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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended January 31, 1998
Commission File No. 0-23570
JUST FOR FEET, INC.
An Alabama Corporation
(IRS Employer Identification No. 63-0734234)
7400 Cahaba Valley Road
Birmingham, Alabama 35242
(205) 408-3000
Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:
None
Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:
Common Stock, par value $.0001 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No ______
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of the Common Stock of the registrant held by
nonaffiliates of the registrant (16,603,769 shares) on April 13, 1998 was
$341,415,000. For the purposes of this response, officers, directors and holders
of 5% or more of the registrant's Common Stock are considered the affiliates of
the registrant at that date.
The number of shares outstanding of the registrant's Common Stock, par value
$.0001 per share, as of April 13, 1998: 30,089,847 shares.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held in 1998 are incorporated by reference into
Part III of this Report, with the exception of information regarding executive
officers required under Item 10 of Part III, which information is included in
Part I, Item 1.
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PART I
ITEM 1. BUSINESS.
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The Private Securities Litigation Reform Act of 1995 provides a safe harbor
to encourage companies to provide prospective information so long as it is
identified as forward-looking and accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed. Forward-looking statements are related
to the plans and objectives of management for the future operations, economic
performance, of projections of revenues, income, earnings per share, capital
expenditures, dividends, capital structure, or other financial items. In the
following discussion and elsewhere in this report, statements containing words
such as "expect," "anticipate," "believe," "goal," "objective," or similar words
are intended to identify forward-looking statements. The Company undertakes no
obligation to update such forward-looking statements, and it wishes to identify
important factors that could cause actual results to differ materially from
those projected in the forward-looking statements contained in the following
discussion and elsewhere in this report. The risks and uncertainties that may
affect the operations, performance, development and results of the Company's
business include but are not limited to the following: (1) heightened
competition, particularly intensified price competition; (2) general economic
and business conditions which are less favorable than expected; (3)
unanticipated changes in industry trends; and (4) other risks detailed herein
and from time to time in the Company's other reports.
Just For Feet, Inc. ("Just for Feet" or the "Company") operates both large
format superstores and smaller specialty stores, each specializing in brand-name
athletic and outdoor footwear and apparel. 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. The
Company also entered the specialty store segment of the athletic and outdoor
footwear market with the acquisitions in March 1997 of Athletic Attic and in May
1997 of Imperial Sports, privately owned retailers of athletic and outdoor
footwear and apparel. At January 31, 1998 there were 82 "Just For Feet"
superstores operating in 18 states, including nine superstores operated by Just
For Feet's only superstore franchisee. There were also 92 Company-owned and 48
franchised specialty stores operating in 20 states and Puerto Rico.
In 1997, total retail sales of athletic and outdoor footwear in the United
States approximated $15 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 serves a unique niche in the industry. To
capitalize on these distinct distribution channels, the Company, which has
historically operated from a superstore format, has recently entered the
specialty store segment of the market.
JUST FOR FEET SUPERSTORES
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 footwear styles as compared to an estimated 200 to 700 footwear styles
typically offered by conventional mall-based athletic footwear retailers,
department stores and sporting goods superstores. 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
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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 as well as to liquidate old or slow moving
inventory. Just For Feet strives to create an exciting and high-energy shopping
experience in its superstores through the use of bright colors, upbeat music, an
enclosed Ahalf-court" basketball court for use by customers and a multi-screen
video bank.
Advertising and Promotion. The Company makes extensive use of television
and print media to generate customer store visits. The Company typically runs at
least one television spot on the local affiliate of each major network five days
per week in most of its markets. Promotions are typically of short duration to
instill a sense of urgency in customers. The Company believes that, as it adds
new superstores in existing markets, it will benefit from print and television
cost efficiencies. The Company strives to make each new superstore opening a
major retail event by widely advertising through newspaper and television. The
Company uses unique promotional events which add to the fun and excitement of
Just For Feet superstores, including appearances by sports celebrities such as
Bart Starr, a director of the Company and Company spokesperson as well as former
NFL quarterback Jim Kelly, who also makes appearances and acts as a
spokesperson.
In-Store Warehousing. Just For Feet does not operate a centralized
distribution center for its superstores, but typically devotes approximately 45%
of the square footage of each superstore to warehouse space. Each superstore
receives regular shipments directly from vendors and stocks merchandise in an
area behind (or above) the selling floor not visible to customers. Just For Feet
employs warehouse personnel at each superstore in order to free sales associates
to attend to customers and to enhance inventory control. This decentralized
distribution system enables Just For Feet to receive merchandise at each
superstore on a timely basis and avoid the time and expense of handling
merchandise twice. Just For Feet believes its in-store warehousing strategy also
permits it to maintain deep inventory positions in core styles and to stock its
superstores more fully in advance of peak selling periods.
Operations. Just For Feet employs a three-tiered management system for
superstore operations, presently consisting of regional directors, divisional
directors and a store director for each store. Each superstore is managed by a
store director, two or more store managers, an office manager, an operations
manager 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 superstores ranges from approximately 60 to
180 employees depending on the size of the store and the time of year. The
Company's policy is to staff its superstores sufficiently to ensure that all
customers receive prompt, personalized attention. Store directors and managers
are paid a salary, while all other superstore employees are paid on an hourly
basis. Just For Feet provides an incentive compensation plan for virtually all
employees. Store director and manager incentive plans are based primarily upon a
combination of store sales, payroll level relative to sales and inventory
variance compared to budget. Sales associates are eligible for semi-annual bonus
payments based on their individual sales performance. In addition, the Company's
incentive plans include grants of stock options to senior management and store
directors, store managers and assistant store managers and certain store
operations personnel.
Just For Feet 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, the presence of an operations
manager and security personnel at each superstore, the use of surveillance
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systems and the reduced handling of merchandise associated with Just For Feet's
in-house warehousing system.
Customer Convenience. Just For Feet superstores operate seven days per
week. To enhance customer convenience, normal hours for superstores located on
outparcels of shopping malls are typically thirty minutes prior to the mall's
opening until thirty minutes after the mall's closing. Superstores are open on
all holidays except Christmas and Thanksgiving.
SPECIALTY STORES
As part of its long-term growth strategy, in 1997 the Company entered the
specialty store segment of the athletic and outdoor footwear and apparel market
with the acquisitions of Athletic Attic and Imperial Sports. On March 17, 1997,
the Company acquired Athletic Attic for approximately $9.7 million in cash (net
of cash acquired) and approximately $5.6 million of Common Stock. The Company
also repaid approximately $1.3 million of Athletic Attic's debt. Athletic Attic
was a privately-owned athletic and outdoor footwear and apparel retailer based
in Gainesville, Florida. Athletic Attic stores are located primarily in enclosed
shopping malls.
On May 14, 1997, the Company acquired Imperial Sports, a privately-owned,
Flint, Michigan-based athletic and outdoor footwear and apparel retailer, for
$5.8 million in cash (net of cash acquired) and $21.5 million in Just For Feet
Common Stock. The Company also repaid approximately $8.7 million of Imperial
Sports' debt. Imperial Sports operates stores in Michigan, Illinois, Indiana and
Ohio, primarily in major enclosed shopping malls and retail strip centers.
At January 31, 1998 there were 92 Company-owned and 48 franchised specialty
stores operating in 20 states and Puerto Rico.
The key components of the Company's strategy for its specialty stores are:
Capitalize on Incremental Expansion Opportunities. The Company believes
that the development of smaller specialty stores provides the Company with
substantial incremental growth opportunities by allowing the Company to target
for expansion a much broader range of markets and real estate locations. Because
of their higher initial investment and fixed costs, Just For Feet superstores
require a much higher level of sales in order to produce an attractive return on
investment and consequently require a larger population base. Whereas
approximately 300,000 to 400,000 people in a trade area are required to generate
the high level of sales expected for Just For Feet superstores, the Company
believes that smaller specialty stores can be successful with as few as 25,000
people in a trade area.
In order to develop the specialty stores as an incremental opportunity
without significantly reducing Just For Feet's management's focus on its core
superstore business, the Company pursued strategic acquisitions as opposed to
the initial start-up of such stores. The Athletic Attic and Imperial Sports
operations have been combined to form the Specialty Store Division of the
Company. Substantially all of the management functions of the Specialty Store
Division have been consolidated at its Flint, Michigan headquarters. The Company
plans to continue to use both the Athletic Attic and Imperial Sports names in
existing markets, but will primarily use the Athletic Attic name in new markets.
The Company expects to open approximately 25 to 35 new specialty stores during
fiscal 1998.
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Improve Store Operations. The Company has focused on four key initiatives
that it believes will provide a solid foundation for successful future growth of
the specialty stores. First, the Company focused on making its expertise in
management information systems available to Athletic Attic and Imperial Sports
and implementing its store level point-of-sale registers and inventory
management systems in its Specialty Store Division. The Company also focused on
remodeling, expanding and refixturing certain outdated and smaller stores. In
addition, the Company has added inventory to and altered the inventory mix of
some stores in an effort to generate higher sales and better gross margins.
Finally, the Company developed a training program based on the concept and
curriculum of the "Just For Feet University" training program. The Company
believes that the above initiatives will provide a solid foundation for the
successful further development and future operation of the Specialty Store
Division.
