UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
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THE NORTH FACE, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $.0025 PER SHARE
(Title of Class of Securities)
65931710
(CUSIP Number)
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JAMES G. FIFIELD
THE NORTH FACE, INC.
2013 FARALLON DRIVE
SAN LEANDRO, CA 94577
TEL. NO.: (510) 618-2848
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
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MAY 13, 1998
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss.250.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for the
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP No. 65931710 Page 2 of 6 Pages
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1 Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons (entities only)
James G. Fifield
2 Check the Appropriate Box if a Member of a Group
(See Instructions) (A) [ ]
(B) [X]
3 SEC Use Only
4 Source of Funds (See Instructions)
PF, SC
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
6 Citizenship or Place of Organization
U.S.A.
7 Sole Voting Power
NUMBER OF 718,394
SHARES
BENEFICIALLY OWNED 8 Shared Voting Power
BY EACH REPORTING
PERSON 0
WITH
9 Sole Dispositive Power
718,394
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
718,394
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
13 Percent of Class Represented by Amount in Row (11)
5.9%
14 Type of Reporting Person (See Instructions)
IN
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CUSIP No. 65931710 Page 3 of 6 Pages
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Item 1. Security and Issuer.
This Schedule relates to shares of Common Stock, par value $.0025 per
share (the "Common Stock"), of The North Face, Inc., a Delaware corporation (the
"Company"). The principal executive offices of the Company are located at 2013
Farallon Drive, San Leandro, California 94577.
Item 2. Identity and Background.
(a), (b) The names and address of the person filing this Schedule (the
"Reporting Party") is:
James G. Fifield
The North Face, Inc.
2013 Farallon Drive
San Leandro, CA 94572
(c) The Reporting Party is the Chief Executive Officer and President
and a director of the Company.
(d), (e) The Reporting Party has not, during the last five years, been
(i) convicted in a criminal proceeding or (ii) a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction as a result of which
such person was subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
(f) The Reporting Party is a citizen of the United States.
Item 3. Source and Amount of Funds or Other Consideration.
On May 13, 1998 the reporting Party purchased 665,060 shares (the
"Purchase Shares") of common Stock from the Company. The aggregate purchase
price for such shares was $14,049,392.50 of which $7,500,000 was paid with
personal funds and $ 6,549,392.50 was paid in the form of a thirty-day full
recourse promissory note. The note is secured by the pledge of 310,030 of the
Purchased Shares pursuant to a Pledge Agreement between the Reporting Party and
the Company (the "Pledge Agreement").
The Reporting Person had previously (i) purchased 45,000 shares of
Common Stock using personal funds and (ii) been granted an option to purchase a
total of 25,000 shares of Common Stock (the "1996 Option") which is exercisable
with respect to 8,334 shares of Common Stock as of May 13, 1998. The 1996 Option
becomes exercisable with respect to one half the remaining shares on each of
September 11, 1998 and September 11, 1999. The 1996 Option was issued under the
Company's 1996 Stock Option Plan for Non-Employee Directors.
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CUSIP No. 65931710 Page 4 of 6 Pages
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Item 4. Purpose of Transaction.
The Purchased Shares were purchased by the Reporting party for
investment in connection with the Reporting Party entering into an Employment
Agreement (the "Employment Agreement") with the Company. The Employment
Agreement provides, among other things, that the Reporting Party will be
employed by the Company as its Chief Executive Officer and President and as the
Chairman of the Board of the Company upon the resignation of the Company's
current Chairman no later than April 30, 1999. The Employment Agreement also
provides that the Company will nominate the Reporting Party for election as a
director of the Company for so long as he is employed by the Company. Pursuant
to the Employment Agreement, the company granted the Reporting Person an option
to purchase 900,000 shares of Common Stock (the "1998 Option") under the
Company's 1998 Non-Statutory Option Plan. The option vests with respect to
60,000 shares on each of the first five anniversaries of May 18, 1998. The
option vests with respect to the remaining 600,000 shares on May 18, 2003
subject to acceleration based on the financial performance of the Company, the
termination of the Reporting Party's employment without "cause" or the Reporting
Party's resignation for "good reason" (each as defined in the Employment
Agreement). Vesting of the 1998 Option is accelerated upon a "change of control"
of the Company (as defined in the Employment Agreement). The Employment
Agreement provides that the Company will file a registration statement under the
Securities Act of 1933 covering the Purchased Shares and the shares of Common
Stock issuable upon exercise of the 1998 Option no later than 90 days after May
18, 1998.
Except for the Employment Agreement, the Reporting Party has no
intention, plan or proposal with respect to:
1. The acquisition by any person of additional securities of the
issuer, or the disposition of securities of the issuer;
2. An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the issuer or any of its
subsidiaries;
3. A sale or transfer of a material amount of assets of the issuer or
any of its subsidiaries;
4. Any change in the present Board of Directors or management of the
issuer, including any plan or proposals to change the number or term
of directors or to fill any existing vacancy on the Board;
5. Any material change in the present capitalization or dividend policy
of the issuer;
6. Any other material change in the issuer's business or corporate
structure;
7. Changes in the issuer's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control
of the issuer by any person;
8. Causing a class of securities of the issuer to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
securities association;
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CUSIP No. 65931710 Page 5 of 6 Pages
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9. A class of equity securities of the issuer becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Act;
or
10. Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
To the Reporting Party's knowledge, the aggregate number of shares of
Common Stock outstanding as of the date hereof is 12,208,819, including the
Purchase Shares.
(a), (b) As of the close of business on the date hereof, Reporting
Party beneficially owned and had the sole power to vote and dispose of 718,394
shares of Common Stock, representing 5.9% of the Common Stock outstanding.
(c) Except as set forth above, the Reporting Party has not effected any
transaction in shares of Common Stock during the preceding 60 days.
(d) Except as set forth above and pursuant to customary default
provisions contained in the Pledge Agreement, to the knowledge of the Reporting
Party, no person other than the Reporting Party has the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the sale of,
the shares of Common Stock identified in Item 5.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as set forth above, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the person named in
Item 2 and any person with respect to any security of the Company.
Item 7. Material to Be Filed as Exhibits
Exhibit 1. Sections 4(c) and 4(d) of the Employment Agreement, dated as
of May 13, 1998, between the Reporting Party and the Company
relating to the purchase of the Purchased Shares.
Exhibit 2. Stock Pledge Agreement, dated as of May 13, 1998, between
the Reporting Party and the Company.
