UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 1)*
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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)
------------------------------------
JAMES G. FIFIELD
C/O THE NORTH FACE, INC.
2013 FARALLON DRIVE
SAN LEANDRO, CA 94577
TEL. NO.: (510) 618-3500
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
------------------------------------
FEBRUARY 26, 1999
(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).
<PAGE>
SCHEDULE 13D
CUSIP No. 65931710 Page 2 of 8 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 710,060
SHARES
BENEFICIALLY OWNED 8 Shared Voting Power
BY EACH REPORTING
PERSON 10,000
WITH
9 Sole Dispositive Power
710,060
10 Shared Dispositive Power
10,000
11 Aggregate Amount Beneficially Owned by Each Reporting Person
720,060
12 Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions) [ ]
13 Percent of Class Represented by Amount in Row (11)
5.6%
14 Type of Reporting Person (See Instructions)
IN
<PAGE>
CUSIP No. 65931710 Page 3 of 8 Pages
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James G. Fifield (the "Reporting Party") hereby amends his report on Schedule
13D, dated May 13, 1998 (the "Schedule 13D"), relating to shares of Common
Stock, par value $.0025 per share (the "Common Stock"), of The North Face, Inc.,
a Delaware corporation (the "Company"). Capitalized terms used but not otherwise
defined herein have the respective meanings given to those terms in the Schedule
13D. The information set forth in the Exhibits attached hereto is expressly
incorporated herein by reference and the response to each item of this statement
is qualified in its entirety by the provisions of such Exhibits.
Item 2. Identity and Background.
Item 2 of the Schedule 13D is hereby amended by adding the following paragraph
at the end thereof:
As described in Item 4, on February 27, 1999 the Company entered in to
a Transaction Agreement (the "Transaction Agreement") with TNF Acquisition LLC
("TNFA"), regarding a recapitalization of the Company. On February 26, 1999, the
Reporting Party, TNFA and TNF Investment LLC, the sole member of TNFA ("TNFI"
and, together with TNFA, the "Investors") entered into two letter agreements
(the "Letter Agreements") in connection with the transactions contemplated by
the Transaction Agreement. As a result, the Reporting Party, the Investors and
GEI (as defined below) may be deemed to constitute a "group" within the meaning
of Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Neither the present filing nor anything contained herein shall
be construed as an admission that the Reporting Party, together with any or all
of the Investors, constitute a "person" or "group" for any purpose. Pursuant to
Rule 13d-1(k)(2) under the Exchange Act, the Reporting Party is making this
filing individually.
To the knowledge of the Reporting Party, each of TNFA and TNFI is a
Delaware limited liability company. To the knowledge of the Reporting Party,
TNFI is the sole member of TNFA and Green Equity Investors III, L.P., a Delaware
limited partnership ("GEI"), is the sole member of TNFI. To the knowledge of the
Reporting Party, the business address of each of TNFA, TNFI and GEI is 11111
Santa Monica Boulevard, Los Angeles, CA 90025.
Item 4. Purpose of Transaction.
Item 4 of the Schedule 13D is hereby amended by replacing the second
paragraph thereof with the following:
To the knowledge of the Reporting Party, on February 27, 1999 the
Company and TNFA entered in to the Transaction Agreement. The steps to be taken
pursuant to the Transaction Agreement include a tender offer by the Company for
any all of its Common Stock (except for the Common Stock held by the Reporting
Party) and the purchase of newly issued shares of Common Stock, representing a
controlling interest of the Company, by TNFA.
<PAGE>
CUSIP No. 65931710 Page 4 of 8 Pages
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The Transaction Agreement calls for the tender offer and stock purchase to be
followed by a merger between TNFA and the Company, with the Company as the
surviving corporation pursuant to which any shares of Common Stock not
previously tendered and redeemed (other than those held by the Reporting Party)
will be acquired for cash. Following the consummation of the transactions
contemplated by the Transaction Agreement, TNFI will own a majority of the
outstanding common stock of the Company.