Refine Specialty Store Prototype. The Company is developing a specialty
store prototype that combines certain concepts used in the operation of Just For
Feet superstores and Athletic Attic and Imperial Sports specialty stores. The
Company believes that a dominant selection of athletic footwear complemented by
apparel, sales of which are mostly incremental and typically have higher gross
margins and faster inventory turn rates than footwear, will help differentiate
its specialty stores from those of its competitors. As a result, the Company
intends to develop a specialty store prototype of approximately 4,000 to 6,000
square feet, which the Company believes is large enough to effectively
merchandise a broad assortment of athletic and outdoor footwear and apparel. The
Company expects to introduce this prototype in fiscal 1998.
MERCHANDISING
Just For Feet 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. The Company carries most of the leading athletic footwear brands
including Nike, Reebok, New Balance, Adidas, Fila, K-Swiss, Asics and Converse,
as well as outdoor footwear brands such as Timberland and Rockport. Just For
Feet seeks to offer virtually all styles in the brands it carries. The Company's
superstores sell shoes for almost every sport and recreational activity,
including running, basketball, cross training, tennis, aerobics, hiking, golf,
football, baseball, soccer, walking and wrestling. Just For Feet superstores
carry shoes in sizes ranging from infants' size one to men's size 22. In
addition to offering most sizes in most styles, Just For Feet superstores carry
a complete selection of widths in those styles which are offered in multiple
widths.
Just For Feet also offers a limited selection of brand-name apparel and
accessories including warm-up suits, T-shirts, athletic shorts, caps, socks and
shoe care products. Apparel and accessory brands include Nike, Reebok, Adidas,
Starter, Fila, Timberland, Ridgeview and Thor-lo. These apparel and accessory
items, which include professional and collegiate licensed apparel, add color and
variety to Just For Feet's product offering and generate additional sales. The
Company believes these items also add freshness to the product offering because
they turn faster than footwear.
Just For Feet constantly monitors product trends through its management
information systems in order to identify and rapidly replenish styles which are,
or may become, popular. Just For Feet seeks to manage the risk associated with
purchasing large volumes of merchandise by first testing new products on a
limited basis in selected stores before placing substantial orders.
Just For Feet also regularly makes special purchases of merchandise made
available to it by leading vendors at close-out prices. These items are
primarily sold in an area in the front of each superstore called the "Combat
Zone" at prices generally ranging from approximately 33% to 70% below
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manufacturers' suggested retail prices. This specially priced merchandise
represented approximately 25% of total shoe sales in fiscal 1997. Merchandise
margins on these products are generally consistent with the average margins of
the Company.
Because Just For Feet is not a discount retailer, management believes it is
able to engender vendor loyalty allowing it to purchase a broad assortment of
the most popular athletic and outdoor footwear. In turn, carrying a broad
selection permits Just For Feet to offer its customers a wide range of prices
appealing to all income levels. Prices for Just For Feet's regularly stocked
footwear generally range from $19.99 to $199.99. In addition, Just For Feet
superstores guaranty to match any competitor's advertised price.
Just For Feet superstores use replaceable price signage posted on shelving
instead of directly on each item, enabling rapid price changes on any item.
Just For Feet's policy is to rapidly and aggressively mark down slow moving
merchandise in order to minimize the quantity of outdated inventory in its
stores.
CUSTOMER SERVICE
The Company believes 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 and apparel 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, Just For Feet devotes substantial time and
resources to training and testing its employees in footwear technology, the
performance attributes of Just For Feet'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 Just For Feet's more
technical products as they demonstrate increased proficiency. In addition, new
store managers and other management personnel undergo an intensive two- to
three-week training program at "Just For Feet University" to enhance their
understanding of all aspects of Just For Feet's business. Each employee receives
ongoing training through frequent clinics sponsored by vendors and consultation
with Just For Feet's technical specialists. Just For Feet also utilizes
satellite technology for broadcasting from corporate headquarters to the
individual superstores. Management believes that such satellite technology is an
effective and cost-efficient way to facilitate communication and continuing
education throughout Just For Feet superstores.
Just For Feet strives to staff its superstores with a high ratio of sales
associates to customers. Because Just For Feet superstores sell almost every
athletic shoe offered by leading brands, sales associates are able to act as
problem solvers for customers and to recommend the ideal shoe with less risk of
losing a sale. Just For Feet seeks to retain its nucleus of well-trained sales
personnel through bonus payments and opportunities for advancement.
PURCHASING AND DISTRIBUTION
Just For Feet primarily purchases regularly stocked merchandise in large
volume and supplements its offering with close-outs and other special-purchase
items. As a result of its consistently large volume of purchases, Just For Feet
believes it has significant purchasing power allowing it to obtain favorable
trade terms from its vendors. The Company further believes that its vendors view
Just For Feet favorably due to the unique presentation of their products and
promotion of the vendor's image. Just For Feet has approximately 120 vendors.
Approximately 48% of Just For Feet's purchases for fiscal 1997 were from
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Nike and Reebok, combined. Just For Feet purchased approximately 64% of its
merchandise during fiscal 1997 from five vendors.
Substantially all of Just For Feet's merchandise is shipped directly from
vendors to its superstores. Just For Feet's relationships with commercial
freight carriers permit it to monitor and control the status of merchandise
deliveries by the carrier through electronic data interchange, providing
important inventory management information. Just For Feet's Specialty Store
Division employs a central distribution strategy, and currently operates two
distribution centers located in Flint, Michigan and Gainesville, Florida.
MANAGEMENT INFORMATION SYSTEM
The Company believes that its advanced information systems provide a key
competitive advantage in improving its store operations and managing its store
expansion. Control of Just For Feet'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. Bar-coding all merchandise and using scanners
for receiving and at the point of sale allows the inventories of all superstores
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 superstore. Systems are in place to review,
on a real-time basis, sales information by store, category, vendor 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.
In order to improve operational productivity, facilitate timely decision
making and support the Company's future growth, the Company has implemented
enhanced systems capabilities utilizing a fully integrated software system on an
IBM AS/400 platform, together with store-level systems and equipment. The
Company's enhanced systems provide management with the capability to track
sales, gross margin and inventory levels by superstore on a real-time basis. In
addition, a Human Resource/Time Management/Payroll system allows daily analysis
of labor costs by location. Management believes that the Company's enhanced
systems will be able to support the Company's planned growth for the foreseeable
future. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations C Year 2000" for a discussion of the Company's
systems' Year 2000 compliance.
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, some of which have developed similar superstore concepts. Within
the past few 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, although the Company believes that it
operates the only significant superstore chain of its kind. The Company believes
that competition in the retail athletic footwear industry is based primarily on
the number of styles of brand-name athletic and outdoor shoes offered, pricing
and customer service. The Company believes that its superstore concept and, to a
lesser extent its specialty store concept, will allow it to carry and display a
larger number of the more popular styles of athletic and outdoor footwear than
its competitors. Additionally, the Company believes that its pricing strategy
and frequent buyer program encourage repeat shopping and customer loyalty. The
Company may face periods of intense competition in the future which could have
an adverse effect on its financial results.
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EXPANSION STRATEGY
Superstores. The Company intends to strengthen its position as a leading
operator of athletic footwear superstores by opening approximately 25
superstores in fiscal 1998. In addition to its prototype superstores, Just For
Feet currently operates high visibility, high profile "flagship" superstores at
Caesar's Palace in Las Vegas and in New York and intends to open additional
flagship superstores in other strategic markets, such as Puerto Rico. Flagship
superstores, which are not necessarily larger than the prototypical Just For
Feet superstore, provide added entertainment features designed to generate and
maintain customer excitement and are in high profile locations. The Company's
expansion strategy is to open superstores in new and existing markets, including
those markets with the potential for multiple sites, which enables the Company
to take advantage of advertising and operating efficiencies. In addition, Just
For Feet will continue to open superstores in smaller markets which can only
accommodate one superstore. Just For Feet has either executed or negotiated
leases with respect to all of the stores currently slated to open during fiscal
1998 and is actively reviewing numerous additional sites in fiscal 1999.
Management generally seeks to open one Just For Feet superstore in a chosen
market for every 300,000 to 400,000 residents. As a result, multiple superstores
opened in larger markets such as Atlanta, Phoenix, Kansas City, Houston, Dallas
and Denver derive significant benefit from advertising and operating
efficiencies. More recently, the Company has also focused on operating single
superstores in mid-sized metropolitan markets such as Jackson, Mississippi and
Montgomery, Alabama. In addition, the Company continues to evaluate select
opportunities to expand internationally.
Because its vendors drop ship merchandise directly to the superstores, Just
For Feet's expansion plans are dependent more on the attractiveness of
individual superstore sites than the logistical constraints that would be
imposed by a central distribution center. Just For Feet plans to open primarily
free-standing superstores 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-owned stores.
Just For Feet leases all but three of its existing superstores and intends
to lease all new superstores. 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 store opening costs,
typically ranges from $1.5 to $2.5 million, depending on the extent of vendor
and landlord assistance and the size and projected volume of the store, while
the total cash outlay required to open a flagship superstore typically
approximates $2.5 to $4.0 million.
Specialty Stores. As part of its long-term growth strategy, the Company
has entered the small store segment of the athletic and outdoor footwear and
apparel market with the acquisitions of Athletic Attic and Imperial Sports. The
Company anticipates opening approximately 25 to 35 specialty stores during
fiscal 1998.