Exhibit 3. Promissory Note, dated May 13, 1998, by the Reporting Party
in favor of the Company.
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CUSIP No. 65931710 Page 6 of 6 Pages
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Signature
After reasonable inquiry and to the best of his knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: May 22, 1998
/s/ James G. Fifield
--------------------
James G. Fifield
Exhibit 1
Sections 4(c) and (d) of the Employment Agreement between James Fifield and the
North Face, Inc., dated May 13, 1998.
(c) Stock Purchase.
(i) Purchase. On the signing date of this Agreement, the
Company agrees to issue and sell to Executive, and Executive agrees to purchase
from the Company, that number of shares of the Company's Common Stock having a
fair market value (based on the closing market price on the signing date of this
Agreement), when combined with the forty-five thousand (45,000) shares of
Company Common Stock currently owned by Executive, of fifteen million dollars
($15,000,000) (the new shares being purchased referred to herein as the
"Shares") for a price equal to 100% of the fair market value of such Shares on
such date. At least $7,500,000 of such purchase price shall be paid to the
Company by wire transfer or by cashiers' check from Executive. At Executive's
option, the balance of the purchase price may be paid to the Company by
Executive in the form of a thirty-day full recourse promissory note, bearing
interest at a 5.43% annual rate and secured by the Shares purchased with such
note. The parties agree and acknowledge that the sale and issuance of such
Shares is an inducement essential to Executive's entering into this Agreement
with the Company.
(ii) Risk. Executive is aware that an investment in the
Company is highly speculative, that there can be no assurance as to what, if
any, return there may be on Executive's investment in the Shares, and that there
can be no assurance that Executive will not incur a loss of some or all of the
amount invested. Executive is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
be able to evaluate the risks and merits of the proposed investment and to reach
an informed and knowledgeable decision to acquire the Shares.
(iii) Experience. Executive has substantial experience in
evaluating and investing in private placement transactions of securities.
Executive is capable of evaluating the merits and risks of its investment in the
Company and has the capacity to protect his or her own interests.
(iv) Investment. Executive is acquiring the Shares for
investment for his own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof. Executive
further represents that he does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to the Shares.
(v) Registration Exemption. Executive understands and
acknowledges that the offering of the Shares will not be registered under the
Securities Act of 1933, as amended (the "Securities Act") on the grounds that
the sale is exempt pursuant to Section 4(2) of the
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Securities Act, and that the Company's reliance on such exemption is predicated
on Executive's representations set forth herein.
(vi) Rule 144. Executive acknowledges that the Shares must be
held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from such registration is available. Executive is aware of
the provisions of Rule 144 promulgated under the Securities Act which permit
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things, the existence
of a public market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of shares being sold during any three-month period
not exceeding specified limitations.
(vii) Access to Data. Executive has had an opportunity to
discuss the Company's business, management and financial affairs with its
management and the opportunity to review the Company's facilities and financial
data. Executive has also had an opportunity to ask questions of officers of the
Company, which questions were answered to his satisfaction. Executive
understands that such discussions, as well as any written information issued by
the Company were intended to describe certain aspects of the Company's business
and prospects but were not a thorough or exhaustive description.
(viii) Registration Rights.
(A) Restrictions on Transferability. The Shares shall
not be transferable except upon the conditions specified in this Agreement,
which conditions are intended to ensure compliance with the provisions of the
Securities Act. Executive will cause any proposed transferee of the Shares held
by the Executive to agree to take and hold such Shares subject to the provisions
and upon the conditions specified in this Agreement.
(B) Restrictive Legend. Each certificate representing
the Shares and any shares issued upon conversion of the Shares pursuant to any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section
4(c)(viii)(C) below) be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF
THE AGREEMENTS COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS
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CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
(C) Notice of Proposed Transfers. Executive agrees to
comply in all respects with the provisions of this Section 4(c)(viii)(C). Prior
to any proposed transfer of any of the Shares, unless there is in effect a
registration statement under the Securities Act covering the proposed transfer
or such transfer is made in compliance with Rule 144, Executive shall give
written notice to the Company of his intention to effect such transfer. Each
such notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and shall, if the Company so requests, be accompanied
(except in transactions made in compliance with Rule 144) by either (i) an
unqualified written opinion of legal counsel who shall be reasonably
satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Shares may be effected without registration under
the Securities Act, or (ii) a "No Action" letter from the Securities & Exchange
Commission (the "Commission") to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon Executive shall
be entitled to transfer the Shares in accordance with the terms of the notice
delivered by Executive to the Company; provided, however, that no opinion or No
Action letter need be obtained with respect to a transfer to (1) Executive's
estate, (2) the spouse, children, grandchildren or spouse of such children or
grandchildren of the Executive (the "Family Members") or (3) to any trust for
the benefit of the Executive or any Family Members, in each case if the
transferee agrees to be subject to the terms hereof. Each certificate evidencing
the Shares transferred as above provided shall bear the appropriate restrictive
legend set forth in Section 4(c)(viii)(B) above, except that such certificate
shall not bear such restrictive legend if in the opinion of counsel for the
Company such legend is not required in order to establish compliance with any
provision of the Securities Act.
(D) Expenses of Registration. All Registration
Expenses (as defined below) incurred in connection with any registration
pursuant to Section 4(c)(viii)(E) shall be borne by the Company; provided,
however, that the Company shall not be required to bear the cost of fees and
disbursement of counsel to Executive. All Selling Expenses (as defined below)
relating to securities registered by Executive shall be borne by Executive on
the basis of the number of shares so registered.
(E) Registration on Form S-3. As soon as practicable
after the Employment Commencement Date but, in any event, no later than ninety
(90) days following the Employment Commencement Date, the Company will file a
registration statement on Form S-3 with the Commission covering the Shares and
any shares acquired by Executive upon exercise of stock options granted to
Executive pursuant to Section 4(d) hereof (the "Option Shares") (and any shares
issued upon conversion of the Shares or the Option Shares pursuant to any stock
split, stock dividend, recapitalization, merger, consolidation or similar
event), and will use its commercially reasonable best efforts to cause such
registration statement to be declared effective as soon as is practicable
thereafter.
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(F) Registration Procedures. The Company will keep
Executive advised in writing as to the filing of the registration statement and
as to the status thereof. At its expense the Company will:
(I) Keep such registration statement
effective until Executive has completed the distribution of all of the
securities covered by such registration statement; and
(II) Furnish such number of prospectuses and
other documents incident thereto as Executive from time to time may reasonably
request.