On February 26, 1999, the Reporting Party and the Investors entered
into the Letter Agreements in connection with the transactions contemplated by
the Transaction Agreement. Pursuant to the first Letter Agreement:
1. The shares of Common Stock owned by the Reporting Party at the time
of the Letter Agreements (the "Owned Company Stock") will continue to be
outstanding at and after the closing of the transactions contemplated by the
Transaction Agreement (the "Closing"). The Owned Company Stock will constitute a
percentage of such class of Company equity issued and outstanding immediately
following the Closing proportional to the value of the Owned Company Stock
relative to the total equity of the Company after the Closing, based on the
price paid in connection with the Transaction to common shareholders of the
Company for their stock (the "Deal Price").
The Reporting Party and TNFI will enter into a Stockholders Agreement
at the Closing that will include customary terms and conditions regarding a
minority investor such as the Reporting Party, including piggyback registration
rights, a demand registration right and tag-along sale rights, drag-along sale
rights and a right of first refusal between the Reporting Party and TNFI. The
Stockholders Agreement will also provide that for so long as the Reporting Party
is employed by the Company, Reporting Party will be nominated to be a member of
the Company's Board of Directors (the "Board") and TNFI will vote its equity in
favor of Reporting Party's election. Any representatives of TNFI who are members
of the Board will vote for the Reporting Party to be Chairman of the Board and a
member of the Board's executive committee, compensation committee and any other
committee of the Board requested by the Reporting Party, so long as such
committee is not legally required to be comprised solely of outside directors or
the Board, based on the advice of counsel, determines that it would be
inadvisable for the Reporting Party to be a member of such committee. The
Reporting Party will continue to be nominated to be a member of the Board after
Reporting Party is no longer employed by the Company, and TNFI will vote its
equity in favor of Reporting Party's election, provided the Reporting Party
maintains a requisite level of equity investment in the Company.
2. The Reporting Party may purchase, directly from the Company or
through a purchase of equity in TNFI or TNFA, additional Company equity, within
the limits established in the Letter Agreements. Such additional equity will be
subject to the Stockholders Agreement.
3. The Reporting Party's 400,000 options to purchase Common Stock, at a
per-share exercise price of $9.63 per share, the vesting and exercisability of
which will be accelerated upon the Closing pursuant to their terms (the "Vested
In-the-Money Options"), will remain outstanding but the exercise price and
number of shares will be adjusted such that the per-share exercise price will be
equal to 30% of the fair market value of one share of the Common Stock
immediately following the Closing and the
<PAGE>
CUSIP No. 65931710 Page 5 of 8 Pages
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number of shares to which the Vested In-the-Money Options are subject also shall
be adjusted, so that the aggregate "spread" in such options following the
adjustment (i.e., the aggregate excess of the fair market value of the Company
equity subject to such options over the aggregate adjusted exercise price of
such options) is equal to the aggregate spread in the pre-adjustment Vested
In-the-Money Options at the Closing, based on the Deal Price. Shares obtained
upon the exercise of Vested In-the-Money Options will become subject to (and
entitled to the benefits of) the Stockholders Agreement, as if such shares were
Owned Company Stock.
4. The Reporting Party's 500,000 options to purchase Common Stock, at a
per-share exercise price of $21.00, the vesting and exercisability of which will
be accelerated upon the Closing pursuant to their terms (the "Vested
Out-of-the-Money Options"), will be canceled as of the Closing. In lieu of those
options, the Reporting Party will receive a new grant of ten-year options to
purchase Company equity (the "New Company Options"). The number of shares to
which the New Company Options will be subject will be equal to six percent (6%)
of the fully diluted equity of the Company (including for this purpose all
Company equity underlying any options outstanding immediately following the
Closing, and all Company equity underlying any options not so outstanding, but
reserved for future issuance). The per-share exercise price of the New Company
Options will be the fair market value of one share of Company equity immediately
following the Closing. One-half of the New Company Options will vest in equal
portions on each of the first five anniversaries of the date of grant (the "Time
Vested Options"). The other one-half of the New Company Options (the
"Performance Options") will vest based on the attainment of pre-established
performance goals, with one-fifth of such options available for vesting in each
of the first five calendar years including and following the Closing (i.e.,
calendar years 1999-2003) based on the attainment of performance goals in those
years. Other than as stated above, the provisions of the New Company Options
(e.g., term, manner of exercise) will be substantially the same as those now
contained in the Vested Out-of-the-Money Options.
