<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-23570
JUST FOR FEET, INC.
(Exact name of registrant as specified in its charter)
ALABAMA 63-0734234
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
153 CAHABA VALLEY PARKWAY NORTH
BIRMINGHAM, AL 35124
(Address of principal executive offices) (Zip Code)
(205) 403-8000
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.0001 par value - 17,691,368 shares as of May 29, 1996
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
- ----------------------------
JUST FOR FEET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
April 30, January 31,
1996 1996
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 39,820,200 $ 96,854,200
Marketable securities available for sale 17,498,400 32,634,200
Accounts receivable, net 4,553,500 3,409,500
Merchandise inventories 67,063,100 56,637,900
Other current assets 4,528,800 4,166,100
------------ ------------
Total current assets 133,464,000 193,701,900
PROPERTY AND EQUIPMENT, NET 26,667,000 23,387,900
MARKETABLE SECURITIES AVAILABLE FOR SALE 28,846,900 22,647,400
FRANCHISE RIGHTS 3,248,100 3,293,200
OTHER ASSETS 549,500 549,500
------------ ------------
$192,775,500 $243,579,900
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 55,000,000
Accounts payable - trade $ 23,855,300 22,268,600
Accrued expenses 3,504,300 2,777,200
Income taxes 2,102,400 3,552,000
Deferred income taxes 644,700 681,100
Obligations under capital leases and
long-term debt due within one year 878,100 1,119,500
------------ ------------
Total current liabilities 30,984,800 85,398,400
LONG-TERM DEBT 5,166,400 5,239,500
CAPITAL LEASE OBLIGATIONS 1,563,700 1,456,200
DEFERRED LEASE RENTALS 1,887,300 1,580,400
DEFERRED INCOME TAXES 473,300 635,600
------------ ------------
Total liabilities 40,075,500 94,310,100
SHAREHOLDERS' EQUITY
Common stock - par value $.0001 per share; authorized
20,000,000 shares; 17,551,861 and 17,532,096 shares issued and
outstanding at April 30, 1996 and January 31, 1996, respective 1,800 1,800
Paid-in capital 135,082,200 135,125,000
Retained earnings 17,616,000 14,143,000
------------ ------------
Total shareholders' equity 152,700,000 149,269,800
------------ ------------
$192,775,500 $243,579,900
============ ============
The accompanying notes are an integral part of these unaudited condensed financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
- -----------------------------------------------------------------------------------------------
Three Months Ended
April 30,
-----------------------------------
1996 1995
NET SALES $49,150,200 $21,136,300
COST OF SALES 28,396,800 12,277,800
----------- -----------
GROSS PROFIT 20,753,400 8,858,500
----------- -----------
FRANCHISE FEES AND ROYALTIES EARNED 121,700 105,000
----------- -----------
OPERATING EXPENSES:
Store operating 13,905,300 6,085,000
Pre-opening costs 1,044,400 509,200
General and administrative 1,520,600 781,600
----------- -----------
Total operating expenses 16,470,300 7,375,800
----------- -----------
OPERATING INCOME 4,404,800 1,587,700
INTEREST INCOME 1,120,900 561,100
INTEREST EXPENSE (162,900) (69,300)
----------- -----------
INCOME BEFORE INCOME TAXES 5,362,800 2,079,500
PROVISION FOR INCOME TAXES 1,889,800 621,000
----------- -----------
NET INCOME $ 3,473,000 $ 1,458,500
=========== ===========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.19 $ 0.09
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES OUTSTANDING 18,639,527 15,982,656
=========== ===========
The accompanying notes are an integral part of these unaudited condensed financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
Three Months Ended
April 30,
----------------------------------
1996 1995
OPERATING ACTIVITIES:
Net income $ 3,473,000 $ 1,458,500
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 850,100 273,500
Amortization of franchise rights 45,100 45,100
Deferred income taxes (198,700) (13,800)
Deferred lease rentals 306,900 128,300
Changes in assets and liabilities providing (using) cash:
Accounts receivable (1,144,000) (27,600)
Merchandise inventories (10,425,200) (13,366,300)
Other assets (362,700) (35,700)
Accounts payable - trade 1,586,700 10,304,600
Accrued expenses 727,100 4,100
Income taxes (1,449,600) 596,300
----------- -----------
Net cash used in operating activities (6,591,300) (633,000)
----------- -----------
INVESTING ACTIVITIES:
Purchases of marketable securities (14,783,500) (17,617,400)
Sales of marketable securities 23,586,200
Purchases of property and equipment (3,995,600) (797,200)
----------- -----------
Net cash provided by (used in) investing activities 4,807,100 (18,414,600)
----------- -----------
FINANCING ACTIVITIES:
Net borrowings under credit agreement 2,435,800
Repayment of short-term borrowing (55,000,000)
Proceeds from long-term debt 379,100
Principal payments on long-term debt (140,700) (229,200)
Principal payments on capital lease obligations (66,300) (10,000)
Exercise of stock options 101,500 16,800
Other (144,300)
----------- -----------
Net cash provided by (used in) financing activities (55,249,800) 2,592,500
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (57,034,000) (16,455,100)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 96,854,200 36,353,300
----------- -----------
END OF PERIOD $39,820,200 $19,898,200
=========== ===========
The accompanying notes are an integral part of these unaudited condensed financial statements.
</TABLE>
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<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1 - GENERAL
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions of Form 10-Q.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. These unaudited financial statements include all adjustments,
consisting of normal, recurring accruals, which Just For Feet, Inc. (the
"Company") considers necessary for a fair presentation of the financial
position and the results of operations for these periods.
The results of operations for the three months ended April 30, 1996 are not
necessarily indicative of the results to be expected for the full year
ending January 31, 1997. For further information, refer to the financial
statements and footnotes thereto for the fiscal year ended January 31, 1996
included in the Company's Form 10-K as filed with the Securities and
Exchange Commission.
NOTE 2 - STOCKHOLDERS' EQUITY
On May 28, 1996, the Company's shareholders increased the authorized number
of common shares to 70,000,000 and the number of common shares reserved for
issuance under the employee incentive stock option plan to 3,000,000.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Just For Feet was founded in 1977 by its current Chairman and Chief
Executive Officer, Harold Ruttenberg, with the opening of a small mall-based
store in Birmingham, Alabama. In 1988, Just For Feet opened its first
superstore adjacent to the Galleria Mall in Birmingham. As a result of the
success and high sales volume generated by the larger store format, since that
time the Company has focused on developing and refining its superstore
concept.
As of April 30, 1996, there were 37 Just For Feet stores operating in 10
states, including seven stores operated by the Company's only franchisee. Of the
30 Company operated stores, 12 stores were opened in fiscal 1995 and three
stores were opened during the first quarter of fiscal 1996. The Company expects
to open a total of 27 new stores during fiscal 1996 and the first quarter of
fiscal 1997, with approximately 16 new stores expected to open in fiscal 1996
and approximately 11 new stores expected to open in the first quarter of fiscal
1997. The Company intends to open six additional stores prior to the end of
fiscal 1997 for a total of 60 Company-owned stores. The Company may accelerate
the opening of new stores in any one fiscal quarter.
In addition to its prototype stores, the Company has opened three high-
visibility, high-profile "flagship" stores, including its original Las
Vegas store. The Company has plans to open an additional four flagship stores
in selected locations. Initial capital expenditures associated with opening
such flagship stores are higher than for prototype stores; however, the
Company believes that such increased costs will be offset by additional
revenue generated by the enhanced entertainment and visibility provided by
such stores, and that the overall profitability of such stores will be
equivalent to that of the Company's prototype stores.
In order to access markets too small to support a traditional Just For Feet
superstore, the Company is contemplating the introduction of a smaller store,
offering a more limited selection of athletic and outdoor footwear. Management
anticipates that, should it elect to pursue this new concept, it would be
developed either internally or through the acquisition of an existing footwear
retailer currently operating in the manner envisioned for the new stores.
Regardless of the means by which it may be developed, implementation of this new
concept could involve significant start-up costs.
In recent years, the Company has achieved positive comparable store sales
growth on an annual basis. During the first three months of fiscal 1996,
comparable store sales increased 42.0%. The Company does not expect comparable
store sales to continue to increase at such rates, nor can any assurance be
given that comparable store sales will continue to increase.
For fiscal 1996, the Company adopted a bonus plan for all corporate level
employees. Under the plan, such employees are eligible to receive a year-end
bonus equal to a percentage of their annual salaries based on the Company's
per share operating results in excess of a target level. A maximum of $2.5
million can be distributed to participants under the plan.
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<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, income statement
data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED APRIL 30,
----------------
1995 1996
------- -------
<S> <C> <C>
Net sales................... 100.0% 100.0%
Cost of sales............... 58.1 57.8
------- -------
Gross profit.............. 41.9 42.2
Franchise fees and royalties
earned..................... 0.5 0.2
Operating expenses:
Store operating........... 28.8 28.3
Pre-opening costs......... 2.4 2.1
General and administra-
tive..................... 3.7 3.1
Executive options......... -- --
------- -------
Operating income........ 7.5 8.9
Interest income (expense),
net........................ 2.3 2.0
------- -------
Income (loss) before income
taxes...................... 9.8 10.9
Provision for income taxes.. 2.9 3.8
------- -------
Net income (loss)......... 6.9% 7.1%
======= =======
</TABLE>
THREE MONTHS ENDED APRIL 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 30,
1995
Net Sales. Net sales increased $28.1 million or 133% to $49.2 million in the
first quarter of fiscal 1996 compared to net sales of $21.1 million for the
first quarter of fiscal 1995. This increase was primarily attributable to
fourteen new stores opened since April 30, 1995, and an increase in comparable
store sales of 42.0%. This calculation for comparable store sales currently
includes a total of sixteen stores. The comparable store sales increase was
primarily due to an increase in the number of footwear units sold.
Gross Profit. Gross profit as a percentage of net sales increased to 42.2%
in the first quarter of fiscal 1996 from 41.9% in the first quarter of fiscal
1995.
Store Operating Expenses. Store operating expenses increased $7.8 million or
128% to $13.9 million in the first quarter of fiscal 1996 from $6.1 million in
the first quarter of fiscal 1995. The increase was primarily attributable to
the operating expenses of the fourteen stores opened since April 30, 1995. As
a percentage of net sales, store operating expenses decreased to 28.3% in the
first quarter of fiscal 1996 from 28.8% in the first quarter of fiscal 1995.
Store Pre-Opening Costs. Store pre-opening costs, which are amortized over
the 12 months following a store opening, increased to $1.0 million in the
first quarter of fiscal 1996 from $509,000 in the first quarter of fiscal
1995, as a result of new store openings.
General and Administrative Expenses. General and administrative expense
increased $739,000 or 94.5% but decreased as a percentage of net sales from
3.7% to 3.1% in the first quarter of fiscal 1996. The dollar increase was
primarily due to increased personnel and infrastructure costs associated with
store operations and management information systems, as well as the accrual of
amounts related to the corporate bonus plan. The percentage decrease resulted
from greater efficiencies of scale in the Company's operations.
Operating Income. Operating income increased to $4.4 million in the first
quarter of fiscal 1996 from $1.6 million in the first quarter of fiscal 1995.
As a percentage of net sales, operating income increased to 8.9% in the first
quarter of fiscal 1996 from 7.5% in the first quarter of fiscal 1995.
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<PAGE>
Net Interest Income. Net interest income was $958,000 in the first quarter
of fiscal 1996 compared to $492,000 in the first quarter of fiscal 1995. This
increase was primarily attributable to investing the proceeds of the Company's
January and September 1995 public offerings of Common Stock.
Net Income. As a result of the above factors, net income increased to $3.5
million in the first quarter of fiscal 1996 from net income of $1.5 million in
the first quarter of fiscal 1995.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company does not experience significant seasonal fluctuations in its
business. However, the highest sales periods for the Company are the spring,
back-to-school and Christmas selling seasons. The Company also generally
experiences lower gross margins during January and February due to retail
markdowns taken to clear seasonal merchandise. Quarterly results may fluctuate
materially depending on the timing of new store openings and related pre-
opening expenses, net sales contributed by new stores and increases or
decreases in comparable store sales.
The following table sets forth certain unaudited results of operations for
the Company's last five quarters ended April 30, 1996. The unaudited
information includes all normal recurring adjustments which
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<PAGE>
management considers necessary for a fair presentation of the information
shown. All amounts shown are in thousands, except per share and store data.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996
------------------------------- -----------
FIRST SECOND THIRD FOURTH FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $21,136 $25,435 $34,770 $38,478 $49,150
Gross profit....................... 8,859 10,811 14,287 16,893 20,753
Operating income................... 1,588 2,691 3,307 4,041 4,405
Net income......................... 1,459 2,056 2,951 3,256 3,473
Net income per share............... $ 0.09 $ 0.13 $ 0.17 $ 0.18 $ 0.19
Weighted average shares
outstanding....................... 15,983 16,372 17,565 18,506 18,640
Company stores at end of period.... 16 21 24 27 30
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Just For Feet's primary sources of working capital are the proceeds of two
public offerings of common stock in January and September 1995, and the
Company's ability to borrow under its line of credit. The Company had working
capital of $55.6 million and $102.5 million at April 30, 1995 and 1996,
respectively. The principal use of working capital has been to purchase
inventory, equipment and fixtures. During fiscal 1995, the Company acquired
property and equipment of $6.9 million to open 12 new stores, invested $2.1
million to upgrade its management information systems and spent $2.2 million on
the construction of the new corporate headquarters facility. The Company's
short-term operational cash requirements are not highly seasonal. The Company
had $86.2 million in cash and marketable securities as of April 30, 1996.
In September 1995, the Company completed a public offering of 2,100,000
shares of Common Stock at $33.00 per share. Net proceeds of approximately
$65.6 million are being used to acquire fixed assets and inventory for the
opening of new stores. A portion of such net proceeds were also used to
upgrade and expand the Company's management information systems.