(III) prepare and file with the Commission
any necessary amendments and supplements to the registration statement. and the
prospectus used in connection therewith, as may be necessary to keep such
registration statement effective and to comply with the Securities Act and the
rules and regulations thereunder and the instructions to Form S-3 with respect
to the disposition of all securities covered by the registration statement;
(IV) use its best efforts to register or
qualify all securities covered by the registration statement under the
securities or blue sky laws of such jurisdictions where an exemption is not
available;
(V) notify the Executive upon discovery
that, or upon the occurrence of an event as a result of which, the registration
statement or prospectus as then in effect includes an untrue statement of
material fact or omits to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(VI) use its best efforts to obtain and
maintain the quotation of the Shares and Option Shares on the Nasdaq National
Market;
(VII) promptly notify the Executive of any
stop order issued or threatened by the Commission and take all reasonable steps
to prevent the entry of such order or use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible time; and
(VIII) otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission and make
available to securityholders as soon as reasonably practicable an earnings
statement covering a period of 12 months beginning three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(G) Suspension of Registration. Executive agrees
that, for such period of time as is reasonably requested by the Company, he will
not make any sale of Shares or Option Shares registered pursuant to this Section
4(c)(viii) if he receives a certificate signed in good faith by an executive
officer of the Company indicating that (I) the sale of Shares or Option Shares
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would require disclosure of a proposed transaction involving the Company, which
disclosure would have a material adverse effect on the negotiation of such
transaction or (II) the prospectus included in the registration statement
contains an untrue statement of a material fact or omits any material fact
necessary to make the statements therein, in the light of the circumstances
under which they are made, not misleading. In the case of an event described in
clause (I) of this Section 4(c)(viii)(G), the period of time Executive shall be
required not to make any sale of Shares or Option Shares registered in this
Section 4(c)(viii) shall not exceed sixty (60) days. In the case of the event
described in clause (II) of this Section 4(c)(viii)(G), the Company will use its
best efforts to amend or otherwise correct such prospectus as soon as
practicable, but in no event more than thirty (30) days after the date upon
which the Company notifies Executive of such event.
(H) Termination of Registration Rights. The Company's
obligation to register the Shares and Option Shares pursuant to Section
4(c)(viii)(E) shall terminate as to Shares or Option Shares, as the case may be,
at such time as Executive is eligible to sell such Shares or Option Shares, as
the case may be, pursuant to Rule 144(k) promulgated under the Securities Act
and the Company will cause new certificates representing such Shares or Option
Shares, as the case may be (without any restrictive legends) to be issued to the
Executive (or other holder of such Shares or Option Shares) at such time.
(I) Information by Executive. Executive shall furnish
to the Company such information regarding Executive and the distribution
proposed by Executive as the Company may request in writing and as shall be
required in connection with any registration referred to in this Agreement.
(J) Indemnification. In the event that any Shares or
Options Shares are included in a registration statement under this Section
4(c)(viii):
(I) To the extent permitted by law, the
Company will indemnify and hold harmless Executive, any underwriter (as defined
in the Securities Act) for Executive and each person, if any, who controls such
underwriter within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "1934 Act") against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law; and the Company will pay, as incurred,
to Executive, each such underwriter or controlling person any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action, as such expenses
are incurred; provided, however, that
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the indemnity agreement contained in this Section 4(c)(viii)(J)(I) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with information furnished expressly for use in
connection with such registration by Executive or any underwriter or controlling
person.
(II) To the extent permitted by law,
Executive will indemnify and hold harmless the Company, each of its directors,
each of its officers who has signed the registration statement, each person, if
any, who controls the Company within the meaning of the Securities Act or the
1934 Act, any underwriter and any controlling person of any such underwriter,
severally but not jointly, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by Executive expressly for use in
connection with such registration; and Executive will pay, as incurred, any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this Section 4(c)(viii)(J)(II), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
4(c)(viii)(J)(II) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of Executive, which consent shall not be unreasonably withheld;
provided, further, that in no event shall Executive's cumulative, aggregate
liability under this Section 4(c)(viii)(J)(II) exceed the gross proceeds from
the sale or offering of Shares or Option Shares by Executive.
(III) Promptly after receipt by an
indemnified party under this Section 4(c)(viii)(J) of notice of the commencement
of any action (including any governmental action), such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party under
this Section 4(c)(viii)(J), deliver to the indemnifying party a written notice
of the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with one counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the indemnified party under this Section 4(c)(viii)(J) unless the failure to
deliver notice is materially prejudicial to its ability to defend such
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action. Any omission to so deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 4(c)(viii)(J).
(IV) If the indemnification provided for in
this Section 4(c)(viii)(J) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations; provided, however, that in no event shall Executive's
cumulative, aggregate liability under this Section 4(c)(viii)(J)(IV), or under
Section 4(c)(viii)(J)(IV) exceed the gross proceeds from the sale or offering of
Shares or Option Shares by Executive. Notwithstanding anything to the contrary
herein, no party shall be liable for contribution under this Section
4(c)(viii)(J)(IV), except to the extent and under the circumstances as such
party would have been liable to indemnity under Section 4(c)(viii)(J)(I) or
Section 4(c)(viii)(J)(II), as the case may be, if such indemnification were
enforceable under applicable law. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(K) Definitions. For purposes of this Section 4(c),
the following definitions shall apply:
The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declara tion or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by
the Company in complying with Section 4(c)(viii)(E) hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
and fees and disbursements of counsel for the Company.
"Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by Executive.
(d) Stock Option. Upon the Employment Commencement Date, Executive
shall be granted a nonstatutory stock option covering nine hundred thousand
(900,000) shares of Company Common Stock with a per share exercise price equal
to 100% of the per share fair market value on the date of grant (the "Option").
The parties agree and acknowledge that the grant of the Option is an inducement
essential to Executive's entering into this Agreement with
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<PAGE>
the Company. The Option shall be for a term of ten years, or shorter upon
termination of Executive's employment with the Company for "Cause" (as defined
herein). Except as otherwise specified in this Agreement, the Option is in all
respects subject to the terms, definitions and provisions of the Company's 1998
Non-Statutory Stock Option Plan (the "Stock Option Plan") and the standard form
of option agreement thereunder (the "Option Agreement") attached hereto as
Exhibit B. Any shares issuable pursuant to the Option shall be registered by the
Company on Form S-8 prior to any vesting of the Option. The Company represents
that it has or will obtain any necessary authority form any regulatory body to
effect the lawful grant of the Option and the issuance and sale of the Shares
subject to the Option.