5. The Reporting Party will enter into an amended and restated
employment agreement with the Company, effective as of the Closing, to reflect
the Reporting Party's continued employment with the Company on terms that are
materially identical with the existing Employment Agreement between the
Reporting Party and the Company, other than terms expressly altered by the
Letter Agreements.
Pursuant to the second Letter Agreement, addressed to the Investors, in
connection with the Transactions contemplated in the Transaction Agreement, the
Reporting Party has also agreed with the Investors not to:
(a) tender any of Reporting Party's Company shares in connection with
any tender offer;
(b) sell, transfer, pledge, hypothecate, encumber, assign, tender or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, hypothecation,
encumbrance, assignment, tender or other disposition of, any of such Company
shares or any interest therein; or
<PAGE>
CUSIP No. 65931710 Page 6 of 8 Pages
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(c) grant any powers of attorney or proxies or consents in respect of
any of such Company shares, deposit any of such Company shares into a voting
trust, enter into a voting agreement with respect to any of such Company shares
or otherwise restrict or take any action adversely affecting Reporting Party's
ability freely to exercise all voting rights with respect thereto.
Except for the transactions and arrangements described in this Schedule
13D, 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;
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.
Item 5 of the Schedule 13D is amended and restated in its entirety as follows:
To the Reporting Party's knowledge, the aggregate number of shares of
Common Stock outstanding on February 24, 1999 was 12,711,072.
<PAGE>
CUSIP No. 65931710 Page 7 of 8 Pages
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(a) As of the close of business on the date hereof, Reporting
Party may be deemed to beneficially own 720,060 shares of Common Stock.
Such shares represent 5.6% of the Common Stock outstanding and include
10,000 shares owned by the Reporting Party's spouse. The Reporting
Party disclaims beneficial ownership of the shares owned by the
Reporting Party's spouse.
(b) The Reporting Party has sole voting and dispositive power
with respect to the shares of Common Stock beneficially owned by
Reporting Party, other than the shares owned by the Reporting Party's
spouse, except to the extent of the Reporting Party's may be deemed to
share voting and dispositive power with TNFA, TNFI and GEI pursuant to
the arrangements set forth in the Letter Agreements.
(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) 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 beneficially owned by Reporting Party, other
than the shares owned by the Reporting Party's spouse.
(e) Not applicable.
To the knowledge of the Reporting Party, none of TNFA, TNFI and GEI
beneficially own any shares of Common Stock except to the extent that they may
be deemed to share voting and dispositive power with the Reporting Party
regarding the shares described in item 5(a) above or may be deemed to comprise a
"group" with Reporting Party. Although Investors and GEI do not beneficially own
any shares of Common Stock of the Company as of the close of business on the
date hereof, pursuant to the terms and transactions contemplated in the
Transaction Agreement, TNFA as the right to acquire a majority interest in the
outstanding common stock of the Company at the Closing.
Item 7. Material to Be Filed as Exhibits
Item 7 of the Schedule 13D is hereby amended by adding the following additional
items at the end thereof:
Exhibit 4. Letter Agreement, dated February 26, 1999, among James
Fifield, TNF Investment LLC and TNF Acquisition LLC.
Exhibit 5. Letter Agreement, dated February 26, 1999, addressed to
TNF Investment LLC and TNF Acquisition LLC from and
executed by James Fifield.
