<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
----------------
153 CAHABA VALLEY PARKWAY NORTH
BIRMINGHAM, ALABAMA 35124
(205) 403-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HAROLD RUTTENBERG
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
153 CAHABA VALLEY PARKWAY NORTH
BIRMINGHAM, ALABAMA 35124
(205) 403-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ARTHUR JAY SCHWARTZ, ESQ. SMITH, JOEL J. HUGHEY, ESQ. ALSTON & BIRD ONE
GAMBRELL & RUSSELL 3343 PEACHTREE ATLANTIC CENTER 1201 WEST PEACHTREE
ROAD, N.E., SUITE 1800 ATLANTA, STREET ATLANTA, GEORGIA 30309 (404)
GEORGIA 30326 (404) 264-2620 881-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
================================================================================
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.0001 per share....... 1,897,500 shares $54.82 $104,020,950 $35,870
- --------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes 247,500 shares subject to the Underwriters' over-allotment
option.
(2) Estimated solely for the purpose of calculating the filing fee pursuant to
Rule 457(c) under the Securities Act of 1933.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 3, 1996
1,650,000 SHARES
(JUST FOR FEET LOGO)
COMMON STOCK
Of the 1,650,000 shares of Common Stock offered hereby, 500,000 are being
sold by Just For Feet, Inc. (the "Company") and 1,150,000 are being sold by
certain shareholders of the Company (the "Selling Shareholders"). See
"Principal and Selling Shareholders." The Company will not receive any of the
proceeds from the shares sold by the Selling Shareholders.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"FEET." The last sale price of the Common Stock on May 31, 1996 as reported on
the Nasdaq National Market was $53.63 per share. See "Price Range of Common
Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount (1) Company(2) Shareholders(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........ $ $ $ $
Total(3)......... $ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting estimated offering expenses of $450,000 payable by the
Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 247,500 additional shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
Price to Public will total $ , the Underwriting Discount will total
$ and the Proceeds to Company will total $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing the shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1996.
-----------
MONTGOMERY SECURITIES
THE ROBINSON-HUMPHREY COMPANY, INC.
WILLIAM BLAIR & COMPANY
ROBERTSON, STEPHENS & COMPANY
, 1996
<PAGE>
+----------------------------------------------------+
+ +
+ [PHOTO OF JUST FOR FEET BUILDING] +
+ +
+----------------------------------------------------+
+----------------------------------------------------+
+ +
+ [PHOTO OF CROWD SCENE] +
+ +
+----------------------------------------------------+
GRAND OPENING HUNTSVILLE, AL -- JULY 1995
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus and incorporated by reference herein. Unless otherwise
indicated, all information in this Prospectus (i) gives effect to 3-for-2
splits of the Common Stock effected as stock dividends on each of November 30,
1994 and July 10, 1995, and (ii) assumes no exercise of the Underwriters' over-
allotment option. The Company's fiscal year ends on January 31. References to
fiscal years by date refer to the fiscal year beginning February 1 of that
calendar year; for example "fiscal 1995" began on February 1, 1995 and ended on
January 31, 1996. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors."
THE COMPANY
Just For Feet, Inc. (the "Company" or "Just For Feet") is a rapidly growing
operator of superstores specializing in brand-name athletic and outdoor
footwear. The Company's goal is to become the leading athletic and outdoor
footwear retailer in each of its markets by offering the largest selection of
brand-name shoes, superior customer service and technical sales assistance in a
high-energy, entertaining store environment. The Company, which began with a
single mall-based store in 1977, opened its first superstore in 1988 and since
that time has focused on developing and refining its superstore concept. There
are presently 40 "Just For Feet" stores operating in twelve states, including
seven stores operated by the Company's only franchisee.
Just For Feet's prototype 15,000 to 20,000 square foot superstore
(approximately two-thirds of which is devoted to selling space) offers
approximately 2,500 to 4,500 styles of athletic and outdoor shoes as compared
to an estimated 200 to 700 styles typically offered by conventional mall-based
athletic footwear retailers, department stores and sporting goods superstores.
The Company carries most of the leading athletic footwear brands including
Nike, Reebok, New Balance, Adidas, Fila, Asics and Converse, as well as outdoor
footwear brands such as Timberland and Rockport. The Company seeks to offer
virtually all styles in the brands it carries. Just For Feet superstores are
primarily free standing and are typically located on outparcels of or adjacent
to shopping malls.
The Company strives to create an exciting and high-energy shopping experience
in its superstores through the use of bright colors, upbeat music, an enclosed
"half-court" basketball court for use by customers, a multi-screen video bank,
a snack bar featuring popcorn and Chicago-style hot dogs, and appearances by
sports celebrities. The Just For Feet prototype superstore features 18 separate
branded "concept shops," which display the brand's product line. The "concept
shops" are typically built and periodically updated by vendors to tie into
their national advertising campaigns. The Company also sponsors creative
promotional events such as trade-in days and "Midnight Madness" sales.
The Company believes that the level of customer service it provides is an
important competitive advantage. The Company seeks to offer a level of customer
service comparable to that typically provided by the leading specialty footwear
retailers. Just For Feet trains its employees in all aspects of footwear
technology, the performance attributes of the Company's merchandise and common
foot problems. The Company staffs its stores with a high ratio of sales
associates to customers to assure prompt and personalized service.
Just For Feet guarantees that it will match any competitor's advertised price
and offers a family frequent buyer plan under the slogan "Just For Feet--Where
the 13th Pair is FREE!"(R), through which the Company gives participating
customers the thirteenth pair of shoes free (up to the average purchase price
of the previous twelve pairs). In addition, the Company seeks to enhance its
reputation for value oriented pricing by offering a limited selection of close-
out merchandise at prices generally ranging from 30% to 60% below
manufacturers' suggested retail prices displayed in an area at the front of
each store called the "Combat Zone." The Company believes that offering a wide
selection of competitively priced, brand-name footwear provides superior value
to its customers.
3
<PAGE>
The Company's expansion strategy is to open stores in new and existing
metropolitan markets, including those markets with the potential for multiple
sites, which enables the Company to capture advertising and operating
efficiencies. In addition, the Company will continue to open stores in smaller,
single store markets. The Company's strategy is to concentrate its efforts on
opening Company operated stores. During fiscal 1996 and the first quarter of
fiscal 1997, Just For Feet expects to open a total of 27 stores, 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 has opened six Company stores to
date in fiscal 1996. 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
it may develop this smaller store concept either internally or through the
acquisition of an existing footwear retailer currently operating in the manner
envisioned for the new stores.
RECENT DEVELOPMENTS
. New Store Openings. The Company has opened six new Company stores to date
in fiscal 1996 and expects to open approximately 21 additional new stores
during the remainder of fiscal 1996 and 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.
. Additions to Management. To support its continuing rapid growth, the
Company has added key personnel in the areas of regional management,
finance and accounting, new store construction and development and
management information systems. The Company has continued its commitment
to employee training and education by refining and improving the "Just
For Feet University" training program, whereby all new store managers
undergo an extensive two- to three-week training program to enhance their
understanding of all aspects of the Company's business.
. Three Months Operating Results. For the three months ending April 30,
1996, the Company had net sales of $49.1 million compared to net sales of
$21.1 million in the comparable period of fiscal 1995. This 132.5%
increase in net sales resulted from the opening of 14 new stores since
April 30, 1995 and the increase in comparable store sales of
approximately 42.0% for the first three months of fiscal 1996. Net income
increased to $3.5 million or $0.19 per share, a 111% per share increase
over the prior year period.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company...... 500,000 shares
Common Stock offered by the Selling 1,150,000 shares
Shareholders............................
Common Stock to be outstanding after the 18,191,368 shares(1)
offering................................
Use of proceeds.......................... To finance new store openings and for
general corporate purposes, including
possible future acquisitions.
Nasdaq National Market symbol............ FEET
</TABLE>
- --------
(1) Excludes (a) 1,412,333 shares of Common Stock issuable as of May 31, 1996
upon the exercise of outstanding stock options, 363,187 of which are
exercisable within the next 60 days, and (b) 1,587,667 shares reserved for
future issuance under the Company's Stock Option Plans.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(In thousands, except per share and selected operating data)
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED APRIL 30,
---------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $8,468 $17,155 $23,678 $56,363 $119,819 $21,136 $49,150
Gross profit........... 3,141 6,895 9,611 23,871 50,850 8,859 20,753
Store contribution(1).. 1,046 2,106 2,853 6,975 14,874 2,264 5,804
Executive options ex-
pense................. -- -- 1,222 (2) -- -- -- --
Litigation settlement
expense............... 647 -- -- -- -- -- --
Operating income
(loss)................ (139) 1,087 53 (3) 4,770 11,628 1,588 4,405
Net income (loss)...... (198) 559 (203)(3) 3,218 9,722 1,459 3,473
Net income (loss) per
share................. $(0.03) $ 0.08 $ (0.03)(3) $ 0.27 $ 0.57 $ 0.09 $ 0.19
Weighted average shares
outstanding........... 7,016 7,016 7,605 11,966 17,030 15,983 18,640
SELECTED OPERATING DATA:
Company Store Data:
Increase in comparable
store sales(4)........ 16.3% 11.8% 6.2% 10.2% 17.9% 10.4% 42.0%
Number of stores at end
of period............. 2 3 5 15 27 16 30
Franchise Store Data:
Number of stores at end
of period............. 1 2 4 5 7 7 7
</TABLE>
<TABLE>
<CAPTION>
APRIL 30, 1996
--------------------
AS
ACTUAL ADJUSTED(5)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $102,479 $127,501
Total assets.............................................. 192,776 217,798
Long-term debt obligations................................ 6,730 6,730
Shareholders' equity...................................... 152,700 177,722
</TABLE>
- --------
(1) Computed as gross profit less store operating expenses and pre-opening
expenses.
(2) Represents the expense attributable to the issuance of certain executive
options, which is primarily a non-cash charge. See Note 11 to the Company's
Consolidated Financial Statements incorporated herein by reference from the
Company's Annual Report on Form 10-K for the year ended January 31, 1996.
(3) Excluding the executive options expense, primarily a non-cash charge,
operating income, net income and net income per share would have been
$1,275,000, $736,000 and $0.10, respectively, for fiscal 1993.
(4) Company operated stores (one to sixteen stores during the periods
presented) are included in the comparable store sales calculation beginning
generally in the thirteenth month of operation or upon their acquisition
assuming at least twelve months of prior operations.
(5) Adjusted to give effect to the sale by the Company of 500,000 shares of
Common Stock at an assumed offering price of $53.63 per share and the
application of the net proceeds therefrom as described under "Use of
Proceeds."
5
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating the Company and
its business before purchasing any of the shares of Common Stock offered
hereby. Except for historical information contained in this Prospectus and in
the documents incorporated in this Prospectus by reference, the matters
discussed herein and therein contain forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those suggested in the forward-looking statements, including without
limitation, the effect of economic conditions, product demand, competitive
products and other risks detailed herein and in the Company's other filings
with the Securities and Exchange Commission (the "Commission").
EXPANSION PLANS
The Company's growth is dependent, in large part, on its ability to open new
superstores and to operate such stores profitably. The Company opened 12 of
its 33 Company-owned stores in fiscal 1995 and has opened six Company stores
to date in 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 also intends
to open six additional stores prior to the end of fiscal 1997, for a total of
60 Company-owned stores. Of these new stores, the Company intends to open four
high-visibility, high profile "flagship" stores, modeled on its original Las
Vegas store, in selected locations. Initial capital expenditures associated
with opening such flagship stores are higher than for prototype stores. The
Company may accelerate the opening of new stores in any one fiscal quarter.
The Company has not previously opened more than seven stores in any fiscal
quarter. The Company's ability to open these numbers of stores on a timely
basis will depend upon a number of factors, including the identification and
acquisition or leasing of suitable sites on acceptable terms, the construction
or refurbishment of sites, the hiring, training, and retention of skilled
managers and personnel and other factors, some of which may be beyond the
Company's control. In addition, adverse weather conditions may affect the
ability of the Company to complete construction of new stores on schedule. As
a result, there can be no assurance that Just For Feet will be able to achieve
its targets for opening new stores. The Company's expansion plans include the
opening of additional stores in market areas where the Company has already
opened stores. There can be no assurance that opening such additional stores
in the same market area will not reduce sales at existing Company stores
located in that area. In addition, the Company continues to evaluate select
opportunities to expand internationally, but presently has no formal plans for
such expansion. There can be no assurance that the Company's new or acquired
stores will be profitable or achieve sales and profitability comparable to the
Company's existing stores. To support the Company's continued growth, the
Company is evaluating the possibility of constructing a new corporate
headquarters facility. Failure to construct a new headquarters facility in a
cost effective and timely manner without disrupting the Company's operations
may have a material adverse effect on the Company. If the Company's management
is unable to manage growth effectively, the Company's business, results of
operations and financial condition could be materially and adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business--Expansion Strategy."
FLUCTUATIONS IN COMPARABLE STORE SALES
A variety of factors affect the Company's comparable store sales results
including, among others, economic conditions, fashion trends, the retail sales
environment, sourcing and distribution of products and the Company's ability
to execute its business strategy efficiently. The Company's quarterly
6
<PAGE>
comparable store sales results have fluctuated significantly in the past. The
Company's comparable store sales results were 6.2%, 10.2% and 17.9% in fiscal
1993, 1994 and 1995, respectively, and 42.0% in the first quarter of fiscal
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The Company does not expect comparable store sales to
continue to increase at similar rates in the future and there can be no
assurance that the Company will continue to generate comparable store sales
increases. The Company's comparable store sales results could cause the price
of the Common Stock to fluctuate substantially.
POTENTIAL DEVELOPMENT OF SMALL STORE CONCEPT
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. The new
stores would be operated by a separate division and largely managed
independently of Just For Feet. Management anticipates that, should it elect
to pursue this new concept, the new stores and the new operating division
would be developed either internally by Just For Feet or through the
acquisition of an existing athletic and outdoor footwear retailer currently
operating in the manner envisioned for the new stores. The Company has engaged
in preliminary discussions with an existing athletic footwear retailer
regarding a potential acquisition by the Company, but such discussions are in
the very early stages and no prediction can be made as to whether this or any
other acquisition by the Company will be pursued or consummated. Regardless of
the means by which it may be developed, implementation of such new concept
could involve significant start-up costs.
No assurance can be given that the Company will proceed with the development
of the new concept or, if implemented, that it will be successful or that it
will not have a material adverse effect on the Company's operating results due
to start-up costs, potential diversion of management's attention or
cannibalization of sales from existing stores. If the Company chooses to
implement the concept through the acquisition of an existing business, there
can be no assurance that the Company will be able to successfully integrate
the acquired business into its operations.
POTENTIAL ACQUISITIONS
Although the Company has no current commitments or understandings with
respect to the 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. There can be no
assurance that the Company will be able to identify and acquire appropriate
businesses or obtain financing for such acquisitions on satisfactory terms.
Any acquisitions may be financed through the issuance of Common Stock, which
may dilute the Company's stockholders, or through the incurrence of additional
indebtedness. The process of integrating acquired businesses into the
Company's operations may result in unforeseen difficulties and may require a
disproportionate amount of resources and management's attention, and there can
be no assurance that the Company will be able to successfully integrate
acquired businesses into its operations. In addition, any businesses acquired
by the Company may have lower margins than the Company, which would adversely
affect the Company's results of operations for the period in which any such
acquisition occurs and subsequent periods until the acquired business is fully
integrated.
RELIANCE ON KEY VENDORS
The Company's business is dependent to a significant degree upon its ability
to purchase brand-name merchandise at competitive prices. For the three months
ended April 30, 1996, approximately 73% of the Company's net sales were sales
of merchandise purchased from five vendors, including approximately 52%
7
<PAGE>
purchased from Nike and Reebok combined. The loss of certain key vendors could
have a material adverse effect on the Company's business. Just For Feet
believes that its relationships with its key vendors are satisfactory and that
the Company has adequate sources of brand-name merchandise; however, there can
be no assurance that the Company will be able to acquire such merchandise at
competitive prices or on competitive terms in the future. Certain merchandise
that is high profile and in high demand is allocated by vendors based upon the
vendors' internal criteria. The Company also purchases close-out merchandise
from vendors at significant price discounts. Although the Company has been
able to purchase sufficient quantities of allocated and close-out merchandise
in the past, there can be no assurance that the Company will be able to obtain
sufficient amounts of such merchandise in the future. A fundamental element of
Just For Feet's merchandising strategy is the use of "concept shops" to
display a leading brand's product line on fixtures typically designed to tie
into national advertising campaigns. These "concept shops" are typically
designed, built and periodically updated by the Company's vendors. There can
be no assurance that this form of vendor support, which provides substantial
financial and merchandising benefits to the Company, will continue in the
future. In addition, the Company's vendors provide support to the Company
through cooperative advertising allowances, employee training, and promotional
events. There can be no assurance that such assistance from the Company's
vendors will continue in the future.
MERCHANDISE TRENDS
The Company's success depends in part on its ability to anticipate and
respond to changing merchandise trends and consumer demands in a timely
manner. Accordingly, any failure by the Company to identify and respond to
emerging trends could adversely affect consumer acceptance of the merchandise
in the Company's stores, which in turn could adversely affect the Company's
business. If the Company miscalculates either the market for the merchandise
in its stores or its customers' purchasing habits, it may be required to sell
a significant amount of unsold inventory at below average markups over the
Company's cost, or below cost, which could have an adverse effect on the
Company's financial condition or results of operations.