As of April 30, 1996, the Company had no borrowings under its revolving bank
line of credit. The line of credit, which expires July 1, 1996, permits the
Company to borrow up to $10.0 million for general working capital purposes.
The Company is renegotiating a new credit line, and expects such new credit
line to be in place by July 1, 1996. Borrowings under the existing line of
credit bear interest at either the bank's prime rate (8.25% at April 30, 1996)
or a rate based on LIBOR, and are unsecured. The line of credit contains
certain financial covenants and other restrictions. The Company also has
several lease arrangements with leasing companies that the Company uses to
finance certain store fixtures, point-of-sale equipment and management
information systems.
Just For Feet's primary capital requirements are for the openings of new
superstores. The Company estimates that the total cash required to open a new
15,000 to 20,000 square foot prototype superstore, including store fixtures
and equipment, leasehold improvements, net working capital and pre-opening
costs, typically ranges from $1.2 to $2.0 million, depending on the amount of
vendor and landlord assistance, while the total cash required to open a
flagship store ranges from $2.0 to $2.5 million. During fiscal 1996 and the
first quarter of fiscal 1997, the Company expects to open a total of 27
stores, with approximately 16 stores expected to open in fiscal 1996 and
approximately 11 stores expected to open in the first quarter of fiscal 1997.
Six of such 27 stores have been opened during fiscal 1996 to date. The Company
intends to open six additional stores prior to the end of fiscal 1997, for a
total of 60 Company owned stores. Of the new stores to be opened, four are
expected to be flagship stores.
The Company is not currently planning any major capital expenditures other
than new store openings. Although the Company has no current commitments or
understandings with respect to the
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<PAGE>
acquisition of any entity, the Company has explored and continues to explore
acquisitions, including acquisitions of entities employing an alternative
format to that of Just For Feet. The Company may utilize an acquisition to
develop its new smaller store concept. Regardless of whether the Company
utilizes an acquisition to implement its new concept or develops the concept
internally, the Company may incur significant start-up costs. In addition, to
support the Company's continued growth, the Company plans to continue to
invest in information systems and personnel, and is evaluating the possibility
of constructing a new corporate headquarters. The Company believes that
whether or not the Company makes any acquisitions or constructs a new
corporate headquarters, the proceeds of its public stock offerings, internally
generated funds, cash on hand and its line of credit will be adequate to fund
its anticipated needs through at least the end of fiscal 1997.
IMPACT OF INFLATION
The Company does not believe that inflation has had a material, adverse
effect on net sales or results of operations. The Company has generally been
able to pass on increased costs through increases in selling prices.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
3(i) Amended and Restated Articles of Incorporation
3(i).1 Articles of Amendment, dated May 28, 1996, amending the Company's
Amended and Restated Articles of Incorporation
10.6.2 Amendment No. 3 to Just For Feet, Inc. Employee Incentive Stock Option
Plan
10.50 Master Revolving Promissory Note dated October 24, 1995 in the principal
amount of $10,000,000 payable to Compass Bank
(b) Reports on Form 8-K. None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JUST FOR FEET, INC.
Dated: May 31, 1996 By: /s/ Harold Ruttenberg
-------------------------------
Harold Ruttenberg
Chairman, President and Chief
Executive Officer
Dated: May 31, 1996 By: /s/ Robert C. Wabler
-------------------------------
Robert C. Wabler
Executive Vice President, Chief
Financial Officer
<PAGE>
EXHIBIT INDEX
3(i) Amended and Restated Articles of Incorporation
3(i).1 Articles of Amendment, dated May 28, 1996, amending the Company's
Amended and Restated Articles of Incorporation
10.6.2 Amendment No. 3 to Just For Feet, Inc. Employee Incentive Stock Option
Plan
10.50 Master Revolving Promissory Note dated October 24, 1995 in the principal
amount of $10,000,000 payable to Compass Bank
<PAGE>
EXHIBIT 3(i)
THIS INSTRUMENT WAS PREPARED BY:
John H. Cooper, Esq.
Sirote & Permutt, P.C.
2222 Arlington Avenue South
Birmingham, AL 35205
STATE OF ALABAMA )
JEFFERSON COUNTY )
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF JUST FOR FEET, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, as President and
Secretary of JUST FOR FEET, INC., a corporation organized and existing under the
laws of the State of Alabama, (the "Corporation") hereby certify that, in
accordance with Code of Alabama 1975, Sections 10-2A-56, 10-2A-110, 10-2A-111,
and 10-2A-113, the Certificate of Incorporation (the "Certificate") was amended
and restated by the unanimous written consent of the Board of Directors and the
unanimous written consent of the holders of shares of Common Stock and the
holders of shares of Series A Preferred Stock, on the 18th day of January, 1994,
on which date there were Two Million Two Hundred Eighty-nine Thousand Three
Hundred Eight (2,289,308) shares of Common Stock and Two Thousand Six Hundred
Sixty-seven (2,667) shares of Series A Preferred Stock outstanding and entitled
to vote thereon, and state as follows:
That the present name of the Corporation is Just For Feet, Inc., formerly
known as Casual Wear, Inc.
That the date of filing of the original Certificate with the Judge of
Probate was September 14, 1977, under the name of Casual Wear, Inc.;
That the date of filing of the Certificate of Amendment to Certificate of
Incorporation of the Corporation with the Judge of Probate was September 23,
1980, under the name of Casual Wear, Inc.;
That the date of filing of the First Amendment to Certificate of
Incorporation of the Corporation with the Judge of Probate was August 13, 1993,
under the name of Casual Wear, Inc.;
That the date of filing of the Articles of Correction of the Corporation
with the Judge of Probate was August 20, 1993, under the name of Just For Feet,
Inc.;
That the text of the Certificate of Incorporation, as amended by the
Certificate of Amendment to Certificate of Incorporation, the First Amendment to
Certificate of Incorporation, and the Articles of Correction, is hereby further
amended by deleting Articles I through XVII by incorporating the provisions
thereof into new Articles 1 through 12, and restating the Certificate in full to
read as herein set forth:
<PAGE>
ARTICLE 1
Name
----
The name of the Corporation shall be Just For Feet, Inc.
ARTICLE 2
Duration
--------
The duration of the Corporation shall be perpetual.
ARTICLE 3
Purposes
--------
The objects for which the Corporation is formed are:
3.1 To engage in the general business of selling at wholesale and retail
all kinds of clothing and accessories; to buy, sell, trade, manufacture, deal in
and deal with all kinds of clothing, dry goods, shoes and goods, wares and
merchandise of every kind and nature, and to carry on such business as
wholesalers, retailers, importers and exporters; to acquire all such
merchandise, supplies, materials and other articles as shall be necessary or
incidental to such business.
3.2 To manufacture, purchase, acquire, hold, maintain, improve,
construct, pledge, hypothecate, exchange, sell, invest and deal in and otherwise
dispose of, alone or in syndicate or otherwise in conjunction with others,
commodities, merchandise and other personal property of every kind, character,
and description whatsoever and wheresoever situated, and any interest therein.
3.3 To purchase, acquire, lease, own, hold, sell, convey or mortgage and
otherwise deal in real estate, property, tenements, and hereditaments, as well
as any interest therein, and directly or through the ownership of stock in any
corporation, to maintain and improve the same by erecting, constructing,
rebuilding, repairing, equipping, any and all kinds of buildings and other
structures and erections, and to install therein such furniture and appliances
which at any time may be necessary to the conduct thereof.
3.4 To acquire bonds or stocks of this corporation or otherwise, the good
will, rights, assets and property, and to undertake or assume the whole or any
part of the obligations or liabilities of any person, firm, association or
corporation; to pay for the same in cash, the stock or other securities of the
corporation or otherwise; to hold, or in any manner dispose of the whole or any
part of the property so acquired; to conduct in any lawful manner the whole or
any part of the business so acquired, and to exercise all the powers necessary
or convenient in and about the conduct and management of any such business.
3.5 To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United States of
America or any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights, trademarks and trade names,
relating to or useful in connection with any business of the Corporation.
2
<PAGE>
3.6 To acquire by purchase, subscription, contract, underwriting or
otherwise, to hold for investment or otherwise, to pledge, hypothecate,
exchange, sell, deal in and with and dispose of or to turn to account or to
realize upon, alone or in syndicate or otherwise in conjunction with others,
stocks, securities and investments of every kind and description, including, but
not by way of limitation, shares, stocks, scrip, notes, bonds, debentures,
rights, participating certificates, certificates of interest, mortgages,
acceptances, commercial paper and choses in action, evidence of indebtedness and
other obligations of every kind and description (all of which is hereinafter
sometimes called "securities") of any private, public or quasi-public
corporation, association, partnership, common law trust, syndicate, firm or
individual or of any combinations, organizations or entities whatsoever,
irrespective of their form or the names by which they may be described, and,
while the owner or holder of any such securities, to exercise all the rights,
powers and privileges of ownership in respect thereto; and, to the extent now
or hereafter permitted by law, to aid by loan, guarantee or otherwise those
issuing, creating or responsible for any such securities.
3.7 To borrow and lend money and to give or take security therefor by way
of mortgage, pledge, transfer or assignment of real or personal property, of
every nature and description.
3.8 To enter into, make and perform contracts of every kind for any
lawful purpose without limit as to amount with any person, firm, association or
corporation, town, city, county, state, territory, government or governmental
subdivision.
3.9 To draw, make, accept, endorse, discount, execute and to issue
promissory notes, drafts, bills of exchange, warrants, debentures and other
negotiable or transferable instruments.
3.10 To issue bonds, debentures or obligations of the Corporation from
time to time, for any of the objects or purposes of the Corporation, and to
secure the same by mortgage, pledge, deed of trust or otherwise.
3.11 To have one or more offices to carry on all or any of its operations
and business and, without restriction or limit as to amount, to purchase or
otherwise acquire, hold, own, mortgage, pledge, sell, assign and transfer,
convey or otherwise dispose of, invest, trade, deal in and deal with goods,
wares and merchandise, and real and personal property of every class and
description in any of the states, districts, territories or colonies of the
United States, and in any and all foreign countries, subject to the laws of such
state, district, territory, colony and country.
3.12 To purchase or otherwise acquire its own shares of stock (so far as
may be permitted by law) and its bonds, debentures, notes, scrip or other
securities, or evidence of indebtedness, and to hold, sell, transfer, or
reissue the same.
3.13 To enter into any plan or project for the assistance and welfare of
its employees.
3.14 To enter into any legal arrangements for sharing of profits, union of
interests, reciprocal concessions or cooperation with any person, partnership,
corporation, association, combination, organization, entity or body whatsoever
domestic or foreign, carrying on or proposing to carry on any business which the
Corporation is authorized to carry on, or any business or transaction deemed
necessary, convenient or incidental to carrying out any of the objects of the
Corporation .
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3.15 To assume, guarantee or become surety for the payment and
performance of any and all debts and obligations of another or others, and to
guarantee the payment of dividends upon any security or securities.
3.16 To do all and everything necessary and proper for the accomplishment
of the objects herein enumerated or necessary or incidental to the protection
and benefit of the Corporation, and in general, to carry on any lawful business
necessary or incidental to the protection and benefit of the Corporation, and in
general, to carry on any lawful business necessary or incidental to the
attainment of the purposes of the Corporation, whether such business is similar
in nature to the objects and powers hereinabove set forth or otherwise; but
nothing herein contained is to be construed as authorizing the Corporation to
carry on the business of banking or that of a trust company or that of the
business of insurance in any of its branches.
The foregoing clauses shall be construed as objects and purposes of the
Corporation, in addition to those powers specifically conferred upon the
Corporation by law, and it is hereby expressly provided that the foregoing
specific enumeration of powers shall not be held to limit or restrict in any
manner the powers of the Corporation otherwise granted by law.
ARTICLE 4
Authorized Capital Shares
-------------------------
4.1 Authorization. The aggregate number of shares which the Corporation
-------------
shall have authority to issue shall be Twenty-five Million Two Thousand Six
Hundred Sixty-seven (25,002,667), divided into Twenty Million (20,000,000)
shares of Common Stock with a par value of $.0001 per share; Five Million
(5,000,000) shares of such other preferred stock, with a par value of $.0001 per
share, as the Board of Directors may decide to issue pursuant to Section 4.3
hereof; and Two Thousand Six Hundred Sixty-seven (2,667) shares of Series A
Preferred Stock of the par value of $.0001 per share, constituting a total
authorized capital of Two Thousand Five Hundred Dollars and Twenty-seven Cents
($2,500.27).
4.2 Common Stock. Except to the extent otherwise provided below, the
------------
holders of Common Stock shall have the specific powers, designations,
preferences, and relative participating rights and privileges as provided in
this Section 4.2.
(a) Voting Rights. Each share of Common Stock outstanding shall be
-------------
entitled to one (1) vote per share with respect to each matter submitted to the
shareholders for a vote.
(b) Dividends. Subject to the rights of the holders of Series A
---------
Preferred Stock, holders of Common Stock shall be entitled to receive such
dividends and other distributions in cash, stock or property of the Corporation
as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor.
(c) Liquidation Rights. In the event of a liquidation or
------------------
dissolution of the Corporation, or a winding up of its affairs, whether
voluntary or involuntary, or a merger or consolidation of the Corporation and
after payment or provision for payment of the debts or liabilities of the
Corporation, the holders of Common Stock shall, subject to the rights of the
holders of the Series
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A Preferred Stock set forth in Section 4.4(c) hereof, be entitled to share
ratably (i.e., an equal amount of assets for each share of Common Stock) in the
remaining assets of the Corporation.