<PAGE>
CUSIP No. 65931710 Page 8 of 8 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: March 5, 1999
/s/ James G. Fifield
--------------------
James G. Fifield
EXHIBIT 4
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TNF ACQUISITION, LLC
TNF INVESTMENT, LLC
February 26, 1999
James Fifield
407 Merrill Avenue
Carbondale, Colorado 81623
Re: The North Face, Inc. Change of Control Transaction
--------------------------------------------------
Dear Mr. Fifield:
TNF Acquisition LLC ("TNFA") and TNF Investment LLC ("TNFI") are
delivering this letter to you in connection with and coincident with the
execution of the Transaction Agreement By and Between TNFA and The North Face,
Inc. (the "Company"), dated as of the date hereof (the "Transaction Agreement").
The purpose of this letter is to memorialize certain agreements you, TNFA and
TNFI have reached related to the consummation of the transactions contemplated
by the Transaction Agreement (collectively, the "Transaction"). Specifically,
this letter describes the agreements among you, on one hand, and TNFA and TNFI,
on the other hand, regarding (i) the treatment in the Transaction of all of the
shares of Company common stock currently held by you and your wife (the "Owned
Company Stock"), (ii) additional direct or indirect purchases of Company equity
you may make at the Closing, (iii) the treatment in the Transaction of your
400,000 options to purchase Company common stock, at a per-share exercise price
of $9.63, the vesting and exercisability of which will be accelerated pursuant
to their terms at the closing of the Transaction (the "Vested In-the-Money
Options"), (iv) the treatment in the Transaction of your 500,000 options to
purchase Company common stock, at a per-share exercise price of $21.00, the
vesting and exercisability of which will be accelerated pursuant to their terms
at the closing of the Transaction (the "Vested Out- of-the-Money Options"), and
(v) the general terms and conditions of your continued employment with the
Company following the closing of the Transaction (the "Closing").
1. Owned Company Stock.
The Owned Company Stock (or Company equity into which the Owned Company
Stock is converted pursuant to the Transaction Agreement in connection with the
Transaction, which for purposes of this letter will continue to be referred to
as the "Owned Company Stock") will continue to be outstanding at and after the
Closing. The Owned Company Stock will be part of the only class of Company
equity outstanding immediately after the closing. The Owned Company Stock will
<PAGE>
2
constitute that percentage of such class of Company equity issued and
outstanding immediately following the Closing equal to (I) the value of the
Owned Company Stock at the Closing, based on the price paid in connection with
the Transaction to common shareholders of the Company for their stock (the "Deal
Price"), divided by (ii) the sum of (A) the amount in clause (I), (B) the cash
equity contribution made to the Company, directly or indirectly, by TNFA and any
of its affiliates, (C) the cash equity contribution made to the Company,
directly or indirectly, by you pursuant to Item 2 below and (D) the value of any
Company common equity held by members of the Company's Board of Directors (the
"Board") or management (other than you) which continues outstanding following
the Closing, based on the Deal Price. For example, if the Owned Company Stock
has a value of $12.2 million based on the Deal Price, the cash equity
contribution by TNFA and its affiliates to the Company is $87.8 million, you
make no additional cash contribution pursuant to Item 2 below and no other
members of the Board or management continue to own outstanding Company equity
after the Closing, then the Owned Company Stock will represent 12.2%
[$12.2M/($12.2M + $87.8M)] of the total issued and outstanding Company equity
immediately following the Closing.
You and TNFI will enter into a Stockholders Agreement at the Closing
reflecting your rights with respect to the Owned Company Stock post-closing (the
"Stockholders Agreement"). The Stockholders Agreement will include customary
terms and conditions as if you were an investment fund similar to Green Equity
Investors III, L.P. and were making a minority investment in the Company in an
amount of the value of the Owned Company Stock, including the following:
A. Piggyback registration rights, allowing you to elect to
register in a public offering a proportional amount of the Owned Company Stock
based on the proportion of TNFI's Company equity which it so registers in a
public offering. If, in the underwriter's opinion, a cutback of the offering is
desirable, your equity will be cut back prior to TNFI's equity; provided that
this provision shall apply to the first public offering in which TNFI sells
stock only, and such cutback shall be on a proportional basis for any additional
public offerings.