RELIANCE ON KEY PERSONNEL
The Company believes that its continued success will depend to a significant
extent upon the efforts and abilities of Harold Ruttenberg, its founder,
Chairman, President and Chief Executive Officer. The loss of his services
could have a material adverse effect on the Company. The Company carries key
man life insurance on Mr. Ruttenberg in the amount of $1,709,000.
SMALL STORE BASE
The Company opened its first superstore in 1988. The Company currently
operates 33 Just For Feet stores, and another seven stores are operated by a
single franchisee of the Company. Nine of the Company operated stores and two
franchise stores were opened in fiscal 1994, twelve Company operated stores
and two franchise stores were opened in fiscal 1995 and six Company operated
stores have been opened to date in fiscal 1996. Consequently, the Company has
a limited history of opening and operating superstores. The comparable store
base used for the calculation of comparable store data currently consists of
only 16 stores. The results achieved to date by the Company's relatively small
store base may not be indicative of the results that may be achieved from a
larger number of stores. Accordingly, the results of any single store may have
a significant impact on the overall comparable store data. In addition, should
any new store be unprofitable or should any existing store experience a
decline in profitability, the effect on the Company's results of operations
could be significant. Although the Company believes it has planned carefully
for the implementation of its expansion program, there can be no assurance
that such plans can be executed as envisioned or that the implementation of
those plans will not have an adverse effect on existing operations or results
of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
8
<PAGE>
MANAGEMENT INFORMATION SYSTEMS
To manage its expansion, the Company is continually evaluating the adequacy
of its existing systems and procedures, including financial controls,
management information systems and superstore management. In fiscal 1995, the
Company spent $2.1 million to upgrade and expand its existing management
information systems. This upgrade and expansion was substantially implemented
in December 1995 on a Company-wide basis. The Company believes that such
Company-wide implementation was successful, and that the completed upgrade and
expansion will support the Company's growth during the foreseeable future;
however, there can be no assurance of such success. In addition, there can be
no assurance that the Company will continue to anticipate all of the changing
demands which its expanding operations will impose on such systems and
procedures. The Company's failure to expand or successfully implement internal
systems or procedures as required could adversely affect its future operating
results.
COMPETITION
The retail athletic footwear industry is highly competitive. The Company
competes primarily with sporting goods superstores, athletic footwear
specialty stores, department stores, discount stores, traditional shoe stores,
traditional sporting goods stores and mass merchandisers and other athletic
footwear superstores, many of which are units of national or regional chains
that have substantially greater financial and marketing resources than the
Company and several of which have developed their own superstore concepts.
Within the past several years, new independent athletic footwear retailers
have opened superstores similar in format to those of the Company that, in
some instances, are competing directly with the Company. The Company may face
periods of intense competition in the future which could have an adverse
effect on its financial results.
QUARTERLY AND SEASONAL FLUCTUATIONS AND GENERAL ECONOMIC CONDITIONS
The Company's quarterly results of operations 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. New store openings will have a significant impact on
quarterly operating results for the foreseeable future due to the Company's
small base of existing stores. The Company's operating results may be
adversely affected by unfavorable local, regional or national economic
conditions, especially those affecting the southeastern and southwestern
regions of the United States, where most of the Company's stores are located.
The Company's business is also subject to some seasonal fluctuation, with
slightly heavier concentrations of sales during the spring, back-to-school and
Christmas selling seasons.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock has risen substantially since
its initial public offering in March 1994. The Common Stock has experienced
substantial price volatility and such volatility may occur in the future,
particularly as a result of quarter to quarter variations in the actual or
anticipated financial results of the Company or other companies in the retail
industry or in the markets served by the Company. In addition, the stock
market has experienced extreme price and volume fluctuations that have
affected the market price of many retail stocks in particular and that have
often been unrelated or disproportionate to the operating performance of these
companies. The Company's Common Stock currently trades at a relatively high
price-earnings multiple, due in part to analysts' expectations of continued
earnings growth. Accordingly, even a relatively small shortfall in earnings
from, or change in, analysts' expectations may cause an immediate and
substantial decline in the Company's Common Stock price. These and other
factors may adversely affect the market price of the Common Stock. See "Price
Range of Common Stock."
9
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 500,000 shares offered
by the Company hereby (at an assumed public offering price of $53.63 per share
and after deducting the underwriting discount and estimated offering expenses
payable by the Company) are estimated to be approximately $25.0 million ($37.6
million if the Underwriters' over-allotment option is exercised in full). The
Company intends to use the net proceeds primarily to finance new store
openings and for general corporate purposes including possible future
acquisitions (although the Company has no current commitments or
understandings with respect to any particular acquisition). Pending such uses,
the net proceeds will be invested in short-term, interest-bearing, investment
grade securities.
The Company will not receive any proceeds from the sale of shares by the
Selling Shareholders.
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the Nasdaq National Market under the symbol
"FEET." The following table sets forth, for the Company's fiscal periods
indicated, the high and low sale prices per share for the Common Stock, as
reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1994
First Quarter (From March 8, 1994)............................ $ 7.45 $ 5.78
Second Quarter................................................ 7.45 4.78
Third Quarter................................................. 13.89 6.89
Fourth Quarter................................................ 15.56 11.17
FISCAL 1995
First Quarter................................................. $20.25 $12.92
Second Quarter................................................ 30.63 18.58
Third Quarter................................................. 35.88 22.63
Fourth Quarter................................................ 37.00 24.13
FISCAL 1996
First Quarter................................................. $49.38 $28.13
Second Quarter (through May 31, 1996)......................... 57.38 46.88
</TABLE>
On May 31, 1996, the last sale price of the Common Stock as reported on the
Nasdaq National Market was $53.63 per share. As of May 31, 1996, there were
approximately 215 holders of record of the Common Stock.
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on its Common Stock.
The Company intends to retain its earnings to finance the growth and
development of its business and does not anticipate paying cash dividends on
its capital stock in the foreseeable future. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and
will depend upon, among other things, future earnings, operations, capital
requirements, contractual restrictions, the general financial condition of the
Company and general business conditions.
10
<PAGE>
CAPITALIZATION
The following table sets forth the short-term obligations and capitalization
of the Company at April 30, 1996 on an actual basis and as adjusted to give
effect to the sale of the 500,000 shares of Common Stock offered by the
Company hereby (at an assumed offering price of $53.63 per share) and the
application of the net proceeds therefrom as described under "Use of
Proceeds."
<TABLE>
<CAPTION>
APRIL 30, 1996
--------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term borrowings..................................... $ -- $ --
Current maturities of long-term obligations............... 878 878
-------- --------
Total short-term obligations.......................... $ 878 $ 878
======== ========
Long-term debt less current maturities.................... $ 5,166 $ 5,166
Capital lease obligations less current maturities......... 1,564 1,564
Shareholders' equity(1):
Preferred stock--par value $.0001 per share; 5,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, par value $.0001 per share; 20,000,000(2)
shares authorized; 17,551,861 and 18,051,861 shares
issued and outstanding on an actual and as adjusted
basis, respectively(3)................................. 2 2
Paid-in capital......................................... 135,082 160,104
Retained earnings....................................... 17,616 17,616
-------- --------
Total shareholders' equity............................ 152,700 177,722
-------- --------
Total capitalization................................ $159,430 $184,452
======== ========
</TABLE>
- --------
(1) For a description of shares of Common Stock reserved for issuance pursuant
to options granted under the Company's Stock Option Plans, see Note 11 of
Notes to the Consolidated Financial Statements incorporated herein by
reference from the Company's Annual Report on Form 10-K for the year ended
January 31, 1996.
(2) On May 28, 1996, the shareholders of the Company approved an increase in
the number of authorized shares of Common Stock from 20,000,000 shares to
70,000,000 shares.
(3) Excludes (a) 1,412,333 shares of Common Stock issuable as of May 31, 1996
upon the exercise of outstanding stock options, 363,187 of which are
exercisable within the next 60 days, and (b) 1,587,667 shares reserved for
future issuance under the Company's Stock Option Plans.
11
<PAGE>
SELECTED FINANCIAL DATA
(In thousands, except per share and selected operating data)
The following income statement and balance sheet data at the end of and for
fiscal 1991, 1992, 1993, 1994 and 1995 have been derived from the Company's
audited consolidated financial statements. The selected financial data for the
three months ended April 30, 1995 and 1996 have been derived from unaudited
consolidated financial statements of the Company. In the opinion of the
Company, the unaudited financial information contains all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations for such periods. The results for
the three months ended April 30, 1996 may not be indicative of the results to
be achieved for the entire fiscal year. The information set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company's Consolidated Financial
Statements and related notes and other financial information included
elsewhere or incorporated by reference herein.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED APRIL 30,
---------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $8,468 $17,155 $23,678 $56,363 $119,819 $21,136 $ 49,150
Cost of sales........... 5,327 10,260 14,067 32,492 68,969 12,277 28,397
------ ------- ------- ------- -------- ------- --------
Gross profit.......... 3,141 6,895 9,611 23,871 50,850 8,859 20,753
Franchise fees and
royalties earned....... 82 257 417 379 485 105 122
Operating expenses:
Store operating....... 2,095 4,649 6,628 16,197 33,264 6,085 13,905
Pre-opening costs..... -- 140 130 699 2,712 509 1,044
General and
administrative....... 620 1,276 1,995 2,584 3,731 782 1,521
Executive options..... -- -- 1,222 (1) -- -- -- --
Litigation
settlements.......... 647 -- -- -- -- -- --
------ ------- ------- ------- -------- ------- --------
Operating income
(loss)............... (139) 1,087 53 (2) 4,770 11,628 1,588 4,405
Interest income (ex-
pense), net............ (170) (185) (85) 376 2,930 492 958
------ ------- ------- ------- -------- ------- --------
Income (loss) before
income taxes......... (309) 902 (32) 5,146 14,558 2,080 5,363
Provision (benefit) for
income taxes........... (111) 343 171 1,928 4,836 621 1,890
------ ------- ------- ------- -------- ------- --------
Net income (loss)..... $ (198) $ 559 $ (203)(2) $ 3,218 $ 9,722 $ 1,459 $ 3,473
====== ======= ======= ======= ======== ======= ========
Net income (loss) per
share.................. $(0.03) $ 0.08 $ (0.03)(2) $ 0.27 $ 0.57 $ 0.09 $ 0.19
====== ======= ======= ======= ======== ======= ========
Weighted average shares
outstanding............ 7,016 7,016 7,605 11,966 17,030 15,983 18,640
SELECTED OPERATING DATA:
Company Store Data:
Increase in comparable
store sales(3)........ 16.3% 11.8% 6.2% 10.2% 17.9% 10.4% 42.0%
Number of stores at end
of period............. 2 3 5 15 27 16 30
Franchise Store Data:
Number of stores at end
of period............. 1 2 4 5 7 7 7
<CAPTION>
JANUARY 31, APRIL 30,
---------------------------------------------- -----------------
1992 1993 1994 1995 1996 1995 1996
------ ------- ------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $1,400 $ 668 $ 2,192 $64,617 $108,304 $55,571 $102,479
Total assets............ 4,174 7,342 16,012 89,505 243,580 104,451 192,776
Long-term debt
obligations............ 1,398 865 902 3,102 6,696 3,168 6,730
Redeemable convertible
preferred stock........ -- -- 3,017 -- -- -- --
Shareholders' equity.... 870 1,431 1,483 72,983 149,270 74,459 152,700
</TABLE>
- -------
(1) Represents the expense attributable to the issuance of certain executive
options, primarily a non-cash charge. See Note 11 to the Company's
Consolidated Financial Statements incorporated herein by reference from
the Company's Annual Report on Form 10-K for the year ended January 31,
1996.
(2) Excluding the executive option expense, primarily a non-cash charge,
operating income, net income and net income per share would have been
$1,275,000, $736,000 and $0.10, respectively, for fiscal 1993.
(3) Company operated stores (one to sixteen stores during the periods
presented) are included in the comparable store sales calculation
beginning generally in the thirteenth month of operation or upon their
acquisition assuming at least twelve months of prior operations.
12
<PAGE>
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.
There are presently 40 Just For Feet stores operating in twelve states,
including seven stores operated by the Company's only franchisee. Of the 33
Company operated stores, 12 stores were opened in fiscal 1995 and six have
been opened during 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. Comparable store sales increased 16.3%, 11.8%,
6.2%, 10.2% and 17.9% in fiscal years 1991 through 1995. 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
fiscal 1996 per share operating results in excess of a target level. A maximum
of $2.5 million can be distributed to participants under the plan.
13
<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
FISCAL YEAR ENDED APRIL 30,
----------------------- ----------------
1993 1994 1995 1995 1996
----- ----- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............... 59.4 57.7 57.6 58.1 57.8
----- ----- ----- ------- -------
Gross profit.............. 40.6 42.3 42.4 41.9 42.2
Franchise fees and royalties
earned..................... 1.7 0.6 0.5 0.5 0.2
Operating expenses:
Store operating........... 28.0 28.7 27.8 28.8 28.3
Pre-opening costs......... 0.5 1.2 2.3 2.4 2.1
General and administra-
tive..................... 8.4 4.6 3.1 3.7 3.1
Executive options......... 5.2 -- -- -- --
----- ----- ----- ------- -------
Operating income........ 0.2(1) 8.4 9.7 7.5 8.9
Interest income (expense),
net........................ (0.3) 0.7 2.4 2.3 2.0
----- ----- ----- ------- -------
Income (loss) before income
taxes...................... (0.1) 9.1 12.1 9.8 10.9
Provision for income taxes.. 0.8 3.4 4.0 2.9 3.8
----- ----- ----- ------- -------
Net income (loss)......... (0.9)%(1) 5.7% 8.1% 6.9% 7.1%
===== ===== ===== ======= =======
</TABLE>
- --------
(1) Excluding the expense attributable to the issuance of certain executive
options, primarily a non-cash charge, operating income and net income
would have been 5.4% and 3.1%, respectively, for fiscal 1993.
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.
14
<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.
FISCAL 1995 COMPARED TO FISCAL 1994
Net Sales. Net sales increased $63.4 million or 113% for fiscal 1995 to
$119.8 million compared to net sales of $56.4 million for fiscal 1994. This
increase was primarily attributable to the 12 new stores opened during the
year. These new stores accounted for $29.7 million in additional net sales
compared with fiscal 1994. In addition, there was an increase in comparable
store sales of 17.9%. The calculation of comparable store sales for the period
includes 15 stores.
Gross Profit. Gross profit as a percentage of net sales increased to 42.4%
in fiscal 1995 compared to 42.3% for fiscal 1994.
Store Operating Expenses. Store operating expenses increased $17.1 million
or 105.6% to $33.3 million in fiscal 1995 from $16.2 million in fiscal 1994.
This increase was primarily attributable to the operating expenses of the 12
new stores opened during fiscal 1995. As a percentage of net sales, store
operating expenses decreased to 27.8% in fiscal 1995 from 28.7% in fiscal
1994.
Store Pre-opening Costs. Store pre-opening costs, which are amortized over
the 12 months following a store opening, increased to $2.7 million in fiscal
1995 from $699,000 in fiscal 1994 as a result of 12 new store openings during
fiscal 1995.
General and Administrative Expense. General and administrative expense
increased $1.1 million or 44.4% but decreased as a percentage of net sales in
fiscal 1995 to 3.1% from 4.6% in fiscal 1994. The dollar increase was
primarily due to increasing the store operations and management information
systems infrastructure, while the percentage decrease resulted from greater
efficiencies of scale in the Company's operations.
Operating Income. Operating income increased to $11.6 million in fiscal 1995
from $4.8 million in fiscal 1994 and increased as a percentage of net sales to
9.7% in fiscal 1995 from 8.4% in the prior year. Both the dollar and
percentage increases were primarily due to 12 new stores opened during fiscal
1995.
Net Interest Income. Net interest income was $2.9 million in fiscal 1995
compared to $376,000 in fiscal 1994. The increase was primarily attributable
to investing the proceeds of two public offerings of the Company's common
stock during January and September 1995.
Net Income. As a result of the above factors, net income increased to $9.7
million in fiscal 1995 from $3.2 million in fiscal 1994, representing a 203.1%
increase over the prior period.
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
15
<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 $2.2 million, $64.6 million, $108.3 million and $102.5 million at
January 31, 1994, 1995 and 1996, and April 30, 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
16
<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.
17
<PAGE>
BUSINESS
GENERAL
Just For Feet is a rapidly growing operator of superstores specializing in
brand-name athletic and outdoor footwear. The Company's goal is to become the
leading athletic and outdoor footwear retailer in each of its markets by
offering the largest selection of brand-name shoes, superior customer service
and technical sales assistance in a high-energy, entertaining store
environment. The Company, which began with a single mall-based store in 1977,
opened its first superstore in 1988 and since that time has focused on
developing and refining its superstore concept. There are presently 40 "Just
For Feet" stores operating in twelve states, including seven stores operated
by the Company's only franchisee.
To support its continuing rapid growth, the Company has added new personnel
in the areas of regional management, finance, new store construction and
management information systems. The Company has implemented a
divisional/regional management structure to more efficiently direct
the operation of the growing number of Company stores. The Company believes
that this structure will improve the Company's ability to control and monitor
individual store performance as Just For Feet continues its new store growth.