EMPLOYEES
At January 31, 1998, the Company had approximately 7,975 employees, of
which approximately 4,950 were employed on a part-time or seasonal basis. The
number of employees fluctuates during the year primarily due to seasonality.
None of the Company's employees are represented by a labor union.
Management attributes a large portion of the Company's success in driving
sales and various areas of cost control to its inclusion of virtually all
employees in incentive compensation plans. The Company
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also contributes to the cost of medical insurance coverage for those employees
who are eligible to participate in Company sponsored plans. Many employees, from
senior executives to store level management participate in the Company's
incentive stock option plans. All employees also receive discounts on Company
merchandise. The Company considers its relationship with its employees to be
good.
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," "Just For Feet, Where The 13th Pair is FREE!" and "Athletic Attic." 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.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME AGE POSITION
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Harold Ruttenberg 55 Chairman of the Board, President
and Chief Executive Officer
Eric L. Tyra 48 Executive Vice President - Finance
and Chief Financial Officer
Adam J. Gilburne 35 Executive Vice President; President -
Superstore Division
Alex M. Bond 28 Executive Vice President -Strategic
Development
Don-Allen Ruttenberg 31 Executive Vice President - New Store
Development
Scott C. Wynne 31 Executive Vice President -Operations and
Secretary
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. Tyra has served as Executive Vice President - Finance and Chief
Financial Officer since May 1997. From January 1994 to May 1997, Mr. Tyra was
Vice President - Finance, Treasurer and Chief Financial Officer of Club Car,
Inc., a manufacturer of golf cars and utility vehicles. From 1991 to 1993, Mr.
Tyra was a Senior Vice President with First Financial Management Corporation,
serving in various financial management positions. Previously, Mr. Tyra was a
partner with Deloitte & Touche LLP.
Mr. Gilburne has served as Executive Vice President of the Company and
President - Superstore Division, since August 1997. 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 -
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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. Bond joined the Company in February 1997 as Executive Vice President -
Strategic Development and has primary responsibility for the development and
operation of the Company's Specialty Store Division. From January 1995 to
January 1997, Mr. Bond was Vice President of Strategic Development for Hollywood
Entertainment Corporation, a publicly traded operator of video retail
superstores. From January 1993 to January 1995, Mr. Bond was an investment
banker with Montgomery Securities, where he focused on the high growth specialty
retail sector.
Mr. Don-Allen Ruttenberg, who joined the Company in 1987, served as Vice
President-Merchandising from January 1994 to February 1997, when he was elected
Executive Vice President-New Store Development. Since 1987, Mr. Ruttenberg also
has been actively involved in various 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, corporate Secretary in
August 1995 and Executive Vice President-Operations in February 1997.
ITEM 2. PROPERTIES.
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The Company operated 73 Just For Feet superstores at January 31, 1998, 10
of which are located in enclosed malls and 63 of which are free-standing. With
the exception of a Birmingham, Alabama store (which is subject to a ground
lease), one store in Orlando, Florida and one store in Knoxville, Tennessee, all
of the Company's facilities are leased. The Company also owned and operated 92
specialty stores, each of which is leased. Specialty stores are located
primarily in enclosed shopping malls and, to a lesser extent, in retail strip
centers.
Certain leases for existing stores provide for fixed minimum rentals and
provide for contingent rental payments based upon various specified percentages
of sales above minimum levels. Certain leases also contain escalation clauses
for increases in minimum rentals, operating costs and taxes. Certain other
leases provide for future rent increases based upon increases in the Consumer
Price Index. Superstore leases carry varying terms expiring between 2003 and
2016, excluding applicable option periods. Specialty store leases are typically
for shorter initial terms and begin expiring in fiscal 1998, excluding option
periods.
The Company's corporate headquarters are located in a new 42,000 square
foot building completed in May 1997, on approximately 25 acres of Company-owned
land in Birmingham, Alabama. The headquarters facilities also include a 36,000
square foot warehouse.
ITEM 3. LEGAL PROCEEDINGS.
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On June 27, 1997, a lawsuit was filed by Donald K. Drucker, individually
and on behalf of all others similarly situated, in the United States District
Court for the Northern District of Alabama against the Company, Harold
Ruttenberg, Don-Allen Ruttenberg, Scott C. Wynne, Adam Gilburne, Pamela B.
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Ruttenberg, Robert C. Wabler, William Blair & Company and Montgomery Securities.
The defendants are the Company; its Chairman and Chief Executive Officer; three
other executive officers of the Company; the Company's former Chief Financial
Officer and a former director; another former officer of the Company; and two of
the four managing underwriters in the Company's June 1996 public offering of
Common Stock. The individual defendants were selling shareholders in such
offering. The plaintiff purports to represent a class consisting of all persons
who purchased Common Stock of the Company in or traceable to the June 1996
public offering. The suit alleges that the Company's registration statement and
the prospectus used in such offering contained materially misleading financial
statements. The plaintiffs are seeking an unspecified amount of damages. The
Company and its named officers and directors deny liability on the claims and
are vigorously defending the suit, which is only in the preliminary stages.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ---------------------------------------------------
No matter was submitted to a vote of security holders of the Company during
the fourth quarter ended January 31, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- ------- ---------------------------------------------------------------------
The Company's Common Stock trades on The Nasdaq Stock Market under the
symbol FEET. The following table sets forth, by fiscal quarter, the high and
low sales prices of the Common Stock reported by The Nasdaq Stock Market for
the last eight fiscal quarters ended January 31, 1998. Share prices give effect
to a 3-for-2 stock split effected on October 15, 1996.
Fiscal Year Ended January 31, 1998
----------------------------------
<TABLE>
<CAPTION>
High Sale Low Sale
--------- --------
<S> <C> <C>
First Quarter ended April 30, 1997 $30.25 $14.00
Second Quarter ended July 31, 1997 22.25 15.88
Third Quarter ended October 31, 1997 20.38 11.88
Fourth Quarter ended January 31, 1998 18.00 12.38
</TABLE>
Fiscal Year Ended January 31, 1997
----------------------------------
<TABLE>
<CAPTION>
High Sale Low Sale
--------- --------
<S> <C> <C>
First Quarter ended April 30, 1996 $32.92 $18.75
Second Quarter ended July 31, 1996 38.25 23.33
Third Quarter ended October 31, 1996 36.67 24.75
Fourth Quarter ended January 31, 1997 32.00 22.25
</TABLE>
-10-
<PAGE>
As of March 24, 1998, the number of shareholders of record of the Company's
Common Stock was approximately 394 and the number of beneficial holders of the
Company's Common Stock was approximately 11,500. The Company has not declared or
paid any cash dividends on its Common Stock. The policy of the Board of
Directors of the Company is to retain earnings for the expansion and development
of the Company's business. Future dividend policy and the payment of dividends,
if any, will be determined by the Board of Directors in light of circumstances
then existing, including the Company's earnings, financial condition,
contractual restrictions and other factors deemed relevant by the Board .
ITEM 6. SELECTED FINANCIAL DATA.
- ------- -----------------------
The following statement of earnings data and balance sheet data, at the end
of and for fiscal 1997, 1996, 1995, 1994 and 1993 have been derived from the
Company's audited consolidated financial statements. 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 herein. 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 1997" began on February 1, 1997 and ended on
January 31, 1998.
As discussed in Note 1 to the Company's Consolidated Financial Statements,
effective February 1, 1996, the Company changed its method of accounting for
store opening costs, which are costs principally for pre-opening employee
salaries and travel that are incremental and directly attributable to the
opening of a new store. Under the new method, the Company charges these costs to
operations in the month that the store opens. Previously, store opening costs
were capitalized and amortized over the twelve months following the store
opening. Pro forma amounts are shown for all periods which are affected to
reflect amounts as if the change had been applied retroactively.
