clothing (Canada) Ltd. (incorporated by
reference from Exhibit 4.7 to the Company's Annual Report on Form
10-K for the fiscal year ended February 1, 2003).
4.7 -- Indenture (including form of note) dated October 21, 2003 among
The Men's Wearhouse and JPMorgan Chase Bank, as trustee, relating
to The Men's Wearhouse's 3.125% Convertible Senior Notes due 2023
(incorporated by reference from Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
November 1, 2003).
4.8 -- Registration Rights Agreement dated October 21, 2003 among The
Men's Wearhouse and Bear, Stearns & Co. Inc., Wachovia Capital
Markets, LLC, J.P. Morgan Securities Inc., Fleet Securities, Inc.
(incorporated by reference from Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
November 1, 2003).
4.9 -- First Amendment to Revolving Credit Agreement, dated October 13,
2003 among the Company, JPMorgan Chase Bank and the Banks listed
therein (incorporated by reference from Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 1, 2003).
5.1 -- Opinion of Fulbright & Jaworski L.L.P. regarding the legality of
the securities to be offered hereby. (filed herewith)
12.1 -- Computation of ratio of earnings to fixed charges. (filed
herewith)
23.1 -- Consent of Deloitte & Touche LLP, independent auditors. (filed
herewith)
23.2 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1)
24.1 -- Powers of Attorney (included on the signature pages hereto).
25.1 -- Statement of Eligibility and Qualification of Trustee under the
Trust Indenture Act of 1939, as amended, on Form T-1
(incorporated by reference from Exhibit 25.1 to the Company's
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Quarterly Report on Form 10-Q for the fiscal quarter ended
November 1, 2003).
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Dates Referenced Herein and Documents Incorporated by Reference
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