ATHLETIC AND OUTDOOR FOOTWEAR INDUSTRY
In 1995, total retail sales of athletic and outdoor footwear in the United
States were over $11 billion. The industry historically has been served by a
variety of distribution channels, including mall-based specialty athletic
footwear retailers, department stores, traditional shoe stores, traditional
sporting goods stores and, more recently, sporting goods superstores. The
Company believes each of these formats has inherent limitations. For example,
while mall-based specialty athletic footwear retailers, department stores and
traditional sporting goods stores typically carry the leading brands of
athletic footwear at manufacturers' suggested retail prices, these stores can
offer only a limited number of styles and sizes due to the limited floor space
available. In addition, sporting goods superstores and other discount
retailers generally offer a limited selection of brands and styles.
To address these limitations, the Company has developed a prototype 15,000
to 20,000 square foot superstore (approximately two-thirds of which is devoted
to selling space). Its larger store format allows the Company to display and
support a dominant selection of brand-name athletic and outdoor shoes, with
between five to 10 times the number of styles found in the stores of most
competing retailers. Further, by emphasizing the training and testing of its
sales associates in the increasingly sophisticated and rapidly changing
technology employed by the manufacturers of athletic and outdoor shoes, the
Company has been able to provide a level of service which it believes exceeds
that found in most traditional specialty retailers of athletic footwear.
BUSINESS STRATEGY
The Company's goal is to become the leading retailer of brand-name athletic
and outdoor footwear in each of the markets it serves. The key components of
its strategy to achieve this goal are:
Dominant Selection of Brand-Name Athletic and Outdoor Footwear. The Company
seeks to offer a larger selection of brand-name athletic and outdoor footwear
in terms of styles, sizes, and price points than any of its competitors. Just
For Feet carries most of the leading athletic brands, such as Nike, Reebok,
New Balance, Adidas, Fila, Asics and Converse, as well as outdoor footwear
brands such as Timberland and Rockport. The Company seeks to offer virtually
all styles in the brands it carries. The Company sells shoes for almost every
sport and recreational activity, including running, basketball, cross
training, tennis, aerobics, hiking, golf, football, baseball, soccer, walking
and wrestling. In addition, in the first quarter of fiscal 1995, the Company
added a selection of in-line skates. The Company carries shoes in sizes
ranging from infants' size one to men's size 21. Just For Feet superstores
carry approximately 2,500 to 4,500 styles of athletic and outdoor footwear as
compared to an estimated 200 to 700 styles typically offered by conventional
mall-based athletic footwear retailers, department stores and sporting goods
superstores. In addition to offering most sizes in most styles, Just For Feet
carries a complete selection of widths in those styles which are offered in
multiple widths.
18
<PAGE>
Entertaining Shopping Experience. The Company strives to create an exciting
and high-energy shopping experience in its prototype superstores through the
use of bright colors, upbeat music, an enclosed "half-court" basketball court
for use by customers, a multi-screen video bank, a snack bar featuring popcorn
and Chicago-style hot dogs and appearances by sports celebrities. In addition,
certain of the Company's newer superstores feature an hourly laser light show
and an updated store design which depicts the structure of a stadium around
the perimeter of the main selling floor. The Just For Feet prototype
superstore features 18 separate branded "concept shops," each displaying the
brand's product line and typically built and periodically updated by the
vendors to tie into their national advertising campaigns. Each Just For Feet
store benefits from the upscale appearance of the branded fixturing. The
Company also sponsors creative promotional events such as "Midnight Madness"
sales and a family frequent buyer program.
Superior Customer Service and Technical Sales Assistance. The Company
believes that the level of service it provides to customers is an important
competitive advantage. Just For Feet is committed to making shopping for
athletic and outdoor footwear an enjoyable experience through the employment
of knowledgeable, well-trained and energetic sales associates. Because of the
large selection of footwear carried and to further differentiate its
superstores from other retailers, the Company devotes substantial time and
resources to training and testing its employees in footwear technology, the
performance attributes of the Company's merchandise and common foot problems.
The initial phase of employee training entails a two-week program in which the
new employee shadows experienced employees to learn the sales and technical
aspects of the business. Employees are allowed to sell the Company's more
technical products as they demonstrate increased proficiency. In addition, new
store managers and other store management personnel undergo an intensive two-
to three-week training program at "Just For Feet University" to enhance their
understanding of all aspects of the Company's business. Each employee receives
ongoing training through frequent clinics sponsored by vendors and
consultation with the Company's technical specialists. The Company is also
exploring the possible use of satellite technology for two-way, interactive
broadcasting between corporate headquarters and individual superstores. The
Company believes that such satellite technology, if properly employed, could
be an effective and cost-efficient way to facilitate communication and
continuing education on a company-wide basis.
The Company strives to staff its stores with a high ratio of sales
associates to customers to assure prompt and personalized service. Because the
Company sells almost every athletic shoe offered by leading brands, its sales
associates are able to act as problem solvers for customers and to recommend
the ideal shoe with less risk of losing a sale. The Company seeks to retain
its nucleus of well-trained sales personnel through bonus payments and
opportunities for advancement.
Competitive Pricing. Just For Feet guarantees that it will match any
competitor's advertised price and offers a family frequent buyer program under
which the Company gives participating customers the thirteenth pair of shoes
free (up to the average purchase price of the previous twelve pairs). In
addition, the Company seeks to enhance its reputation for value oriented
pricing by offering a limited selection of close-out merchandise at prices
generally ranging from 30% to 60% below manufacturers' suggested retail prices
displayed in an area at the front of each store called the "Combat Zone." The
Company believes that providing a wide selection of competitively priced,
brand-name footwear provides superior value to its customers.
EXPANSION STRATEGY
The Company intends to strengthen its position as a leading operator of
athletic footwear superstores by opening a total of 27 new stores during
fiscal 1996 and the first quarter of fiscal 1997, with approximately 16 stores
expected to open in fiscal 1996 and approximately 11 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. In addition to its prototype stores, the Company has
19
<PAGE>
opened three, and has plans to open an additional four, high-visibility, high-
profile "flagship" stores in selected locations. Flagship stores, which are
not necessarily larger than the prototypical Just For Feet store, provide
added entertainment features designed to generate and maintain customer
excitement. The Company's expansion strategy is to open stores in new and
existing metropolitan markets, including those markets with the potential for
multiple sites, which enables the Company to capture advertising and operating
efficiencies. In addition, the Company will continue to open stores in
smaller, single store markets. The Company has either executed or negotiated
leases with respect to all 27 stores currently slated to open during fiscal
1996 and the first quarter of fiscal 1997. The Company is actively reviewing
numerous additional sites.
Management generally seeks to open one store in a chosen market for every
400,000 to 500,000 residents. As a result, multiple stores opened in larger
markets such as Atlanta, Phoenix, and Kansas City derive significant benefit
from advertising and operating efficiencies. More recently, the Company has
also focused on opening single superstores in mid-sized metropolitan markets
such as Huntsville, Alabama and Knoxville, Tennessee. In addition, the Company
continues to evaluate select opportunities to expand internationally, but
presently has no formal plans for such expansion. The Company has explored and
may continue to explore aquisitions of entities employing an altered format to
that of Just For Feet.
Because the Company's vendors drop ship merchandise directly to the stores,
the Company's expansion plans are dependent more on the attractiveness of
individual store sites than the logistical constraints that would be imposed
by a central distribution center. The Company plans to open primarily
free-standing stores in high traffic, high visibility locations typically on
outparcels of or adjacent to shopping malls. The Company's strategy is to
concentrate its efforts on opening Company operated stores.
The Company leases all but three of its existing stores and intends to lease
all new stores. The Company estimates that its total cash requirements to open
each new 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 extent of vendor and
landlord assistance, while the total cash outlay required to open a flagship
superstore typically approximates $2.5 million.
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. These
stores, which would operate under a name other than "Just For Feet," would be
located in either smaller markets not served by a Just For Feet superstore
with populations less than 200,000, or in certain areas of markets currently
served by Just For Feet. Management anticipates that, should it elect to
pursue this new concept, it would be developed either internally by Just For
Feet or through the acquisition of an existing athletic and outdoor footwear
retailer currently operating in the manner envisioned for the new stores. The
Company has engaged in preliminary discussions with an existing athletic
footwear retailer regarding a potential acquisition by the Company, but such
discussions are in the very early stages and no prediction can be made as to
whether this or any other acquisition by the Company will be pursued or
consummated. In addition, no assurance can be given that the Company will
proceed with the development of the new concept or, if implemented, that it
will be successful or that it will not have a material adverse effect on the
Company's operating results.
20
<PAGE>
STORE LOCATIONS
The following map shows the location of existing Just For Feet stores as of
May 31, 1996:
[MAP APPEARS HERE]
JUST FOR FEET SUPERSTORE
Large Store Format. The prototype 15,000 to 20,000 square foot Just For Feet
superstore has approximately three to four times the selling space of leading
mall-based specialty athletic footwear retailers. This large store format
enables each Just For Feet superstore to offer approximately 2,500 to 4,500
styles as compared to an estimated 200 to 700 styles typically offered in a
conventional mall-based athletic footwear store. The store layout permits
customers to locate shoes by brand (e.g. Nike, Reebok, New Balance) or
category (e.g. running, basketball, tennis). One shoe of each regularly
stocked style is located in the appropriate branded concept shop and the other
is presented on a full three-wall display arranged by category which surrounds
the fitting area at the back of the store. These displays, which emphasize
current, in-season products, are complemented by the "Combat Zone," where Just
For Feet regularly highlights special values on close-outs and other special-
purchase merchandise. The Company strives to create an exciting and high-
energy shopping experience in its superstores through the use of bright
colors, upbeat music, an enclosed "half-court" basketball court for use by
customers, a multi-screen video bank and a snack bar featuring popcorn and
Chicago-style hot dogs.
In-Store Warehousing. The Company does not operate a centralized
distribution center but typically devotes approximately one-third of the
square footage of each superstore to warehouse space. Each store receives
regular shipments directly from vendors and stocks merchandise in an area
behind (or above) the selling floor not visible to customers. The Company
employs warehouse personnel at each store in order to free sales associates to
attend to customers and to enhance inventory control. This decentralized
distribution system enables the Company to receive merchandise at each store
on a timely basis and avoid the time and expense of handling merchandise
twice. The Company believes its in-store warehousing strategy also permits it
to maintain deep inventory positions in core styles and to stock its stores
more fully in advance of peak selling periods.
21
<PAGE>
Operations. The Company has established a three-tiered management system for
store operations, presently consisting of four regional directors, 12
divisional directors and a store director for each store. Each store is
managed by a store director, two store managers, and up to six assistant
managers, depending on the sales volume of the store. Store directors report
to a divisional director, who in turn reports to a regional director.
The sales staff of individual stores ranges from approximately 20 to 85
employees depending on the size of the store and the time of year. The
Company's policy is to staff its stores sufficiently to ensure that all
customers receive prompt personalized attention. Store directors and managers
are paid a salary, while all other store employees are paid on an hourly
basis. The Company provides an incentive compensation plan for virtually all
employees. Store director and manager incentive plans are based primarily upon
store profitability and inventory shrinkage compared to budget. Sales
associates are eligible for semi-annual bonus payments based on their
individual sales performances.
The Company experiences inventory shrinkage rates which it believes are
below the retail industry average. Management attributes its low shrinkage
rate to stocking footwear off the selling floor, employment of security
personnel at each superstore, the use of surveillance systems and the reduced
handling associated with the Company's in-house warehousing system.
Customer Convenience. Just For Feet stores operate seven days per week. To
enhance customer convenience, normal hours for superstores located on
outparcels of shopping malls are thirty minutes prior to the mall's opening
until thirty minutes after the mall's closing. Superstores are open on all
holidays except Christmas, Thanksgiving and Easter.
MANAGEMENT INFORMATION SYSTEM
Control of the Company's merchandising activities is currently maintained by
a fully integrated point-of-sale (POS), inventory, and management information
system which permits management personnel to monitor inventory and store
operations on a daily basis and to determine weekly operating results by
store. Bar-coding all merchandise and using scanners at the point of sale
allows the inventories of all stores to be automatically adjusted and sales
automatically logged as customers check out. Purchasing, tracking and
receiving systems provide efficient and timely distribution of merchandise to
each store. Systems are in place to review sales information by store,
category or employee in order to focus on store needs and employee
productivity and motivation. In-store information systems are linked directly
to the corporate office by leased lines.
In addition, in order to improve operational productivity, facilitate timely
decision making and support the Company's future growth, in December 1995 the
Company substantially completed implementation of enhanced systems
capabilities utilizing a fully integrated software system on an IBM AS/400
platform. The Company invested $2.1 million in the upgrade. The Company's
enhanced systems provide management with the capability to track sales, gross
margin and inventory levels by store, by stock keeping unit and by sales
associate on a real-time basis. Management believes that the Company's
enhanced systems will be able to support the Company's planned growth for the
foreseeable future.
COMPETITION
The retail athletic footwear industry is highly competitive. The Company
competes primarily with sporting goods superstores, athletic footwear
specialty stores, department stores, discount stores, traditional shoe stores,
traditional sporting goods stores and mass merchandisers and other athletic
footwear superstores, many of which are units of national or regional chains
that have substantially greater financial and marketing resources than the
Company and several of which have developed their own superstore concepts.
Within the past two years, new independent athletic footwear retailers have
opened
22
<PAGE>
superstores similar in format to those of the Company that, in some instances,
are competing directly with the Company. The Company may face periods of
intense competition in the future which could have an adverse effect on its
financial results.
TRADEMARKS
The Company owns the following federally registered service marks (in design
form): "Just For Feet," "Just For Feet, World's Largest Athletic Shoe Store,"
and "Just For Feet, Where The 13th Pair is FREE!". The Company believes its
marks are valuable and, accordingly, intends to maintain its marks and the
related registrations. The Company is not aware of any pending claims of
infringement or other challenges to the Company's right to use its marks in
the United States.
23
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Harold Ruttenberg....... 53 Chairman of the Board, President and Chief Executive Officer
Robert C. Wabler........ 47 Executive Vice President, Chief Financial Officer and Director
Adam J. Gilburne........ 33 Executive Vice President
Don-Allen Ruttenberg.... 29 Vice President
Scott C. Wynne.......... 29 Vice President and Secretary
Bart Starr, Sr.......... 62 Director
Michael P. Lazarus...... 40 Director
Randall L. Haines....... 53 Director
David F. Bellet......... 49 Director
</TABLE>
Mr. Harold Ruttenberg is the founder of the Company and has served as its
Chairman, President and Chief Executive Officer since its inception in 1977.
Mr. Wabler has been employed by the Company since May 1993 and was elected
Executive Vice President, Chief Financial Officer and a director in August
1993. From 1989 to May 1993, Mr. Wabler was Senior Vice President--Finance and
Administration of The Athlete's Foot Group where his responsibilities included
personnel, inventory systems, financial controls and reporting, and commercial
and investment banking relationships.
Mr. Gilburne served as Vice President--Store Operations of the Company from
March 1994 to December 1994, at which time he was promoted to Executive Vice
President--Merchandising. Mr. Gilburne previously owned and operated a
franchised Just For Feet store in San Antonio, Texas, which the Company
acquired in March 1994. From 1986 until 1993, Mr. Gilburne was the President
of a chain of baby and children's furniture stores located in Las Vegas,
Nevada.
Mr. Don-Allen Ruttenberg has served as Vice President since 1987 and was
elected Vice President--Merchandising in January 1994. Since 1987, Mr.
Ruttenberg has been actively involved in the merchandising aspects of the
Company, focusing on footwear technology. Mr. Ruttenberg is the son of Mr.
Harold Ruttenberg.
Mr. Wynne has been employed by the Company since 1985 and has served as
operations manager since 1990 with specific responsibilities in inventory
control, distribution, management information systems and traffic. He was
elected Vice President--Store Operations in January 1994 (which title was
changed to Vice President--Administration in March 1994) and corporate
secretary in August 1995.
Mr. Starr has served as a director of the Company since August 1993. He has
served as the Chairman of the Board of Healthcare Realty Management, a real
estate development company, since 1990 and from 1984 to 1990 was a partner in
RAL Management Group, also a real estate development company. From 1956 to
1972, Mr. Starr was a professional football player for the Green Bay Packers
of the National Football League. He presently serves as a spokesperson for the
Company.
24
<PAGE>
Mr. Lazarus has served as a director of the Company since August 1993. Mr.
Lazarus has served as a Managing Partner of Weston Presidio Capital
Management, L.P., a venture capital firm, since 1991. From 1986 to 1991, he
served as Managing Director and Director of the Private Placement Department
of Montgomery Securities.
Mr. Haines has served as a director of the Company since May 1994. Mr.
Haines has served as President of Compass Bank-Birmingham since February 1996.
From January 1993 to January 1996, Mr. Haines served as President of Compass
Bank of Huntsville, Alabama. From 1986 to January 1993, Mr. Haines served as
Commercial Banking Manager of Compass Bank of Birmingham, Alabama.
Mr. Bellet has been Chairman of Crown Advisors Ltd., a private investment
counseling firm, since founding the firm in 1981. He is also a general partner
in the limited partnerships managed by Crown in the venture capital industry.
From 1969 to 1981, Mr. Bellet was a Vice President of Citibank in the
Investment Management Group. Mr. Bellet also serves on the Board of Directors
of One Price Clothing Stores.