4.3 Preferred Stock. The Board of Directors of the Corporation is
---------------
authorized, subject to limitations prescribed by law and the provisions of this
Section 4.3, to adopt one or more resolutions to provide for the issuance from
time to time in one or more series of any number of shares of preferred stock,
and to establish the number of shares to be included in each such series, and to
fix the designation, relative rights, preferences, qualifications and
limitations of shares of the each such series. The authority of the Board of
Directors with respect to each such series shall include, but not be limited to,
a determination of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and if so, from which date or dates, and whether
they should be payable in preference to, or in another relation to, the
dividends payable on any other class or classes or series of stock;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion or exchange
privileges, and, if so, the terms and conditions of such conversion or exchange,
including provision for adjustments for the conversion or exchange rate in such
events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the manner of selecting shares for redemption if less than all shares are to be
redeemed, the date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(f) Whether that series shall be entitled to the benefit of
a sinking fund to be applied to the purchase or redemption of shares of that
series, and, if so, the terms and amounts of such sinking funds;
(g) The right of the shares of that series to the benefit of
conditions and restrictions upon the creation of indebtedness of the Corporation
or any subsidiary, upon the issuance of any additional stock (including
additional shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase, redemption
or other acquisition by the corporation or any subsidiary of any outstanding
stock of the Corporation;
(h) The right of the shares of that series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and whether such rights shall be in preference to, or in other
relation to, the comparable rights of any other class or classes or series of
stock; and
(i) Any other relative, participating, optional or other special
rights, qualifications, limitations or restrictions of that series.
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4.4 Series A Preferred Stock. The rights, preferences, privileges, and
------------------------
restrictions granted to and imposed on the Series A Preferred Stock are as set
forth below in this Section 4.4.
(a) Voting Rights.
-------------
(1) The holder of each share of Series A Preferred Stock
shall have the right to one (1) vote for each share of Common Stock into which
such Series A Preferred Stock could then be converted as provided in Section
4.4(d) hereof (with any fractional share determined on an aggregate conversion
basis being rounded to the nearest whole share), and with respect to such vote,
such holder shall have full voting rights and powers equal to the voting rights
and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholders' meeting in
accordance with the by-laws of the Corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote.
(2) (A) The Board of Directors of the Corporation shall be not
more than six (6) members. So long as any shares of the Series A Preferred Stock
remain outstanding, Weston Presidio Offshore Capital Management L.P. shall be
entitled to elect one (1) member of the Board. If a vacancy on the Board is to
be filled by the Board, such vacancy shall be filled by the vote of only those
directors elected by the same class of shareholders as would be entitled to vote
to fill such a vacancy, or if no such directors remain in office, by the class
of shareholders as would be entitled to vote to fill such a vacancy.
(B) Notwithstanding the provisions of Section 4.4(a)(2)(A)
above, upon the occurrence of an Event of Default (as defined in the Series A
Preferred Stock Purchase Agreement (the "Stock Purchase Agreement") between the
Corporation and the Investors listed on Schedule A thereto (the "Investors"),
dated August 16, 1993), the holders of the Series A Preferred Stock shall
thereafter be entitled, by the affirmative vote of the holders of at least sixty
percent (60%) of such shares of Series A Preferred Stock, voting together as a
class, to elect a majority of the Board of Directors as provided in Section 5
of the Stockholders Agreement between the Corporation, the Founders (as defined
therein) and the Investors, dated August 16, 1993, and Section 8.3 of the Stock
Purchase Agreement.
(b) Dividend Provisions. The holders of shares of Series A Preferred
-------------------
Stock shall be entitled to receive dividends, out of any assets legally
available therefor, prior and in preference to any declaration or payment of
any dividend or distribution (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation) on the Common Stock of the Corporation, in an amount equal to that
declared on each share of Common Stock multiplied by the number of shares of
Common Stock into which each such share of Series A Preferred Stock could then
be converted. No dividends or distributions (other than those payable in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock
of the Corporation) shall be paid on any Common Stock of the Corporation during
any fiscal year of the Corporation until dividends on the Series A Preferred
Stock shall have been paid or declared and set apart during that fiscal year.
Dividends and distributions shall be paid by forwarding a check, postage
prepaid, to the address of each holder (or, in the case of joint holders, to the
address of any such holder) of shares of Series A Preferred Stock as shown on
the books of the Corporation, or to such other address as such holder specifies
for such a purpose by written notice to the Corporation.
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The forwarding of such check shall satisfy all obligations of the Corporation
with respect to such dividends and distributions, unless such check is not paid
upon timely presentation. Notwithstanding the foregoing, no dividends or
distributions shall be made on any capital stock of the Corporation until the
adjustments (if any), as contemplated by Section 4.4(d)(4) hereof, are finalized
and effected.
(c) Liquidation Preference.
----------------------
(1) In the event of any liquidation, dissolution or winding up of this
corporation, either voluntary or involuntary, the holders of Series A Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets of the Corporation to the holders of Common Stock by reason
of their ownership thereof, an amount per share equal to the sum of (A) One
Thousand One Hundred Sixty-two Dollars and Fifty Cents ($1,162.50) for each
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price") and (B) an amount equal to a fifteen percent (15%) rate of return
compounded annually, from the date of issuance of such stock through the date on
which such payment is made, on the Original Series A Issue Price, as adjusted to
reflect any share split, reclassification or similar event involving the Series
A Preferred Stock (such amount being referred to herein as the "Premium"). If
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock
in proportion to the amount of such stock owned by each such holder.
(2) Whenever the distribution provided for in this Section 4.4(c) shall
be payable in property other than cash, the value of such distribution shall be
the fair market value of such property as determined in good faith by not less
than two-thirds (2/3) of the Board of Directors.
(3) A consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale, conveyance or disposition of all or
substantially all of the assets of the Corporation or the effectuation by the
Corporation of a transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Corporation is disposed of,
shall be deemed to be a liquidation, dissolution or winding up within the
meaning of this Section 4.4(c).
(d) Conversion. The holders of the Series A Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
(1) Right to Convert.
----------------
(A) Each share of Series A Preferred Stock shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of
such share, at the office of the Corporation or any transfer agent for the
Series A Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Original Series A Issue
Price by the Conversion Price at the time in effect for such share. The initial
Conversion Price per share for shares of Series A Preferred Stock shall be Seven
Dollars and Seventy-five Cents ($7.75); provided, however, that the Conversion
Price for the Series A Preferred Stock shall be subject to adjustment as set
forth in subsection 4.4(d)(3). Notwithstanding the foregoing, under no
circumstances shall a holder have the right to convert shares of Series A
Preferred Stock into shares of Common Stock until the adjustments (if any)
contemplated by Section 4.4(d)(4) hereof are finalized and effected. As a result
of the foregoing,
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<PAGE>
the initial conversion ratio for the Series A Preferred Stock shall be One
Hundred Fifty (150) shares of Common Stock for each outstanding share of Series
A Preferred Stock.
(B) Each share of Series A Preferred Stock shall automatically be
converted into shares of Common Stock at the Conversion Price at the time in
effect for such Series A Preferred Stock immediately upon the (i) consummation
of the Corporation's sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement on Form S-1, or any successor
form, under the Securities Act of 1933, as amended, where (I) the gross proceeds
of the offering to the Corporation are not less than Fifteen Million Dollars
($15,000,000), and (II) the product of the price per share to the public of the
Common Stock times the number of shares of Common Stock outstanding immediately
prior to the consummation of the underwritten offering (including any shares of
Common Stock then issued or issuable upon conversion of the Series A Preferred
Stock and upon the exercise of options to purchase up to One Hundred Ninety-nine
Thousand Seventy (199,070) shares of Common Stock (as adjusted for stock spits
and similar events) which are outstanding as of August 16, 1993) shall be not
less than Fifty Million Dollars ($50,000,000) or (ii) the date upon which the
Corporation obtains the consent of the holders of two-thirds (2/3) of the then
outstanding shares of Series A Preferred Stock to convert their shares of Series
A Preferred Stock. Notwithstanding the foregoing, under no circumstances shall
any shares of Series A Preferred Stock be so automatically converted into shares
of Common Stock until the adjustments (if any) contemplated by Section 4.4(d)(4)
hereof are finalized and effected.
(2) Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Series A Preferred
Stock, and shall give written notice by mail, postage prepaid, to the
Corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Series A Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offer of securities registered pursuant to the
Securities Act of 1933, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of such sale of securities.
(3) Conversion Price Adjustments of Preferred Stock. The Conversion
-----------------------------------------------
Price of the Series A Preferred Stock shall be subject to adjustment from time
to time as follows:
(A) (i) If the Corporation shall issue any Additional Stock (as
defined below) without consideration or for a consideration per share less than
the Conversion Price for the Series A Preferred Stock in effect immediately
prior to the issuance of such Additional Stock, the
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Conversion Price for the Series A Preferred Stock in effect immediately prior to
each such issuance shall forthwith (except as otherwise provided in this clause
(i)) be adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (I) below by the total computed under clause (II) below as
follows:
(I) an amount equal to the sum of
(1) the aggregate purchase price of the shares
of the Series A Preferred Stock sold pursuant to the Series A Preferred Stock
Purchase Agreement dated as of August 16, 1993 by and among the Corporation and
the investors listed on Schedule A thereto (the "Stock Purchase Agreement"),
plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or after the date
of the Stock Purchase Agreement (the "Purchase Date") other than shares of
Common Stock issued or issuable with respect to the Series A Preferred Stock
issued pursuant to the Stock Purchase Agreement;
(II) an amount equal to the sum of
(1) the aggregate purchase price of the shares
of Series A Preferred Stock sold pursuant to the Stock Purchase Agreement
divided by the initial Conversion Price for such shares in effect at the
Purchase Date (or such higher or lower Conversion Price for such series as
results from the application of subsections 4.4(d)(3)(C) and (D) and assuming
that this Certificate was in effect as of the Purchase Date) plus
(2) the number of shares of Additional Stock
issued since the Purchase Date (increased or decreased to the extent that the
number of such shares of Additional Stock shall have been increased or decreased
as the result of the application of subsections 4.4(d)(3)(C) and (D)).
(ii) No adjustment of the Conversion Price for the Series A
Preferred Stock shall be made in an amount less than one cent ($.01) per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for
in subsections 4.4(d)(3)(A)(v)(III) and 4.4(d)(3)(A)(v)(IV), no adjustment of
such Conversion Price pursuant to this subsection 4.4(d)(3)(A) shall have the
effect of increasing the Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
(iii) In the case of the issuance of shares of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any discounts, commissions or other expenses allowed,
paid or incurred by the Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(iv) In the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be
9
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deemed to be the fair value thereof as determined by the Board of Directors
irrespective of any accounting treatment.
(v) Except for options issued pursuant to subsections
4.4(d)(3)(B)(iii), in the case of the issuance (whether before, on
or after the Purchase Date) of options to purchase or rights to subscribe for
shares of Common Stock, securities by their terms convertible or exchangeable
for Common Stock or options to purchase or rights to subscribe for such
convertible or exchangeable securities, the following provisions shall apply for
all purposes of this subsection 4.4(d)(3)(A) and subsection 4.4 (d)(3)(B):
(I) The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for shares of Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections
4.4(d)(3)(A)(iii) and 4.4(d)(3)(A)(iv), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum exercise price provided
in such options or rights for the shares of Common Stock covered thereby.
(II) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the Corporation for any securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the Corporation upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the manner
provided in subsections 4.4(d)(3)(A)(iii) and 4.4(d)(3)(A)(iv)).
(III) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to the
Corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of the Series A Preferred Stock, to the extent in any way
affected by or computed using such options, rights or securities, shall be
recomputed to reflect such change, but no further adjustment shall be made for
the actual issuance of shares of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the conversion
or exchange of such securities.
(IV) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series A Preferred Stock, to the extent
in any way affected by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock (and convertible or
exchangeable securities which remain in effect) actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities.
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(V) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
4.4(d)(3)(A)(v)(I) and 4.4(d)(3)(A)(v)(II) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in either
subsection 4.4(d)(3)(A)(v)(III) or 4.4(d)(3)(A)(v)(IV).
(B) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 4.4(d)(3)(A)(v) by
the Corporation after the Purchase Date other than:
(i) upon conversion of shares of Series A Preferred Stock,
(ii) pursuant to a transaction described in subsection
4.4(d)(3)(C) or 4.4(d)(3)(D) hereof,
(iii) subject to subsection 4.4(d)(12), to employees,
consultants, officers or directors of the Corporation pursuant to a stock option
plan, restricted stock plan or other stock or employee incentive plan or
agreement approved by the Board of Directors of the Corporation; provided that
the total number of shares of Common Stock so issuable or issued (and not
repurchased at cost by the Corporation in connection with termination of
employment) does not exceed a cumulative total of Three Hundred One Thousand
Thirty-four (301,034) shares (as adjusted for stock splits and similar events)
since the inception of this corporation,
(iv) as a dividend or distribution on Series A Preferred
Stock,
(v) for which adjustment of the Conversion Price is made
pursuant to subsection 4.4(d)(3)(C) or 4.4(d)(3)(D), or
(vi) (I) in a public offering before or in connection with
which all outstanding shares of Series A Preferred Stock will be automatically
converted into shares of Common Stock, (II) upon exercise of warrants or rights
granted to underwriters in connection with such public offering, or (III) up to
Nineteen Thousand Nine Hundred Fifty (19,950) shares of Common Stock (as
adjusted for stock splits and similar events) subject to warrants issued to
Robinson-Humphrey in connection with the Closing of the Series A Preferred Stock
financing.
(C) In the event the Corporation should at any time or from time
to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share shall
be increased in proportion to such increase of the aggregate of shares of Common
Stock outstanding and
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those issuable with respect to such Common Stock Equivalents with the number of
shares issuable with respect to Common Stock Equivalents determined from time to
time in the manner provided for deemed issuances in subsection 4.4(d)(3).