-11-
<PAGE>
(In thousands except per share and selected operating data)
<TABLE>
<CAPTION>
FISCAL YEAR
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales................................................. $478,638 $256,397 $119,819 $56,364 $23,678
Cost of sales............................................. 279,816 147,526 68,969 32,492 14,067
-------- -------- -------- ------- -------
Gross profit......................................... 198,822 108,871 50,850 23,872 9,611
Franchise fees, royalties and other revenue............. 1,101 581 485 379 417
Operating expenses:
Store operating...................................... 139,659 69,329 33,264 16,197 6,628
Store opening costs.................................. 6,728 11,240 2,712 699 130
Amortization of intangibles.......................... 1,200 180 157 155 --
General and administrative........................... 18,040 7,878 3,575 2,429 1,995
Executive options.................................... -- -- -- -- 1,222 /(1)/
-------
Operating income.......................................... 34,296 20,825 11,627 4,771 53
Interest income (expense), net............................ (76) 3,918 2,931 376 (85)
-------- -------- -------- ------- -------
Earnings (loss) before income taxes
and cumulative effect of change in
accounting principle................................. 34,220 24,743 14,558 5,147 (32)
Provision for income taxes................................ 12,817 8,783 4,836 1,928 171
-------- -------- -------- ------- -------
Earnings (loss) before cumulative
effect of change in accounting principle............. 21,403 15,960 9,722 3,219 (203)
Cumulative effect on prior years (to January
31, 1996) of change in accounting principle.......... -- 2,041 -- -- --
------- -------- -------- ------- -------
Net earnings (loss).................................... $ 21,403 $ 13,919 $ 9,722 $ 3,219 $ (203)
======== ======== ======== ======= =======
Basic net earnings (loss) per share
before cumulative effect of change in
accounting principle................................. $ 0.72 $ 0.58 $ 0.40 $ 0.19 $ (0.02)
Cumulative effect on prior years (to January
31, 1996) of change in accounting principle.......... -- 0.08 -- -- --
-------- -------- -------- ------- -------
Basic net earnings (loss) per share....................... $ 0.72 $ 0.50 $ 0.40 $ 0.19 $ (0.02)
======== ======== ======== ======= =======
Diluted net earnings (loss) per share
before cumulative effect of change in
accounting principle................................. $ 0.70 $ 0.55 $ 0.38 $ 0.18 $ (0.02)
Cumulative effect on prior years (to January
31, 1996) of change in accounting principle.......... -- 0.07 -- -- --
-------- -------- -------- ------- -------
Diluted net earnings (loss) per share..................... $ 0.70 $ 0.48 $ 0.38 $ 0.18 $ (0.02)
======== ======== ======== ======= =======
Basic weighted average shares outstanding................. 29,615 27,627 24,246 17,017 10,553
======== ======== ======== ======= =======
Diluted weighted average shares outstanding............... 30,410 29,096 25,546 17,948 11,408
======== ======== ======== ======= =======
Pro Forma Amounts Assuming the Change in
Accounting Principle is Applied
Retroactively:
Net earnings (loss).................................. $ 8,487 $ 2,607 ($ 397)
======== ======= =======
Basic net earnings (loss) per share.................. $ 0.35 $ 0.15 $ (0.04)
======== ======= =======
Diluted net earnings (loss) per share................ $ 0.33 $ 0.15 $ (0.03)
======== ======= =======
SELECTED OPERATING DATA:
Increase in comparable store sales /(2)/................. 4.5% 24.7% 17.9% 10.2% 6.2%
Number of comparable stores /(2)/......................... 42 27 15 5 3
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
JANUARY 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................... $155,461 $167,829 $108,304 $64,617 $ 2,192
Total assets............................................. 448,352 375,834 243,580 89,505 16,012
Long-term obligations.................................... 16,646 6,488 6,696 3,102 902
Redeemable convertible preferred stock................... -- -- -- -- 3,017
Shareholders= equity..................................... 268,084 218,556 149,270 72,983 1,483
</TABLE>
________________________________
/(1)/ Represents the expense attributable to the issuance of certain executive
options, primarily a non-cash charge.
/(2)/ Company operated superstores 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. Specialty stores will not be included in the comparable store
sales base until fiscal 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ----------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
OVERVIEW
The Company was founded in 1977 with the opening of a small mall-based
store and in 1988, Just For Feet opened its first superstore in Birmingham,
Alabama. As a result of the success and high sales volume generated by the
larger store format, the Company has focused on developing and refining its
superstore concept. There were 82 Just For Feet superstores at January 31,
1998, operating in 18 states, including nine stores operated by Just For Feet's
only superstore franchisee.
Of the 73 Company operated superstores, 23 superstores were opened in
fiscal 1997. The Company expects to open approximately 25 superstores during
fiscal 1998. The Company may accelerate the opening of new stores in any one
fiscal quarter.
As part of its long-term growth strategy, the Company entered the
specialty store segment of the athletic and outdoor footwear and apparel market
in fiscal 1997 through the acquisitions of Athletic Attic and Imperial Sports.
At January 31, 1998 there were 92 Company-owned and 48 franchised specialty
stores in 20 states and Puerto Rico. The Company anticipates opening
approximately 25 to 35 specialty stores during fiscal 1998. The specialty
stores have a higher general and administrative expense structure than the
Company's superstores.
To accommodate the Company's superstore expansion strategy and the
development of the Specialty Store Division, the Company has expanded and
upgraded its corporate staff. In addition, the specialty stores have a higher
general and administrative expense structure as a percent of net sales than the
superstore operations. These factors resulted in general and administrative
costs increasing to 3.8% of sales during fiscal 1997 from 3.1% in fiscal 1996
and 3.0% in fiscal 1995.
-13-
<PAGE>
In recent years, the Company has achieved positive comparable store
sales growth on an annual basis. Comparable superstore sales increased 4.5%,
24.7%, 17.9%, 10.2% and 6.2% in fiscal years 1997, 1996, 1995, 1994 and 1993,
respectively. The Company does not expect comparable store sales to continue to
increase in the future at historical rates, nor can any assurance be given that
increases in comparable store sales will continue. The Company will not include
the specialty stores in its comparable store sales percentages until fiscal
1998.
Effective February 1, 1996, the Company changed its method of
accounting for store opening costs, which are costs principally for pre-opening
salaries and travel that are incremental and directly attributable to the
opening of a new store. Under the new method, the Company charges these costs
to operations in the month that the store opens. Previously, store opening
costs were capitalized and amortized over the 12 months following the store
opening. The cumulative effect of this change in accounting principle resulted
in a charge to operations for the year ended January 31, 1997 of $2.0 million,
net of income taxes of $1.1 million.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, statement
of earnings data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0%
Cost of sales.................................. 58.5 57.5 57.6
---- ---- ----
Gross profit............................... 41.5 42.5 42.4
Franchise fees, royalties other revenue....... 0.2 0.2 0.5
Operating expenses:
Store operating.......................... 29.2 27.0 27.7
Store opening costs...................... 1.4 4.4 2.3
Amortization of intangibles.............. 0.2 -- 0.1
General and administrative............... 3.8 3.1 3.0
---- ---- ----
Operating income...................... 7.1 8.2 9.8
Interest income (expense), net................ -- 1.5 2.4
---- ---- ----
Earnings before income taxes and cumulative
effect of change in accounting principle.... 7.1 9.7 12.2
Provision for income taxes.................... 2.6 3.4 4.1
---- ---- ----
Earnings before cumulative effect of change
in accounting principle.................... 4.5 6.3 8.1
Cumulative effect on prior years (to
January 31, 1996) of change in accounting
principle................................. -- 0.8 --
---- ---- ----
Net earnings.......................... 4.5% 5.5% 8.1%
==== ==== ====
Pro Forma Amounts Assuming the Change
in Accounting Principle is Applied
Retroactively:
Net earnings......................... 7.1%
====
</TABLE>
-14-
<PAGE>
FISCAL 1997 COMPARED TO FISCAL 1996
Net Sales. Net sales increased $222.2 million or approximately 86.7%
for fiscal 1997 to $478.6 million compared to net sales of $256.4 million for
fiscal 1996. This increase was primarily attributable to additional sales of
$68.9 million from the 23 new superstores opened during the year, an increase in
comparable store sales of 4.5%, and additional sales of approximately $60.5
million from the specialty stores acquired during fiscal 1997. The calculation
of comparable store sales for the year included 42 superstores. The Specialty
Stores Division of the Company consists of Athletic Attic and Imperial Sports
which were acquired on March 17, 1997 and May 14, 1997, respectively. Both
acquisitions have been accounted for as purchases and, accordingly, the results
of operations of these acquired businesses are included in the Company=Company's
consolidated statements of earnings from their respective acquisition dates.
Gross Profit. Gross profit increased to $198.8 million or 82.6% for
fiscal 1997 from $108.9 million in fiscal 1996 as a result of increased sales.
As a percentage of net sales, gross profit decreased to 41.5% for fiscal 1997
from 42.5% for fiscal 1996, primarily as a result of programs utilized to
increase sales and to reduce inventory in the second half of fiscal 1997.
Store Operating Expenses. Store operating expenses increased $70.4
million or 101.6% to $139.7 million in fiscal 1997 from $69.3 million in fiscal
1996. This increase was primarily attributable to the operating expenses of the
23 superstores opened during fiscal 1997 and the operating expenses of the
acquired specialty stores. As a percentage of net sales, store operating
expenses increased to 29.2% in fiscal 1997 from 27.0% in fiscal 1996 primarily
as a result of increased superstore regional management payroll and related
expenses and increases in superstore level payroll as a result of the impact of
minimum wage increases in October 1996 and September 1997.
Store Opening Costs. Store opening costs are charged to operations in
the month the applicable store opens. Twenty-three superstores were opened
during each of fiscal 1997 and 1996. Store opening costs decreased $4.5 million
or 40.1% to $6.7 million in fiscal 1997 from $11.2 million in fiscal 1996,
reflecting a reduction in per store opening costs as a result of increased focus
on controlling costs in this area.
General and Administrative Expense. General and administrative
expenses of $18.0 million increased approximately $10.1 million, or 127.8% in
fiscal 1997 from $7.9 million in fiscal 1996. As a percentage of net sales,
general and administrative expenses increased to 3.8% in fiscal 1997 as compared
to 3.1% for fiscal 1996, primarily attributable to increased corporate staff and
facilities to support the Company=Company's current and future growth and the
acquisitions of the specialty stores which have higher general and
administrative expenses as a percentage of net sales than the Company had
experienced prior to the acquisitions.
Amortization of Intangibles. Amortization of intangibles, which
includes amortization of goodwill and franchise rights, increased to
approximately $1.2 million for fiscal 1997 from approximately $0.2 million for
fiscal 1996. This increase was primarily attributable to the amortization of
goodwill resulting from the acquisitions of Athletic Attic and Imperial Sports.