25
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
Based solely on information furnished to the Company, the following table
sets forth information regarding the beneficial ownership of the Common Stock
of the Company as of the date of this Prospectus (unless otherwise indicated)
and as adjusted to give effect to the offering, by (i) each person who is
known by the Company to beneficially own more than five percent of the
Company's Common Stock, (ii) each director and executive officer of the
Company, and (iii) all officers and directors as a group.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
PRIOR TO THE BENEFICIAL OWNERSHIP
OFFERING NUMBER OF SHARES AFTER THE OFFERING
----------------- TO BE SOLD -----------------------
NAME OF BENEFICIAL OWNER (1) SHARES PERCENT IN THE OFFERING SHARES PERCENT
---------------------------- --------- ------- ---------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Harold Ruttenberg (2).......... 4,763,256 26.9% 583,186 3,810,596 20.9%
Pamela B. Ruttenberg (3)....... 1,847,372 10.4 369,474 1,477,898 8.1
FMR Corp. (4).................. 1,868,900 10.6 -- 1,868,900 10.3
Metropolitan Life Insurance
Company (5)................... 1,080,100 6.1 -- 1,080,100 5.9
State Street Research &
Management Company (6)........ 986,800 5.6 -- 986,800 5.4
Karl B. Friedman, as Trustee
for the Pamela B. Ruttenberg
Irrevocable Children's Trust
(7)........................... 434,924 2.5 86,985 347,939 1.9
Adam J. Gilburne (8)........... 203,498 1.1 40,700 162,798 *
Robert C. Wabler (9)........... 182,321 1.0 36,464 145,857 *
Ruttenberg Family Foundation
(10).......................... 109,100 * 17,309 91,791 *
Don-Allen Ruttenberg (11)...... 39,705 * 7,941 31,764 *
Scott C. Wynne (11)............ 39,705 * 7,941 31,764 *
Randall L. Haines (12)......... 12,725 * -- 12,725 *
Michael P. Lazarus (13)........ 12,500 * -- 12,500 *
Bart Starr, Sr................. 6,768 * -- 6,768 *
David F. Bellet................ -- -- -- -- *
All executive officers and
directors as a group (8
persons) (14)................. 5,260,478 29.5% 676,232 4,214,772 23.0%
---------
1,150,000
=========
</TABLE>
- --------
* Less than 1%
(1) Unless otherwise indicated, each person has sole voting and investment
power as to all such shares. Shares of Common Stock underlying options to
purchase Common Stock are deemed to be outstanding for the purpose of
computing the outstanding Common Stock owned by the particular person and
by the group, but are not deemed outstanding for any other purpose.
(2) Harold Ruttenberg and Pamela B. Ruttenberg are husband and wife. Includes
2,915,884 shares owned directly by Harold Ruttenberg and 1,847,372 shares
held by him as Trustee under a Voting Trust Agreement for the benefit of
Pamela B. Ruttenberg which terminates in 2003. Mr. Ruttenberg's address is
153 Cahaba Valley Parkway North, Birmingham, Alabama 35124.
(3) Represents shares held by Harold Ruttenberg as Voting Trustee for Pamela
B. Ruttenberg, with respect to which Mr. Ruttenberg has voting power. Mrs.
Ruttenberg retains the power to dispose of such shares. Mrs. Ruttenberg's
address is 153 Cahaba Valley Parkway North, Birmingham, Alabama 35124.
(4) Based upon a statement on Schedule 13G dated March 8, 1996 filed by FMR
Corp. These shares include 54,600 shares over which FMR Corp. has sole
voting power and 1,868,900 over which FMR Corp. has sole dispositive
power. The Company makes no representation as to the accuracy or
completeness of the information reported. FMR Corp.'s business address is
82 Devonshire Street, Boston, Massachusetts 02109.
(5) Based upon a statement on Schedule 13G dated February 13, 1996 filed by
Metropolitan Life Insurance Company. The Company makes no representation
as to the accuracy or completeness of the information reported. The
business address of Metropolitan Life Insurance Company is One Madison
Avenue, New York, New York 10010.
(6) Based upon a statement on Schedule 13F dated May 15, 1996 filed by State
Street Research & Management Company ("State Street"). State Street
disclaims any beneficial interest in the shares. The Company makes no
representation as to the accuracy or completeness of the information
reported. State Street's business address is One Financial Center, 30th
Floor, Boston, Massachusetts 02111-2690.
26
<PAGE>
(7) Trust is for the benefit of the three adult children of Harold and Pamela
Ruttenberg. The shares held in the trust are allocated pro rata among the
three children. Mr. Friedman disclaims beneficial ownership of the shares
in the trust.
(8) Includes 48,168 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 109,752 shares subject
to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(9) Includes 27,025 shares owned by Mr. Wabler's wife. Excludes 133,509 shares
subject to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(10) Shares held by the Ruttenberg Family Foundation for the benefit of the
Birmingham Jewish Federation. The Ruttenbergs disclaim beneficial
ownership of the shares held by the Foundation.
(11) Includes 39,705 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 63,970 shares subject
to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(12) Includes 12,500 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 27,500 shares subject
to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(13) Represents shares subject to outstanding options to purchase Common Stock
which are exercisable within 60 days. Excludes 27,500 shares subject to
outstanding options to purchase Common Stock which will become exercisable
at various dates in the future.
(14) Includes outstanding options to purchase an aggregate of 152,578 shares of
Common Stock held by executive officers and directors which are
exercisable within 60 days. Excludes 426,201 shares subject to outstanding
options to purchase Common Stock which will become exercisable at various
dates in the future.
27
<PAGE>
UNDERWRITING
The Underwriters, Montgomery Securities, The Robinson-Humphrey Company,
Inc., William Blair & Company, L.L.C. and Robertson, Stephens & Company LLC,
have severally agreed, subject to the terms and conditions set forth in the
Underwriting Agreement, to purchase from the Company and the Selling
Shareholders the number of shares of Common Stock indicated below opposite
their respective names at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters are committed to
purchase all of the shares if they purchase any.
<TABLE>
<CAPTION>
NUMBER
NAME OF UNDERWRITER OF SHARES
------------------- ---------
<S> <C>
Montgomery Securities..............................................
The Robinson-Humphrey Company, Inc. ...............................
William Blair & Company, L.L.C.....................................
Robertson, Stephens & Company LLC .................................
---------
Total............................................................ 1,650,000
=========
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Common Stock to the public on the terms set forth on the cover page
of this Prospectus. The Underwriters may allow to selected dealers a
concession of not more than $ per share; and the Underwriters may allow, and
such dealers may reallow, a concession of not more than $ per share to
certain other dealers. After the offering, the offering price and other
selling terms may be changed by the Underwriters. The Common Stock is offered
subject to receipt and acceptance by the Underwriters, and to certain other
conditions, including the right to reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 247,500 additional shares of Common Stock to cover over-allotments,
if any, at the same price per share as the initial shares to be purchased by
the Underwriters. To the extent that the Underwriters exercise this option,
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in
the above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with this offering.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.
The Company, its directors and officers, certain of the Selling Shareholders
and certain other existing shareholders of the Company have agreed, subject to
certain limited exceptions, that they will not, without the prior written
consent of Montgomery Securities, offer, sell or otherwise dispose of any
shares of Common Stock, or any right to acquire such shares, for a period of
180 days from the date of this Prospectus.
In connection with this offering, certain underwriters and selling group
members (if any) or their respective affiliates who are qualified registered
market makers on the Nasdaq National Market may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 10b-6A under the Exchange Act during the two business day
period before commencement of offers or sales of the Common Stock. The passive
market making transactions must comply with applicable volume and price limits
and be identified as such. In general, a passive market maker may display its
bid at a price not in excess of the highest independent bid for the security;
however if all independent bids are lowered below the passive market marker's
bid, such bid must then be lowered when certain purchase limits are exceeded.
28
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Smith, Gambrell & Russell, Atlanta, Georgia. Certain matters will
be passed upon for the Underwriters by Alston & Bird, Atlanta, Georgia.
EXPERTS
The consolidated financial statements of Just For Feet, Inc. and
subsidiaries as of January 31, 1996 and for each of the three years in the
period ended January 31, 1996 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report incorporated by reference
herein and are so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to certain informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
files reports and other information with the Commission. Such reports and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at 7
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Securities
and Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Company's Common Stock is quoted on the Nasdaq
National Market and reports and other information concerning the Company may
also be inspected and copied at the office of the Nasdaq Stock Market, Inc.
9513 Key West Avenue, Rockville, Maryland 20850.
The Company has filed a Registration Statement on Form S-3 (together with
all amendments and exhibits filed or to be filed in connection therewith, the
"Registration Statement") under the Securities Act of 1933, as amended, with
respect to the Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified
in its entirety by reference to the copy of the applicable document filed with
the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the year ended January
31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1996; and
3. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A as filed with the
Commission on March 4, 1994.
In addition, all documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus
and prior to the termination of this offering shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document
29
<PAGE>
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified and superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, upon written or oral request of such person, a copy of any and
all of the information that has been incorporated by reference in this
Prospectus (excluding exhibits unless such exhibits are specifically
incorporated by reference into such documents). Please direct such requests to
the Secretary of Just For Feet, Inc. at the Company's principal offices
located at 153 Cahaba Valley Parkway North, Birmingham, Alabama 35124,
telephone number (205) 403-8000.
30
<PAGE>
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
[PICTURE APPEARS HERE]
<PAGE>
================================================================================
No dealer, representative or any other person has been authorized to give in-
formation or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company, the Selling Sharehold-
ers or by the Underwriters. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date hereof or
that the information contained herein is correct as of any date subsequent to
the date hereof. This Prospectus does not constitute an offer to sell or a so-
licitation of an offer to buy any securities offered hereby by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
------------------
TABLE OF CONTENTS
------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 10
Price Range of Common Stock............................................... 10
Dividend Policy........................................................... 10
Capitalization............................................................ 11
Selected Financial Data................................................... 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 13
Business.................................................................. 18
Management................................................................ 24
Principal and Selling Shareholders........................................ 26
Underwriting.............................................................. 28
Legal Matters............................................................. 29
Experts................................................................... 29
Available Information..................................................... 29
Incorporation of Certain Documents By Reference........................... 29
</TABLE>
===============================================================================
===============================================================================
1,650,000 SHARES
[JUST FOR FEET LOGO APPEARS HERE]
COMMON STOCK
------------------
PROSPECTUS
------------------
Montgomery Securities
The Robinson-Humphrey
Company, Inc.
William Blair & Company
Robertson, Stephens & Company
, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of issuance and distribution of the Common Stock,
other than underwriting discounts, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 35,870
National Association of Securities Dealers, Inc. Filing Fee........ 10,903
Legal Fees and Expenses............................................ 100,000
Accounting Fees and Expenses....................................... 120,000
Printing and Engraving............................................. 50,000
Blue Sky Fees and Expenses......................................... 15,000
Miscellaneous...................................................... 118,227
--------
TOTAL............................................................ $450,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 10-2B-8.51 of the 1994 Alabama Business Corporation Act (the
"Alabama Act") provides that a corporation may indemnify an individual made a
party to a proceeding because he is or was a director of the Company against
liability incurred in the proceeding if the individual conducted himself in
good faith and, in the case of conduct in his official capacity with the
Company, reasonably believed that his conduct was in the best interests of the
Company or, in all other cases that the conduct was at least not opposed to
the best interests of the Company, and, in the case of any criminal
proceeding, he has no reasonable cause to believe his conduct was unlawful. A
corporation may not, however, indemnify a director under section 8.51 of the
Alabama Act (i) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
(ii) in connection with any other proceeding charging improper personal
benefit to the director in which the director was adjudged liable on the basis
that personal benefit was improperly received by him.
Sections 10-2B-8.52 and 10-2B-8.56 of the Alabama Act provide that a
corporation shall indemnify a director or officer who was successful in the
defense of any proceeding, or of any claim, issue or matter in such
proceeding, where he was a party because he is or was a director or officer of
the corporation, against reasonable expenses incurred in connection therewith,
notwithstanding that he was not successful on any other claim, issue or matter
in any such proceeding.
Sections 10-2B-8.53 and 10-2B-8.56(b) of the Alabama Act provide that a
corporation may pay for or reimburse the reasonable expenses incurred by a
director, officer, employee or agent of the corporation who is a party to a
proceeding in advance of final disposition of the proceeding if (i) such
individual furnishes the corporation a written affirmation of good faith
belief that he met the standard of conduct required for permissive
indemnification set forth in section 10-2B-8.51 of the Alabama Act; (ii) such
individual furnishes the corporation a written undertaking to repay the
advance if it is ultimately determined that such person did not meet such
standard of conduct or is not otherwise entitled to indemnification under
section 8.51 unless indemnification is approved by the court under section
8.54; and (iii) a determination is made that the facts then known to those
making the determination would not preclude indemnification under the Alabama
Act.
II-1
<PAGE>
Article 11 of the Amended and Restated Certificate of Incorporation of Just
For Feet, Inc. provides that the Company shall indemnify every director or
officer against expenses and liabilities reasonably incurred by him in
connection with any claim, action, suit or proceeding to which he is a party
by reason of his being or having been a director or officer of the Company,
or, at the Company's request, a director, officer, employee or agent of any
corporation of which the Company is a shareholder or creditor, provided such
director or officer acted in good faith in what he reasonably believed to be
the best interest of the Company, and in addition, in any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The exhibits listed below are filed with or incorporated by reference
into this Registration Statement. The exhibits which are denominated with an
asterisk (*) were previously filed as part of, and are hereby incorporated by
reference from either (i) the Company's Registration Statement on Form S-1
under the Securities Act of 1933, Registration No. 33-74404 ("S-1"), or (ii)
the Company's Quarterly Report on Form 10-Q for the quarter ended April 30,
1996 ("10-Q"). Unless otherwise indicated, the exhibit number corresponds to
the exhibit number in the referenced document.
<TABLE>
<CAPTION>
S-K REFERENCE
NUMBER DESCRIPTION
------------- -----------
<C> <S>
1 Form of Underwriting Agreement.
*3(i).1 Articles of Amendment, dated May 28, 1996, amending the
Company's Amended and Restated Articles of Incorporation. (10-Q)
*4 Specimen of Common Stock Certificate of the Company. (S-1)
5 Opinion of Smith, Gambrell & Russell.
*10.6.2 Amendment No. 3 to Employee Incentive Stock Option Plan. (10-Q)
*10.50 Master Revolving Promissory Note dated October 24, 1995 in the
principal amount of $10,000,000 payable to Compass Bank. (10-Q)
23.1 Consent of Deloitte & Touche LLP.
Consent of Smith, Gambrell & Russell (contained in their opinion
23.2 filed as Exhibit 5).
24.1 Power of Attorney (included on signature page)
</TABLE>
(b) All financial statement schedules of Just For Feet, Inc. and
subsidiaries have been omitted as they are not required under the related
instructions or are inapplicable.
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes that, for purposes of
determining liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offering therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
(3) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUND TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF BIRMINGHAM, STATE OF ALABAMA, ON THIS 31ST DAY OF
MAY, 1996.
Just For Feet, Inc.
By: /s/ Robert C. Wabler
---------------------------------
Robert C. Wabler
Executive Vice President and Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS HAROLD RUTTENBERG AND ROBERT C. WABLER AND EACH
OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-
EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME,
WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH,
INCLUDING A REGISTRATION STATEMENT FILED UNDER RULE 462(B) OF THE SECURITIES
ACT OF 1993, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR
COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-
IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES,
MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE
/s/ Harold Ruttenberg Chairman of the Board of May 31, 1996
- ------------------------------------- Directors, President
HAROLD RUTTENBERG and Chief Executive
Officer (Principal
Executive Officer)
/s/ Robert C. Wabler Vice President, Chief May 31, 1996
- ------------------------------------- Financial Officer and
ROBERT C. WABLER Director (Principal
Financial and
Accounting Officer)
/s/ Michael P. Lazarus Director May 31, 1996
- -------------------------------------
MICHAEL P. LAZARUS
/s/ Bart Starr, Sr. Director May 31, 1996
- -------------------------------------
BART STARR, SR.
/s/ Randall L. Haines Director May 31, 1996
- -------------------------------------
RANDALL L. HAINES
Director May , 1996
- -------------------------------------
DAVID F. BELLET
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
S-K REFERENCE
NUMBER DESCRIPTION PAGE
------------- ----------- ----
<C> <S> <C>
1 Form of Underwriting Agreement.
5 Opinion of Smith, Gambrell & Russell.
23.1 Consent of Deloitte & Touche LLP.
</TABLE>
<PAGE>
1,650,000 Shares
JUST FOR FEET, INC.
Common Stock
FORM OF UNDERWRITING AGREEMENT
------------------------------
June ___, 1996
MONTGOMERY SECURITIES
The Robinson-Humphrey Company, Inc.
WILLIAM BLAIR & COMPANY, L.L.C.
ROBERTSON, STEPHENS & COMPANY LLC
As Representatives of the several Underwriters
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
SECTION 1. Introductory. Just For Feet, Inc., an Alabama corporation (the
------------
"Company"), proposes to issue and sell 500,000 shares of its authorized but
unissued Common Stock (the "Common Stock") and certain stockholders of the
Company named in Schedule B annexed hereto (the "Inside Selling Stockholders")
and Schedule C annexed hereto (the "Outside Selling Stockholders") (the Inside
Selling Stockholders and the Outside Selling Stockholders are referred to herein
collectively as the "Selling Stockholders") propose to sell an aggregate of
1,150,000 shares of the Company's issued and outstanding Common Stock to the
several underwriters named in Schedule A annexed hereto (the "Underwriters") for
whom you are acting as Representatives. Said aggregate of 1,650,000 shares are
herein called the "Firm Common Shares." In addition, the Company proposes to
grant to the Underwriters an option to purchase up to 247,500 additional shares
of Common Stock (the "Optional Common Shares"), as provided in Section 5 hereof.