(D) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price for the Series A Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
(4) Special Conversion Price Adjustment. The Conversion Price of
-----------------------------------
the Series A Preferred Stock shall be subject to further adjustment subject to
the provisions of this subsection 4.4(d)(4):
(A) The Corporation shall close its books as of July 31, 1994
for the twelve (12) months then ended. The Corporation shall, at its expense,
cause an audit to be conducted on its income statement for the twelve (12) month
period ending July 31, 1994, which audit shall be completed and delivered within
ninety (90) days of the close of the period and shall be promptly furnished to
each holder of Series A Preferred Stock. Such audit shall be conducted in
accordance with generally accepted accounting principles by the Corporation's
existing independent accounting firm. The accounting practices, policies and
procedures utilized in connection with such audit shall be the same as those
utilized in connection with the audited financial statements of the Corporation
for the year ended January 31, 1994 (which were approved by the holders of
Series A Preferred Stock). If any Series A Preferred Stockholder objects to the
audit results for the twelve (12) month period ended July 31, 1994, such Series
A Preferred Stockholder may cause a separate audit to be performed at its
expense. If the Corporation and the holders of at least sixty percent (60%) of
the then outstanding Series A Preferred Stock cannot agree on the results of
either the Corporation's audit or the audit conducted by the Series A Preferred
Stockholders, the Corporation and the Series A Preferred Stockholders agree to
submit the two audits to binding arbitration for final resolution. The
Corporation and the Series A Preferred Stockholders agree that any such
arbitration entered into pursuant to this subsection (A) shall be subject to the
rules and regulations promulgated by the American Arbitration Association.
(B) If, pursuant to the audit conducted in accordance with
subsection (A) of this Section 4.4(d)(4), the pre-tax income of the Corporation
is Three Million Two Hundred Thirteen Thousand Dollars ($3,213,000) to Three
Million Nine Hundred Twenty-seven Thousand Dollars ($3,927,000), no adjustment
shall be made as provided in this Section 4.4(d)(4);6 provided, however, that
for purposes of this Section 4.4(d)(4) the pre-tax income of the Corporation
shall not include the effect of any material acquisitions or sales of assets not
in the ordinary course of business and exclusive of any bonuses paid during the
period ended July 31, 1994, to either or both of Messrs. Wood and Wabler in
connection with the exercise of options by them and pursuant to their Employment
Agreements with the Corporation dated as of May 9, 1993, (under no circumstance,
however, shall such bonuses exceed Two Hundred Forty Thousand Dollars ($240,000)
in the aggregate).
(C) If the pre-tax income, exclusive of the effect of any
material acquisitions or sales of assets not in the ordinary course of business,
of the Corporation exceeds Three Million Nine Hundred Twenty-seven Thousand
Dollars ($3,927,000) then the Conversion Price of the Series A Preferred Stock
shall be as follows:
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(i) Seven Dollars and Seventy-five Cents ($7.75) per
share plus an amount equal to the product obtained by multiplying Seven Dollars
and Seventy-five Cents ($7.75) by a fraction, the numerator of which is the
excess pre-tax income above Three Million Five Hundred Seventy Thousand Dollars
($3,570,000), and the denominator of which is Three Million Five Hundred
Seventy Thousand Dollars ($3,570,000).
(ii) The Seven Dollars and Seventy-five Cents ($7.75)
amount specified in subsection (i) above shall be subject to adjustment pursuant
to the other provisions of this Section 4.4.
(D) If the pre-tax income of the corporation, exclusive of the
effect of any material acquisitions or sales of assets not in the ordinary
course of business, falls below Three Million Two Hundred Thirteen Thousand
Dollars ($3,213,000), then the Conversion Price of the Series A Preferred Stock
shall be as follows:
(i) Seven Dollars and Seventy-five Cents ($7.75) per
share minus an amount equal to the product obtained by multiplying Seven dollars
and Seventy-five Cents ($7.75) by a fraction, the numerator of which is the
deficit in pre-tax income below Three Million Five Hundred Seventy Thousand
Dollars ($3,570,000) and the denominator of which is Three Million Five Hundred
Seventy Thousand Dollars ($3,570,000).
(ii) The Seven Dollars and Seventy-five Cents ($7.75)
amount specified in subsection (i) above shall be subject to adjustment pursuant
to the other provisions of this Section 4.4.
(E) Notwithstanding the foregoing, the Conversion Price shall
never be adjusted as described herein on the basis of pre-tax income in excess
of Five Million Three Hundred Fifty-five Thousand Dollars ($5,355,000) or less
than One Million Seven Hundred Eighty-five Thousand Dollars ($1,785,000),
exclusive of the effect of any material acquisitions or sales of assets not in
the ordinary course of business, of the Corporation.
(5) Other Distributions. In the event the Corporation shall declare a
-------------------
distribution payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in subsection 4.4(d)(3)(B), then, in each such
case for the purpose of this subsection 4.4(d)(5) the holders of the Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the Corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(6) Recapitalizations. If at any time or from time to time there shall
-----------------
be a recapitalization of the Common Stock (other than a subdivision, combination
or merger or sale of assets transaction provided for elsewhere in this
Section 4.4) provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock the number of shares of stock or other securities or
property of the Corporation or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4.4 with respect to the rights of the holders of the
Series A Preferred Stock
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<PAGE>
after the recapitalization to the end that the provisions of this Section 4.4
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series A Preferred Stock) shall be
applicable after that event as nearly equivalent as may be practicable.
(7) No Impairment. The Corporation will not, by amendment of this
-------------
Certificate or through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4.4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
(8) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(A) No fractional shares shall be issued upon conversion of the
Series A Preferred Stock, and the number of shares of Common Stock to be issued
shall be rounded to the nearest whole share. Whether or not fractional shares
are issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(B) Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series A Preferred Stock pursuant to this Section 4.4, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustment and
readjustment, (ii) the Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of Series A
Preferred Stock.
(9) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least twenty (20) days
prior to the date specified herein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(10) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Series A Preferred Stock such number of its shares of Common Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock, in addition to such other remedies as shall be available to the
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<PAGE>
holder of such Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
(11) Notices. Any notice required by the provisions of this
-------
Section 4.4 to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
this corporation.
(12) Overriding Antidilution Protections. Notwithstanding any
-----------------------------------
provisions herein to the contrary, in no event and under no circumstances shall
(A) any shares issued to consultants, officers, employees or directors pursuant
to or under a stock option plan, a restricted stock plan or any other stock or
employee incentive plan or agreement, or (B) any adjustment made to the Series A
Conversion Price pursuant to Section 4.4(d)(4) hereof, cause the holders of
Series A Preferred Stock to own less than thirteen percent (13%) of the
Corporation's then outstanding capital stock (treating, for this purpose all
shares of Series A Preferred Stock on an as converted basis and all options and
warrants or other rights to acquire capital stock on an as exercised basis and
after adjusting for the effect of any redemption of Series A Preferred Stock by
treating that redeemed stock as being still outstanding). The Corporation shall
take all actions necessary to effect the provisions of this Section 4.4(d)(12)
on an immediate basis.
(e) Redemption.
----------
(1) If the Corporation shall have received, after June 30,
1997, and prior to June 30, 2002, written requests (a "Redemption Election") by
the holders of all of the then outstanding Series A Preferred Stock, for the
Corporation to redeem all of the Series A Preferred Stock, the Corporation shall
immediately after receipt of such Redemption Election, redeem the percentage of
Series A Preferred Stock specified in such Redemption Election by paying in cash
therefor a per share sum equal to the Original Series A Issue Price for each
share of Series A Preferred Stock to be redeemed (as adjusted to reflect a stock
split, combination, reclassification or similar event involving the Series A
Preferred Stock), plus all declared but unpaid dividends thereon through the
date on which such share of Series A Preferred Stock is actually redeemed, plus
either (A) Warrants to purchase shares of Common Stock (the "Warrants") in an
amount and pursuant to the terms set forth in Section 1.3 of the Stock Purchase
Agreement or (B) the Premium (such cash Premium amount payable under this
Section 4.4(c) and the cash amount or the Original Series A Issue Price plus
declared and unpaid dividends shall hereinafter collectively be referred to as
the "Redemption Price"). Each of the holders of the Series A Preferred Stock
shall notify the Corporation at the time of election as to whether they elect to
receive either (A) or (B) above. If a holder elects to receive Warrants pursuant
to subsection (A), such Warrants shall be issued to such holder on an immediate
basis. The Redemption Price shall be payable in sixteen (16) equal consecutive
quarterly payments beginning on the thirtieth (30th) day after the date the
Corporation receives the Redemption Election (the "Initial Redemption Date") and
each subsequent redemption installment shall occur on each quarterly anniversary
of the Initial Redemption Date unless such anniversary falls on a day which is
not a business day in which case the applicable redemption installment shall be
due and payable on the next business day (each such date, and the Initial
Redemption Date, are sometimes referred to herein as a "Redemption Date"). On
each Redemption Date, each holder of shares of Series A Preferred Stock shall
surrender the certificate or certificates representing the shares of Series A
Preferred Stock to be redeemed on such Redemption Date (together with a proper
assignment of such certificate(s) to the Corporation in exchange for payment of
the applicable Redemption Price for such
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<PAGE>
shares of Series A Preferred Stock. In the event that either the number of
shares of Series A Preferred Stock required to be redeemed by the Corporation on
such Redemption Date is less than the number of shares of Series A Preferred
Stock represented by such certificate(s), or the Corporation fails to pay the
Redemption Price for all of the shares of Series A Preferred Stock required to
be redeemed on such Redemption Date, the Corporation shall reissue and deliver
to such holder on such Redemption Date a certificate representing the number of
shares of Series A Preferred Stock which are not required to be redeemed or for
which the Redemption Price has not been paid in full. Until the Redemption Date,
all unredeemed shares shall be deemed to be outstanding, and the Premium (if
applicable) shall continue to accrue until such shares are redeemed. When notice
is required to be given pursuant to this subsection 4.4(e)(1), such notice shall
be written notice, mailed first class, postage prepaid, to the Corporation at
the address where the principal executive offices of the Corporation is located.
Notice shall be deemed received when received by the Corporation.
(2) Notwithstanding subsection 4.4(e)(1), if at any time after an
Event of Default (as defined in the Stock Purchase Agreement) has occurred and
is continuing the holders of the then outstanding shares of Series A Preferred
Stock may elect to have the Corporation redeem all of their shares of Series A
Preferred Stock by delivering a written notice of such election to the
Corporation (a "Default Redemption Election"), then the Corporation shall redeem
all of the shares of Series A Preferred Stock, for the cash Redemption Price, in
a single installment on the thirtieth (30th) business day after the date on
which the Corporation receives the Default Redemption Election (the "Default
Redemption Date"). On the Default Redemption Date, each holder of shares of
Series A Preferred Stock shall surrender the certificate or certificates
representing its shares of Series A Preferred Stock (together with a proper
assignment of such certificate(s) to the Corporation in exchange for payment of
the Redemption Price for such shares of Series A Preferred Stock. In the event
that the Corporation is unable to pay (or legally prevented from paying) the
Redemption Price for all of the shares of Series A Preferred Stock represented
by such certificate(s), the Corporation shall reissue and deliver to such holder
a certificate representing the number of shares of Series A Preferred Stock for
which the Redemption Price has not been paid in full. When notice is required to
be given pursuant to this subsection 4.4(e)(2), such notice shall be written
notice, mailed first class, postage prepaid, to the Corporation at the address
where the principal executive offices of the Corporation is located. Notice
shall be deemed received when received by the Corporation and such notice must
be provided by all of the investors for the election pursuant to this subsection
---
4.4(e)(2) to be effective.
(3) No more than thirty (30) days, prior to a Redemption Date, written
notice shall be mailed, first class postage prepaid, to each holder of record
(at the close of business on the business day next preceding the day on which
notice is given) of the Series A Preferred Stock to be redeemed, at the address
last shown on the records of this Corporation for such holder or given by the
holder to this Corporation for the purpose of notice or if no such address
appears or is given at the place where the principal executive office of this
Corporation is located, notifying such holder of the redemption to be effected,
specifying the Redemption Date, the cash Redemption Price, the place at which
payments may be obtained and the date on which such holder's Conversion Rights
as to such shares terminate and calling upon such holder to surrender to this
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Each holder of Series A Preferred Stock shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the first installment
of the cash Redemption Price of such shares shall be payable to the order of the
person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled.
16
<PAGE>
(4) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
such shares as holders of Series A Preferred Stock that have been delivered for
redemption (except the right to receive the cash Redemption Price) shall cease
with respect to such shares, and such shares shall not thereafter be transferred
on the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Series A Preferred Stock on any Redemption Date are insufficient to
pay in full the cash portion of the Redemption Price for the total number of
shares of Series A Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of the shares of Series A Preferred
Stock to be redeemed based on the aggregate Redemption Prices of such series
required to be redeemed. The shares of Series A Preferred Stock not redeemed
shall remain outstanding and entitled to all rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of Series A Preferred Stock, such
funds will immediately be used to redeem the balance of the shares which the
Corporation has become obligated to redeem on any Redemption Date, but which it
has not redeemed. The aggregate cash portion of the Redemption Price for the
shares of Series A Preferred Stock that are not redeemed by the Corporation as
required on a Redemption Date shall bear interest from August 16, 1993 at
fifteen percent (15%) per annum, in each cash based upon a year of Three Hundred
Sixty (360) days and the actual number of days elapsed.
(5) Three (3) days prior to the Redemption Date, the Corporation
shall deposit the cash Redemption Price of all outstanding shares of Series A
Preferred Stock designated for redemption in the Redemption Notice, and not yet
redeemed or converted, with a bank or trust company having aggregate capital and
surplus in excess of Fifty Million Dollars ($50,000,000) as a trust fund for the
benefit of the respective holders of the shares designated for redemption and
not yet redeemed. Simultaneously, the Corporation shall deposit irrevocable
instruction and authority to such bank or trust company to publish the notice of
redemption thereof (or to complete such publication if theretofore commenced)
and to pay, on and after the date fixed for redemption, the Redemption Price of
the Series A Preferred Stock to the holders thereof upon surrender of their
certificates.