(i) 300,000 Share Employment-Based Vesting Component. Three
hundred thousand (300,000) shares subject to the Option shall vest as to twenty
percent (20%) (i.e., 60,000 shares) on each anniversary of the Employment
Commencement Date, so as to be one hundred percent (100%) vested on the fifth
anniversary of the Employment Commencement Date, subject to Executive remaining
employed by the Company on such vesting dates.
(ii) Performance/Employment-Based "Hybrid" Vesting Component.
The remaining six hundred thousand (600,000) shares subject to the Option (the
"Hybrid Vesting Component") shall vest one hundred percent (100%) on the fifth
anniversary of the Employment Commencement Date, subject to Executive remaining
employed by the Company on such vesting date; subject to accelerated vesting as
follows:
(A) 15% Performance Tranche. One hundred and fifty
thousand (150,000) shares of the Hybrid Vesting Component (the "15% Performance
Tranche") shall vest as follows:
(I) With respect to thirty thousand (30,000)
shares of the 15% Performance Tranche (the "First-Year 15% Sub-Tranche"), such
shares shall vest upon the earliest of the following dates (i) the date of the
issuance of the Company's audited annual financial statements for fiscal year
1998, but only if such financial statements reflect at least a fifteen percent
(15%) increase in Company net income after tax, determined in accordance with
generally accepted U.S. accounting principles, but excluding for purposes of
such computation any Company expenses related to the relocation of the Company's
corporate headquarters ("Net Income"), when measured against the Company's 1997
Net Income, (ii) the date of the issuance of the Company's audited annual
financial statements for fiscal year 1999, but only if such financial statements
reflect at least a thirty-two percent (32%) increase in Company Net Income when
measured against the Company's 1997 Net Income, (iii) the date of the issuance
of the Company's audited annual financial statements for fiscal year 2000, but
only if such financial statements reflect at least a fifty-two percent (52%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, (iv) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a seventy-five percent (75%) increase in Company Net Income when
measured against the Company's 1997 Net Income, or (v) the date of the issuance
of the Company's audited annual financial statements for fiscal year 2002, but
only if such financial
8
<PAGE>
statements reflect at least a one hundred and one percent (101%) increase in
Company Net Income when measured against the Company's 1997 Net Income, with any
such vesting of the First-Year 15% Sub-Tranche conditioned upon Executive's
remaining an employee of the Company as of the vesting date.
(II) With respect to a separate thirty
thousand (30,000) shares of the 15% Performance Tranche (the "Second-Year 15%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 1999, but only if such financial statements reflect
at least a thirty-two percent (32%) increase in Company Net Income when measured
against the Company's 1997 Net Income, (ii) the date of the issuance of the
Company's audited annual financial statements for fiscal year 2000, but only if
such financial statements reflect at least a fifty-two percent (52%) increase in
Company Net Income when measured against the Company's 1997 Net Income, (iii)
the date of the issuance of the Company's audited annual financial statements
for fiscal year 2001, but only if such financial statements reflect at least a
seventy-five percent (75%) increase in Company Net Income when measured against
the Company's 1997 Net Income, or (iv) the date of the issuance of the Company's
audited annual financial statements for fiscal year 2002, but only if such
financial statements reflect at least a one hundred and one percent (101%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, with any such vesting of the Second-Year 15% Sub-Tranche conditioned
upon Executive's remaining an employee of the Company as of the vesting date.
(III) With respect to a separate thirty
thousand (30,000) shares of the 15% Performance Tranche (the "Third-Year 15%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2000, but only if such financial statements reflect
at least a fifty-two percent (52%) increase in Company Net Income when measured
against the Company's 1997 Net Income, (ii) the date of the issuance of the
Company's audited annual financial statements for fiscal year 2001, but only if
such financial statements reflect at least a seventy-five percent (75%) increase
in Company Net Income when measured against the Company's 1997 Net Income, or
(iii) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2002, but only if such financial statements reflect
at least a one hundred and one percent (101%) increase in Company Net Income
when measured against the Company's 1997 Net Income, with any such vesting of
the Third-Year 15% Sub-Tranche conditioned upon Executive's remaining an
employee of the Company as of the vesting date.
(IV) With respect to a separate thirty
thousand (30,000) shares of the 15% Performance Tranche (the "Fourth-Year 15%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a seventy-five percent (75%) increase in Company Net Income when
measured against the Company's 1997 Net Income, or (ii) the date of the issuance
of the Company's audited annual financial statements for fiscal year 2002, but
only if such financial statements reflect at least a one hundred and one percent
(101%) increase in Company Net Income when
9
<PAGE>
measured against the Company's 1997 Net Income, with any such vesting of the
Fourth-Year 15% Sub-Tranche conditioned upon Executive's remaining an employee
of the Company as of the vesting date.
(V) With respect to a separate thirty
thousand (30,000) shares of the 15% Performance Tranche (the "Fifth-Year 15%
Sub-Tranche"), such shares shall vest upon the date of the issuance of the
Company's audited annual financial statements for fiscal year 2002, but only if
such financial statements reflect at least a one hundred and one percent (101%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, with any such vesting of the Fifth-Year 15% Sub-Tranche conditioned upon
Executive's remaining an employee of the Company as of the vesting date.
(B) 20% Performance Tranche. A separate one hundred
and fifty thousand (150,000) shares of the Hybrid Vesting Component (the "20%
Performance Tranche") shall vest as follows:
(I) With respect to thirty thousand (30,000)
shares of the 20% Performance Tranche (the "First-Year 20% Sub-Tranche"), such
shares shall vest upon the earliest of the following dates (i) the date of the
issuance of the Company's audited annual financial statements for fiscal year
1998, but only if such financial statements reflect at least a twenty percent
(20%) increase in Company Net Income when measured against the Company's 1997
Net Income, (ii) the date of the issuance of the Company's audited annual
financial statements for fiscal year 1999, but only if such financial statements
reflect at least a forty-four percent (44%) increase in Company Net Income when
measured against the Company's 1997 Net Income, (iii) the date of the issuance
of the Company's audited annual financial statements for fiscal year 2000, but
only if such financial statements reflect at least a seventy-three percent (73%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, (iv) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a one hundred and seven percent (107%) increase in Company Net Income
when measured against the Company's 1997 Net Income, or (v) the date of the
issuance of the Company's audited annual financial statements for fiscal year
2002, but only if such financial statements reflect at least a one hundred and
forty-nine percent (149%) increase in Company Net Income when measured against
the Company's 1997 Net Income, with any such vesting of the First-Year 20%
Sub-Tranche conditioned upon Executive's remaining an employee of the Company as
of the vesting date.