B. At anytime after six months after the Company completes an
initial public offering ("IPO"), you will have one demand registration right (at
the Company's expense). TNFI may piggyback on such demand but if, in the
underwriter's opinion, a cutback of the offering is desirable, TNFI's equity
will be cut back prior to your equity.
C. If there is an IPO, the Company will, coincident with the
IPO, either register the equity underlying all your options pursuant to the IPO
Form S-1 or pursuant to a Form S-8 (with Form S-3 reoffer prospectus).
D. Tag-along sale rights, allowing you to elect to sell a
proportional amount of the Owned Company Stock in a transaction other than a
public
<PAGE>
3
offering, based on the proportion of TNFI's Company equity which it so sells in
such transaction.
E. Drag-along sale rights, allowing TNFI to elect to cause you
to sell a proportional amount of the Owned Company Stock in a transaction other
than a public offering, based on the proportion of TNFI's Company equity which
it so sells in such transaction.
F. A right of first refusal, requiring you to offer to sell to
TNFI any of the Owned Company Stock for which you have received a bona fide
offer from a third party which you intend to accept, on the terms and conditions
contained in such offer. This provision will not apply to transfers made by you
(i) without consideration to charities or relatives, or to trusts, partnerships
or other organizations on any of their behalf, or (ii) in a public offering.
G. So long as you are employed by the Company, you will be
nominated to be a member of the Board of Directors of the Company (the "Board"),
and TNFI will vote its equity in your favor. Any representatives of TNFI who are
members of the Board will vote for you to be Chairman of the Board and a member
of the Board's executive committee, compensation committee and any other
committee of the Board you request, so long as such committee is not legally
required to be comprised solely of outside directors or the Board, based on the
advice of counsel, determines that it would be inadvisable for you to be a
member of such committee. After you no longer are employed by the Company, you
will continue to be nominated to be a member of the Board, and TNFI will vote
its equity in your favor, so long as you continue to own 80% in aggregate of the
Owned Company Stock and "Additional Owned Company Stock" (as defined in Item 2
below); provided that such percentage will be adjusted downward proportionally
to reflect a sale by you of any of the Owned Company Stock and Additional Owned
Company Stock pursuant to the tag-along or drag-along rights described above.
2. Additional Purchase of Company Equity.
You may purchase, directly from the Company or through a purchase of
equity in TNFI or TNFA (at your option), additional Company equity, of the
single class issued and outstanding immediately following the Closing, in any
amount less than or equal to the excess, if any, of (i) $17 million over (ii)
the value of the Owned Company Stock based on the Deal Price (the "Additional
Owned Company Stock"). The Additional Owned Company Stock will constitute that
percentage of such class of Company equity issued and outstanding immediately
following the Closing equal to (I) the dollar amount paid by you for the
Additional Owned Company Stock, divided by (ii) the sum of (A) the amount in
clause (i), (B) the cash equity contribution made to the Company, directly or
indirectly, by TNFA, TNFI and any of their affiliates, (C) the value, based on
the Deal Price, of the Owned Company Stock and (D) the value of any Company
common equity held by members of the Company's Board of Directors (the "Board")
or management (other than you) which
<PAGE>
4
continues outstanding following the Closing, based on the Deal Price. For
example, if you purchase Additional Owned Company Stock for $2.8 million, the
Owned Company Stock has a value of $12.2 million based on the Deal Price, the
cash equity contribution by TNFA and its affiliates to the Company is $87.8
million, and no other members of the Board or management continue to own
outstanding the Company equity after the Closing, then the Additional Owned
Company Stock will represent 2.72% [$2.8M/($2.8M + $87.8M + $12.2M)] of the
total issued and outstanding Company equity immediately following the Closing.
The Additional Owned Company Stock will be subject to (and entitled to
the benefits of) the Stockholders Agreement, as if it were Owned Company Stock.