Operating Income. Operating income increased 64.9% to $34.3 million
in fiscal 1997 from $20.8 million in fiscal 1996 as a result of growth in the
Superstore Division and the results of operations in the acquired Specialty
Store Division. As a percentage of net sales, operating income decreased from
8.2% in fiscal 1996 to 7.1% in fiscal 1997, due primarily to the percentage
decline in gross profit margin and
-15-
<PAGE>
increase, as a percentage of net sales, in store operating expenses, general and
administrative expenses and amortization of intangibles, offset by the decline
in store opening costs as a percentage of net sales, as discussed above.
Net Interest Income (Expense). Net interest expense was approximately
$76,000 in fiscal 1997, compared to net interest income of approximately $3.9
million in fiscal 1996. The decrease was primarily due to the decrease in cash
as a result of financing the acquisitions of the specialty stores, cash outlays
for opening 23 new superstores during fiscal 1997 and the remodeling and
information systems improvements at the Specialty Store Division.
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales increased $136.6 million or approximately 114.0%
for fiscal 1996 to $256.4 million compared to net sales of $119.8 million for
fiscal 1995. This increase was primarily attributable to 23 new stores opened
during the year. These new stores accounted for $73.7 million in additional net
sales compared to fiscal 1995. In addition, there was an increase in comparable
store sales of 24.7%. The calculation of comparable store sales for the period
includes 27 stores.
Gross Profit. Gross profit as a percentage of net sales increased to
42.5% in fiscal 1996 from 42.4% in fiscal 1995.
Store Operating Expenses. Store operating expenses increased $36.1
million or approximately 108.4% to $69.3 million in fiscal 1996 from $33.3
million in fiscal 1995. This increase was primarily attributable to the
operating expenses of the 23 stores opened during fiscal 1996. As a percentage
of net sales, store operating expenses decreased to 27.0% in fiscal 1996 from
27.7% in fiscal 1995.
Store Opening Costs. As is discussed in Note 1 to the Company's
Consolidated Financial Statements, effective February 1, 1996, the Company
changed its method of accounting for store opening costs, which are costs
principally for pre-opening salaries and travel that are incremental and
directly attributable to the opening of a new store. Under the new method, the
Company charges these costs to operations in the month that the store opens.
Previously, store opening costs were capitalized and amortized over the twelve
months following the store opening. The cumulative effect of this change in
accounting principle resulted in a $2.0 million charge to operations for the
year ended January 31, 1997, net of income taxes of $1.1 million. This change
increased operating expenses for the year ended January 31, 1997 by
approximately $5.1 million and decreased earnings before the cumulative effect
of change in accounting principle by approximately $3.3 million ($0.12 per basic
and $0.11 per diluted share). Had the statements of earnings for the years ended
January 31, 1996 and 1995 been restated for the effects of this change, store
opening costs for these years would have increased from the amounts reported in
the accompanying statements of earnings to approximately $4.6 million and $1.7
million, respectively. The increase in store opening costs in fiscal 1996 to
$11.2 million from the pro forma amount of $4.6 million in fiscal 1995 resulted
from increased store openings and an increase in the dedicated corporate staff
to support new store openings.
General and Administrative Expense. General and administrative expense
increased $4.3 million or approximately 115.9% from $3.6 million to $7.9
million. The increase was primarily attributable to the addition of corporate
personnel to Just For Feet and in anticipation of continued growth and
development of the small store concept.
-16-
<PAGE>
Operating Income. Operating income increased to $20.8 million in
fiscal 1996 from $11.6 million in fiscal 1995 but decreased as a percentage of
net sales from 9.8% in fiscal 1995 to 8.2% in fiscal 1996. This decrease is due
to the increase in store opening costs associated with the change in accounting
principle. Had fiscal 1995 been restated for the effects of the change in
accounting principle, operating income for fiscal 1995 would have decreased to
approximately $9.8 million or 8.1% of sales.
Net Interest Income. Net interest income increased to $3.9 million in
fiscal 1996 from $2.9 million in fiscal 1995. The change was primarily
attributable to investing the proceeds of the public offering of the Company=s
Common Stock in June 1996.
Earnings Before Cumulative Effect of Change in Accounting Principle
and Net Earnings. As a result of the above factors, earnings before cumulative
effect of change in accounting principle increased to $16.0 million in fiscal
1996 from earnings before cumulative effect of change in accounting principle of
$9.7 million ($8.5 million on a pro forma basis) in fiscal 1995. Net earnings
increased to $13.9 million in fiscal 1996 from net earnings of $9.7 million
($8.5 million on a pro forma basis) in fiscal 1995.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company does not experience significant seasonal fluctuations in
its business. However, the highest sales periods for the Company are the spring,
back-to-school and Christmas selling seasons. The Company also generally
experiences lower gross margins during January and February due to retail
markdowns taken to clear seasonal merchandise. Quarterly results may fluctuate
materially depending on the timing of new store openings and related store
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 eight fiscal quarters ended January 31, 1998. The
unaudited information includes all normal recurring adjustments which 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 1997
------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales.......................................... $92,803 $112,369 $131,033 $142,433
Gross profit....................................... 39,002 47,254 53,567 58,999
Earnings before income taxes....................... 8,253 7,877 8,813 9,277
Net earnings....................................... 5,201 4,805 5,376 6,021
Basic net earnings per common and common
equivalent share................................ $ 0.18 $ 0.16 $ 0.18 $ 0.20
Diluted net earnings per common and common
equivalent share................................ $ 0.18 $ 0.16 $ 0.18 $ 0.20
Basic weighted average shares outstanding.......... 28,687 29,796 29,984 29,991
Diluted weighted average shares outstanding........ 29,580 30,881 30,611 30,581
Company superstores at period end.................. 54 61 66 73
Company specialty stores at period end............. 87 85 87 92
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
FISCAL 1996
-----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales................................................... $49,150 $58,379 $69,739 $79,129
Gross profit................................................ 20,753 24,812 29,439 33,867
Earnings before income taxes and cumulative effect
of change in accounting principle........................ 4,899 4,535 7,902 7,407
Net earnings before cumulative effect of change
in accounting principle.................................. 3,176 2,930 5,028 4,826
Cumulative effect on prior years of change
in accounting principle.................................. 2,041 - - -
Net earnings................................................ $ 1,135 $ 2,930 $ 5,028 $ 4,826
Basic net earnings per common and common
equivalent share before cumulative effect of
change in accounting principle.......................... $ 0.12 $ 0.11 $ 0.18 $ 0.17
Basic net earnings per common and common
equivalent share.......................................... $ 0.04 $ 0.11 $ 0.18 $ 0.17
Diluted net earnings per common and common
equivalent share before cumulative effect of
change in accounting principle........................... $ 0.11 $ 0.10 $ 0.17 $ 0.16
Diluted net earnings per common and common
equivalent share.......................................... $ 0.04 $ 0.10 $ 0.17 $ 0.16
Basic weighted average shares outstanding................... 26,310 27,348 28,373 28,478
Diluted weighted average shares outstanding................. 27,959 28,888 29,763 29,713
Company superstores at end of period........................ 30 39 44 50
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Just For Feet's primary sources of working capital are cash flow from
operations and borrowings under its line of credit and other credit facilities.
In addition, the Company's working capital was augmented by a portion of the
proceeds of three public offerings of Common Stock in January and September 1995
and June 1996. The Company had working capital of $155.5 million, $167.8 million
and $108.3 million at January 31, 1998, 1997 and 1996, respectively. The
principal uses of working capital have been to purchase inventory, equipment and
fixtures, to acquire Athletic Attic and Imperial Sports and to complete
construction of the Company's new corporate headquarters. During fiscal 1997,
the Company acquired approximately $43.5 million of property and equipment,
including approximately $14.9 million to open 23 new superstores, approximately
$5.1 million for improvements to existing superstores, approximately $8.0
million for corporate and superstore level management information systems and
approximately $8.5 million for the construction of the new corporate
headquarters and purchased approximately $7.0 million of property and equipment
in the Specialty Store Division to remodel acquired stores and to open ten new
specialty stores and improve management information systems, primarily at the
store level. The Company invested approximately $25.5 of cash in the
acquisitions of Athletic Attic and Imperial Sports. The Company's short-term
operational cash requirements are not highly seasonal.
In June 1996, the Company completed a public offering of 1,638,750 shares
of Common Stock at $34.25 per share. Net proceeds of approximately $53 million
were used primarily to fund acquisitions
-18-
<PAGE>
and acquire fixed assets and inventory for the opening of new stores. The
Company had $82.5 million and $172.7 million in cash and marketable securities
as of January 31, 1998 and 1997, respectively.
As an Alabama corporation, the Company is subject to Alabama shares tax on
the book value of the Company's Common Stock less certain exclusions. As part of
its planning for taxes, the Company makes temporary investments in short-term
federal obligations which are excludable for determining the taxable value of
the shares. At January 31, 1998 and January 31, 1997, the Company had borrowed
$75 million and $100 million, respectively, on a short-term basis from a bank
with the funds used to purchase U.S. Treasury securities. The total investment
in U.S. Treasury securities at January 31, 1998 and 1997 was $75 million and
$125 million, respectively. These securities were sold in the following month
(which is the beginning of the next fiscal year) with the proceeds utilized to
repay the short-term borrowings.