The Firm Common Shares and, to the extent such option is exercised, the Optional
Common Shares are hereinafter collectively referred to as the "Common Shares."
You have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective portions of
the Common Shares on the effective date of the registration statement
hereinafter referred to, or as soon thereafter as in your judgment is advisable.
The Company and each of the Selling Stockholders hereby confirm their
respective agreements with respect to the purchase of the Common Shares by the
Underwriters as follows:
<PAGE>
SECTION 2. Representations and Warranties of the Company and the Inside
------------------------------------------------------------
Selling Stockholders. The Company and each of the Inside Selling Stockholders
- --------------------
represent and warrant, jointly and severally, to the several Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-
___________) with respect to the Common Shares has been prepared by the
Company in conformity with the requirements of the Securities Act of 1933,
as amended (the "Act"), and the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission. The Company may have
prepared and filed or may prepare and file prior to the effective date of
such registration statement an amendment or amendments to such registration
statement, which amendment or amendments, if any, have been or will be
similarly prepared. There have been delivered to you four signed copies of
such registration statement and amendments, together with two copies of
each exhibit filed therewith. Conformed copies of such registration
statement and amendments (but without exhibits) and of the related
preliminary prospectus have been delivered to you in such reasonable
quantities as you have requested for each of the Underwriters. The Company
will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment thereto,
including the form of final prospectus, (ii) a final prospectus in
accordance with Rules 430A and 424(b) of the Rules and Regulations, or
(iii) a term sheet (the "Term Sheet") as described in and in accordance
with Rules 434 and 424(b) of the Rules and Regulations. As filed, the
final prospectus, if one is used, or the Term Sheet and Preliminary
Prospectus, if a final prospectus is not used, shall include all Rule 430A
Information (as defined) and, except to the extent that you shall agree in
writing to a modification, shall be in all substantive respects in the form
furnished to you prior to the date and time that this Agreement was
executed and delivered by the parties hereto, or, to the extent not
completed at such date and time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus (as defined)) as the Company shall have
previously advised you in writing would be included or made therein.
The term "Registration Statement" as used in this Agreement shall
mean such registration statement at the time such registration statement
becomes effective and, in the event any post-effective amendment thereto
becomes effective prior to the First Closing Date (as hereinafter defined),
shall also mean such registration statement as so amended; provided,
however, that such term shall also include (i) all Rule 430A Information
deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 430A of the
Rules and Regulations, and (ii) a registration statement, if any, filed
pursuant to Rule 462(b) of the Rules and Regulations relating to the Common
Shares. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary
prospectus included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as used
in this Agreement shall mean either (i) the prospectus relating to the
Common Shares in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations or, (ii) if a Term
-2-
<PAGE>
Sheet is not used and no filing pursuant to Rule 424(b) of the Rules and
Regulations is required, the form of final prospectus included in the
Registration Statement at the time such registration statement becomes
effective, or (iii) if a Term Sheet is used, the Term Sheet in the form in
which it is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations, together with the Preliminary Prospectus included in
the Registration Statement at the time it becomes effective. The term
"Rule 430A Information" means information with respect to the Common Shares
and the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A of the Rules and
Regulations. Any reference herein to the Registration Statement, any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated therein by reference pursuant to Form S-
3 under the Act, as from time to time amended or supplemented pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Act or otherwise. Any reference to the "date" of a Prospectus that
includes a Term Sheet shall mean the date of such Term Sheet.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects to the requirements of
the Act and the Rules and Regulations and, as of its date, has not included
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and at the time the
Registration Statement becomes effective, and at all times subsequent
thereto up to and including each Closing Date hereinafter mentioned, the
Registration Statement and the Prospectus, and any amendments
or supplements thereto, will contain all material statements and
information required to be included therein by the Act and the Rules and
Regulations and will in all material respects conform to the requirements
of the Act and the Rules and Regulations, and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto, will
include any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, no representation or warranty
contained in this subsection 2(b) shall be applicable to information
contained in or omitted from any Preliminary Prospectus, the Registration
Statement, the Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of any Underwriter, directly or through the Representatives,
specifically for use in the preparation thereof. The documents
incorporated or deemed to be incorporated by reference in the Prospectus,
at the time they were or hereafter are filed with the Commission, conformed
or will conform in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder,
and none of such documents contained or will contain an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(c) The Company does not own or control, directly or indirectly,
any corporation, association or other entity other than the subsidiaries
-3-
<PAGE>
listed in Exhibit 21 to the Company's Annual Report on Form 10-K for the
year ended January 31, 1996. The Company and each of its subsidiaries have
been duly incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of incorporation,
with full power and authority (corporate and other) to own and lease their
properties and conduct their respective businesses as described in the
Prospectus; the Company owns all of the outstanding capital stock of its
subsidiaries free and clear of all claims, liens, charges and encumbrances;
the Company and each of its subsidiaries are in possession of and operating
in compliance with all authorizations, licenses, permits, consents,
certificates and orders material to the conduct of their respective
businesses, all of which are valid and in full force and effect; the
Company and each of its subsidiaries are duly qualified to do business and
in good standing as foreign corporations in each jurisdiction in which the
ownership or leasing of properties or the conduct of their respective
businesses requires such qualification, except for jurisdictions in which
the failure to so qualify would not have a material adverse effect upon the
Company or the subsidiary; and no proceeding has been instituted in any
such jurisdiction, revoking, limiting or curtailing, or seeking to revoke,
limit or curtail, such power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock
as set forth under the heading "Capitalization" in the Prospectus; the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, and conform to the description
thereof contained in the Prospectus. All issued and outstanding shares of
capital stock of each subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Except as
disclosed in or contemplated by the prospectus and the financial statements
of the Company, and the related notes thereto, included in the Prospectus,
neither the Company nor any subsidiary has outstanding any options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts
or commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description of
the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set forth
in this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
Prospectus. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Common Shares
by the Company pursuant to this Agreement. No stockholder of the Company
-4-
<PAGE>
has any right which has not been waived to require the Company to register
the sale of any shares owned by such stockholder under the Act in the
public offering contemplated by this Agreement. No further approval or
authority of the stockholders or the Board of Directors of the Company will
be required for the transfer and sale of the Common Shares to be sold by
the Selling Stockholders or the issuance and sale of the Common Shares to
be sold by the Company as contemplated herein.
(f) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding obligation of the Company in
accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws
affecting the enforcement of creditor rights generally and to general
equitable principles whether applied by a court of law or equity. The
making and performance of this Agreement by the Company and the
consummation of the transactions herein contemplated will not violate any
provisions of the certificate of incorporation or bylaws, or other
organizational documents, of the Company or any of its subsidiaries, and
will not conflict with, result in the breach or violation of, or
constitute, either by itself or upon notice or the passage of time or both,
a default under any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of its respective properties may be bound or affected,
any statute or any authorization, judgment, decree, order, rule or
regulation of any court or any regulatory body, administrative agency or
other governmental body applicable to the Company or any of its
subsidiaries or any of their respective properties, except for such
conflicts, breaches, or defaults, which individually or in the aggregate,
would not have a material adverse effect on the financial position, results
of operations or business of the Company and its subsidiaries, taken as a
whole. No consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, except for
compliance with the Act, the Blue Sky laws applicable to the public
offering of the Common Shares by the several Underwriters and the clearance
of such offering with the National Association of Securities Dealers, Inc.
(the "NASD").
(g) Deloitte & Touche LLP, who have expressed their opinion with
respect to the financial statements and schedules included or incorporated
by reference in the Prospectus and in the Registration Statement, are
independent accountants as required by the Act and the Rules and
Regulations.
(h) The financial statements and schedules of the Company, Lone
Star Feet, Inc., and GSV Corporation, and the related notes thereto,
included or incorporated by reference in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the
respective dates of such financial statements and schedules, and the
results of operations and changes in financial position of the Company for
the respective periods covered thereby. Such statements, schedules and
related notes have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis as certified by the
-5-
<PAGE>
independent accountants named in subsection 2(g). No other financial
statements or schedules are required to be included or incorporated by
reference in the Registration Statement. The selected financial data,
together with the notes thereto, set forth in the Prospectus under the
captions "Capitalization" and "Selected Financial Data," fairly present the
information set forth therein on the basis stated in the Registration
Statement.
(i) Except as disclosed in the Prospectus, and except as to
defaults which individually or in the aggregate would have a material
adverse effect on the financial position, results of operations or business
of the Company and its subsidiaries taken as a whole, neither the Company
nor any of its subsidiaries is in violation or default of any provision of
its certificate of incorporation or bylaws, or other organizational
documents, or is in breach of or default with respect to any provision of
any agreement, judgment, decree, order, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which it is a
party or by which it or any of its properties are bound; and there does not
exist any state of facts which constitutes an event of default on the part
of the Company or any such subsidiary as defined in such documents or
which, with notice or lapse of time or both, would constitute such an event
of default.
(j) There are no contracts or other documents required to be
described in the Registration Statement or to be filed or incorporated by
reference as exhibits to the Registration Statement by the Act or by the
Rules and Regulations which have not been described or filed or
incorporated by reference as required. The contracts so described in the
Prospectus are in full force and effect on the date hereof; and neither the
Company nor any of its subsidiaries, nor to the best of the Company's
knowledge, any other party is in breach of or default under any of such
contracts.
(k) There are no legal or governmental actions, suits or
proceedings pending or, to the best of the Company's knowledge, threatened
to which the Company or any of its subsidiaries is or may be a party or of
which property owned or leased by the Company or any of its subsidiaries is
or may be the subject, or related to environmental or discrimination
matters, which actions, suits or proceedings might, individually or in the
aggregate, prevent or materially and adversely affect the transactions
contemplated by this Agreement or result in a material adverse change in
the condition (financial or otherwise), properties, business, results of
operations or prospects of the Company and its subsidiaries; and no labor
disturbance by the employees of the Company or any of its subsidiaries
exists or is imminent which might be expected to materially and adversely
affect such condition, properties, business, results of operations or
prospects. Neither the Company nor any of its subsidiaries is a party or
subject to the provisions of any material injunction, judgment, decree or
order of any court, regulatory body, administrative agency or other
governmental body.
(l) The Company or the applicable subsidiary has good and
marketable title to all the properties and assets reflected as owned in the
financial statements hereinabove described (or elsewhere in the
Prospectus), subject to no lien, mortgage, pledge, charge or encumbrance of
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any kind except (i) those, if any, reflected in such financial statements
(or elsewhere in the Prospectus), or (ii) those which are not material in
amount and do not materially and adversely affect the use made and proposed
to be made of such property by the Company and its subsidiaries. The
Company or the applicable subsidiary holds its leased properties under
valid and binding leases, with such exceptions as are not materially
significant in relation to the business of the Company. Except as
disclosed in the Prospectus, the Company owns or leases all such properties
as are necessary to its operations as now conducted or as proposed to be
conducted.
(m) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or
written agreement or other transaction which is not in the ordinary course
of business or which could result in a material reduction in the future
earnings of the Company and its subsidiaries; (ii) the Company and its
subsidiaries have not sustained any material loss or interference with
their respective businesses or properties from fire, flood, windstorm,
accident or other calamity, whether or not covered by insurance; (iii) the
Company has not paid or declared any dividends or other distributions with
respect to its capital stock and the Company and its subsidiaries are not
in default in the payment of principal or interest on any outstanding debt
obligations; (iv) there has not been any change in the capital stock (other
than upon the sale of the Common Shares hereunder and upon the exercise of
options and warrants described in the Registration Statement) or
indebtedness material to the Company and its subsidiaries (other than in
the ordinary course of business); and (v) there has not been any material
adverse change in the condition (financial or otherwise), business,
properties, results of operations or prospects of the Company and its
subsidiaries.
(n) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its subsidiaries have sufficient trademarks,
trade names, patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct their businesses as now conducted;
the expiration of any trademarks, trade names, patent rights, mask works,
copyrights, licenses, approvals or governmental authorizations would not
have a material adverse effect on the condition (financial or otherwise),
business, results of operations or prospects of the Company or its
subsidiaries; and the Company has no knowledge of any material infringement
by it or its subsidiaries of trademark, trade name rights, patent rights,
mask works, copyrights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company or its
subsidiaries regarding trademark, trade name, patent, mask work, copyright,
license, trade secret or other infringement which could have a material
adverse effect on the condition (financial or otherwise), business, results
of operations or prospects of the Company and its subsidiaries.
(o) The Company has not been advised, and has no reason to
believe, that either it or any of its subsidiaries is not conducting
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business in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including, without
limitation, all applicable local, state and federal environmental laws and
regulations; except where failure to be so in compliance would not
materially adversely affect the condition (financial or otherwise),
business, results of operations or prospects of the Company and its
subsidiaries.
(p) The Company and its subsidiaries have filed all necessary
federal, state and foreign income and franchise tax returns and have paid
all taxes shown as due thereon; and the Company has no knowledge of any tax
deficiency which has been or might be asserted or threatened against the
Company or its subsidiaries which could materially and adversely affect the
business, operations or properties of the Company and its subsidiaries.
(q) The Company is not currently and will not after receipt of
its portion of the proceeds of the offering contemplated herein become an
"investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Act").
(r) The Company has not distributed and will not distribute prior
to the First Closing Date (as hereinafter defined) any offering material in
connection with the offering and sale of the Common Shares other than the
Prospectus, the Registration Statement and the other materials permitted by
the Act.
(s) Each of the Company and its subsidiaries maintains insurance
of the types and in the amounts generally deemed adequate for its business,
including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(t) Neither the Company nor any of its subsidiaries has at any
time during the last five years (i) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any contribution
in violation of law, or (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar
public or quasi-public duties, other than payments required or permitted by
the laws of the United States or of any jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Common Shares.
(v) Except as disclosed in the Prospectus, the Company currently
has no plans (i) to acquire its only franchisee or the business of any
other corporation, partnership or other entity or (ii) enter into any
additional area franchise agreements.
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SECTION 3. Representations, Warranties and Covenants of the
------------------------------------------------
Selling Stockholders. Each of the Selling Stockholders, severally and not
--------------------
jointly, represents and warrants to, and agrees with, the several
Underwriters that:
(a) Such Selling Stockholder has, and on the First Closing Date
and the Second Closing Date hereinafter mentioned will have, good and
marketable title to the Common Shares proposed to be sold by such Selling
Stockholder hereunder on such Closing Date and full right, power and
authority to enter into this Agreement and to sell, assign, transfer and
deliver such Common Shares hereunder, free and clear of all voting trust
arrangements, liens, encumbrances, equities, security interests,
restrictions and claims whatsoever; and upon delivery of and payment for
such Common Shares hereunder, the Underwriters will acquire good and
marketable title thereto, free and clear of all liens, encumbrances,
equities, claims, restrictions, security interests, voting trusts or other
defects of title whatsoever.
(b) Such Selling Stockholder has executed and delivered a Power
of Attorney and caused to be executed and delivered on such Selling
Stockholder's behalf a Custody Agreement (hereinafter collectively referred
to as the "Stockholders Agreement") and in connection herewith such Selling
Stockholder further represents, warrants and agrees that such Selling
Stockholder has deposited in custody, under the Stockholders Agreement,
with the agent named therein (the "Agent") as custodian, certificates in
negotiable form for the Common Shares to be sold hereunder by such Selling
Stockholder, for the purpose of further delivery pursuant to this
Agreement. Such Selling Stockholder agrees that the Common Shares to be
sold by such Selling Stockholder on deposit with the Agent are subject to
the interests of the Company and the Underwriters, that the arrangements
made for such custody are to that extent irrevocable, and that the
obligations of such Selling Stockholder hereunder shall not be terminated,
except as provided in this Agreement or in the Stockholders Agreement, by
any act of such Selling Stockholder, by operation of law, by the death or
incapacity of such Selling Stockholder or by the occurrence of any other
event. If the Selling Stockholder should die or become incapacitated, or if
any other event should occur, before the delivery of the Common Shares
hereunder, the documents evidencing Common Shares then on deposit with the
Agent shall be delivered by the Agent in accordance with the terms and
conditions of this Agreement as if such death, incapacity or other event
had not occurred, regardless of whether or not the Agent shall have
received notice thereof. This Agreement and the Stockholders Agreement
have been duly executed and delivered by or on behalf of such Selling
Stockholder and the form of such Stockholders Agreement has been delivered
to you.
(c) The performance of this Agreement and the Stockholders
Agreement and the consummation of the transactions contemplated hereby and
by the Stockholders Agreement will not result in a breach or violation by
such Selling Stockholder of any of the terms or provisions of, or
constitute a default by such Selling Stockholder under, any indenture,
mortgage, deed of trust, trust (constructive or other), loan agreement,
lease, franchise, license or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder or any
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of its properties is bound, any statute, or any judgment, decree, order,
rule or regulation of any court or governmental agency or body applicable
to such Selling Stockholder or any of its properties.
(d) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Common Shares.
(e) Each Preliminary Prospectus and the Prospectus, insofar as it
has related to such Selling Stockholder, has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and
has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made; and
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, as it relates to such Selling Stockholder, will include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading.
(f) Such Selling Stockholder, without undertaking any independent
investigation, is not aware that any of the representations and warranties
set forth in Section 2 above is untrue or inaccurate in any material
respect.
(g) Such Selling Stockholder is not affiliated with or associated
with any member of the National Association of Securities Dealers, Inc.