3. Vested In-the-Money Options.
The Vested In-the-Money Options will remain outstanding following the
Closing, subject to adjustment as described below. The per-share exercise price
will be adjusted to an amount equal to 30% of the fair market value of one share
of the Company's issued and outstanding equity immediately following the
Closing, based on the per-share price paid for Company equity by TNFA and you in
connection with the Transaction. The number of shares to which the Vested
In-the-Money Options are subject also shall be adjusted, so that the aggregate
"spread" in such options following the adjustment (i.e., the aggregate excess of
the fair market value of the Company equity subject to such options, computed as
provided above in this Item 3, over the aggregate adjusted exercise price of
such options, also computed as provided above in this Item 3) is equal to the
aggregate spread in the pre-adjustment Vested In-the- Money Options at the
Closing, based on the Deal Price.1/ Other than the adjustments described above,
the terms will remain substantially the same as those of the Vested In-the-Money
Options (e.g., term and expiration).
Shares obtained by you upon the exercise of Vested In-the-Money Options
will become subject to (and entitled to the benefits of) the Stockholders
Agreement, as if such shares were Owned Company Stock.
4. Vested Out-of-the-Money Options.
The Vested Out-of-the-Money Options will be canceled as of the Closing.
In lieu of those options, you will receive a new grant of ten-year options to
purchase Company equity (the "New Company Options"). The number of shares to
which the New Company Options will be subject will be equal to six percent (6%)
of the fully diluted equity of the Company (including for this purpose all
Company equity underlying any options outstanding immediately following the
Closing, and all Company equity underlying any options not so outstanding, but
reserved for future
- -------------------
1/ You, TNFA and TNFI will discuss the adjustment methodology further, and may
ultimately agree on a methodology other than that described herein.
<PAGE>
5
issuance). The per-share exercise price of the New Company Options will be the
fair market value of one share of Company equity immediately following the
Closing, based on the per-share price paid for the Company equity by TNFA and
you in connection with the Transaction.
50% of the New Company Options will vest in equal portions on each of
the first five anniversaries of the date of grant (the "Time Vested Options").
The other 50% of the New Company Options (the "Performance Options") will vest
based on the attainment of pre-established performance goals, with one-fifth of
such options available for vesting in each of the first five calendar years
including and following the Closing (i.e., calendar years 1999-2003) based on
the attainment of performance goals in those years. The performance goals for
each year shall be mutually agreed upon on an annual basis by you and (i) TNFI,
with respect to 1999 (and such goals shall be established prior to the Closing)
and (ii) the Company Board of Directors, with respect to 2000-2003. The
Performance Options will contain a "Clawback" feature, pursuant to which you
will have the opportunity to vest in any portion of such options as to which the
applicable performance year has expired, based on cumulative performance in such
year and the following year.
The New Company Options will contain provisions accelerating vesting of
all the unvested options upon a "Change in Control" of the Company. Upon a
termination of your employment by the Company without "Cause" or by you with
"Good Reason" (each quoted term to be defined in your employment agreement), all
of the Time Vested Options shall become immediately vested and exercisable.
Subject in all cases to their scheduled termination date, the vested New Company
Options will expire (i) two years following your termination of employment prior
to an IPO for any reason other than by the Company with Cause or by you without
Good Reason, (ii) one year following your termination of employment at or after
an IPO for any reason other than by the Company with Cause or by you without
Good Reason, and (iii) 90 days following your termination of employment by the
Company with Cause or by you without Good Reason.
Other than as stated above, the provisions of the New Company Options
(e.g., term, manner of exercise) will be substantially the same as those now
contained in the Vested Out-of-the-Money Options.