As of January 31, 1998, the Company had borrowed $15.7 million under its
revolving bank line of credit. The line of credit, which expires July 1, 1999,
permits the Company to borrow up to $40.0 million for general working capital
purposes. Borrowings under such line of credit bear interest at a floating rate
above LIBOR (5.6% plus 1.5% at January 31, 1998) 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 current capital requirements are primarily for the opening
of new superstores and specialty stores. 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 store opening costs, typically ranges from $1.5 to $2.5 million,
depending on the amount of vendor and landlord assistance. The Company estimates
that the total cash required to open a 4,000 to 6,000 square foot prototype
specialty store will range from $300,000 to $400,000. The Company expects to
open approximately 25 superstores and 25 to 35 specialty stores in fiscal 1998.
The Company is not currently planning any major expenditures other than
those mentioned above and believes that the proceeds of its public 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 1998.
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.
YEAR 2000
The Company has established policies and procedures to coordinate changes
to computer systems and applications necessary to achieve a year 2000 date
conversion with no effect on customers or disruption to business operations.
These actions are necessary to ensure that the systems and applications will
recognize and process the year 2000 and beyond. Major areas of potential
business impact have been identified and conversion efforts have been completed
or are underway. The Company's primary operating and financial systems are
already Year 2000 compliant. The Company also is communicating with suppliers,
vendors, financial institutions and others with which it does business to
coordinate year 2000 conversion. The total cost of compliance and its effect on
the Company's future results of
-19-
<PAGE>
operations is being determined as part of the conversion planning, but is not
expected to be material.
1998 ANNUAL MEETING
At the Company's 1998 Annual Meeting, the Company's shareholders will asked
to vote upon (i) a proposal to change the state of incorporation of the Company
from Alabama to Delaware, and (ii) a proposal to ratify the adoption of an
amendment to the Company's Articles of Incorporation which was approved at the
1996 Annual Meeting of Shareholders and to further ratify certain issuances of
Common Stock of the Company made in reliance upon the original adoption of such
amendment.
The Board of Directors has proposed the reincorporation in Delaware in
order to take advantage of Delaware's more flexible and modern corporate law.
The Board of Directors has proposed the ratification discussed above in order to
eliminate uncertainty surrounding the shareholders' adoption of an amendment to
the Company's Articles of Incorporation at the Company's Annual Meeting of
Shareholders in 1996. At such meeting, held on May 28, 1996, the shareholders
adopted an amendment to the Company's Articles of Incorporation to increase the
number of authorized capital shares to 75,000,000 shares, consisting of
70,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, and
to eliminate a previously outstanding class of preferred shares which was no
longer outstanding (the "Charater Amendment"). Notice of the 1996 annual meeting
was first given to shareholders on May 8, 1996. The Constitution of the State of
Alabama of 1901 requires at least thirty days notice to shareholders prior to
increasing the number of authorized shares. The Company inadvertently provided
shareholders with only 20 days notice. The Company believes, based in part upon
opinions of counsel, that the inadvertent failure to provide notice of the 1996
annual meeting in a timely manner does not render the Charter Amendment void,
and that the Charter Amendment and subsequent share issuances are valid.
However, the Company has included in its 1998 Proxy Statement a resolution
ratifying the Charter Amendment and related share issuances in order to
eliminate any uncertainty. In the event shareholders fail to ratify the Charter
Amendment and the share issuances at the Annual Meeting, the Company will
continue to treat the Charter Amendment and the share issuances as valid.
For a more detailed discussion of these proposals and other business to be
conducted at the 1998 Annual Meeting, please refer to the Proxy Statement
relating to such meeting.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
- ------------------------------------------------------------------
No response is required to this Item.
-20-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
- ------- --------------------
The following financial statements are filed with this report:
Independent Auditors' Report
Consolidated Balance Sheets as of January 31, 1998 and 1997
Consolidated Statements of Earnings for the years ended
January 31, 1998, 1997 and 1996.
Consolidated Statements of Shareholders' Equity for the years ended
January 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended
January 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements
-21-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Just For Feet, Inc.:
We have audited the accompanying consolidated balance sheets of Just For Feet,
Inc. and subsidiaries as of January 31, 1998 and 1997, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended January 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Just For Feet, Inc. and
subsidiaries as of January 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1998 in conformity with generally accepted accounting principles.
As is discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for store opening costs effective February 1,
1996.
DELOITTE & TOUCHE LLP
Birmingham, Alabama
March 30, 1998
-22-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1998 AND 1997
(in thousands except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 82,490 $ 138,785
Marketable securities available for sale 33,961
Accounts receivable 15,840 6,553
Merchandise inventories 206,128 133,323
Other 6,709 2,121
Total current assets 311,167 314,743
PROPERTY AND EQUIPMENT, NET 94,529 54,922
REPURCHASED FRANCHISE RIGHTS, NET 2,913 3,113
GOODWILL, NET 36,106
OTHER ASSETS 3,637 3,056
---------- -----------
$ 448,352 $ 375,834
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 90,667 $ 100,000
Accounts payable 51,162 38,897
Accrued expenses 9,292 5,486
Income taxes 1,363 425
Current maturities of long-term obligations 3,222 2,106
Total current liabilities 155,706 146,914
LONG-TERM OBLIGATIONS 16,646 6,488
DEFERRED LEASE RENTALS 7,212 3,036
DEFERRED INCOME TAXES 704 840
---------- -----------
Total liabilities 180,268 157,278
---------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 7, 11 and 12)
SHAREHOLDERS' EQUITY:
Common stock - par value $.0001 per share; 70,000 shares authorized;
29,993 (1998) and 28,495 (1997) shares issued and outstanding 3 3
Paid-in capital 218,616 190,491
Retained earnings 49,465 28,062
---------- -----------
Total shareholders' equity 268,084 218,556
---------- -----------
$ 448,352 $ 375,834
========== ===========
</TABLE>
See notes to consolidated financial statements.
-23-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JANUARY 31, 1998, 1997, AND 1996
(In thousands except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 478,638 $ 256,397 $ 119,819
Cost of sales 279,816 147,526 68,969
--------- --------- ---------
Gross profit 198,822 108,871 50,850
--------- --------- ---------
Franchise fee, royalties and other revenue 1,101 581 485
--------- --------- ---------
OPERATING EXPENSES:
Store operating 139,659 69,329 33,264
Store opening costs 6,728 11,240 2,712
Amortization of intangibles 1,200 180 157
General and administrative 18,040 7,878 3,575
--------- --------- ---------
Total operating expenses 165,627 88,627 39,708
--------- --------- ---------
Operating income 34,296 20,825 11,627
Interest expense (1,446) (832) (703)
Interest income 1,370 4,750 3,634
--------- --------- ---------
Earnings before income taxes and cumulative
effect of change in accounting principle 34,220 24,743 14,558
Provision for income taxes 12,817 8,783 4,836
--------- --------- ---------
Earnings before cumulative effect of change in
accounting principle 21,403 15,960 9,722
Cumulative effect on prior years (to January 31,
1996) of change in accounting principle 0 2,041 0
--------- --------- ---------
Net earnings $ 21,403 $ 13,919 $ 9,722
--------- --------- ---------
BASIC EARNINGS PER SHARE:
Before cumulative effect of change in accounting
principle $ 0.72 $ 0.58 $ 0.40
Cumulative effect on prior years (to January 31,
1996) of change in accounting principle 0 0.08 0
--------- --------- ---------
Net earnings $ 0.72 $ 0.50 $ 0.40
--------- --------- ---------
DILUTED EARNINGS PER SHARE:
Before cumulative effect of change in accounting
principle $ 0.70 $ 0.55 $ 0.38
Cumulative effect on prior years (to January 31,
1996) of change in accounting principle 0 0.07 0
--------- --------- ---------
Net earnings $ 0.70 $ 0.48 $ 0.38
--------- --------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 29,615 27,627 24,246
--------- --------- ---------
Diluted 30,410 29,096 25,546
--------- --------- ---------
Proforma amounts assuming the change in accounting
principle is applied retroactively:
Net earnings $ 8,487
---------
Basic earnings per share $ 0.35
---------
Diluted earnings per share $ 0.33
---------
</TABLE>
See notes to consolidated financial statements.
-24-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1998, 1997, AND 1996
(In thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Paid-in Retained
----------------------------
Shares Par Value Capital Earnings
<S> <C> <C> <C> <C>
BALANCE, FEBRUARY 1, 1995 23,049 $ 2 $ 68,560 $ 4,421
Public offering of common stock,
net of offering costs 3,150 1 65,637
Exercise of options 97 429
Income tax benefit from exercise
of options 468
Other capital transactions 2 30
------- ---- --------- --------
Net earnings 9,722
BALANCE, JANUARY 31, 1996 26,298 3 135,124 14,143
Public offering of common stock,
net of offering costs 1,639 52,900
Exercise of options 557 1,822
Income tax benefit from exercise
of options 620
Other capital transactions 1 25
Net earnings 13,919
------- ---- --------- --------
BALANCE, JANUARY 31, 1997 28,495 3 190,491 28,062
Common stock issued in connection with
acquisitions 1,336 27,123
Exercise of options 161 804
Income tax benefit from exercise
of options 173
Other capital transactions 1 25
Net earnings 21,403
------- ---- --------- --------
BALANCE, JANUARY 31, 1998 29,993 $ 3 $ 218,616 49,465
======= ==== --------- --------
</TABLE>
See notes to consolidated financial statements.