(f) Protective Provisions. So long as shares of Series A
---------------------
Preferred Stock are outstanding, the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of sixty percent (60%) of the then outstanding shares of Series A
Preferred Stock:
(1) authorize or issue, or obligate itself to authorize or
issue, additional shares of Common Stock, Preferred Stock or any other capital
stock except (A) the issuance of shares of Common Stock pursuant to stock option
plans or restricted stock plans or written option agreements approved by the
Board of Directors, (B) the issuance of shares of Common Stock upon the
conversion of the Series A Preferred Stock, (C) issuances of shares of Common
Stock upon the conversion of any convertible securities outstanding on or prior
to the Purchase Date; (D) the issuance of Common Stock upon the exercise of any
Warrant issued under subsection 4(a) or Section 1.3 of the Stock Purchase
Agreement; and (E) the consummation of the Corporation's sale of shares of
Common Stock in a bona fide, firm commitment underwriting pursuant to a
registration statement on Form S-1, or any successor form, under the Securities
Act of 1933, as amended, where (i) the gross proceeds of the offering to the
Corporation are not less than Fifteen Million Dollars ($15,000,000), and (ii)
the product of the price per share to the public of the Common Stock times the
number of shares of Common Stock outstanding immediately prior to the
consummation of the underwritten offering (including any
17
<PAGE>
shares of Common Stock then issued or issuable upon conversion of the Series A
Preferred Stock and including a maximum of One Hundred Ninety-nine Thousand
Seventy (199,070) shares of Common Stock issuable upon exercise of stock
options issued to employees as of August 16, 1993, shall not be less than Fifty
Million Dollars ($50,000,000).
(2) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares; or
(3) increase the authorized number of shares of Series A Preferred
Stock; or
(4) create any new class or series of stock or any other
securities convertible into equity securities of the Corporation having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to voting, dividends or upon liquidation, or to sell or authorize any
additional shares of Series A Preferred Stock; or
(5) do any act or thing which would result in taxation of the
holders of shares of the Series A Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision of the
Internal Revenue Code as hereafter from time to time amended); or
(6) amend this Certificate or the By-Laws of the Corporation if
such amendment shall adversely affect the rights, preferences or privileges of
the Series A Preferred Stock.
(7) make any distributions or issue any dividends on any shares of
the Corporation's capital stock.
(g) Status of Converted or Redeemed Stock. In the event any shares of
-------------------------------------
Series A Preferred Stock shall be converted pursuant to Section 4.4(d) hereof,
the shares so converted shall be cancelled and shall not be issuable by the
Corporation. The Certificate shall be approximately amended to effect the
corresponding reduction in the Corporation's authorized capital stock.
ARTICLE 5
Registered Office and Agent
---------------------------
The location and mailing address of the registered office of the
Corporation shall be:
3000 Riverchase Galleria
Suite 900
Birmingham, Alabama 35244
The name of the Corporation's registered agent at said address shall be
Harold Ruttenberg.
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<PAGE>
ARTICLE 6
Board of Directors
------------------
6.1 Initial Board of Directors. The Board of Directors shall consist of
-------------------------
six (6) Directors. The names and mailing addresses of the persons who are to
serve as Directors until the first annual meeting of shareholders, or until
their successors are elected and qualified, are as follows:
NAME MAILING ADDRESS
---- ---------------
Harold Ruttenberg 3000 Riverchase Galleria
Suite 900
Birmingham, Alabama 35244
Joseph W. Wood 3000 Riverchase Galleria
Suite 900
Birmingham, Alabama 35244
Robert C. Wabler 3000 Riverchase Galleria
Suite 900
Birmingham, Alabama 35244
Bart Starr, Sr. Starr-Sanders Properties
One Chase Corporate Drive, Suite 450
Birmingham, Alabama 35244
Michael P. Lazarous Weston Presidio Offshore Capital
Management L.P.
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
Edward S. Croft, III Robinson-Humphrey Company, Inc.
Atlanta Financial Center
3333 Peachtree Road, N.E.
Atlanta, Georgia 30326
6.2 Removal of Directors. Notwithstanding any other provision of this
--------------------
Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation (and notwithstanding the fact that a lesser percentage may be
specified by law, this Amended and Restated Certificate of Incorporation, or the
By-Laws of the Corporation), any director or the entire Board of Directors of
the Corporation may be removed at any time, with or without cause, by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, or by written consent.
19
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ARTICLE 7
Incorporator
------------
The name and mailing address of the incorporator is as follows:
NAME MAILING ADDRESS
---- ---------------
Harold Ruttenberg 3000 Riverchase Galleria
Suite 900
Birmingham, Alabama 35244
ARTICLE 8
Internal Affairs
----------------
The following provisions for the regulation of the business and for
the conduct of the affairs of the Corporation, the Directors and the
shareholders are hereby adopted:
8.1 The initial By-Laws of the Corporation shall be adopted by the
shareholders. The power to alter, amend, repeal the By-Laws or adopt new
By-Laws shall be vested in the Board of Directors and the shareholders, or
either of them, which power may be exercised in the manner and to the extent
provided in the By-Laws; provided, however, that the Board of Directors may not
alter, amend or repeal any By-Law which was adopted by the shareholders and
specifically provides that it cannot be altered, amended or repealed by the
Board of Directors, or which is not permitted by applicable law to be altered,
amended or repealed solely by action of the Board of Directors. The By-Laws may
contain any provisions for the regulation of the business and for the conduct of
the affairs of the Corporation, the Directors and shareholders not inconsistent
with the Alabama Business Corporation Act or this Certificate of Incorporation.
8.2 The business and affairs of the Corporation shall be managed by
the Board of Directors. The number of Directors comprising the Board of
Directors shall be the number of persons listed as Directors in Article 4
hereof. Thereafter, the number of Directors of the Corporation shall be fixed
by, or in the manner provided in, the By-Laws or, in the absence of a By-Law
providing for the number of Directors, the number of Directors shall be the same
as the number set forth in Article 6 hereof. The number of Directors may be
increased or decreased from time to time, in the manner provided in the By-Laws,
provided that no decrease shall have the effect of shortening the term of any
incumbent Director, except that any Director may be removed as set forth in
Section 6.2 hereof.
8.3 In furtherance, and not in limitation, of the powers conferred
by statute, the Board of Directors is expressly authorized:
(a) To fix and determine and to vary the amount of working
capital of the Corporation; to determine whether any, and if any, what part of
any, accumulated profits shall be declared and paid as dividends; to determine
the date or dates for the declaration and payment of
20
<PAGE>
dividends; to direct and determine the use and disposition of any surplus or net
profits over and above the capital shares paid in;
(b) To make, from time to time (so far as may be permitted by
federal or state law and regulations), temporary secured or unsecured loans
when, in the judgement of the Board of Directors, the money so loaned is not at
the time required in the conduct of the business of the Corporation.
(c) To distribute to the shareholders of any class of shares as a
stock dividend shares of any other class which the Corporation is authorized to
issue, subject to the restrictions and limitations as set forth in the Alabama
Business Corporation Act as presently in effect, or as hereafter amended, or as
set forth in this Certificate or the By-Laws of the Corporation.
(d) To distribute to the shareholders of the Corporation, either out
of its capital surplus or out of its earned surplus, a portion of the
Corporation's assets, in cash or in property, subject to the restrictions and
limitations as set forth in the Alabama Business Corporation Act as presently in
effect, or as hereafter amended, or as set forth in this Certificate or the By-
Laws of the Corporation.
8.4 Except as provided in this Section 8.4, any action required or
permitted to be taken by the shareholders of the Corporation must be effected at
a duly called annual or special meeting of the shareholders of the Corporation
and may not be effected by any consent in writing by such shareholders, except
for the removal of any director as provided in Section 6.2 hereof. Advance
notice of items of business to be considered at any meeting of the shareholders
shall be given in the manner and to the extent provided in the Bylaws of the
Corporation. Notwithstanding the foregoing, this Section 8.4 does not apply to
the Corporation if it does not have a class of voting stock that is either (i)
listed on a national securities exchange, (ii) authorized for quotation on an
inter dealer quotation system of the registered national securities association,
or (iii) held of record by more than 2,000 stockholders.
8.5 At any time and from time to time when authorized by resolution of the
Board of Directors and, except as otherwise provided in the within Certificate
and by statute, without any action by its shareholders, the Corporation may
(a) issue or sell for such consideration as may be fixed from time
to time by the Board of Directors, any number of its capital shares, and whether
out of the unissued shares thereof authorized by this Certificate, as from time
to time amended, or out of shares of its capital shares acquired by it after the
issuance thereof;
(b) issue and sell its obligations, secured or unsecured, and in
bearer, registered or such other form, and including such provisions as to
redeemability, covertibility or otherwise, as the Board of Directors, in its
sole discretion, may determine, and mortgage or pledge as security therefor, any
property of the Corporation, real or personal, including after-acquired
property; and
(c) issue or grant, for such consideration as may from time to time
be fixed by the Board of Directors, warrants or options, in bearer, registered
or such other form as the Board of Directors may determine, for the purchase of
its capital shares with or without par value of any class within such period of
time, or without limit as to time, to such aggregate number of shares, and at
such
21
<PAGE>
price per share as the Board of Directors may determine. Such warrants or
options may be issued or granted separately or in connection with the issue of
any bonds, debentures, notes or other evidences of indebtedness or capital
shares of any class of the Corporation and for such consideration and on such
terms and conditions as the Board of Directors in its sole discretion may
determine.
8.6 The Corporation shall have a lien upon all shares subscribed
for or issued for the full subscription price thereof or any debt or liability
incurred to it by the subscriber or shareholder, which lien may be exercised by
cancellation, forfeiture, or public or private sale, upon reasonable notice, of
such subscription, which remedies are cumulative to an action to enforce payment
or other remedies provided by law. At the election of the Corporation, a
subscriber shall not be considered as a shareholder until said subscription
shall have been paid in full.
8.7 The Corporation shall have the right to purchase, take, receive
or otherwise acquire, hold, own, pledge, and transfer or otherwise dispose of
its own shares, but purchases of its own shares, whether direct or indirect,
shall be made only to the extent of unreserved and unrestricted earned surplus
available therefor, or to the extent of unreserved and unrestricted capital
surplus available therefor.
8.8 The Corporation may, from time to time, lawfully enter into
any agreement to which all, or less than all, the holders of record of the
issued and outstanding shares of its capital stock shall be parties restricting
the transfer of any or all shares of its capital stock represented by
certificates therefor.
8.9 All persons who shall acquire stock in this Corporation shall
acquire it subject to the provisions of this Certificate as the same from time
to time may hereafter be amended. So far as not otherwise expressly provided by
the laws of the State of Alabama, the Corporation shall be entitled to treat the
person or entity in whose name any share of its stock is registered as the owner
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in said share on the part of any other person,
whether or not the Corporation shall have notice thereof.
ARTICLE 9
Amendments
----------
9.1 Subject to the provisions of Section 4.4(f) hereof, the
Corporation reserves the right from time to time to amend, alter or repeal each
and every provision contained in this Certificate or to add one or more
additional provisions, in the manner now or hereafter prescribed or permitted by
the Alabama Business Corporation Act, and all rights conferred upon shareholders
at any time are granted subject to this reservation. Notwithstanding any other
provision of this Amended and Restated Certificate of Incorporation or the
By-Laws of the Corporation (and in addition to any other vote that may be
required by law, this Amended and Restated Certificate of Incorporation, or the
By-Laws of the Corporation), the affirmative vote of the holders of at least 80%
of the outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors (considered for this purpose as one
class) shall be required to amend, alter or repeal any provision of Article 9,
11, or 12 of this Amended and Restated Certificate of Incorporation.
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<PAGE>
9.2 Any and every statute of the State of Alabama hereafter enacted
whereby the rights, powers and privileges of the shareholders of corporations
organized under the general laws of the State of Alabama are increased,
diminished or in any way affected, or whereby effect is given to the action
taken by any part less than all of the shareholders of any such corporation,
shall apply to the Corporation and shall be binding upon not only the
Corporation but upon every shareholder thereof, to the same extent as if such
statute had been in force at the date of the making and filing of this
Certificate.
ARTICLE 10
Denial of Preemptive Rights
---------------------------
No holder of shares of any class of the Corporation shall, as such
holder, have any preemptive rights in, or preemptive rights to purchase or
subscribe to, any shares of the Corporation, or any bonds, debentures or other
securities or obligations convertible into or exchangeable with any shares of
the Corporation, other than such rights of conversion or exchange and such
rights under options or warrants or purchase or subscription arrangements, as
shall be expressly granted by the Board of Directors or shareholders at such
prices and upon such other terms and conditions as the Board of Directors, in
its discretion, or the shareholders may fix or designate.
ARTICLE 11
Indemnification
---------------
11.1 Every person (and the heirs, executors and administrators of such
person) who is or was an officer or director of the Corporation, or served as an
officer, director, employee or agent of any other corporation at the request of
the Corporation, and of which the Corporation directly or indirectly is a
shareholder or creditor, or in which, or in the stocks, bonds, securities or
other obligations of which it is in any way interested, shall in accordance with
the second paragraph of this Article be indemnified by the Corporation against
any and all liability and reasonable expense that may be incurred by him in
connection with or resulting from any claim, action, suit or proceeding (whether
brought by or in the right of the Corporation or such other company or
otherwise), civil or criminal, or in connection with an appeal relating
thereto, in which he may become involved, as a party or otherwise, by reason of
his being or having been an officer or director of the Corporation or director,
officer, employee, or agent of such other corporation, or by reason of any
action taken or not taken by him in such capacity, whether he continues to be
such officer or director at the time such liability or expense shall have been
incurred, provided he acted in good faith in what he reasonably believed to be
the best interests of the Corporation or such other corporation, as the case may
be, and, in addition, in any criminal action or proceeding, had no reasonable
cause to believe that his conduct was unlawful. As used herein the terms
"liability" and "expense" shall include, but shall not be limited to counsel
fees and disbursements and amounts of judgments, fines or penalties against,
and amounts paid and settlements by or for such person. The termination of any
claim, action, suit or proceeding, civil or criminal by judgment, settlement
(whether with or without court approval) or conviction shall not create a
presumption that such person does not meet the standards of conduct set forth
herein.