5. Continued Employment.
You will enter into an amended and restated employment agreement with
the Company, effective as of the Closing, to reflect the terms and conditions of
your continued employment with the Company. Other than as is inconsistent with
matters discussed in this letter, such employment agreement will be materially
identical with the existing Employment Agreement between you and the Company,
effective as of May 18, 1998. The employment agreement will provide that at your
election you will be entitled to receive additional vested options in lieu of
all or a portion of any salary increases or bonuses, on terms to be determined
by the Board
<PAGE>
6
and communicated to you prior to the time you make such election. The employment
agreement will include a provision granting you reimbursement for business use
of your private aircraft, provided that either (i) you continue to use the same
model aircraft you use today or (ii) the reimbursement paid to you is not
materially greater than that incurred by you today ($15,000/month + $850/hour),
other than on account of increases in cost which reasonably would have been
expected to apply if you had continued using the same model aircraft you use
today.
Please sign this letter where indicated below to reflect that you agree
to its terms. Once this letter has been signed by you, TNFA and TNFI, it will be
a binding agreement between you and TNFA and TNFI (governed by the laws of the
State of California, without regard to conflicts of law), subject only to (i)
the consummation of the Transaction and (ii) as to Sections 3, 4 and 5 of this
letter, approval by holders of at least 75% of the voting power of all
outstanding stock of the Company immediately following the Closing, excluding
such stock owned by you and your wife (and TNFI agrees to vote its equity in
favor of such approval as part of the Closing). Although you, TNFA and TNFI
agree to diligently work to execute formal documentation of the items described
in this letter no later than the Closing, the failure to do so shall not obviate
your, TNFA's and TNFI's obligation to comply with the terms hereof and, in the
case of TNFI, to cause the Company to so comply on and after the Closing. As of
the Closing, whether or not TNFA is merged into the Company, this letter shall
become an obligation of the Company and TNFA and TNFI shall take any necessary
action to cause that to occur. This letter represents the entire agreement of
the parties hereto as to the subject matter hereof as of the date of this
letter.
Sincerely,
TNF ACQUISITION, LLC
By: Jonathan D. Sokoloff, Manager
/s/ Jonathan D. Sokoloff
------------------------
TNF INVESTMENT, LLC
By: Jonathan D. Sokoloff, Manager
/s/ Jonathan D. Sokoloff
------------------------
AGREED AND ACCEPTED
/s/ James Fifield
- -----------------
James Fifield
EXHIBIT 5
---------
JAMES FIFIELD
407 MERRILL AVENUE
CARBONDALE, COLORADO 81623
February 26, 1999
TNF Investment, LLC
TNF Acquisition, LLC
c/o Green Equity Investors III, L.P.
Attention: Mr. Jonathan D. Sokoloff
Re: The North Face, Inc. Change of Control Transaction
--------------------------------------------------
Dear Mr. Sokoloff:
I am delivering this letter to you in connection with and coincident with the
execution of the Transaction Agreement By and Between TNF Acquisition LLC
("TNFA") and The North Face Inc. (the "Company"), dated as of the date hereof
(the "Transaction Agreement").
I covenant and agree for the benefit of TNF Investment, LLC ("TNFI") and TNFA
that, until termination of the Transaction Agreement, I will not:
(a) tender any of my Company shares in connection with any
tender offer;
(b) sell, transfer, pledge, hypothecate, encumber, assign,
tender or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
hypothecation, encumbrance, assignment, tender or other disposition of, any of
such shares or any interest therein; or
(c) grant any powers of attorney or proxies or consents in
respect of any of such shares, deposit any of such shares into a voting trust,
enter into a voting agreement with respect to any of such shares or otherwise
restrict or take any action adversely affecting my ability freely to exercise
all voting rights with respect thereto.
I acknowledge that the agreements contained in this letter are an
integral part of the transactions contemplated by the Transaction Agreement, and
that, without these agreements, TNFA and TNFI would not enter into the
Transaction Agreement, and acknowledge that damages would be an inadequate
remedy for any breach by me of the provisions of this letter. Accordingly, I
agree that my
<PAGE>
2
obligations under this letter shall be specifically enforceable and I shall not
take any action to impede TNFA or TNFI from seeking to enforce such right of
specific performance.
Sincerely,
/s/ James Fifield
-----------------
James Fifield