-25-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1998, 1997, AND 1996
(In thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $ 21,403 $ 13,919 $ 9,722
Adjustments to reconcile net earnings to net cash used by operating activities:
Cumulative effect of change in accounting principle 2,041
Depreciation and amortization 8,783 3,971 2,209
Deferred income taxes 2,194 (744) 515
Deferred lease rentals 2,111 1,456 1,029
Changes in assets and liabilities providing (using) cash, net of effects of
acquisitions in 1998:
Accounts receivable (8,918) (3,143) (3,071)
Merchandise inventories (56,616) (76,685) (31,540)
Other assets (5,643) 271 (2,604)
Accounts payable 7,495 16,628 15,199
Accrued expenses 2,264 2,709 688
Income taxes 543 (2,506) 2,086
--------- --------- --------
Net cash used by operating activities (26,384) (42,083) (5,767)
--------- --------- --------
INVESTING ACTIVITIES:
Purchases of marketable securities (14,726) (44,778) (94,086)
Maturities and sales of marketable securities 51,653 63,132 51,600
Purchases of property and equipment (43,446) (33,206) (14,380)
Acquisitions, net of cash acquired (25,548)
--------- --------- --------
Net cash used for investing activities (32,067) (14,852) (56,866)
--------- --------- --------
FINANCING ACTIVITIES:
Short-term borrowings (repayments), net (9,333) 45,000 55,000
Borrowings of long-term debt 12,739 479 3,102
Principal payments on long-term obligations (2,054) (1,335) (1,034)
Proceeds from exercise of options 804 1,822 429
Public offerings of common stock, net 52,900 65,637
--------- --------- --------
Net cash provided by financing activities 2,156 98,866 123,134
--------- --------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (56,295) 41,931 60,501
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 138,785 96,854 36,353
--------- --------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 82,490 $ 138,785 $ 96,854
========= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest, net of amounts capitalized $ 1,376 $ 832 $ 724
========= ========= ========
Income taxes $ 9,851 $ 7,878 $ 2,291
========= ========= ========
Fair value of assets acquired under capital leases $ 507 $ 1,633 $ 1,749
========= ========= ========
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - Just For Feet, Inc. is a national retailer of
athletic and outdoor footwear and activewear for men, women and children
which utilizes both a superstore and smaller specialty store concept. The
Company's footwear merchandise is purchased principally from five vendors.
Just For Feet operated 73 company-owned and 9 franchise superstores and 92
company-owned and 48 franchise specialty stores at January 31, 1998.
PRINCIPLES OF CONSOLIDATION - The accompanying financial statements
include the consolidated accounts of Just For Feet, Inc. and its
wholly-owned subsidiaries (collectively, "the Company"). All significant
intercompany transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS - The Company considers highly liquid
investments with original maturities of three months or less to be cash
equivalents.
MERCHANDISE INVENTORIES - Merchandise inventories consist of athletic and
outdoor footwear and clothing and are valued at the lower of cost
(first-in, first-out method) or market. Costs associated with certain
purchasing and merchandise handling activities are included in
inventories.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation and amortization are computed using the straight-line method
over the lesser of the estimated useful lives of the related assets or the
relevant lease term. Estimated useful lives range from two to ten years
for furniture, fixtures and equipment, up to 20 years for leasehold
improvements, and up to 39 years for buildings. Maintenance and repairs
are expensed as incurred. Renewals and betterments which extend the useful
lives of assets are capitalized.
During the year ended January 31, 1998, the Company completed construction
of new corporate facilities in Birmingham, Alabama. The former corporate
headquarters and an office and retail center in Michigan with an aggregate
net book value of $3,331 at January 31, 1998 represent real estate held
for sale and are classified in other assets in the accompanying
consolidated balance sheet. The Company expects the ultimate sales prices
of these properties to exceed their respective carrying values.
STORE OPENING COSTS - Effective February 1, 1996, the Company changed its
method of accounting for store opening costs, which are costs principally
for pre-opening employee salaries and travel which are incremental and
directly attributable to the opening of a new store. Under the new
accounting principle, the Company charges store opening costs to
operations in the month the store opens. Previously, store opening costs
were capitalized and amortized over the twelve months following the store
opening. The cumulative effect of this change in accounting principle
resulted in a $2,041 charge to income, net of income taxes of $1,137, for
the year ended January 31, 1997 ($0.08 per basic and $0.07 per diluted
share). This change increased operating expenses for the year ended
January 31, 1997 by approximately $5,081 and decreased earnings before
cumulative effect of change in accounting principle by approximately
$3,277 ($0.12 per basic and $0.11 per diluted share). At January 31, 1998
and 1997,
-27-
<PAGE>
capitalized store opening costs of $968 and $624 are included in other
current assets in the accompanying consolidated balance sheets.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Statement of Financial Accounting
Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial
Instruments requires certain disclosures for financial instruments for
which it is practicable to estimate the fair value. The Company's
financial instruments consist of cash and cash equivalents, receivables,
marketable securities, payables, accrued expenses and interest-bearing
debt. The fair value of each of the Company's financial instruments
approximates the carrying values reflected in the accompanying
consolidated balance sheets at January 31, 1998 and 1997, primarily
because of the short-term nature of these instruments. The Company's debt
is a combination of fixed and variable rates which approximate market
rates at January 31, 1998. As such, the carrying value of the debt
approximates fair value.
ACCOUNTING FOR STOCK-BASED COMPENSATION - The Company accounts for stock-
based compensation in accordance with Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees. SFAS No. 123, Accounting
for Stock-Based Compensation, requires certain pro forma disclosures which
are presented in Note 11.
GOODWILL - Goodwill is being amortized on the straight-line basis over 30
years (Note 2). Periodically, the Company reviews the recoverability of
goodwill based primarily upon an analysis of cash flow forecasts. Based on
its most recent review, the Company believes that no impairment of
goodwill exists. Accumulated amortization of goodwill was $1,000 at
January 31, 1998.
REPURCHASED FRANCHISE RIGHTS - Franchise rights repurchased in connection
with acquisitions of franchisees in 1994 are being amortized over 20 years
using the straight-line method. Related accumulated amortization was $692
and $492 at January 31, 1998 and 1997, respectively.
REVENUE RECOGNITION - Revenues from retail sales are recognized at the
time of sale. The Company maintains an incentive program for frequent
buyers of footwear. Estimated future costs associated with providing
incentives under this program are included in accrued expenses.
Franchise fee income is recognized when the related franchise store begins
operations which coincides with substantial performance of initial
services to the franchisee. Royalty revenues are recognized as earned.
Sales of merchandise to franchisees (and related cost of sales) are netted
in net sales in the accompanying statements of operations as such amounts,
and the resulting gross profit, are immaterial.
ADVERTISING - The Company expenses the cost of advertising as incurred.
Advertising expense, net of co-op credits, charged to operations was
$27,714, $17,720 and $9,186 for the years ended January 31, 1998, 1997 and
1996, respectively.
INCOME TAXES - The Company accounts for income taxes using the liability
method. Deferred tax assets and liabilities are recorded based on the
differences between the financial statement and tax basis of assets and
liabilities and the tax rates in effect.
EARNINGS PER SHARE - In March 1997, the Financial Accounting Standards
Board ("FASB") released SFAS No. 128, Earnings Per Share, which is
effective for fiscal years ending after December 15, 1997. In accordance
with this standard, the Company is now required to report two separate
earnings per share numbers, basic and diluted. Accordingly, all historical
earnings per share data has been restated to
-28-
<PAGE>
conform to this new standard. Weighted average common shares outstanding
(diluted), now includes the dilutive effect of stock options as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Weighted average common shares outstanding (basic) 29,615 27,627 24,246
Dilutive effect of stock options 795 1,469 1,300
------ ------ ------
Weighted average common shares outstanding (diluted) 30,410 29,096 25,546
====== ====== ======
</TABLE>
Diluted earnings per share is the same number as the Company's previously
reported earnings per share amounts. For the years ended January 31, 1998,
1997 and 1996 there were options to purchase 1,292, 303 and 31,
respectively, of common stock excluded from the computation of weighted
average shares as such options would have been anti-dilutive.
ACCOUNTING ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual
results may differ from those estimates.
RECLASSIFICATIONS - Certain reclassifications have been made in the
January 31, 1997 and 1996 presentations to conform to the January 31, 1998
presentation.
2. ACQUISITIONS
In March 1997, the Company acquired Athletic Attic for approximately
$9,700 in cash, net of cash acquired, the repayment of approximately
$1,300 of Athletic Attic's debt and approximately $5,600 of the Company's
common stock (259 shares). In May 1997, the Company acquired Imperial
Sports for approximately $5,800 in cash, net of cash acquired, the
repayment of approximately $8,700 of Imperial Sport's debt and
approximately $21,500 of the Company's common stock (1,077 shares). These
acquisitions have been accounted for as purchases and, accordingly, each
purchase price has been allocated to assets acquired and liabilities
assumed based upon their estimated fair values at the acquisition dates.
The excess of the consideration paid over the net tangible and
identifiable intangible assets acquired has been recorded as goodwill. The
accompanying consolidated statement of earnings for the year ended January
31, 1998, includes the results of operations of each acquisition from its
respective purchase date.