(II) With respect to a separate thirty
thousand (30,000) shares of the 20% Performance Tranche (the "Second-Year 20%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 1999, but only if such financial statements reflect
at least a forty-four percent (44%) increase in Company Net Income when measured
against the Company's 1997 Net Income, (ii) the date of the issuance of the
Company's audited annual financial statements for fiscal year 2000, but only if
such financial statements reflect at least a seventy-three percent (73%)
increase in Company Net Income when measured against the
10
<PAGE>
Company's 1997 Net Income, (iii) the date of the issuance of the Company's
audited annual financial statements for fiscal year 2001, but only if such
financial statements reflect at least a one hundred and seven percent (107%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, or (iv) the date of the issuance of the Company's audited annual
financial statements for fiscal year 2002, but only if such financial statements
reflect at least a one hundred and forty-nine percent (149%) increase in Company
Net Income when measured against the Company's 1997 Net Income, with any such
vesting of the Second-Year 20% Sub-Tranche conditioned upon Executive's
remaining an employee of the Company as of the vesting date.
(III) With respect to a separate thirty
thousand (30,000) shares of the 20% Performance Tranche (the "Third-Year 20%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2000, but only if such financial statements reflect
at least a seventy-three percent (73%) increase in Company Net Income when
measured against the Company's 1997 Net Income, (ii) the date of the issuance of
the Company's audited annual financial statements for fiscal year 2001, but only
if such financial statements reflect at least a one hundred and seven percent
(107%) increase in Company Net Income when measured against the Company's 1997
Net Income, or (iii) the date of the issuance of the Company's audited annual
financial statements for fiscal year 2002, but only if such financial statements
reflect at least a one hundred and forty-nine percent (149%) increase in Company
Net Income when measured against the Company's 1997 Net Income, with any such
vesting of the Third-Year 20% Sub-Tranche conditioned upon Executive's remaining
an employee of the Company as of the vesting date.
(IV) With respect to a separate thirty
thousand (30,000) shares of the 20% Performance Tranche (the "Fourth-Year 20%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a one hundred and seven percent (107%) increase in Company Net Income
when measured against the Company's 1997 Net Income, or (ii) the date of the
issuance of the Company's audited annual financial statements for fiscal year
2002, but only if such financial statements reflect at least a one hundred and
forty-nine percent (149%) increase in Company Net Income when measured against
the Company's 1997 Net Income, with any such vesting of the Fourth-Year 20%
Sub-Tranche conditioned upon Executive's remaining an employee of the Company as
of the vesting date.
(V) With respect to a separate thirty
thousand (30,000) shares of the 20% Performance Tranche (the "Fifth-Year 20%
Sub-Tranche"), such shares shall vest upon the date of the issuance of the
Company's audited annual financial statements for fiscal year 2002, but only if
such financial statements reflect at least a one hundred and forty-nine percent
(149%) increase in Company Net Income when measured against the Company's 1997
Net Income, with any such vesting of the Fifth-Year 20% Sub-Tranche conditioned
upon Executive's remaining an employee of the Company as of the vesting date.
11
<PAGE>
(C) 25% Performance Tranche. A separate one hundred
and fifty thousand (150,000) shares of the Hybrid Vesting Component (the "25%
Performance Tranche") shall vest as follows:
(I) With respect to thirty thousand (30,000)
shares of the 25% Performance Tranche (the "First-Year 25% Sub-Tranche"), such
shares shall vest upon the earliest of the following dates (i) the date of the
issuance of the Company's audited annual financial statements for fiscal year
1998, but only if such financial statements reflect at least a twenty-five
percent (25%) increase in Company Net Income when measured against the Company's
1997 Net Income, (ii) the date of the issuance of the Company's audited annual
financial statements for fiscal year 1999, but only if such financial statements
reflect at least a fifty-six percent (56%) increase in Company Net Income when
measured against the Company's 1997 Net Income, (iii) the date of the issuance
of the Company's audited annual financial statements for fiscal year 2000, but
only if such financial statements reflect at least a ninety-five percent (95%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, (iv) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a one hundred and forty-four percent (144%) increase in Company Net
Income when measured against the Company's 1997 Net Income, or (v) the date of
the issuance of the Company's audited annual financial statements for fiscal
year 2002, but only if such financial statements reflect at least a two hundred
and five percent (205%) increase in Company Net Income when measured against the
Company's 1997 Net Income, with any such vesting of the First-Year 25%
Sub-Tranche conditioned upon Executive's remaining an employee of the Company as
of the vesting date.
(II) With respect to a separate thirty
thousand (30,000) shares of the 25% Performance Tranche (the "Second-Year 25%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2000, but only if such financial statements reflect
at least a fifty-six percent (56%) increase in Company Net Income when measured
against the Company's 1997 Net Income, (ii) the date of the issuance of the
Company's audited annual financial statements for fiscal year 2000, but only if
such financial statements reflect at least a ninety-five percent (95%) increase
in Company Net Income when measured against the Company's 1997 Net Income, (iii)
the date of the issuance of the Company's audited annual financial statements
for fiscal year 2001, but only if such financial statements reflect at least a
one hundred and forty-four percent (144%) increase in Company Net Income when
measured against the Company's 1997 Net Income, or (iv) the date of the issuance
of the Company's audited annual financial statements for fiscal year 2002, but
only if such financial statements reflect at least a two hundred and five
percent (205%) increase in Company Net Income when measured against the
Company's 1997 Net Income, with any such vesting of the Second-Year 25%
Sub-Tranche conditioned upon Executive's remaining an employee of the Company as
of the vesting date.
(III) With respect to a separate thirty
thousand (30,000) shares of the 25% Performance Tranche (the "Third-Year 25%
Sub-Tranche"), such shares shall
12
<PAGE>
vest upon the earliest of the following dates (i) the date of the issuance of
the Company's audited annual financial statements for fiscal year 2000, but only
if such financial statements reflect at least a ninety-five percent (95%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, (ii) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a one hundred and forty-four percent (144%) increase in Company Net
Income when measured against the Company's 1997 Net Income, or (iii) the date of
the issuance of the Company's audited annual financial statements for fiscal
year 2002, but only if such financial statements reflect at least a two hundred
and five percent (205%) increase in Company Net Income when measured against the
Company's 1997 Net Income, with any such vesting of the Third-Year 25%
Sub-Tranche conditioned upon Executive's remaining an employee of the Company as
of the vesting date.