Such Selling Stockholder has not entered into any financial consulting
agreement or any arrangement contemplating the payment of advisory or
finder's fees that would result in additional compensation to the
Underwriters.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Internal Revenue Code of 1986, as amended, with
respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to you prior to or at the Closing Time (as
hereinafter defined) a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
SECTION 4. Representations and Warranties of the Underwriters. The
--------------------------------------------------
Representatives, on behalf of the several Underwriters, represent and warrant to
the Company and to the Selling Stockholders that the information set forth (i)
on the cover page of the Prospectus with respect to price, underwriting
discounts and commissions and terms of offering and (ii) under "Underwriting" in
the Prospectus was furnished to the Company by and on behalf of the Underwriters
for use in connection with the preparation of the Registration Statement and the
Prospectus and is correct in all material respects. The Representatives
represent and warrant that they have been authorized by each of the other
Underwriters as the Representatives to enter into this Agreement on its behalf
and to act for it in the manner herein provided.
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SECTION 5. Purchase, Sale and Delivery of Common Shares. On the basis
--------------------------------------------
of the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, (i) the Company agrees to issue
and sell to the Underwriters 339,000 of the Firm Common Shares, and (ii) each of
the Selling Stockholders agrees, severally and not jointly, to sell to the
Underwriters the number of Firm Common Shares set forth next to such Selling
Stockholder in Schedule B or Schedule C hereto, as applicable. The Underwriters
agree, severally and not jointly, to purchase from the Company and the Selling
Stockholders, respectively, the number of Firm Common Shares described below.
The purchase price per share to be paid by the several Underwriters to the
Company and to the Selling Stockholders, respectively, shall be $_______ per
share.
The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of full shares which (as nearly as practicable, as
determined by you) bears to 500,000 the same proportion as the number of shares
set forth opposite the name of such Underwriter in Schedule A hereto bears to
the total number of Firm Common Shares. The obligation of each Underwriter to
the Selling Stockholders shall be to purchase from the Selling Stockholders that
number of full shares which (as nearly as practicable, as determined by you)
bears to 1,150,000 the same proportion as the number of shares set forth
opposite the name of such Underwriter in Schedule A hereto bears to the total
number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters and payment therefor shall be made at the offices of Montgomery
Securities, 600 Montgomery Street, San Francisco, California (or such other
place as may be agreed upon by the Company and the Representatives) at such time
and date, not later than the third (or, if the Firm Common Shares are priced, as
contemplated by Rule 15c6-1(c) promulgated pursuant to the Exchange Act, after
4:30 P.M. Washington, D.C. time, the fourth) full business day following the
first date that any of the Common Shares are released by you for sale to the
public, as you shall designate by at least 48 hours prior notice to the Company
(or at such other time and date, not later than one week after such third or
fourth, as the case may be, full business day as may be agreed upon by the
Company and the Representatives) (the "First Closing Date"); provided, however,
that if the Prospectus is at any time prior to the First Closing Date
recirculated to the public, the First Closing Date shall occur upon the later of
the third or fourth, as the case may be, full business day following the first
date that any of the Common Shares are released by you for sale to the public or
the date that is 48 hours after the date that the Prospectus has been so
recirculated.
Delivery of certificates for the Firm Common Shares shall be made by or
on behalf of the Company and the Selling Stockholders to you, for the respective
accounts of the Underwriters with respect to the Firm Common Shares to be sold
by the Company and by the Selling Stockholders against payment by you, for the
accounts of the several Underwriters, of the purchase price therefor by
certified or official bank checks payable in next day funds to the order of the
Company and of the Agent in proportion to the number of Firm Common Shares to be
sold by the Company and the Selling Stockholders, respectively. The
certificates for the Firm Common Shares shall be registered in such names and
denominations as you shall have requested at least two full business days prior
to the First Closing Date, and shall be made available for checking and
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<PAGE>
packaging on the business day preceding the First Closing Date at a location in
New York, New York, as may be designated by you. Time shall be of the essence,
and delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 247,500 Optional
Common Shares at the purchase price per share to be paid for the Firm Common
Shares, for use solely in covering any over-allotments made by you for the
account of the Underwriters in the sale and distribution of the Firm Common
Shares. The option granted hereunder may be exercised at any time (but not more
than once) within 30 days after the first date that any of the Common Shares are
released by you for sale to the public, upon notice by you to the Company
setting forth the aggregate number of Optional Common Shares as to which the
Underwriters are exercising the option, the names and denominations in which the
certificates for such shares are to be registered and the time and place at
which such certificates will be delivered. Such time of delivery (which may not
be earlier than the First Closing Date), being herein referred to as the "Second
Closing Date," shall be determined by you, but if at any time other than the
First Closing Date shall not be earlier than three nor later than five full
business days after delivery of such notice of exercise. The number of Optional
Common Shares to be purchased by each Underwriter shall be determined by
multiplying the number of Optional Common Shares to be sold by the Company
pursuant to such notice of exercise by a fraction, the numerator of which is the
number of Firm Common Shares to be purchased by such Underwriter as set forth
opposite its name in Schedule A and the denominator of which is 1,650,000
(subject to such adjustments to eliminate any fractional share purchases as you
in your discretion may make). Certificates for the Optional Common Shares will
be made available for checking and packaging on the business day preceding the
Second Closing Date at a location in New York, New York, as may be designated by
you. The manner of payment for and delivery of the Optional Common Shares shall
be the same as for the Firm Common Shares purchased from the Company and the
Selling Stockholders as specified in the two preceding paragraphs. At any time
before lapse of the option, you may cancel such option by giving written notice
of such cancellation to the Company. If the option is cancelled or expires
unexercised in whole or in part, the Company will deregister under the Act the
number of Optional Common Shares as to which the option has not been exercised.
You have advised the Company and the Selling Stockholders that each
Underwriter has authorized you to accept delivery of its Common Shares, to make
payment and receipt therefor. You, individually and not as the Representatives
of the Underwriters, may (but shall not be obligated to) make payment for any
Common Shares to be purchased by any Underwriter whose funds shall not have been
received by you by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose to
make a public offering of their respective portions of the Common Shares as soon
after the effective date of the Registration Statement as in the judgment of the
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Representatives is advisable and at the public offering price set forth on the
cover page of and on the terms set forth in the final prospectus if one is used,
or on the first page of the Term Sheet, if one is used.
SECTION 6. Covenants of the Company. The Company covenants and agrees
------------------------
that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto to become effective. If the Registration Statement has become or
becomes effective pursuant to Rule 430A of the Rules and Regulations, or
the filing of the Prospectus is otherwise required under Rule 424(b) of the
Rules and Regulations, the Company will file the Prospectus, properly
completed, pursuant to the applicable paragraph of Rule 424(b) of the Rules
and Regulations within the time period prescribed and will provide evidence
satisfactory to you of such timely filing. The Company will promptly
advise you in writing (i) of the receipt of any comments of the Commission,
(ii) of any request of the Commission for amendment of or supplement to the
Registration Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus or for additional information,
(iii) when the Registration Statement shall have become effective and (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose. If the Commission shall enter any such stop
order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. The Company will
not file any amendment or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or the
Prospectus of which you have not been furnished with a copy a reasonable
time prior to such filing or to which you reasonably object or which is not
in compliance with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which in your judgment may be
necessary or advisable to enable the several Underwriters to continue the
distribution of the Common Shares and will use its best efforts to cause
the same to become effective as promptly as possible. The Company will
fully and completely comply with the provisions of Rule 430A of the Rules
and Regulations with respect to information omitted from the Registration
Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in
Section 10(a)(3) of the Act during which a prospectus relating to the
Common Shares is required to be delivered under the Act any event occurs,
as a result of which the Prospectus, including any amendments or
supplements, would include an untrue statement of a material fact, or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or if it is necessary at any
time to amend the Prospectus, including any amendments or supplements, to
comply with the Act or the Rules and Regulations, the Company will promptly
advise you thereof and will promptly prepare and file with the Commission,
at its own expense, an amendment or supplement which will correct such
statement or omission or an amendment or supplement which will effect such
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<PAGE>
compliance and will use its best efforts to cause the same to become
effective as soon as possible; and, in case any Underwriter is required to
deliver a prospectus after such nine-month period, the Company upon
request, but at the expense of such Underwriter, will promptly prepare such
amendment or amendments to the Registration Statement and such Prospectus
or Prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after the
end of the first quarter ending after one year following the "effective
date of the Registration Statement" (as defined in Rule 158(c) of the Rules
and Regulations), the Company will make generally available to its security
holders an earnings statement (which need not be audited) covering a period
of 12 consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last
paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred to in
Section 10(a)(3) of the Act, will furnish to you and the Selling
Stockholders or mail to your order copies of the Registration Statement,
the Prospectus, the Preliminary Prospectus and all amendments and
supplements to any such documents in each case as soon as available and in
such quantities as you and the Selling Stockholders may request, for the
purposes contemplated by the Act; without limiting the application of this
sentence, the Company, not later than (A) 6:00 P.M., New York City time, on
the date of determination of the public offering price, if such
determination occurred at or prior to 12:00 Noon, New York City time, on
such date or (B) 6:00 P.M., New York City time, on the business day
following the date of determination of the public offering price, if such
determination occurred after 12:00 Noon, New York City time, on such date,
will, if requested by the Representatives, deliver to the Representatives,
without charge, as many copies of the Prospectus and any amendment or
supplement thereto as the Representatives may reasonably request for
purposes of confirming orders that are expected to settle on the First
Closing Date.
(f) The Company shall cooperate with you and your counsel in
order to qualify or register the Common Shares for sale under (or obtain
exemptions from the application of) the Blue Sky laws of such jurisdictions
as you designate, will comply with such laws and will continue such
qualifications, registrations and exemptions in effect so long as
reasonably required for the distribution of the Common Shares. The Company
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such jurisdiction where it is
not presently qualified or where it would be subject to taxation as a
foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any
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<PAGE>
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company, with your
cooperation, will use its best efforts to obtain the withdrawal thereof.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request of the Representatives, to
each of the other Underwriters: (i) as soon as practicable after the end of
each fiscal year, copies of the Annual Report of the Company containing the
balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof, copies
of each proxy statement, Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its Common Stock.
(h) During the period of 180 days after the first date that any
of the Common Shares are released by you for sale to the public, without
the prior written consent of Montgomery Securities (which consent may be
withheld at the sole discretion of Montgomery Securities), the Company will
not other than pursuant to outstanding stock options and warrants disclosed
in the Prospectus (the exercisability of which shall not be accelerated)
issue, offer, sell, grant options to purchase or otherwise dispose of any
of the Company's equity securities or any other securities convertible into
or exchangeable with its Common Stock or other equity security.
(i) The Company will apply the net proceeds of the sale of the
Common Shares sold by it substantially in accordance with its statements
under the caption "Use of Proceeds" in the Prospectus and will invest and
utilize the net proceeds such that the Company will not become an
"investment company" under the Investment Act.
(j) The Company will use its best efforts to maintain the
qualification or registration of its Common Stock for sale in non-issuer
transactions under (or maintain the exemption from the application of) the
Blue Sky laws of the State of California (thereby permitting market making
transactions and secondary trading in the Company's Common Stock in
California), will continue to comply with such Blue Sky laws and will
continue such qualifications, registrations and exemptions in effect for a
period of five years after the date hereof.
(k) The Company will use its best efforts to preserve the
designation of its Common Stock for quotation as a national market system
security on the NASD Automated Quotation System.
You, on behalf of the Underwriters, may, in your sole discretion, waive
in writing the performance by the Company of any one or more of the foregoing
covenants or extend the time for their performance.
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SECTION 7. Payment of Expenses. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company and, unless otherwise paid by the Company, the Selling
Stockholders agree to pay in such proportions as they may agree upon among
themselves all costs, fees and expenses incurred in connection with the
performance of their obligations hereunder and in connection with the
transactions contemplated hereby, including without limiting the generality of
the foregoing, (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of
the Company's counsel and the Company's independent accountants, (v) all costs
and expenses incurred in connection with the preparation, printing, filing,
shipping and distribution of the Registration Statement, each Preliminary
Prospectus and the Prospectus (including all exhibits and financial statements)
and all amendments and supplements provided for herein, this Agreement, the
Agreement Among Underwriters, the Selected Dealers Agreement, the Underwriters'
Questionnaire, the Underwriters' Power of Attorney and the Blue Sky memorandum,
(vi) all filing fees, attorneys' fees and expenses incurred by the Company or
the Underwriters in connection with qualifying or registering (or obtaining
exemptions from the qualification or registration of) all or any part of the
Common Shares for offer and sale under the Blue Sky laws of any state or
Canadian province, (vii) the filing fee of the NASD, (viii) the expenses of the
Company incurred in connection with marketing of the Common Shares, and (ix) all
other fees, costs and expenses referred to in Item 14 of the Registration
Statement. The Underwriters may deem the Company to be the primary obligor with
respect to all costs, fees and expenses to be paid by the Company and by the
Selling Stockholders. Except as provided in this Section 7, Section 9 and
Section 11 hereof, the Underwriters shall pay all of their own expenses,
including the fees and disbursements of their counsel (excluding those relating
to qualification, registration or exemption under the Blue Sky laws and the Blue
Sky memorandum referred to above), stock transfer taxes on resale of any of the
Common Shares by them, the expenses of the Underwriters incurred in connection
with marketing of the Common Shares, and any advertising expenses connected with
any offers they make. This Section 7 shall not affect any agreements relating
to the payment of expenses between the Company and the Selling Stockholders.
The Selling Stockholders or the Company, as may be agreed amongst
themselves, will pay (directly or by reimbursement) all fees and expenses
incident to the performance of their obligations under this Agreement which are
not otherwise specifically provided for herein, including but not limited to (i)
any fees and expenses of counsel for such Selling Stockholders; (ii) any fees
and expenses of the Agent; and (iii) all expenses and taxes incident to the sale
and delivery of the Common Shares to be sold by such Selling Stockholders to the
Underwriters hereunder.
SECTION 8. Conditions of the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the several Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein set
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forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of Company
officers and the Selling Stockholders made pursuant to the provisions hereof, to
the performance by the Company and the Selling Stockholders of their respective
obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M. (or in the case of a registration statement filed
pursuant to Rule 462(b) of the Rules and Regulations relating to the Common
Shares, not later than 10:00 P.M.), Washington, D.C. Time, on the date of
this Agreement, or at such later time as shall have been consented to by
you; if the filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b) of the Rules and Regulations, the
Prospectus shall have been filed in the manner and within the time period
required by Rule 424(b) of the Rules and Regulations; and prior to such
Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge
of the Company, the Selling Stockholders or you, shall be contemplated by
the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement, or otherwise, shall
have been complied with to your satisfaction.
(b) You shall be satisfied that since the respective dates as of
which information is given in the Registration Statement and Prospectus,
(i) there shall not have been any change in the capital stock (other than
pursuant to the exercise of outstanding options and warrants disclosed in
the Prospectus) of the Company or any of its subsidiaries or any material
change in the indebtedness (other than in the ordinary course of business)
of the Company or any of its subsidiaries, (ii) except as set forth or
contemplated by the Registration Statement or the Prospectus, no material
verbal or written agreement or other transaction shall have been entered
into by the Company or any of its subsidiaries, which is not in the
ordinary course of business or which could result in a material reduction
in the future earnings of the Company and its subsidiaries, (iii) no loss
or damage (whether or not insured) to the property of the Company or any of
its subsidiaries shall have been sustained which materially and adversely
affects the condition (financial or otherwise), business, results of
operations or prospects of the Company and its subsidiaries, (iv) no legal
or governmental action, suit or proceeding affecting the Company or any of
its subsidiaries which is material to the Company and its subsidiaries or
which materially and adversely affects or may materially and adversely
affect the transactions contemplated by this Agreement shall have been
instituted or threatened and (v) there shall not have been any change in
the condition (financial or otherwise), business, management, results of
operations or prospects of the Company and its subsidiaries which is so
material and adverse as to make it impractical or inadvisable in the
judgment of the Representatives to proceed with the public offering or
purchase the Common Shares as contemplated hereby.
(c) There shall have been furnished to you, as Representatives of
the Underwriters, on each Closing Date, in form and substance satisfactory
to you, except as otherwise expressly provided below:
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<PAGE>
(i) An opinion of Smith, Gambrell & Russell, counsel for the
Company and the Inside Selling Stockholders (other than the Pamela B.