11.2 Any indemnification hereunder shall be made if the Board of
Directors (with no director who is a party to or interested in such claim,
action, suit or proceeding, participating) shall find that such person has met
the standards of conduct set forth in the preceding paragraph. If two-thirds
(2/3)
23
<PAGE>
or more of the Board of Directors are parties to or interested in such claim,
action, suit or proceeding, the regular counsel for the Corporation shall
determine whether such person has met such standards.
11.3 Expenses incurred with respect to any such claim, action, suit or
proceeding may be advanced by the Corporation prior to the final disposition
thereof upon receipt of an undertaking by or on behalf of such person to repay
such amount unless it shall ultimately be determined that he is entitled to
indemnification hereunder.
11.4 The rights of indemnification provided in this Article 11 shall be in
addition to any rights to which any such person may otherwise be entitled under
any by-law, agreement, vote of shareholders, or otherwise.
ARTICLE 12
Business Combinations
---------------------
12.1 Supermajority Vote for Business Combinations. Except as provided in
--------------------------------------------
Section 12.2 hereof, the Corporation shall not become a party to any Business
Combination without the prior affirmative vote at a meeting of the Corporation's
shareholders of at least 80% of the outstanding shares of all classes of Voting
Stock of the Corporation considered for purposes of this Article 12 as a single
class. Such favorable vote shall be in addition to any shareholder vote which
would be otherwise required notwithstanding the fact that no vote may be
required, or that some lesser percentage may be specified by law or elsewhere in
this Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation or otherwise.
12.2 Director Approval Exception. The provisions of Section 12.1 shall not
---------------------------
apply to a Business Combination if:
(a) The Directors of the Corporation, by an affirmative vote of not
less than two-thirds (2/3) of the Directors, (1) have expressly approved a
letter of intent or a memorandum of understanding with respect to the Business
Combination and the Business Combination is effected on substantially the same
terms and conditions as are provided by the letter of intent or the memorandum
of understanding, or (2) have otherwise approved the Business Combination, or
(b) The Business Combination is solely between the Corporation and
another corporation, eighty percent (80%) of the Voting Stock of which is owned
directly or indirectly by the Corporation.
12.3 Definitions. For purposes of this Article 12:
-----------
(a) A "Business Combination" means:
(1) The sale, exchange, lease, transfer, or other disposition by
the Corporation (in a single transaction or in a Series of Related Transactions)
of all or substantially all, or any Substantial Part, of its assets or
business; or
(2) Any merger or consolidation of the Corporation into or with
another Person irrespective of which Person is the surviving entity in such
merger or consolidation;
24
<PAGE>
(b) A "Series of Related Transactions" shall be deemed to include not
only a series of related transactions with the same Person, but also a series of
separate transactions with a Person or any Affiliate or Associate of such
Person.
(c) A "Person" shall mean any individual, firm, corporation, or other
entity and any partnership, syndicate, or other group.
(d) An "Affiliate" of, or a person Affiliated with, a specific Person
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified.
(e) The term "Associate" used to indicate a relationship with any
Person, means (1) any corporation or organization (other than this Corporation
or a majority-owned Subsidiary of this Corporation) of which such Person is an
officer or partner or is, directly or indirectly, the Beneficial Owner of five
percent (5%) or more of any class of equity securities, (2) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar fiduciary capacity, (3) any
relative or spouse of such Person, or any relative of such spouse, who has the
same home as such Person, or (4) any investment company registered under the
Investment Company Act of 1940, as amended, for which such Person or any
Affiliates of such Person serves as investment advisor.
(f) "Voting Stock" shall mean all outstanding shares of capital stock
of the Corporation or another corporation entitled to vote generally on the
election of Directors, and each reference to a proportion of shares of Voting
Stock shall refer to such proportion of the votes entitled to be cast by such
shares.
(g) "Substantial Part" means properties and assets involved in any
single transaction or a Series of Related Transactions having an aggregate fair
market value of more than ten percent (10%) of the total consolidated assets of
the Person in question as determined immediately prior to such transaction or
Series of Related Transactions.
12.4 Director Determinations. A majority of the Directors shall have the
-----------------------
power to determine for the purposes of this Article 12, on the basis of
information known to them: (a) the number of shares of Voting Stock of which any
Person is the beneficial owner, (b) whether a Person is an Affiliate or
Associate of another, (c) whether a Person has an agreement, arrangement, or
understanding with another as to be deemed a "beneficial owner," (d) whether the
assets subject to any Business Combination constitute a Substantial Part, (e)
whether two or more transactions constitute a Series of Related Transactions,
and (f) such other matters with respect to which a determination is required
under this Article 12.
12.5 Article 12 Nonexclusive. The provisions of this Article 12 are
-----------------------
nonexclusive and are in addition to any other provisions of law or this restated
certificate of incorporation or the By-Laws of the Corporation relating
to Business Combinations or similar matters.
The above Amended and Restated Certificate of Incorporation provides for
an exchange or reclassification of issued shares and a change in the amount of
stated capital. The manner in which this change is effected is as follows: The
amendment provides for an increase in the authorized shares to Twenty-five
Million Two Thousand Six Hundred Sixty Seven (25,002,667) shares, of which
Twenty
25
<PAGE>
Million (20,000,000) shares will be Common Stock with a par value of $.0001 per
share; Five Million (5,000,000) shares will be Preferred Stock with a par value
of $.0001 per share; and Two Thousand Six Hundred Sixty Seven (2,667) shares
will be Preferred Stock with a par value of $.0001 per share. The shareholders
holding all of the shares of Common Stock shall receive an aggregate of Two
Million Eight Hundred Seventy Thousand Seven Hundred Ninety Two (2,870,792)
(2,289,308 x 1.254) shares of Common Stock in exchange for the shares they
currently own. The stated capital is currently Six Thousand Two Dollars and
Sixty-seven Cents ($6,002.67). This Amendment will decrease the stated capital
to Two Thousand Five Hundred Dollars and Twenty-seven Cents ($2,500.27).
We further certify that the within Amended and Restated Certificate of
Incorporation is being filed in the Office of the Judge of Probate of Jefferson
County, Alabama, for the purpose of effecting such amendment in accordance with
the requirements of Code of Alabama 1975, Section 10-2A-114.
IN WITNESS WHEREOF, we have hereunto set our hands and seal this 18th
day of January, 1994.
/s/ Harold Ruttenberg (SEAL)
----------------------------
Harold Ruttenberg, President
/s/ Pamela Beryl Ruttenberg (SEAL)
----------------------------
Pamela Beryl Ruttenberg, Secretary
26
<PAGE>
VERIFICATION
I, the undersigned, as President of Just For Feet, Inc. do hereby verify
that the above and foregoing instrument represents the Amended and Restated
Certificate of Incorporation of Just For Feet, Inc., an Alabama corporation,
duly approved and adopted by a unanimous vote of the Directors and by majority
vote of the Shareholders of the Corporation and that the statements contained
therein are true and correct.
DONE, this 18th day of January, 1994.
/s/ Harold Ruttenberg
--------------------------------
Harold Ruttenberg, President
Sworn to and subscribed before me on this 18th day of January, 199_.
/s/ John H. Cooper
--------------------------------
Notary Public
My Commission Expires: 3/17/95
-------------
<PAGE>
EXHIBIT 3(i).1
STATE OF ALABAMA
COUNTY OF JEFFERSON
ARTICLES OF AMENDMENT
OF
JUST FOR FEET, INC.
Pursuant to Section 10-2B-10.06 of the Alabama Business Corporation Act, the
undersigned corporation hereby adopts the following Articles of Amendment.
I.
The name of the Corporation is Just For Feet, Inc.
II.
The following amendment to the Corporation's Amended and Restated Articles
of Incorporation was adopted in the manner prescribed by the Alabama Business
Corporation Act:
Article 4 of the Amended and Restated Articles of Incorporation of the
Corporation is amended by deleting Section 4.4 thereof (entitled "Series A
Preferred Stock") in its entirety and further by amending Section 4.1
thereof (entitled "Authorization") to read in its entirety as follows:
"4.1 Authorization. The aggregate number of shares which the
-----------------
Corporation shall have authority to issue shall be Seventy-Five
Million (75,000,000), divided into Seventy Million (70,000,000) shares
of Common Stock with a par value of $.0001 per share, and Five Million
(5,000,000) shares of Preferred Stock, with a par value of $.0001 per
share, as the Board of Directors may decide to issue pursuant to
Section 4.3 hereof, constituting a total authorized capital of Seven
Thousand Five Hundred Dollars ($7,500)."
III.
The above Amendment was adopted by the Board of Directors of the Corporation
on March 5, 1996 and by the shareholders of the Corporation on May 28, 1996, in
the manner prescribed by the Alabama Business Corporation Act.
IV.
The number of shares of Common Stock of the Corporation outstanding at the
time of the adoption of the Amendment by the shareholders was 17,691,368; the
number of shares entitled to
<PAGE>
vote thereon was 17,548,907; and the number of shares represented in person or
by proxy at the shareholders' meeting was 15,170,100. The number of shares
voted in favor of the Amendment was 12,394,739 and the number of shares voted
against the Amendment was 2,608,872.
V.
The following additional amendment to the Corporation's Amended and Restated
Articles of Incorporation was adopted in the manner prescribed by the Alabama
Business Corporation Act:
Section 8.2 of the Amended and Restated Articles of Incorporation of
the Corporation is amended by adding the following new sentence to the end
of Section 8.2 as it existed prior to the date hereof:
"The Board of Directors shall have the power to fill vacancies on
the Board of Directors, including vacancies resulting from an increase
in the number of Directors."
VI.
The above amendment was adopted by the Board of Directors of the Corporation
on March 5, 1996 and by the shareholders of the Corporation on May 28, 1996, in
the manner prescribed by the Alabama Business Corporation Act.
VII.
The number of shares of Common Stock outstanding at the time of the adoption
of the Amendment by the shareholders was 17,691,368; the number of shares
entitled to vote thereon was 17,548,907; and the number of shares represented in
person or by proxy at the shareholders' meeting was 15,170,100. The number of
shares voted in favor of the Amendment was 12,440,993 and the number of shares
voted against the Amendment was 2,619,110.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed by Harold Ruttenberg, Chairman of the Board, President and Chief
Executive Officer of the Corporation, on this 28th day of May, 1996.
JUST FOR FEET, INC.
By: /s/ Harold Ruttenberg
--------------------------------
Harold Ruttenberg
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
EXHIBIT 10.6.2
AMENDMENT NO. 3
EMPLOYEE INCENTIVE STOCK OPTION PLAN
JUST FOR FEET, INC.
WHEREAS, the Board of Directors of Just For Feet, Inc. (the "Company") has
previously adopted, and the shareholders of the Corporation have approved, the
Employee Incentive Stock Option Plan, as amended (the "Plan") pursuant to which
options to purchase stock of the Corporation may be issued to eligible
directors, officers and key employees of the Corporation; and
WHEREAS, the Board of Directors of the Corporation deems it desirable to
amend the Plan so as to increase the number of shares available for issuance
pursuant to the exercise of options granted under the Plan and to provide for
the exercise of options under the Plan upon the termination of employment, death
or disability of a Plan participant;
NOW, THEREFORE, the Plan is amended upon the terms, and subject to the
conditions, set forth herein:
ARTICLE I
AMENDMENT TO PLAN
1.1 Section 4 of the Plan shall be amended by deleting such section in its
entirety and substituting therefor the following:
"4. SHARES RESERVED FOR PLAN. The shares of the Corporation's $.0001
------------------------
par value common stock (the "Common Stock") to be sold to eligible
employees under the Plan may at the election of the Board of Directors
be either treasury shares or shares originally issued for such purpose.
The maximum number of shares which shall be reserved and made available
for sale under the Plan shall be Three Million
(3,000,000). Any shares subject to an option granted hereunder which
for any reason expires or is terminated unexercised may again be
subject to an option under the Plan."
ARTICLE II
EFFECTIVE DATE OF AMENDMENT
2.1 The amendment effected hereby shall be effective for options granted
under the Plan to eligible employees on or after the date this amendment is
approved by the Board of Directors of the Corporation, but subject to approval
of a majority of the shares of Common Stock
A-1
<PAGE>
of the Corporation entitled to vote thereon represented in person and by proxy
at a meeting of shareholders. In the event shareholder approval of adoption of
this amendment is not obtained within twelve months of the date this amendment
is approved by the Board of Directors of the Corporation, then any option
granted in the intervening period to eligible employees shall be void.