(IV) With respect to a separate thirty
thousand (30,000) shares of the 25% Performance Tranche (the "Fourth-Year 25%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a one hundred and forty-four percent (144%) increase in Company Net
Income when measured against the Company's 1997 Net Income, or (ii) the date of
the issuance of the Company's audited annual financial statements for fiscal
year 2002, but only if such financial statements reflect at least a two hundred
and five percent (205%) increase in Company Net Income when measured against the
Company's 1997 Net Income, with any such vesting of the Fourth-Year 25%
Sub-Tranche conditioned upon Executive's remaining an employee of the Company as
of the vesting date.
(V) With respect to a separate thirty
thousand (30,000) shares of the 25% Performance Tranche (the "Fifth-Year 25%
Sub-Tranche"), such shares shall vest upon the date of the issuance of the
Company's audited annual financial statements for fiscal year 2002, but only if
such financial statements reflect at least a two hundred and five percent (205%)
increase in Company Net Income when measured against the Company's 1997 Net
Income, with any such vesting of the Fifth-Year 25% Sub-Tranche conditioned upon
Executive's remaining an employee of the Company as of the vesting date.
(D) 30% Performance Tranche. A separate one hundred
and fifty thousand (150,000) shares of the Hybrid Vesting Component (the "30%
Performance Tranche") shall vest as follows:
(I) With respect to thirty thousand (30,000)
shares of the 30% Performance Tranche (the "First-Year 30% Sub-Tranche"), such
shares shall vest upon the earliest of the following dates (i) the date of the
issuance of the Company's audited annual financial statements for fiscal year
1998, but only if such financial statements reflect at least a thirty percent
(30%) increase in Company Net Income when measured against the Company's 1997
Net Income, (ii) the date of the issuance of the Company's audited annual
financial statements for fiscal year 1999, but only if such financial statements
reflect at least a sixty-nine
13
<PAGE>
percent (69%) increase in Company Net Income when measured against the Company's
1997 Net Income, (iii) the date of the issuance of the Company's audited annual
financial statements for fiscal year 2000, but only if such financial statements
reflect at least a one hundred and twenty percent (120%) increase in Company Net
Income when measured against the Company's 1997 Net Income, (iv) the date of the
issuance of the Company's audited annual financial statements for fiscal year
2001, but only if such financial statements reflect at least a one hundred and
eighty-six percent (186%) increase in Company Net Income when measured against
the Company's 1997 Net Income, or (v) the date of the issuance of the Company's
audited annual financial statements for fiscal year 2002, but only if such
financial statements reflect at least a two hundred and seventy-one percent
(271%) increase in Company Net Income when measured against the Company's 1997
Net Income, with any such vesting of the First-Year 30% Sub-Tranche conditioned
upon Executive's remaining an employee of the Company as of the vesting date.
(II) With respect to a separate thirty
thousand (30,000) shares of the 30% Performance Tranche (the "Second-Year 30%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2000, but only if such financial statements reflect
at least a sixty-nine percent (69%) increase in Company Net Income when measured
against the Company's 1997 Net Income, (ii) the date of the issuance of the
Company's audited annual financial statements for fiscal year 2000, but only if
such financial statements reflect at least a one hundred and twenty percent
(120%) increase in Company Net Income when measured against the Company's 1997
Net Income, (iii) the date of the issuance of the Company's audited annual
financial statements for fiscal year 2001, but only if such financial statements
reflect at least a one hundred and eighty-six percent (186%) increase in Company
Net Income when measured against the Company's 1997 Net Income, or (iv) the date
of the issuance of the Company's audited annual financial statements for fiscal
year 2002, but only if such financial statements reflect at least a two hundred
and seventy-one percent (271%) increase in Company Net Income when measured
against the Company's 1997 Net Income, with any such vesting of the Second-Year
30% Sub-Tranche conditioned upon Executive's remaining an employee of the
Company as of the vesting date.
(III) With respect to a separate thirty
thousand (30,000) shares of the 30% Performance Tranche (the "Third-Year 30%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2000, but only if such financial statements reflect
at least a one hundred and twenty percent (120%) increase in Company Net Income
when measured against the Company's 1997 Net Income, (ii) the date of the
issuance of the Company's audited annual financial statements for fiscal year
2001, but only if such financial statements reflect at least a one hundred and
eighty-six percent (186%) increase in Company Net Income when measured against
the Company's 1997 Net Income, or (iii) the date of the issuance of the
Company's audited annual financial statements for fiscal year 2002, but only if
such financial statements reflect at least a two hundred and seventy-one percent
(271%) increase in Company Net Income when measured against the Company's 1997
Net Income, with any such vesting of
14
<PAGE>
the Third-Year 30% Sub-Tranche conditioned upon Executive's remaining an
employee of the Company as of the vesting date.
(IV) With respect to a separate thirty
thousand (30,000) shares of the 30% Performance Tranche (the "Fourth-Year 30%
Sub-Tranche"), such shares shall vest upon the earliest of the following dates
(i) the date of the issuance of the Company's audited annual financial
statements for fiscal year 2001, but only if such financial statements reflect
at least a one hundred and eighty-six percent (186%) increase in Company Net
Income when measured against the Company's 1997 Net Income, or (ii) the date of
the issuance of the Company's audited annual financial statements for fiscal
year 2002, but only if such financial statements reflect at least a two hundred
and seventy-one percent (271%) increase in Company Net Income when measured
against the Company's 1997 Net Income, with any such vesting of the Fourth-Year
30% Sub-Tranche conditioned upon Executive's remaining an employee of the
Company as of the vesting date.
(V) With respect to a separate thirty
thousand (30,000) shares of the 30% Performance Tranche (the "Fifth-Year 30%
Sub-Tranche"), such shares shall vest upon the date of the issuance of the
Company's audited annual financial statements for fiscal year 2002, but only if
such financial statements reflect at least a two hundred and seventy-one percent
(271%) increase in Company Net Income when measured against the Company's 1997
Net Income, with any such vesting of the Fifth-Year 30% Sub-Tranche conditioned
upon Executive's remaining an employee of the Company as of the vesting date.