Ruttenberg Irrevocable Children's Trust), addressed to the
Underwriters and dated the First Closing Date, or the Second Closing
Date, as the case may be, to the effect that:
(1) Each of the Company and its subsidiaries has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation, is duly qualified to do business as a foreign
corporation and is in good standing in all other jurisdictions
where the ownership or leasing of properties or the conduct of
its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Company and its subsidiaries
(based upon a review of standard compilations of state
corporation laws and certificates of officials in such
jurisdictions), and has full corporate power and authority to own
its properties and conduct its business as described in the
Registration Statement;
(2) The authorized, issued and outstanding capital
stock of the Company is as set forth under the caption
"Capitalization" in the Prospectus; all necessary and proper
corporate proceedings have been taken in order to authorize
validly such authorized Common Stock; all outstanding shares of
Common Stock (including the Firm Common Shares and any Optional
Common Shares) have been duly and validly issued, are fully paid
and nonassessable, were not issued in violation of or subject to
any preemptive rights or, to the best of such counsel's
knowledge, other rights to subscribe for or purchase any
securities and conform to the description thereof contained in
the Prospectus; all shares of Common Stock issued since April 8,
1994 have been issued in compliance with federal and, if
applicable, Georgia securities laws; without limiting the
foregoing, there are no preemptive or, to the best of such
counsel's knowledge, other rights to subscribe for or purchase
any of the Common Shares to be sold by the Company hereunder;
(3) All of the issued and outstanding shares of the
Company's subsidiaries have been duly and validly authorized and
issued, are fully paid and nonassessable and, to the best of such
counsel's knowledge, are owned beneficially by the Company free
and clear of all liens, encumbrances, equities, claims, security
interests, voting trusts or other defects of title whatsoever;
(4) The certificates evidencing the Common Shares to be
delivered hereunder are in due and proper form under Alabama law,
and when duly countersigned by the Company's transfer agent and
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<PAGE>
registrar, and delivered to you or upon your order against
payment of the agreed consideration therefor in accordance with
the provisions of this Agreement, the Common Shares represented
thereby will be duly authorized and validly issued, fully paid
and nonassessable, will not have been issued in violation of or
subject to any preemptive rights or, to the best of such
counsel's knowledge, other rights to subscribe for or purchase
securities and will conform in all respects to the description
thereof contained in the Prospectus;
(5) Except as disclosed in or specifically contemplated
by the Prospectus, to the best of such counsel's knowledge, there
are no outstanding options, warrants or other rights calling for
the issuance of, and no commitments, plans or arrangements to
issue, any shares of capital stock of the Company or any security
convertible into or exchangeable for capital stock of the
Company;
(6) (a) The Registration Statement has become
effective under the Act, and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement or preventing the use of the Prospectus
has been issued and no proceedings for that purpose have been
instituted or are pending or contemplated by the Commission; any
required filing of the Prospectus and any supplement thereto,
pursuant to Rule 424(b) of the Rules and Regulations has been
made in the manner and within the time period required by such
Rule 424(b);
(b) The Registration Statement, the Prospectus and each
amendment or supplement thereto (except for the financial
statements and schedules included therein as to which such
counsel need express no opinion) comply on their face as to form
in all material respects with the requirements of the Act and the
Rules and Regulations;
(c) To the best of such counsel's knowledge, there are
no franchises, leases, contracts, agreements or documents of a
character required to be disclosed in the Registration Statement
or Prospectus or to be filed or incorporated by reference as
exhibits to the Registration Statement which are not disclosed or
filed, as required;
(d) To the best of such counsel's knowledge, there are
no legal or governmental actions, suits or proceedings pending or
threatened against the Company which are required to be described
in the Prospectus which are not described as required; and
(e) The documents incorporated by reference in the
Prospectus (except for any financial statements and schedules
included in such documents as to which such counsel need express
no opinion), when they were filed with the Commission, complied
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<PAGE>
as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission
thereunder.
(7) The Company has full right, power and authority to
enter into this Agreement and to sell and deliver the Common
Shares to be sold by it to the several Underwriters; this
Agreement has been duly and validly authorized by all necessary
corporate action by the Company, has been duly and validly
executed and delivered by and on behalf of the Company, and is a
valid and binding agreement of the Company in accordance with its
terms, except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally
and except as to those provisions relating to indemnity or
contribution for liabilities arising under the Act as to which no
opinion need be expressed; and no approval, authorization, order,
consent, registration, filing, qualification, license or permit
of or with any court, regulatory, administrative or other
governmental body is required for the execution and delivery of
this Agreement by the Company or the consummation of the
transactions contemplated by this Agreement, except such as have
been obtained and are in full force and effect under the Act and
such as may be required under applicable Blue Sky laws in
connection with the purchase and distribution of the Common
Shares by the Underwriters and the clearance of such offering
with the NASD;
(8) The execution and performance of this Agreement and
the consummation of the transactions herein contemplated will not
conflict with, result in the breach of, or constitute, either by
itself or upon notice or the passage of time or both, a default
under, any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument known to such
counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or any
of its or their property may be bound or affected and which is
material to the Company and its subsidiaries, or violate any of
the provisions of the certificate of incorporation or bylaws, or
other organizational documents, of the Company or any of its
subsidiaries or, so far as is known to such counsel, violate any
statute, judgment, decree, order, rule or regulation of any court
or governmental body having jurisdiction over the Company or any
of its subsidiaries or any of its or their property;
(9) Neither the Company nor any subsidiary is in
violation of its certificate of incorporation or bylaws, or other
organizational documents, or to the best of such counsel's
knowledge, in breach of or default with respect to any provision
of any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument known to such
counsel to which the Company or any such subsidiary is a party or
by which it or any of its properties may be bound or affected,
except where such default would not materially adversely affect
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<PAGE>
the Company and its subsidiaries; and, to the best of such
counsel's knowledge, the Company and its subsidiaries are in
compliance with all laws, rules, regulations, judgments, decrees,
orders and statutes of any court or jurisdiction to which they
are subject, except where noncompliance would not materially
adversely affect the Company and its subsidiaries;
(10) To the best of such counsel's knowledge, no
holders of securities of the Company have rights which have not
been waived to the registration of shares of Common Stock or
other securities, because of the filing of the Registration
Statement by the Company or the offering contemplated hereby;
(11) (a) This Agreement and the Stockholders Agreement
have been duly authorized and delivered by or on behalf of each
of such Inside Selling Stockholder; (b) The Agent has been duly
and validly authorized to act as the custodian of the Common
Shares to be sold by each such Inside Selling Stockholder; (c) To
the best of such counsel's knowledge, the performance of this
Agreement and the Stockholders Agreement and the consummation of
the transactions herein contemplated by each such Inside Selling
Stockholder will not result in a breach of, or constitute a
default under, any indenture, mortgage, deed of trust, trust
(constructive or other), loan agreement, lease, franchise,
license or other material agreement or instrument known to
counsel to which any of such Inside Selling Stockholder is a
party or by which any of such Inside Selling Stockholder or any
of their properties may be bound, or violate any statute,
judgment, decree, order, rule or regulation known to such counsel
of any court or governmental body having jurisdiction over any of
such Inside Selling Stockholders or any of their properties; and
(d) To the best of such counsel's knowledge, no approval,
authorization, order or consent of any court, regulatory body,
administrative agency or other governmental body is required for
the execution and delivery of this Agreement or the Stockholders
Agreement or the consummation by such Inside Selling Stockholders
of the transactions contemplated by this Agreement, except such
as have been obtained and are in full force and effect under the
Act and such as may be required under the rules of the NASD and
applicable Blue Sky laws;
(12) Such Inside Selling Stockholders have full right,
power and authority to enter into this Agreement and the
Stockholders Agreement and to sell, transfer and deliver the
Common Shares to be sold on such Closing Date by such Inside
Selling Stockholders hereunder, and good and marketable title to
such Common Shares so sold, free and clear of all liens,
encumbrances, equities, claims, restrictions, security interests,
voting trusts, or other defects of title whatsoever, will have
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<PAGE>
been transferred to the Underwriters (whom counsel may assume to
be bona fide purchasers) who have purchased such Common Shares
hereunder;
(13) This Agreement and the Stockholders Agreement are
valid and binding agreements of each of such Inside Selling
Stockholder in accordance with their terms except as
enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and except with respect to
those provisions relating to indemnities or contributions for
liabilities under the Act, as to which no opinion need be
expressed;
(14) No transfer taxes are required to be paid in
connection with the sale and delivery of the Common Shares to the
Underwriters hereunder, and
(15) The Company is not after receipt of its portion of
the proceeds of the offering an "investment company" as defined
in the Investment Act.
In rendering such opinion, such counsel may rely, as to the matters set
forth in paragraphs (11), (12), (13) and (14), on opinions of other counsel
retained by the Selling Stockholders, as to matters of Alabama law and local
laws, on opinions of local counsel, and as to matters of fact, on certificates
of the Selling Stockholders and of officers of the Company and of governmental
officials, in which case their opinion is to state that they are so doing and
that the Underwriters are justified in relying on such opinions or certificates.
Such counsel shall also include a statement to the effect that nothing has come
to such counsel's attention that leads such counsel to believe that either at
the effective date of the Registration Statement or at the applicable Closing
Date the Registration Statement or the Prospectus, or any such amendment or
supplement, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(ii) An opinion Sirote & Permutt, P.C., counsel to the
Outside Selling Stockholder and Karl B. Friedman, as Trustee for the
Pamela B. Ruttenberg Irrevocable Children's Trust:
(1) (a) this Agreement and the Stockholders Agreement
have been duly authorized, executed and delivered by or on behalf
of such Selling Stockholder; (b) the Agent has been duly and
validly authorized to act as the custodian of the Common Shares
to be sold by such Selling Stockholder; and (c) the performance
of this Agreement and the Stockholders Agreement and the
consummation of the transactions herein contemplated by such
Selling Stockholder will not result in a breach of, or constitute
a default under, any indenture, mortgage, deed of trust, trust
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<PAGE>
(constructive or other), loan agreement, lease, franchise,
license or other material agreement or instrument known to
counsel to which such Selling Stockholder is a party or by which
such Selling Stockholder or any of its properties may be bound,
or violate any statute, judgment, decree, order, rule or
regulation known to such counsel of any court or governmental
body having jurisdiction over such Selling Stockholder or any of
its properties; and to the best of such counsel's knowledge, no
approval, authorization, order or consent of any court,
regulatory body, administrative agency or other governmental body
is required for the execution and delivery of this Agreement or
the Stockholders Agreement or the consummation by such Selling
Stockholder of the transactions contemplated by this Agreement,
except such as have been obtained and are in full force and
effect under the Act and such as may be required under the rules
of the NASD and applicable Blue Sky laws;
(2) Such Selling Stockholder has full right, power and
authority to enter into this Agreement and the Stockholders
Agreement and to sell, transfer and deliver the Common Shares to
be sold on such Closing Date by such Selling Stockholder
hereunder, and good and marketable title to such Common Shares so
sold, free and clear of all liens, encumbrances, equities,
claims, restrictions, security interests, voting trusts, or other
defects of title whatsoever, will have been transferred to the
Underwriters (whom counsel may assume to be bona fide purchasers)
who have purchased such Common Shares hereunder; and
(3) This Agreement and the Stockholders Agreement are
valid and binding agreements of such Selling Stockholder in
accordance with their terms except as enforceability may be
limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors'
rights generally and except with respect to those provisions
relating to indemnities or contributions for liabilities under
the Act, as to which no opinion need be expressed.
In rendering such opinion, such counsel may rely, as to the matters of
local laws, on opinions of local counsel, and as to matters of fact, on
certificates of the such Selling Stockholders and of officers of the Company and
of governmental officials, in which case their opinion is to state that they are
so doing and that the Underwriters are justified in relying on such opinions or
certificates, and copies of said opinions or certificates are to be attached to
the opinion.
(iii) Such opinion or opinions of Alston & Bird, counsel
for the Underwriters dated the First Closing Date or the Second
Closing Date, as the case may be, with respect to the incorporation of
the Company, the sufficiency of all corporate proceedings and other
legal matters relating to this Agreement, the validity of the Common
Shares, the Registration Statement and the Prospectus and other
related matters as you may reasonably require, and the Company and the
Selling Stockholders shall have furnished to such counsel such
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<PAGE>
documents and shall have exhibited to them such papers and records as
they may reasonably request for the purpose of enabling them to pass
upon such matters. In connection with such opinions, such counsel may
rely as to matters of Alabama law and other local laws, on opinions of
local counsel, and as to matters of fact, on representations or
certificates of officers of the Company and governmental officials.
(iv) A certificate of the Company executed by the Chairman
of the Board or President and the chief financial or accounting
officer of the Company, dated the First Closing Date or the Second
Closing Date, as the case may be, to the effect that:
(1) The representations and warranties of the Company
set forth in Section 2 of this Agreement are true and correct as
of the date of this Agreement and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied on or prior to such
Closing Date;
(2) The Commission has not issued any order preventing
or suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness of
the Registration Statement has been issued; and to the best of
the knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated under
the Act;
(3) Each of the respective signers of the certificate
has carefully examined the Registration Statement and the
Prospectus; and, to the best of his knowledge, neither the
Registration Statement nor the Prospectus nor any amendment or
supplement thereto includes any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction
or event has occurred which should have been set forth in an
amendment to the Registration Statement or in a supplement to or
amendment of any prospectus which has not been disclosed in such
a supplement or amendment;
(5) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, there
has not been any material adverse change or a development
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<PAGE>
involving a material adverse change in the condition (financial
or otherwise), business, properties, results of operations,
management or prospects of the Company and its subsidiaries; and
no legal or governmental action, suit or proceeding is pending or
threatened against the Company or any of its subsidiaries which
is material to the Company and its subsidiaries, whether or not
arising from transactions in the ordinary course of business, or
which may adversely affect the transactions contemplated by this
Agreement; since such dates and except as so disclosed, neither
the Company nor any of its subsidiaries has entered into any
verbal or written agreement or other transaction which is not in
the ordinary course of business or which could result in a
material reduction in the future earnings of the Company or
incurred any material liability or obligation, direct, contingent
or indirect, made any change in its capital stock (other than
upon the sale of the Common Shares hereunder and upon the
exercise of options and warrants described in the Registration
Statement), made any material change in its short-term debt or
funded debt (other than in the ordinary course of business) or
repurchased or otherwise acquired any of the Company's capital
stock; and the Company has not declared or paid any dividend, or
made any other distribution, upon its outstanding capital stock
payable to stockholders of record on a date prior to the First
Closing Date or Second Closing Date; and
(6) Since the respective dates as of which information
is given in the Registration Statement and the Prospectus and
except as disclosed in or contemplated by the Prospectus, the
Company and its subsidiaries have not sustained a material loss
or damage by strike, fire, flood, windstorm, accident or other
calamity (whether or not insured).
(v) On the First Closing Date or the Second Closing Date, as
the case may be, a certificate, dated such Closing Date and addressed
to you, signed by or on behalf of each of the Selling Stockholders to
the effect that the representations and warranties of such Selling
Stockholder in this Agreement are true and correct, as if made at and
as of the First Closing Date or the Second Closing Date, as the case
may be, and such Selling Stockholder has complied with all the
agreements and satisfied all the conditions on his part to be
performed or satisfied prior to the First Closing Date or Second
Closing Date, as the case may be.
(vi) On the date before this Agreement is executed and also
on the First Closing Date and the Second Closing Date a letter
addressed to you, as Representatives of the Underwriters, from
Deloitte & Touche LLP, independent accountants, the first one to be
dated the day before the date of this Agreement, the second one to be
dated the First Closing Date and the third one (in the event of a
Second Closing) to be dated the Second Closing Date, in form and
substance reasonably satisfactory to you.
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<PAGE>
(vii) On or before the First Closing Date, letters from
each of the Selling Stockholders who will own any Common Stock after
the Offering and each director and officer of the Company, in form and
substance satisfactory to you, confirming that for a period of 180
days after the first date that any of the Common Shares are released
by you for sale to the public, such person will not directly or
indirectly sell or offer to sell or otherwise dispose of any shares of
Common Stock or any right to acquire such shares without the prior
written consent of Montgomery Securities, which consent may be
withheld at the sole discretion of Montgomery Securities.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Alston & Bird, counsel for the Underwriters. The Company shall
furnish you with such manually signed or conformed copies of such opinions,
certificates, letters and documents as you request. Any certificate signed by
any officer of the Company and delivered to the Representatives or to counsel
for the Underwriters shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company and the Selling Stockholders without liability on
the part of any Underwriter, the Company or the Selling Stockholders except for
the expenses to be paid or reimbursed by the Company and by the Selling
Stockholders pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. Notwithstanding any
---------------------------------------
other provisions hereof, if this Agreement shall be terminated by you pursuant
to Section 8, or if the sale to the Underwriters of the Common Shares at the
First Closing is not consummated because of any refusal, inability or failure on
the part of the Company or the Selling Stockholders to perform any agreement
herein or to comply with any provision hereof, the Company agrees to reimburse
you and the other Underwriters upon demand for all out-of-pocket expenses that
shall have been reasonably incurred by you and them in connection with the
proposed purchase and the sale of the Common Shares, including but not limited
to fees and disbursements of counsel, printing expenses, travel expenses,
postage, telegraph charges and telephone charges relating directly to the
offering contemplated by the Prospectus. Any such termination shall be without
liability of any party to any other party except that the provisions of this
Section, Section 7 and Section 11 shall at all times be effective and shall
apply.
SECTION 10. Effectiveness of Registration Statement. You, the Company
---------------------------------------
and the Selling Stockholders will use your, its and their best efforts to cause
the Registration Statement to become effective, to prevent the issuance of any
stop order suspending the effectiveness of the Registration Statement and, if
such stop order be issued, to obtain as soon as possible the lifting thereof.