A-2
<PAGE>
EXHIBIT 10.50
MASTER REVOLVING PROMISSORY NOTE
--------------------------------
$10,000,000.00 Birmingham, Alabama
October 24, 1995
FOR VALUE RECEIVED, the undersigned, JUST FOR FEET, INC., an Alabama
corporation (the "Borrower"), hereby promises to pay to the order of COMPASS
BANK (the "Lender", or together with any subsequent assignee, transferee or
holder of this Note, the "Holder"), at its office at 15 South 20th Street,
Birmingham, Alabama 35233, or at such other place as Lender may direct, in
lawful money of the United States of America constituting legal tender in
payment of all debts and dues, public and private, the principal amount of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00), or so much thereof as may have been
advanced or re-advanced from time to time, and outstanding hereunder, together
with interest thereon calculated at the rate and in the manner set forth herein
(and any charges and expenses provided for under this Note), all on and in
accordance with the terms and in the manner more particularly set forth below:
1. Revolving Line. Borrower has applied to Lender for a revolving line of
--------------
credit not to exceed an aggregate principal amount at any one time outstanding
of TEN MILLION AND NO/100 DOLLARS ($100,000,000.00) (the "Revolving Line"),
which Revolving Line is and shall be governed by this Note. Holder is willing to
extend such Revolving Line to Borrower on the terms and subject to the
conditions set forth herein. Accordingly, in consideration of the forgoing, the
credit to be made available hereunder, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
from the date hereof until July 1, 1996, subject to the terms and
Master Revolving Promissory Note Page 1 Initial [INITIAL APPEARS HERE]
----------------------
<PAGE>
conditions of this Note and so long as no event of default shall have occurred
hereunder, Holder shall make advances and re-advances hereunder available to
Borrower which Borrower agrees to use for general corporate uses. Advances and
re-advances shall be made from time to time hereunder as requested by
Borrower's Authorized Agent (as defined herein) and payments shall be accepted
from Borrower in accordance with and subject to provisions of this Note. The
principal amount outstanding hereunder may vary from time to time by increases
of up to the maximum principal amount stated above, plus accrued interest (and
any other charges and expenses provided for under this Note), and decreases down
to no outstanding principal or accrued interest (or any other charges or
expenses provided for under this Note). In no event shall the aggregate sum of
all advances for principal made by Holder at any one time outstanding hereunder
collectively exceed the sum of TEN MILLION AND NO/100 DOLLARS ($10,000,000.00).
In no event shall Holder have any obligation to make and Borrower shall not
request, any advances hereunder after the first to occur of (i) the occurrence
of an event of default hereunder, or (ii) July 1, 1996.
2. Certain Definitions. The following terms shall, for purposes of this
-------------------
Note, have the following meanings:
"Alternative Rate" shall mean a LIBOR Rate.
-----------------
"Authorized Agent" shall mean the President or Chief Financial Officer of
----------------
the Borrower or any other agent of Borrower from time to time designated by
Borrower as authorized to request advances and to make the interest rate
elections provided for hereunder.
Master Revolving Promissory Note Page 2 Initial[INITIAL APPEARS HERE]
----------------------
<PAGE>
"Business Day" shall mean any day, Monday through Friday, on which Holder
------------
is open for the conduct of its general banking business.
"Compass Bank Prime", as used herein, is a reference rate established by
------------------
Holder for use in computing and adjusting interest, is subject to increase,
decrease or change at Holder's discretion, and is only one of the reference
rates or indices that Holder uses. Holder may lend to others at rates of
interest at, or greater or less than, Compass Bank Prime or the rate(s) provided
herein. Any change in the applicable rate under this Note resulting from a
change in Compass Bank Prime shall take effect on the day of such change
(provided such change shall not affect any Alternative Rate previously elected
by Borrower and then in effect pursuant to the terms of this Note).
"Election Date" shall mean, so long as Compass Bank Prime is applicable,
-------------
any Business Day or, so long as an Alternative Rate is applicable, the last day
of any period during which such Alternative Rate applies. If the last day of
any period during which any Alternative Rate applies falls on a holiday, then
the relevant Election Date shall be the next Business Day.
"Election Period" shall mean the period of time for which Borrower elects
---------------
for any Alternative Rate, as provided in Section 5 below, to apply. Such period
shall be any one of 7, 30, 60, 90, 120 or 180 days, at Borrower's option, but
shall not exceed the maturity date of this Note.
"Interest Payment Date" for such periods of time and in such portions of
---------------------
the principal amount hereof to which (i) Compass Bank Prime is applicable shall
be the first day of each calendar month and (ii) an Alternative Rate is
applicable shall be the first day
Master Revolving Promissory Note Page 3 Initial [INITIAL APPEARS HERE]
--------------------
<PAGE>
of each month and on the expiration date of the relevant Election Period. If
any Interest Payment Date would otherwise be a day which is not a Business Day,
such Interest Payment Date shall be extended to the end of the next succeeding
Business Day.
"LIBOR Rate" means, at the time of any computation required under Section
----------
5 below, an interest rate equal to (i) Holder's reasonable estimate of the rate
at which United States dollar deposits in like amount and period requested by
Borrower pursuant to Section 5 would be, at Holder's request, offered to Holder
by brokers or other intermediaries trading in the London Interbank Market at
approximately 11:00 A.M. (London Time), on the date on which the LIBOR Rate
advance is to be made and the interest period is to apply; plus (ii) any
then-applicable assessment rate required to be paid by the Holder from time to
time to the Federal Deposit Insurance Corporation (or any successor) for such
corporation's insuring Holder's deposits in the United States (as additional
percentage points); plus (iii) one and one-half percentage points (1 1/2%).
3. Interest Payments and Maturity. Interest, calculated as set forth
------------------------------
below, on the unpaid principal amount hereof shall be paid on each Interest
Payment Date (as herein defined), beginning on November 1, 1995. The entire
unpaid principal balance outstanding hereunder plus accrued interest (and any
charges and expenses provided for under this Note) shall be due and payable in
full on July 1, 1996, which is the maturity date of this Note, unless such
amounts are due sooner pursuant to the terms of this Note.
4. Applicable Interest Rate. The outstanding principal balance of this
Note shall bear interest at a rate equal to the greater of (a) Compass Bank
Prime from time to time prevailing, such rate to change as Compass Bank Prime
changes, or (b) six percent (6%),
Master Revolving Promissory Note Page 4 Initial [INITIAL APPEARS HERE]
---------------------
<PAGE>
unless Borrower elects an Alternative Rate, in which event such Alternative Rate
shall apply for the period or periods specified pursuant to the provisions of
Section 5 below. Any advances of principal hereunder made during any Election
Period shall bear interest at Compass Bank Prime from time to time prevailing
until the next Election Date and thereafter until Borrower elects an Alternative
Rate pursuant to the terms hereof. Any principal amounts outstanding hereunder
after maturity shall bear interest at a rate equal to Compass Bank Prime plus
two percentage points (2%), calculated in a manner set forth herein.
5. LIBOR Rate Alternative. In lieu of Compass Bank Prime, Borrower may
----------------------
from time to time elect as the applicable interest rate for any portion (which
is an integral multiple of $500,000) or all of the principal balance of this
Note a rate equal to the then applicable LIBOR Rate. Such election shall be
made, and the resulting interest rate determined, as follows:
5.1 Before 11:00 A.M. (Central time) on any Election Date, an Authorized
Agent shall telephone Janet Brock or Con Holland or any other officer of Holder
designated to Borrower from time to time by Holder ("Bank Authorized Officer")
and shall request quotations of the LIBOR Rate for the Election Period
designated by Borrower for all or a portion of the principal balance then
outstanding or proposed to be borrowed contemporaneously therewith hereunder
(which shall be an integral multiple of $500,000) which Borrower desires to bear
interest at such LIBOR Rate for such Election Period.
5.2 Holder shall thereupon (subject to availability) give its reasonable
estimate of the LIBOR Rate for funds in such face amount and maturity, as so
determined, that
Master Revolving Promissory Note Page 5 Initial [INITIAL APPEARS HERE]
----------------------
<PAGE>
shall be applicable to the principal portion hereof and the Election Period so
designated by Borrower. On or before 2:00 P.M.(Central Time) on the Election
Date, the Authorized Agent shall elect whether or not to accept the quoted LIBOR
Rate and shall so inform the Bank Authorized Officer. If Borrower elects not to
accept the quoted LIBOR Rate or fails to inform the Bank Authorized Officer of
its election prior to such deadline, Compass Bank Prime shall apply until the
Authorized Agent has elected an Alternative Rate in the manner set forth above
at a subsequent Election Date. At the conclusion of any Election Period, the
principal portion hereof theretofore bearing interest at the relevant LIBOR Rate
shall revert to bearing interest at Compass Bank Prime unless an Authorized
Agent has elected an Alternative Rate in the manner set forth above.
5.3 Notwithstanding the fact that Borrower may elect to base the
interest rate hereof upon the London Interbank Market, Borrower agrees that
Holder shall not be required actually to obtain funds from such source at any
time.
5.4 Interest on said election shall be paid by Borrower on each
respective Interest Payment Date.
6. 360-Day Year. Irrespective of which rate is the applicable interest
------------
rate under this Note, interest from date on the outstanding unpaid principal
balance of this Note shall be calculated by multiplying the product of the
relevant principal amount and the applicable interest rate by the actual number
of days elapsed, and dividing by 360.
7. Non-Usage Fee. In consideration of the Holder's commitment to make
-------------
the Revolving Line available, set aside funds sufficient to make advances
thereunder and incurring certain administrative expenses, Borrower agrees to and
shall pay to Holder
Master Revolving Promissory Note Page 6 Initial [INITIAL APPEARS HERE]
---------------------
<PAGE>
quarterly (or more often as may be required by the terms below), in arrears, a
contingent commitment fee (calculated as set forth below on the basis of a
360-day year) beginning to accrue on the date hereof, with the payment of such
fee being the first day of March, June, September, and December, beginning March
1, 1996, with a final fee payment being due on the maturity date of this Note
(or an any other date when advances under the Revolving Line are terminated).
Such fee shall be in an amount equal to the product of (a) 1/4 % of the average
Unused Availability under the Revolving Line for the applicable quarter or
portion thereof preceding the due date for the payment of such fee, and (b) the
number of days elapsed since the latter of the date hereof or the date of the
last such fee payment (if any), divided by 360. For purposes of this section,
"Unused Availability" shall mean and refer to the amount by which $10,000,000
exceeds the average balance of Borrower's loan account for the quarters ending
January 31, April 30, July 31 and October 31 of any year.
8. Transaction Statements. Subject to the terms and conditions of this
----------------------
Note, advances shall be made at the request of the Authorized Agent. All
advances, payments and appropriate entries and charges hereunder shall be
recorded as debits and credits upon records maintained by Holder. On a monthly
basis, Holder shall render to Borrower a statement showing all transactions
during the immediately preceding month.
9. Prepayments. Borrower shall not be entitled to prepay the outstanding
-----------
principal balance of this Note, or any part thereof, bearing interest at an
Alternative Rate, during any Election Period, unless due by reason of default
under or maturity of this Note. It is expressly understood and agreed that
Borrower shall be allowed to prepay (without
Master Revolving Promissory Note Page 7 Initial [INITIAL APPEARS HERE]
<PAGE>
penalty) the principal balance of this Note, or any part thereof, bearing
interest at Compass Bank Prime.
10. Indemnity. Borrower hereby agrees to indemnify Holder, its officers,
---------
employees, and agents from any cost or loss arising from their actions taken or
omitted to be taken in good faith based upon communications between Borrower and
Holder. The obligations of Borrower under this Section shall survive payment of
this Note.
11. Expenses. Holder shall be entitled to recover all expenses incurred
--------
in collecting or attempting to collect this Note, including, without limitation,
court costs and attorneys' fees. The obligations of Borrower under this Section
shall survive payment of this Note.
12. Certain Covenants. (a)(i)Borrower shall maintain a minimum Tangible
-----------------
Net Worth of not less than $70,000,000 from the date hereof through October 30,
1995, and $135,000,000 at all times after October 30, 1995. (ii) Borrower shall
not cause or allow its Total Debt-to-Tangible Net Worth ratio to exceed
1.0 - to - 1.0 at any time. As used in this paragraph 12(a), "Tangible Net
Worth" shall mean Borrower's net worth (determined in accordance with generally
accepted accounting principles) less (A) any and all loans and other advances to
and investments in Borrower's affiliates, subsidiaries, owners, parent,
employees, officers, shareholders, directors or other related entities, (B)
notes, notes receivable, accounts, accounts receivable, intercompany
receivables, and other amounts owing from Borrower's affiliates, subsidiaries,
owners, parent, employees, officers, shareholders, directors or other related
entities; and (C) any and all intangibles. As used in this paragraph 12(a),
"Total Debt" shall mean all of Borrower's indebtedness
Master Revolving Promissory Note Page 8 Initial [INITIALS APPEAR HERE]
----------------------
<PAGE>
and liabilities owing to Holder or to any other person or entity, howsoever and
whensoever created or arising, absolute or contingent, and joint or several.
(b) Borrower shall maintain a minimum Fixed Charge Coverage Ratio of
1.5 - to 1. Borrower's Fixed Charge Coverage Ratio shall be defined as the
quotient of (I) the sum of (i) Borrower's earnings before interest expenses and
taxes, plus (ii) lease expenses; divided by (II) the sum of Borrower's interest
expenses plus lease expenses.
(c) If at any time the amount outstanding under this note exceeds
$10,000,000, then Borrower shall immediately remit to Holder good funds
sufficient to eliminate such excess.
(d) Borrower shall submit or cause to be submitted to Holder (i) for the
first three (3) quarters during each fiscal year, Borrower's internal unaudited
quarterly financial statements within forty-five (45) days after the close of
each such quarter in each fiscal year including balance sheets as of the close
of such period, income statements, and reconciliations of surplus for such
period, prepared and analyzed in accordance with generally accepted accounting
principles; (ii) Borrower's audited fiscal year-end financial statements within
one hundred twenty (120) days after the close of each fiscal year, including
balance sheets as of the close of such period, income statements, and
reconciliations of stockholders' equity audited by an independent certified
public accountant and analyzed in accordance with generally accepted accounting
principles; and (iii) such other financial and related information which Holder
reasonably shall request regarding Borrower when and as requested by Holder. In
addition, Borrower shall notify Holder immediately in writing if any event has
occurred which constitutes an event of default or
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would constitute an event of default but for the requirement that notice be
given or time elapse or both, under any of Borrower's loans, notes, debentures
or bonds then outstanding, accompanied by a description of the nature of such
event.
(e) Borrower shall at all times comply with all laws, ordinances, rules
and regulations of any governmental authority or entity governing or affecting
Borrower or any of its property, and shall immediately notify Holder of any and
all actual, alleged or asserted violations of any such laws, ordinances, rules
or regulations which could materially impact Borrower's ability to perform under
this Note.