15
Exhibit 2
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of May
13, 1998, is executed by James Fifield ("Pledgor") in favor of The North Face,
Inc., a Delaware corporation ("Company").
RECITALS
A. Pledgor has purchased from Company 665,060 shares of Common Stock of
Company pursuant to an Employment Agreement dated as of May 13, 1998, among
Company and Pledgor (the "Employment Agreement"), for an aggregate purchase
price of $14,049,392.50, and has executed a full recourse promissory note, a
copy of which is attached hereto as Exhibit A (the "Note"), in favor of Company
for the principal sum of $6,549,392.50.
B. To secure the payment when due of all amounts under the Note,
Pledgor is pledging 310,030 shares of the Common Stock of the Company pursuant
to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Pledgor hereby agrees with Company as follows:
1. Definitions. When used in this Pledge Agreement, the following terms
shall have the following respective meanings:
"Collateral" shall have the meaning given to that term in Paragraph
2 hereof.
"Obligations" shall mean and include all obligations owed by Pledgor
to Company under the Note including without limitation all interest,
fees, charges, expenses, attorneys' fees and accountants' fees and
costs chargeable to Pledgor or payable by Pledgor.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of California from time to time.
2. Pledge. As security for the payment and performance of the
Obligations, Pledgor hereby pledges and assigns to Company and grants to Company
a security interest in all right, title
-1-
<PAGE>
and interest of Pledgor in and to 310,030 shares of Common Stock of the Company
(the "Shares"), and all proceeds of the foregoing, including, without
limitation, all dividends, additional shares of stock, certificates and other
money and property received and receivable by Pledgor in connection with the
foregoing (the "Collateral"). Upon payment in full of all such Obligations, the
Company shall release its security interests in the Collateral and the Pledgor
shall be entitled to the return of the Shares.
3. Representations and Warranties. Pledgor represents and warrants to
Company that (a) upon delivery of the Shares to the Pledgor by the Company
pursuant to the Employment Agreement, Pledgor is and will be the record and
beneficial owner of the Collateral (or, in the case of after-acquired
Collateral, at the time Pledgor acquires rights in the Collateral, will be the
record and beneficial owner thereof) and no other person has (or, in the case of
after-acquired Collateral, at the time Pledgor acquires rights therein, will
have) any right, title, claim or interest (by way of lien or otherwise) in,
against or to the Collateral; (b) upon delivery to Company of all Collateral
consisting of securities, Company will have a first priority perfected security
interest in such Collateral; (c) Pledgor currently owns the Shares, which Shares
have been duly and validly issued and are fully paid and nonassessable; and (d)
Pledgor maintains his or her primary residence in the State of California.
4. Covenants. Pledgor hereby agrees (a) to perform all acts that may be
necessary to maintain, preserve, protect and perfect the Collateral, the lien
granted to Company therein and the first priority of such lien; (b) promptly to
deliver to Company all originals of certificates and other documents,
instruments and agreements evidencing the Shares, together with such blank stock
powers executed by Pledgor as Company may request; (c) to procure, execute and
deliver from time to time any endorsements, assignments, financing statements
and other documents, instruments and agreements and take other actions deemed
necessary or appropriate by Company to perfect, maintain and protect its lien
hereunder and the priority thereof; (d) to appear in and defend any action or
proceeding which may affect its title to or Company's interest in the
Collateral; and (e) not to surrender or lose possession of (other than to
Company), sell, encumber, lease, rent, or otherwise dispose of or transfer any
Collateral or right or interest therein and to keep the Collateral free of all
liens.
5. Voting Rights Prior to Default. Unless an Event of Default (as
defined in Subparagraph 6(a) hereof) shall have occurred and Company shall have
given notice to Pledgor of Company's intent to exercise its rights pursuant to
Subparagraph 6(b) below, Pledgor shall be permitted to exercise all voting with
respect to the Shares; provided, however, that no vote shall be cast or other
action taken which could impair the Collateral or which would be inconsistent
with or which could result in a default in the payment of principal or interest
under the Note.
6. Default and Remedies.
(a) Events of Default. Pledgor shall be deemed in default under this
Pledge Agreement upon the breach of any term of, or the occurrence of a default
in the payment when due of principal or interest under the Note (each an "Event
of Default").
-2-
<PAGE>
(b) Dividends, Voting Rights, Etc. Upon the occurrence of any Event
of Default, Company may, upon notice to Pledgor, to the extent permissible under
applicable law, (i) pay all dividends on Shares to the account of Company,
receive and collect all such dividends and make application thereof to the
obligations in such order as Company may determine, and (ii) register the Shares
in its name or the name of the Company's nominee, and the Company or the
Company's nominee may thereafter exercise (A) all voting, corporate and other
rights pertaining to the Shares at any meeting of shareholders of Company or
otherwise and (B) any and all rights of conversion, exchange, subscription and
any other rights, privileges or options pertaining to the Shares as if they were
the absolute owner thereof (including, without limitation, the right to exchange
at its discretion any and all of the Shares upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of the Company, or upon the exercise by Pledgor or Company of any
right, privilege or option pertaining to the Shares, and in connection
therewith, the right to deposit and deliver any and all of the Shares with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine), all without liability except to
account for property actually received by them, but Company shall have no duty
to Pledgor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(c) Additional Remedies. Upon the occurrence of an Event of Default,
Company may exercise, in addition to all other rights and remedies granted in
this Pledge Agreement and in the Note, all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, Company
may, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind to or upon Pledgor or any other person
(except notice of time and place of sale and any other notice required by law
referred to below) forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give an
option or options to purchase or otherwise dispose of and deliver the Collateral
or any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of Company or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. Company shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in Pledgor, which right or equity is hereby waived and released.
Company shall apply any proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred in respect thereof or incidental to the care or safekeeping of any of
the Collateral or in any way relating to the Collateral or the rights of Company
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel to Company, to the payment in whole or in part of the
Obligations, in such order as Company may elect, and only after such application
and after the payment by Company of any other amount required by any provision
of law, need Company account for the surplus, if any, to Pledgor. To the extent
permitted by applicable law, Pledgor waives all claims, damages and demands it
may acquire against Company arising out of the exercise by it of any rights
hereunder except as may arise solely from Company's gross negligence or willful
misconduct. If any notice of a proposed sale or other
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<PAGE>
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.