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<PAGE>
SECTION 11. Indemnification. (a) The Company and each of the Selling
---------------
Stockholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act against any losses, claims, damages, liabilities or expenses,
joint or several, to which such Underwriter or such controlling person may
become subject, under the Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof
as contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading; and will
reimburse each Underwriter and each such controlling person for any legal and
other expenses as such expenses are reasonably incurred by such Underwriter or
such controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action; provided, however, that neither the Company nor the Selling Stockholders
will be liable in any such case to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company pursuant to Section 4 hereof; provided,
---------
further, that neither the Company nor any Selling Stockholder will be liable to
- -------
any Underwriter or any controlling person of an Underwriter in respect of any
Preliminary Prospectus to the extent that (i) the Prospectus did not contain the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage, liability, expense or action; (ii) the
Prospectus was not sent to or given to the purchaser of the Common Shares in
question at or prior to the time at which the written confirmation of the sale
of such Common Shares was sent or given to such person; and (iii) the failure to
deliver such Prospectus was not the result of the Company's noncompliance with
its obligations under Sections 6(b), 6(c) and 6(e) hereof; and provided,
---------
further, that no Outside Selling Stockholder shall be required to provide
indemnification hereunder until the Underwriters or controlling person seeking
indemnification shall have (x) first made a demand for payment on the Company
with respect to any such loss, claim, damage, liability or expense and the
Company shall have either rejected such demand or failed to make such requested
payment within thirty (30) days after receipt thereof, and, if the Company has
either rejected such demand or failed to make such requested payment within
thirty (30) days after receipt thereof, then (y) next made a demand for payment
on the Inside Selling Stockholders with respect to any such loss, claim, damage,
liability or expense and the Inside Selling Stockholders shall have either
rejected such demand or failed to make such requested payment within thirty (30)
days after receipt thereof. The Company and the Selling Stockholders may agree,
as among themselves and without limiting the rights of the Underwriters under
this Agreement, as to their respective amounts of such liability for which they
each shall be responsible. In addition to their other obligations under this
Section 11(a), the Company and the Selling Stockholders agree that, as an
interim measure during the pendency of any claim, action, investigation, inquiry
or other proceeding arising out of or based upon any statement or omission, or
any alleged statement or omission, all as described in this Section 11(a), they
will reimburse each Underwriter on a quarterly basis for all reasonable legal or
other expenses incurred in connection with investigating or defending any such
claim, action, investigation, inquiry or other proceeding, notwithstanding the
absence of a judicial determination as to the propriety and enforceability of
the Company's or the Selling Stockholders' obligation to reimburse each
Underwriter for such expenses and the possibility that such payments might later
be held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement
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<PAGE>
payment is so held to have been improper, each Underwriter shall promptly return
it to the Company, and/or the Selling Stockholders, as the case may be, together
with interest, compounded daily, determined on the basis of the prime rate (or
other commercial lending rate for borrowers of the highest credit standing)
announced from time to time by Bank of America NT&SA, San Francisco, California
(the "Prime Rate"). Any such interim reimbursement payments which are not made
to an Underwriter within 30 days of a request for reimbursement, shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement will be in addition to any liability which the Company or the Selling
Stockholders may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement, the Selling Stockholders and each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act, against any
losses, claims, damages, liabilities or expenses to which the Company, or any
such director, officer, Selling Stockholder or controlling person may become
subject, under the Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof as contemplated below) arise out of or are based
upon any untrue or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with the information
furnished to the Company pursuant to Section 4 hereof; and will reimburse the
Company, or any such director, officer, Selling Stockholder or controlling
person for any legal and other expense reasonably incurred by the Company, or
any such director, officer, Selling Stockholder or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. In addition to its other
obligations under this Section 11(b), each Underwriter severally agrees that, as
an interim measure during the pendency of any claim, action, investigation,
inquiry or other proceeding arising out of or based upon any statement or
omission, or any alleged statement or omission, described in this Section 11(b)
which relates to information furnished to the Company pursuant to Section 4
hereof, it will reimburse the Company (and, to the extent applicable, each
officer, director, controlling person or Selling Stockholder) on a quarterly
basis for all reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry or
other proceeding, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the Underwriters' obligation to reimburse
the Company (and, to the extent applicable, each officer, director, controlling
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<PAGE>
person or Selling Stockholder) for such expenses and the possibility that such
payments might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, the Company (and, to the extent applicable, each
officer, director, controlling person or Selling Stockholder) shall promptly
return it to the Underwriters together with interest, compounded daily,
determined on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company within 30 days of a request for
reimbursement, shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise than under the indemnity agreement contained in this Section or to the
extent it is not prejudiced as a proximate result of such failure. In case any
such action is brought against any indemnified party and such indemnified party
seeks or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the next preceding sentence (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel, approved by the Representatives in the case of paragraph (a),
representing the indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 11 is required by
its terms but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under paragraphs (a), (b) and
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<PAGE>
(c) in respect of any losses, claims, damages, liabilities or expenses referred
to herein, then each applicable indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the Underwriters from the offering of the
Common Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the Selling Stockholders and the Underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company, the Selling Stockholders and the Underwriters shall be deemed to be in
the same proportion, in the case of the Company and the Selling Stockholders as
the total price paid to the Company and to the Selling Stockholders,
respectively, for the Common Shares sold by them to the Underwriters (net of
underwriting commissions but before deducting expenses), and in the case of the
Underwriters as the underwriting commissions received by them bears to the total
of such amounts paid to the Company and to the Selling Stockholders and received
by the Underwriters as underwriting commissions. The relative fault of the
Company, the Selling Stockholders and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in subparagraph (c) of this Section 11, any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
subparagraph (c) of this Section 11 with respect to notice of commencement of
any action shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under subparagraph
(c) for purposes of indemnification. The Company, the Selling Stockholders and
the Underwriters agree that it would not be just and equitable if contribution
pursuant to this Section 11 were determined solely by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section 11, no Underwriter shall be required to contribute
any amount in excess of the amount of the total underwriting commissions
received by such Underwriter in connection with the Common Shares underwritten
by it and distributed to the public. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 11 are several in proportion to their respective underwriting
commitments and not joint.
(e) It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in Sections 11(a) and 11(b) hereof,
-30-
<PAGE>
including the amounts of any requested reimbursement payments and the method of
determining such amounts, shall be settled by arbitration conducted under the
provisions of the Constitution and Rules of the Board of Governors of the New
York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure of
the NASD. Any such arbitration must be commenced by service of a written demand
for arbitration or written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration does not
make such designation of an arbitration tribunal in such demand or notice, then
the party responding to said demand or notice is authorized to do so. Such an
arbitration would be limited to the operation of the interim reimbursement
provisions contained in Sections 11(a) and 11(b) hereof and would not resolve
the ultimate propriety or enforceability of the obligation to reimburse expenses
which is created by the provisions of such Sections 11(a) and 11(b) hereof.
(f) Notwithstanding anything to the contrary in this Section 11, the
liability of each Selling Stockholder for indemnification and contribution under
this Section 11 shall be limited to an amount equal to the net proceeds received
by such Selling Stockholder from the Underwriters in the offering.
SECTION 12. Default of Underwriters. It shall be a condition to this
-----------------------
Agreement and the obligation of the Company and the Selling Stockholders to sell
and deliver the Common Shares hereunder, and of each Underwriter to purchase the
Common Shares in the manner as described herein, that, except as hereinafter in
this paragraph provided, each of the Underwriters shall purchase and pay for all
the Common Shares agreed to be purchased by such Underwriter hereunder upon
tender to the Representatives of all such shares in accordance with the terms
hereof. If any Underwriter or Underwriters default in their obligations to
purchase Common Shares hereunder on either the First or Second Closing Date and
the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed to purchase on such Closing Date does not exceed
10% of the total number of Common Shares which the Underwriters are obligated to
purchase on such Closing Date, the non-defaulting Underwriters shall be
obligated severally, in proportion to their respective commitments hereunder, to
purchase the Common Shares which such defaulting Underwriters agreed but failed
to purchase on such Closing Date. If any Underwriter or Underwriters so default
and the aggregate number of Common Shares with respect to which such default
occurs is more than the above percentage and arrangements satisfactory to the
Representatives and the Company for the purchase of such Common Shares by other
persons are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company or the Selling Stockholders except for the expenses to be paid by the
Company and the Selling Stockholders pursuant to Section 7 hereof and except to
the extent provided in Section 11 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than five business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected. As
used in this Agreement, the term "Underwriter" includes any person substituted
-31-
<PAGE>
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 7, 9, 11, 14 and 16 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 2:00 P.M., California time, on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the Company
or by release of any of the Common Shares for sale to the public. For the
purposes of this Section 13, the Common Shares shall be deemed to have been so
released upon the release for publication of any newspaper advertisement
relating to the Common Shares or upon the release by you of telegrams (i)
advising Underwriters that the Common Shares are released for public offering,
or (ii) offering the Common Shares for sale to securities dealers, whichever may
occur first.
SECTION 14. Termination. Without limiting the right to terminate this
-----------
Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to
you and the Selling Stockholders or by you by notice to the Company and the
Selling Stockholders at any time prior to the time this Agreement shall
become effective as to all its provisions, and any such termination shall
be without liability on the part of the Company or the Selling Stockholders
to any Underwriter (except for the expenses to be paid or reimbursed by the
Company and the Selling Stockholders pursuant to Sections 7 and 9 hereof
and except to the extent provided in Section 11 hereof) or of any
Underwriter to the Company or the Selling Stockholders (except to the
extent provided in Section 11 hereof).
(b) This Agreement may also be terminated by you prior to the
First Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been
suspended on either such Exchange or in the over the counter market by the
NASD, or a general banking moratorium shall have been established by
federal, New York or California authorities, (ii) if an outbreak of major
hostilities or other national or international calamity or any substantial
change in political, financial or economic conditions shall have occurred
or shall have accelerated or escalated to such an extent, as, in the
judgment of the Representatives, to affect materially and adversely the
marketability of the Common Shares, (iii) if any adverse event shall have
occurred or shall exist which makes untrue or incorrect in any material
respect any statement or information contained in the Registration
Statement or Prospectus or which is not reflected in the Registration
Statement or Prospectus but should be reflected therein in order to make
the statements or information contained therein not misleading in any
material respect, or (iv) if there shall be any action, suit or proceeding
pending or threatened, or there shall have been any development or
prospective development involving particularly the business or properties
or securities of the Company or any of its subsidiaries or the transactions
-32-
<PAGE>
contemplated by this Agreement, which, in the reasonable judgment of the
Representatives, may materially and adversely affect the Company's business
or earnings and makes it impracticable or inadvisable to offer or sell the
Common Shares. Any termination pursuant to this subsection (b) shall be
without liability on the part of any Underwriter to the Company or the
Selling Stockholders or on the part of the Company or the Selling
Stockholders to any Underwriter (except for expenses to be paid or
reimbursed by the Company and the Selling Stockholders pursuant to Sections
7 and 9 hereof and except to the extent provided in Section 11 hereof).
SECTION 15. Failure of the Selling Stockholders to Sell and Deliver. If
-------------------------------------------------------
one or more of the Selling Stockholders shall fail to sell and deliver to the
Underwriters the Common Shares to be sold and delivered by such Selling
Stockholders at the First Closing Date under the terms of this Agreement, then
the Underwriters may at their option, by written notice from you to the Company
and the Selling Stockholders, either (i) terminate this Agreement without any
liability on the part of any Underwriter or, except as provided in Sections 7, 9
and 11 hereof, the Company or the Selling Stockholders, or (ii) purchase the
shares which the Company and other Selling Stockholders have agreed to sell and
deliver in accordance with the terms hereof. In the event of a failure by one
or more of the Selling Stockholders to sell and deliver as referred to in this
Section, either you or the Company shall have the right to postpone the Closing
Date for a period not exceeding seven business days in order that the necessary
changes in the Registration Statement, Prospectus and any other documents, as
well as any other arrangements, may be effected.
SECTION 16. Representations and Indemnities to Survive Delivery. The
---------------------------------------------------
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter or the Company or any of its or their partners,
officers or directors or any controlling person, or the Selling Stockholders, as
the case may be, and will survive delivery of and payment for the Common Shares
sold hereunder and any termination of this Agreement.
SECTION 17. Notices. All communications hereunder shall be in writing
-------
and, if sent to the Representatives shall be mailed, delivered or telegraphed
and confirmed to you at 600 Montgomery Street, San Francisco, California 94111,
Attention: John Berg, with a copy to Joel J. Hughey, Alston & Bird, One Atlantic
Center, 1201 West Peachtree Street, Atlanta, Georgia 30309-3424; and if sent to
the Company or the Selling Stockholders shall be mailed, delivered or
telegraphed and confirmed to the Company at 3000 Riverchase Galleria, Suite 990,
Birmingham, Alabama 35244, Attention: Harold Ruttenberg, with a copy to Arthur
Jay Schwartz, Smith, Gambrell & Russell, 3343 Peachtree Road, N.E., Suite 1800,
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<PAGE>
Atlanta, Georgia 30326. The Company, the Selling Stockholders or you may change
the address for receipt of communications hereunder by giving notice to the
others.
SECTION 18. Successors. This Agreement will inure to the benefit of and
----------
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 12 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 11, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not include
any purchaser of the Common Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 19. Representation of Underwriters. You will act as
------------------------------
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you, as
Representatives, will be binding upon all the Underwriters.
SECTION 20. Partial Unenforceability. The invalidity or
------------------------
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 21. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 22. General. This Agreement constitutes the entire agreement of
-------
the parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Selling Stockholders and you.
Any person executing and delivering this Agreement as Attorney-in-fact
for the Selling Stockholders represents by so doing that he has been duly
appointed as Attorney-in-fact by such Selling Stockholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-fact to
take such action. Any action taken under this Agreement by any of the
Attorneys-in-fact will be binding on all the Selling Stockholders.
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<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement among the Company, the Selling Stockholders and
the several Underwriters including you, all in accordance with its terms.
Very truly yours,
JUST FOR FEET, INC.
By:
------------------------------------
Harold Ruttenberg
Chairman and Chief Executive Officer
-35-
<PAGE>
SELLING STOCKHOLDERS
Harold Ruttenberg
Pamela B. Ruttenberg*
Karl B. Friedman, as Trustee for the Pamela B.
Ruttenberg Irrevocable Children's
Trust for the benefit of Don-Allen Ruttenberg,
Jodi Ruttenberg and Warren Ruttenberg*
Robert C. Wabler*
Adam J. Gilburne*
Ruttenberg Family Foundation*
Don-Allen Ruttenberg*
Scott C. Wynne*
*By:
----------------------------------
(Attorney-in-fact)
-36-
<PAGE>
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.
MONTGOMERY SECURITIES
THE ROBINSON-HUMPHREY COMPANY, INC.
WILLIAM BLAIR & COMPANY, L.L.C.
ROBERTSON, STEPHENS & COMPANY LLC
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By MONTGOMERY SECURITIES
By:
--------------------------------
Partner
-37-
<PAGE>
SCHEDULE A
Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
Montgomery Securities
The Robinson-Humphrey Company, Inc.....................
William Blair & Company, L.L.C.........................
Robertson, Stephens & Company LLC.....................
----------------
TOTAL UNDERWRITERS
A-1
<PAGE>
SCHEDULE B
Number of Firm
Common Shares to be sold by
Name of Inside Selling Stockholder Inside Selling Stockholder
--------------------------------- ---------------------------
Harold Ruttenberg................................
Pamela B. Ruttenberg.............................
Karl B. Friedman, as Trustee for the Pamela B.
Ruttenberg Irrevocable
Children's Trust for the benefit
of Don-Allen Ruttenberg, Jodi Ruttenberg
and Warren Ruttenberg.........................
Robert C. Wabler.................................
Adam J. Gilburne.................................
Don-Allen Ruttenberg.............................
Scott C. Wynne...................................
------------------
TOTAL
B-1
<PAGE>
SCHEDULE C
Number of Firm
Common Shares to be sold by
Name of Outside Selling Stockholder Inside Selling Stockholder
----------------------------------- ---------------------------
Ruttenberg Family Foundation...................
----------------
TOTAL
C-1
<PAGE>
[LETTERHEAD OF SMITH, GAMBRELL & RUSSELL APPEARS HERE]
May 31, 1996
Board of Directors
Just For Feet, Inc.
153 Cahaba Valley Parkway North
Birmingham, Alabama 35124
RE: Just For Feet, Inc.
Registration Statement on Form S-3
1,897,500 Shares of Common Stock
--------------------------------
Gentlemen:
We have acted as counsel for Just For Feet, Inc. (the "Company") in
connection with the proposed public offering by the Company and certain of its
shareholders of the shares of the Company's $.0001 par value Common Stock (the
"Common Stock") covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, as amended, certified
by the Secretary of State of the State of Alabama;
(2) The By-Laws of the Company, certified as complete and correct by the
Secretary of the Company;
(3) The minute book of the Company, certified as correct and complete by
the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company, issued by
the Secretary of State of the State of Alabama; and
(5) The Registration Statement on Form S-3 to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Registration Statement").
<PAGE>
Board of Directors
Just For Feet, Inc.
May 31, 1996
Page 2
Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion that:
(A) The Company has been duly incorporated under the laws of the State
of Alabama and is validly existing and in good standing under the
laws of that state.
(B) The 747,500 shares of Common Stock covered by the Registration
Statement to be sold by the Company (which includes 247,500 shares
subject to an over-allotment option granted by the Company to the
underwriters of the offering) have been legally authorized by the
Company and when sold in accordance with the terms described in said
Registration Statement, will be validly issued, fully paid and
nonassessable.
(C) The 1,150,000 shares of Common Stock covered by the Registration
Statement to be sold by the selling shareholders referenced therein
have been legally authorized by the Company and when sold in
accordance with the terms described in said Registration Statement,
will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus. In giving this consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, or the rules and regulations of
the Securities and Exchange Commission thereunder.
Sincerely,
SMITH, GAMBRELL & RUSSELL
/s/ Arthur Jay Schwartz
-------------------------
Arthur Jay Schwartz
AJS/dkaw
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Just For Feet, Inc. and subsidiaries on Form S-3 of our report dated April 12,
1996 appearing in the Annual Report on Form 10-K of Just For Feet, Inc. and
subsidiaries for the year ended January 31, 1996 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Birmingham, Alabama
May 31, 1996
