Court Directs That $1 Million be Withheld From Tender Offer Proceeds Pending Further Proceedings
December 09 2005 - 6:31PM
PR Newswire (US)
KNOXVILLE, Tenn., Dec. 9 /PRNewswire-FirstCall/ -- Goody's Family
Clothing, Inc. (NASDAQ:GDYS) announced that the Chancery Court for
Knox County, Tennessee, today entered a temporary injunction
requiring that $1,000,000 be withheld from the tender offer
proceeds (approximately $0.03 per share) in connection with the
announced Agreement and Plan of Merger between Goody's Family
Clothing, Inc. and affiliates of GMM Capital LLC, and Prentice
Capital Management, LP (the "Merger Agreement"). The Merger
Agreement provides for a price of $9.60 per share. The $1,000,000
amount is to be withheld pending determination of what amount of
fees, if any, Plaintiffs' counsel are entitled to receive.
Prentice/GMM have advised Goody's that they are likely to exercise
their right to extend the expiration of the tender offer for 10
business days. Any extension of the tender offer will be made
pursuant to an announcement and filing with the Securities and
Exchange Commission by Prentice/GMM and this release does not
constitute such an extension. The temporary injunction was entered
in connection with Plaintiffs' fourth class action lawsuit, which
was filed on November 10, 2005 (the "Fee Complaint") in the
consolidated action naming the Company, its directors, certain of
its officers, GMM Capital LLC, Prentice Capital Management, LP, and
Acquisition Corp. as defendants. The Fee Complaint alleges that the
increase in tender offer price of $8.00 per share in the merger
agreement previously entered into with affiliates of Sun Capital
Partners, IV to the $9.60 per share in the Merger Agreement with
affiliates of Prentice/GMM was caused by the Plaintiffs' lawsuits
and related actions, and that counsel for the putative class are
entitled to an award of attorneys' fees as a percentage of the
total increase in value of the transaction. The Fee Complaint
seeks, among other things, a declaration that the matter is
properly maintainable as a class action, and an injunction
prohibiting consummation of the merger until "an appropriate amount
of the merger proceeds" is set aside for a future award of
attorneys' fees. Plaintiffs' counsel also sought by motion a
temporary restraining order to enjoin the distribution of
$10,595,200 of the proceeds of the tender offer so that funds
remain available to be used to pay an award of attorneys' fees. At
the proceeding today, the Chancery Court granted Plaintiffs a
temporary injunction requiring that $1,000,000 be withheld of the
tender offer proceeds and indicated that a further hearing would be
scheduled to determine whether Plaintiffs' counsel are entitled to
receive any of such withheld amount. In determining said amount,
the Court rejected Plaintiffs' contention that fees should be
awarded as a percentage of tender offer proceeds and stated that
any award would be on the basis of quantum meruit, or "as much as
deserved," rather than as a percentage of the tender offer
proceeds. In the event that an amount less than $1,000,000 is
awarded to Plaintiffs' counsel, an additional distribution to
shareholders could be made following further proceedings. The Court
reserved decision on whether the shareholder defendants (certain
officers and directors of the Company, including Robert M.
Goodfriend) will be excluded from contribution to any fee award as
a matter of law because they have been separately represented in
the action. Goody's, headquartered in Knoxville, Tennessee, is a
retailer of moderately priced family apparel, and with the
temporary closure of one store due to hurricane damage, currently
operates 381 stores in the 21 states of Alabama, Arkansas, Florida,
Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana,
Maryland, Mississippi, Missouri, North Carolina, Ohio, Oklahoma,
South Carolina, Tennessee, Texas, Virginia and West Virginia.
DATASOURCE: Goody's Family Clothing, Inc. CONTACT: Edward R.
Carlin, Chief Financial Officer of Goody's Family Clothing, Inc.,
+1-865-966-2000
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