7. Sale of Shares.
(a) Private Sale. Pledgor recognizes that Company may be unable to
effect a public sale of any or all of the Shares, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws or otherwise, and may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers which will be obliged to agree, among other things, to acquire
such securities for its own account for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner. Company shall be under no obligation to delay a sale of any of the
Shares for the period of time necessary to register such securities for public
sale under the Securities Act, or under applicable state securities laws.
(b) Further Assurances. Pledgor further agrees to use its best
efforts to do or cause to be done all such other acts as may be necessary to
make such sale or sales of all or any portion of the Shares pursuant to this
Pledge Agreement valid and binding and in compliance with any and all other
applicable laws, rules and regulations of all governmental authorities. Pledgor
further agrees that a breach of any of the covenants contained in this Paragraph
7 will cause irreparable injury to Company, that Company has no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Paragraph 7 shall be specifically enforceable against
Pledgor.
8. Limitation on Duties Regarding Collateral. Company's sole duty with
respect to the custody, safekeeping and physical preservation of the Collateral
in its possession, under Section 9207 of the UCC or otherwise, shall be to deal
with it in the same manner as Company deals with similar securities and property
for its own account. Neither Company nor any of its employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of Pledgor or otherwise.
9. Miscellaneous.
(a) Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Company or Pledgor under this Pledge Agreement shall be duly given or made if
sent in writing by certified mail, recognized overnight courier or hand delivery
and shall be effective upon delivery to the recipient.
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<PAGE>
(b) Nonwaiver. No failure or delay on Company's part in exercising
any right hereunder shall operate as a waiver thereof or of any other right nor
shall any single or partial exercise of any such right preclude any other
further exercise thereof or of any other right.
(c) Amendments and Waivers. This Pledge Agreement may not be amended
or modified, nor may any of its terms be waived, except by written instruments
signed by Pledgor and Company. Each waiver or consent under any provision hereof
shall be effective only in the specific instances for the purpose for which
given.
(d) Assignments. This Pledge Agreement shall be binding upon and
inure to the benefit of Company and Pledgor and their respective successors and
assigns; provided that Pledgor may not assign its obligations hereunder without
the written consent of Company.
(e) Cumulative Rights, etc. The rights, powers and remedies of
Company under this Pledge Agreement shall be in addition to all rights, powers
and remedies given to Company by virtue of any applicable law, rule or
regulation of any governmental entity, the Note, any other agreement, all of
which rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Company's rights hereunder.
Pledgor waives any right to require Company to proceed against any person or to
exhaust any Collateral or to pursue any remedy in Company's power.
(f) Payments Free of Taxes, Etc. All payments made by Pledgor under
this Pledge Agreement shall be made by Pledgor free and clear of and without
deduction for any and all present and future taxes, levies, charges, deductions
and withholdings. In addition, Pledgor shall pay upon demand any stamp or other
taxes, levies or charges of any jurisdiction with respect to the execution,
delivery, registration, performance and enforcement of this Pledge Agreement.
(g) Partial Invalidity. If at any time any provision of this Pledge
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Pledge Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
(h) Governing Law. This Pledge Agreement shall be governed by and
construed in accordance with the laws of the State of California without
reference to conflicts of law rules.
(i) Authorized Action by Company. Upon the occurrence and during the
continuance of an Event of Default, Pledgor hereby irrevocably appoints Company
as its attorney-in-fact and agree that Company may perform (but Company shall
not be obligated to and shall incur no liability to Pledgor or any third party
for failure so to do) any act which Pledgor is obligated by this Pledge
Agreement to perform and to exercise such rights and powers as Pledgor might
exercise with respect to the Collateral, including, without limitation, the
right to (a) exercise (1) all voting, corporate and other rights pertaining to
the Shares at any meeting of shareholders of the Company or otherwise and (2)
any and all rights of conversion, exchange, subscription and any
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other rights, privileges or options pertaining to the Shares; (b) collect by
legal proceedings or otherwise and endorse, receive and receipt for all
dividends, interest, payments, proceeds and other sums and property now or
hereafter payable on or on account of the Collateral; (c) enter into any
extension, reorganization, deposit, merger, consolidation or other agreement
pertaining to, or deposit, surrender, accept, hold or apply other property in
exchange for the Collateral; (d) insure, process and preserve the Collateral;
(e) make any compromise or settlement, and take any action it deems advisable,
with respect to the Collateral and (f) pay any indebtedness of Pledgor relating
to the Collateral. Pledgor agrees to reimburse Company upon demand for any
reasonable costs and expenses, including, without limitation, attorneys' fees
and costs, Company may incur while acting as Pledgor's attorney-in-fact
hereunder, all of which costs and expenses are included in the Obligations.
IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be
executed as of the day and year first above written.
PLEDGOR
/s/ James Fifield
-----------------
James Fifield, an individual
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Exhibit 3
Conformed Copy
PROMISSORY NOTE
$6,549,392.50 San Leandro, California
May 13, 1998
FOR VALUE RECEIVED, James Fifield hereby promises to pay, and, by
pledging three hundred ten thousand thirty (310,030) shares of Common Stock of
The North Face, Inc., a Delaware corporation (the "Company"), hereby secures
such promise to pay, to the Company, the principal sum of six million five
hundred forty-nine thousand three hundred ninety-two dollars and fifty cents
($6,549,392.50) with interest thereon at the simple rate of 5.34 percent per
annum, compounded annually, at the principal offices of the Company, upon the
following terms and conditions:
The principal amount of this Note and all accrued but unpaid interest
from the date hereof shall be due June 12, 1998.
Executive shall have the right to prepay at any time, and from time to
time, without premium or penalty all or any portion of the principal and/or
accrued interest hereunder.
Executive hereby waives presentment, protest, demand for payment,
notice of dishonor and all other notices or demands in connection with the
delivery, acceptance, performance, default or endorsement of this Note.
This Note is a full recourse note and is originally secured by a pledge
of three hundred ten thousand thirty (310,030) shares of Common Stock of the
Company held by Executive pursuant to a Stock Pledge Agreement of even date
herewith which is on file with the Secretary of the Company.
Executive agrees to pay any costs of collection of this Note, including
without limitation reasonable attorneys' fees and costs, in the event it is not
fully paid when due.
Neither this Note nor the Stock Pledge Agreement may be assigned other
than to an affiliate of or successor to the Company.
This Note has been made and delivered in the State of California and
shall be construed in accordance with, and all actions arising hereunder shall
be governed by, the laws of the State of California.
EXECUTIVE
/s/ James Fifield
-----------------
James Fifield, an individual