(f) Promptly after the same shall have become known to Borrower,
Borrower shall notify Holder in writing of any action, suit or proceeding at law
or in equity or by or before any governmental instrumentality or other agency,
if adversely determined, might impair the ability of Borrower to perform its
obligations under this Note.
(g) Borrower shall not (i) liquidate, discontinue or materially reduce
its normal operations with intention to liquidate; or (ii) cause, allow or
suffer to occur (a) the merger or consolidation of or involving Borrower with or
into any corporation, partnership, or other entity, or (b) the sale, lease,
transfer or other disposal of all or any substantial part of its assets.
(h) Borrower shall pay all fees and expenses, including, without
limitation, legal fees and expenses, filing fees, insurance premiums and
expenses, appraisal fees, recording costs and taxes actually incurred by Holder
from time to time in connection with the preparation of and closing on this Note
and any related documents. Borrower shall pay to Holder on demand any and all
such fees and expenses together with any and all
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fees, expenses and costs (i) of collection or (ii) otherwise incurred or paid by
Holder in amending, modifying, extending or administering this Note or the
transactions contemplated hereby or in protecting or enforcing its rights upon
or with respect to this Note
(i) Borrower shall pay any and all taxes, with exception of taxes measured
by income, charges and expenses of every kind or description paid or incurred by
Holder under or with respect to this Note, any advances hereunder or any
collateral therefor or the collection of or realization upon the same.
13. Representations and Warranties. Borrower represents and warrants as
------------------------------
follows:
(a) Borrower is a duly organized Alabama corporation, validly existing,
and in good standing under the laws of the State of Alabama and is qualified to
do business and is good standing in all other jurisdictions where such
qualification is necessary. Borrower (i) has all necessary licenses and
corporate powers and authority to own its assets and conduct its business as now
conducted or presently proposed to be conducted; and (ii) is duly qualified and
in good standing (and will remain so qualified and in good standing) in every
jurisdiction in which it is or shall be doing business or in which the failure
to qualify and remain in good standing would or could have an adverse effect on
its business or properties.
(b) The execution, delivery, and performance of this Note are within
Borrower's corporate powers, have been duly and validly authorized and are not
in contravention of the law or the terms of its charter, by-laws, or other
incorporation papers, or of any
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indenture, agreement, or undertaking or any law, regulation or order to which
Borrower is a party or by which Borrower or any of its property is or may be
bound. Upon execution and delivery, this Note will be a valid and binding
obligation of Borrower enforceable in accordance with its terms.
(c) Subject to any limitations stated therein or in connection therewith,
all balance sheets earnings statements and other financial data which have been
or may hereafter be furnished to Holder in connection herewith, do or shall
fairly represent the financial condition of Borrower (or other person or entity,
as applicable) as of the dates and results of operations for the periods for
which the same are furnished in accordance with generally accepted accounting
principles consistently applied, and all other information, reports and other
papers and data furnished to Holder shall be accurate, as of the relevant date,
and correct in all material respects and complete insofar as completeness may be
necessary to give Holder a true and accurate knowledge of the subject matter.
(d) Borrower's name is as set forth on the first page of this Note.
Borrower will promptly advise Holder in writing of any change in Borrower's
name, chief executive office or principal place of business.
(e) Borrower is not now in default under any agreement evidencing an
obligation for the payment of money, performance of a service or delivery of
goods, demand for performance under which, or acceleration of the maturity of
which would render Borrower insolvent or unable to meet its other debts as they
become due or conduct its business as usual.
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(f) In the event (i) any of Borrower's warranties or representations
shall prove to be false or misleading, or (ii) anyone in judicial proceedings
shall assert against Holder a claim or defense arising out of any transaction
between itself and Borrower, Borrower agrees to indemnify and hold Holder
harmless against any liability, judgment, cost, attorneys' fees or other expense
whatsoever arising therefrom.
(g) There are no judgments, actions, suits, claims, proceedings or
investigations existing, outstanding, pending, or to the best of Borrower's
knowledge after due inquiry, threatened or in prospect, before any court, agency
or tribunal, or governmental authority against or involving Borrower or any
guarantor which do or could materially affect the ability of Borrower to perform
its obligations under this Note.
14. Events of Default. Upon the occurrence or existence of any one or
------------------
more of the following events of default:
(a) failure by Borrower to make any payment of principal, interest or
charges and expenses provided for under this Note as and when the
same is due and payable;
(b) failure by Borrower to pay or perform any other loan, indebtedness,
liability or obligation to Holder as and when due;
(c) failure by Borrower or any other person or entity to observe or
comply with any covenant, obligation, agreement, term or provision
contained or referenced in this Note or in any other document,
agreement or instrument executed in connection with or securing
this Note;
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(d) the occurrence or continuation of any default of event of default
contained, specified or referenced in any other document, agreement
or instrument executed in connection with or securing this Note;
(e) the occurrence or continuation of any default or event of default
under any of Borrower's notes, loans, debentures or bonds or related
agreements with or in favor of any other creditor of or lender to
Borrower;
(f) if any warranty or representation contained herein shall prove false
or misleading in any material respect or if Borrower made or makes
any other material misrepresentation to Holder for the purpose of
obtaining credit or any extension of credit;
(g) Issuance by an injunction or attachment against property of, the
general assignment by, judgment against or filing of petition in
bankruptcy by or against Borrower; the filing of an application in
any court for a receiver for Borrower; or the dissolution or
liquidation of Borrower (provided, however, Borrower shall have sixty
(60) days to have dismissed of record any involuntary bankruptcy
petition filed against it); or
(h) calling of a meeting of creditors, appointment of a committee of
creditors or liquidation agents, or offering of a composition or
extension to creditors by, for or of Borrower;
then, or at any time thereafter, Holder may, with or without notice to Borrower,
declare this Note to be forthwith due and payable, as to principal and interest
and related charges and expenses provided for under this Note, without
presentment, demand, protest, or
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other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in any other instrument executed in connection with or
securing this Note to the contrary notwithstanding.
15. Waivers. With respect to the amount due under this Note and
--------
Borrower's obligations hereunder, Borrower waives the following:
(a) All rights of exemption of property from levy or sale under execution
or other process for the collection of debts under the Constitution or laws of
the United States or any state thereof; and
(b) Demand, presentment, protest, notice of protest or dishonor, notice
of nonpayment, suit against any party, diligence in collection, and all other
requirements necessary to charge or hold the undersigned liable on any
obligations hereunder. Holder may accept partial payment, or (if this Note is
hereafter secured or collateralized) release or exchange any security or any
collateral without discharging or releasing any of the obligations evidenced
hereby or any unreleased security or collateral.
16. Compliance With Laws. It is the intention of Holder and Borrower to
--------------------
conform strictly to any applicable usury laws. Accordingly, if the transactions
contemplated hereby would be usurious under any applicable law, then, in that
event, notwithstanding anything to the contrary in this Note or any agreement
entered into in connection with or as security for or guaranteeing this Note, it
is agreed as follows: (a) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved, charged,
or received by Holder under this Note or under any agreement entered into in
connection with or as security for this Note shall under no
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circumstances exceed the Highest Lawful Rate (as defined below), and any excess
shall be canceled automatically and, if theretofore paid, shall, at the option
of Holder, be credited by Holder on the principal amount of any indebtedness
owed to Holder by Borrower or refunded by Holder to Borrower, and (b) in the
event that the payment of this Note is accelerated or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to Holder may never include more then the Highest
Lawful Rate and excess interest, if any, to Holder provided for in this Note or
otherwise shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall, at the option of Holder, be credited
by Holder on the principal amount of any indebtedness owed to Holder by Borrower
or refunded by Holder to Borrower.
"Highest Lawful Rate" means the maximum non-usurious interest rate that at
any time or from time to time may be contracted for, taken, reserved, charged,
or received on amounts due to Holder, under laws applicable to Holder with
regard to this Note that are presently in effect or, to the extent allowed by
law, under such applicable laws that allow a higher maximum non-usurious rate
than applicable laws now allow.
17. General. Holder shall not by any act, delay, omission or otherwise be
-------
deemed to have waived any of its rights or remedies, and no waiver of any kind
shall be valid unless in writing and signed by Holder. All rights and remedies
of Holder under the terms of this Note, and applicable statutes or rules of law,
shall be cumulative and may be exercised successively or concurrently. Borrower
agrees that there are no defenses, equities or setoffs in respect to the
obligations set forth herein. The obligations of
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Borrower hereunder shall be binding upon and enforceable against Borrower and
its successors and assigns. Borrower agrees that this Note shall be governed by
and construed under the laws of the State of Alabama (without regard to choice
of law considerations), including, without limitation, applicable usury laws.
This Note has been negotiated, and is being executed and delivered in the State
of Alabama, or if executed elsewhere, shall become effective upon Holder's
receipt and acceptance of the executed original of this Note in the State of
Alabama; provided, however, that Holder shall have no obligation to give, nor
shall Borrower be entitled to receive, any notice of such acceptance for this
Note to become a binding obligation of Borrower. It is intended, and Borrower
and Holder specifically agree, that the laws of the State of Alabama governing
interest shall apply to this Note and this transaction. Notwithstanding the
foregoing, nothing contained in this paragraph shall prevent Holder from
bringing any action or exercising any rights against Borrower, any guarantor,
any security for this Note or any of Borrower's or any guarantor's properties in
any other county, state or jurisdiction. Initiating such action or proceeding
or taking any such action in any other state or jurisdiction shall in no event
constitute a waiver by Holder of any of the foregoing. As used herein, the
terms "Borrower", "Lender", "guarantor" and "Holder" shall be deemed to include
their respective successors, legal representatives and assigns, whether by
voluntary action of the parties or by operation of law. This Note is given
under the seal of all parties hereto and it is intended that this Note shall
constitute and have the effect of a sealed instrument according to law. Any
provision in this Note which may be unenforceable or invalid under applicable
law shall be ineffective to the extent of such
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unenforceability or invalidity without affecting the enforceability or validity
of any other provision hereof.
18. Failure to Pay or Borrow on Certain Dates. If any payment of any part
-----------------------------------------
of any advances subject to the LIBOR Rate occurs on a date which is not the last
day of an Election Period, or if any advance which is to be subject to any LIBOR
Rate is not made on the date specified by Borrower for any reason other than the
failure by Holder to make any advance (which failure to advance is not
attributable to Borrower), Borrower shall upon demand by Holder indemnify Holder
for all costs incurred by Holder resulting therefrom, including, without
limitation, any loss in liquidating or employing deposits acquired to fund or
maintain such LIBOR Rate advance.
19. Yield Protection.
----------------
19.1 General. With respect to LIBOR Rate advances, if any future law, rule,
-------
regulation or directive, or any future judicial or administrative interpretation
of any existing law, rule, regulation or directive
(a) subjects Holder to any tax, duty, charge or withholding on or from
payments due from Borrower (excluding taxation of the overall net
income of Holder or taxation which may be treated as an offset
against such taxation of overall net income), or
(b) imposes or increases any reserve, special deposit or similar
requirement against Holder, or
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(c) imposes any other condition, the result of which is to increase the
cost to Holder of making, funding or maintaining loans or reduces any
amount receivable by Holder in connection with loans, or requires
Holder to make any payment calculated by reference to the amount of
loans held or interest received by it,
then, upon demand by Holder, Borrower shall pay to Holder that portion of such
increased expense incurred or reduced amount received which Holder determines is
attributable to making, funding and maintaining LIBOR Rate advances hereunder.
Holder promptly shall notify Borrower upon its becoming aware of any such
increased expense or reduced amount received.
19.2 Survival of Indemnity. Determination of amounts payable under
---------------------
Section 18 above in connection with LIBOR Rate advances shall be calculated as
though Holder funded the LIBOR Rate advances through the purchase of a deposit
of the type, amount and maturity corresponding to the deposit used as a
reference in determining the applicable LIBOR Rate for such advance. The amount
specified in the certificate shall be payable at the end of the applicable
Election Period after receipt by Borrower of the certificate. The obligations
of Borrower under Sections 18 and 19 hereof shall survive payment of this Note.
19.3 Illegality Affecting LIBOR Rate Advances. If Holder, in its sole
----------------------------------------
discretion, determines that maintenance of any LIBOR Rate would violate any
applicable law, rule, regulation, or directive applicable to Holder, then Holder
may suspend the availability of a LIBOR Rate, including LIBOR Rate advances then
outstanding, upon notice to Borrower.
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Such suspension of availability shall terminate the Election Period with
respect to the affected advances. The applicable rate under Section 4 hereof
will then apply to such affected advances.
19.4 Availability of Interest Rate. If Holders, in its reasonable
------------------------------
discretion, determines that (a) deposits of a type and maturity appropriate to
match a LIBOR Rate advance are not available to it, or (b) that the LIBOR Rate
does not accurately reflect the cost to Holder of making the corresponding
advance, Holder may suspend the availability of the affected rate option with
respect to future advances and future interest periods.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered by its duly authorized officer in Alabama on this 24 day of
October __, 1995.
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BORROWER:
---------
Attest: JUST FOR FEET, INC.
By: [SIGNATURE APPEARS HERE] By: [SIGNATURE APPEARS HERE]
------------------------ ------------------------
ITS: CFO ITS: CEO & PRESIDENT
------------------------ ------------------------
(CORPORATE SEAL)
STATE OF Alabama - State at Large
-------
COUNTY OF Shelby
------
I, Ashley Fulford , a notary public in and for said county in said state,
--------------
hereby certify that Harold Ruttenberg , whose name as CEO of JUST FOR FEET,
----------------- ---
INC., a corporation, is signed to the foregoing instrument and who is known to
me, acknowledged before me on this day that, being informed of the contents of
such instrument, he, as such officer and with full authority, executed the same
voluntarily for and as the act of said corporation.
Given under my hand and official seal this the 24 day of October __, 1995.
--
[SIGNATURE APPEARS HERE]
-----------------------------
[NOTARIAL SEAL] Notary Public
My Commission Expires: 3/4/98
------
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