-29-
<PAGE>
The estimated fair value of assets acquired and liabilities assumed in
these acquisitions is summarized as follows:
<TABLE>
<S> <C>
Cash $ 907
Merchandise inventories 16,188
Property and equipment 5,318
Other assets 1,336
Goodwill 37,044
Deferred income taxes 1,759
Accounts payable and accrued liabilities (6,312)
Deferred lease rentals (2,064)
Other liabilities (598)
---------
$ 53,578
========
Consideration consisted of:
Cash $ 26,455
Stock issued 27,123
--------
$ 53,578
========
</TABLE>
The common stock issued in connection with these acquisitions represents
non-cash investing and financing activities for the purpose of the
consolidated statement of cash flows for the year ended January 31, 1998.
Certain fees aggregating $222 associated with these acquisitions were paid
to an entity in which a director of the Company is a partner. Pro forma
results of operations are not presented because the effects of the
acquisitions are not significant.
3. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Owned:
Land $ 3,807 $ 3,537
Store facilities and corporate office 15,212 7,254
Furniture, fixtures and equipment 37,847 21,424
Leasehold improvements 42,765 23,718
Construction-in-progress 4,753 1,752
-------- --------
104,384 57,685
Accumulated depreciation and amortization (12,910) (5,866)
-------- --------
91,474 51,819
-------- --------
Under capital lease:
Furniture, fixtures and equipment 4,103 3,796
Accumulated amortization (1,048) (693)
-------- --------
3,055 3,103
-------- --------
$ 94,529 $ 54,922
======== ========
</TABLE>
-30-
<PAGE>
4. MARKETABLE SECURITIES
Marketable securities consisted of the following:
<TABLE>
<CAPTION>
1997
<S> <C>
Marketable securities available for sale:
Short-term:
State and municipal bonds $ 32,916
Other securities 1,045
--------
Total 33,961
Long-term -
State and municipal bonds 2,966
--------
$ 36,927
========
</TABLE>
These investments were accounted for as securities "available for sale"
under the provisions of SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities, whereby unrealized holding gains and losses
are reported as a separate component of shareholders' equity until
realized. At January 31, 1997, there were no material unrealized holding
gains or losses as the market value of these investments approximated
their cost. For the years ended January 31, 1998, 1997 and 1996, there
were no significant realized gains or losses from investments. Gains and
losses on the sale of marketable securities were determined using the
specific identification method. Long-term marketable securities are
classified in other assets.
5. SHORT-TERM BORROWINGS
The Company has a $40,000 unsecured line of credit bank agreement which
expires July 1, 1999. (The president of one of the bank's subsidiaries is
also a director of the Company.) Commitment fees are computed at 0.125%
per annum on the unused portion of the line of credit and the Company is
required to pay a yearly facility fee of $100. No compensating balances
are required under the agreement. Borrowings under this line of credit
bear interest at a floating rate above the LIBOR rate (5.6% plus 1.5% at
January 31, 1998). The agreement contains certain covenants which include
the maintenance of minimum net worth and certain financial ratios. At
January 31, 1998, $15,667 was outstanding under this agreement; there were
no borrowings outstanding under this agreement at January 31, 1997.
At January 31, 1998 and 1997, the Company had $75,000 and $100,000
respectively, of short-term borrowings that were used to purchase U.S.
Treasury securities for Alabama share tax planning purposes. These
securities, which were pledged as collateral on this debt, were sold in
early February 1998 and 1997, respectively; the respective sale proceeds
were utilized to repay such borrowings
-31-
<PAGE>
6. LONG-TERM OBLIGATIONS
Long-term debt consists of various notes payable due in monthly
installments through 2010 which bear interest at variable and fixed rates
ranging from 6.9% to 12.0% at January 31, 1998. Such debt is
collateralized principally by land, buildings, and equipment with an
aggregate carrying value of approximately $17,872 at January 31, 1998.
Scheduled maturities of long-term debt at January 31, 1998 were as
follows:
<TABLE>
<CAPTION>
Year Ending
January 31,
<S> <C>
1999 $ 2,533
2000 2,499
2001 2,450
2002 2,239
2003 1,826
Thereafter 6,279
--------
Total $ 17,826
========
</TABLE>
The Company leases certain furniture, fixtures and equipment under
long-term agreements which are accounted for as capital leases. Scheduled
maturities of obligations under these capital leases at January 31, 1998
were as follows:
<TABLE>
<CAPTION>
Year Ending
January 31,
<S> <C>
1999 $ 818
2000 735
2001 474
2002 99
2003 74
Thereafter 60
----------
2,260
Less amounts representing interest (218)
----------
Total capital lease obligations 2,042
Less current portion (689)
----------
Long-term capital lease obligations $ 1,353
==========
</TABLE>
-32-
<PAGE>
7. OPERATING LEASE COMMITMENTS
The Company leases certain store facilities and land under agreements
which are accounted for as operating leases. Lease terms range from
approximately five years to twenty years. Certain leases contain renewal
options. At January 31, 1998, future annual minimum lease payments under
operating leases with remaining terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
Year Ending
January 31,
<S> <C>
1999 $ 36,538
2000 38,617
2001 38,562
2002 38,682
2003 38,623
Thereafter 316,524
---------
Total $ 507,546
=========
</TABLE>
The above table includes lease payments for 16 store facilities not yet
opened at January 31, 1998. In addition, subsequent to January 31, 1998,
the Company entered into a lease agreement for a store facility which
requires aggregate rental payments of $3,465 through 2014. This commitment
is not reflected in the above table.
Total rent expense under all operating leases was as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Minimum rentals $ 23,891 $ 10,190 $ 5,372
Additional rentals based on sales volume 272 710 475
-------- -------- --------
$ 24,163 $ 10,900 $ 5,847
======== ======== ========
</TABLE>
Rent expense for operating leases which contain scheduled rent increases
is recognized for financial reporting purposes on the straight-line
method. Consequently, amounts which have been expensed for financial
reporting purposes, but not yet paid, are reflected as deferred lease
rentals in the accompanying consolidated balance sheets. Certain leases
provide for future rent increases based upon increases in the Consumer
Price Index. The Company has subleased a portion of two facilities to
third parties. Future sublease rentals are not material.
-33-
<PAGE>
8. INCOME TAXES
The consolidated provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal $ 9,763 $ 7,397 $ 3,983
State 860 1,245 338
------- ------- -------
10,623 8,642 4,321
------- ------- -------
Deferred:
Federal 1,991 130 475
State 203 11 40
------- ------- -------
2,194 141 515
------- ------- -------
$12,817 $ 8,783 $ 4,836
======== ======== =======
</TABLE>
Following is a reconciliation of the applicable U.S. federal income tax,
computed at the statutory rate, to the provision reflected in the
consolidated statements of earnings, excluding the cumulative effect of
the 1997 accounting change:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Federal income tax at statutory rate $ 11,977 $ 8,660 $ 4,950
State income taxes, net of federal tax effect 691 820 266
Tax exempt interest income (270) (856) (604)
Amortization of goodwill 398
Other 21 159 224
-------- ------- -------
$ 12,817 $ 8,783 $ 4,836
========= ======= =======
</TABLE>
Deferred tax assets and liabilities that arise as a result of temporary
differences are summarized as follows:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred tax assets:
Accrued expenses $ 865 $ 625
Inventory valuation 56 370
Deferred lease rentals 2,509 1,124
Other 381
------ ------
Total deferred tax assets 3,811 2,119
------ ------
Deferred tax liabilities:
Store opening costs (358) (231)
Other prepaid expenses (430) (213)
Franchise rights (880) (954)
Depreciation (2,375) (1,042)
Other (524)
------ ------
Total deferred tax liabilities (4,567) (2,440)
------ ------
$ (756) $ (321)
------- ------
</TABLE>
-34-
<PAGE>
9. FRANCHISE AND OTHER ACTIVITIES
Franchise operations consist of one franchisee who operates nine franchise
superstores in two states and 17 franchisees who operate 48 franchise
specialty stores in 15 states and Puerto Rico. The Company generally
receives initial franchise fees for the superstore franchises on a per
store basis for providing certain services and other advice related to
opening a franchise store. In addition, the Company receives royalties
from superstore and specialty franchise stores based on a percentage of
sales of each franchise.
Revenues from franchisees included in the accompanying consolidated
statements of operations are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Initial franchisee fees $ 45 $ 15 $ 30
Royalties 841 566 455
----- ----- -----
886 581 485
----- ----- -----
Merchandise sales to franchisees $ 796 $ 399 $ 135
===== ===== =====
</TABLE>
Included in accounts receivable at January 31, 1998 and 1997 is $847 and
$433, respectively, due from franchisees and $348 and $183, respectively,
due from officers of the Company.
10. COMMON STOCK
In September 1995, the Company completed a third public offering of 3,150
shares of its common stock at $22 per share. Net proceeds (after offering
costs) from the sale of this stock approximated $65,638.
In June of 1996, the Company completed a fourth public offering of 1,639
shares of its common stock at $34.25 per share. Net proceeds (after
offering costs) from the sale of this stock approximated $52,900.
Certain shares of the Company's common stock are subject to registration
rights.
At the Company's annual meeting of shareholders on May 28, 1996, the
Company's shareholders adopted an amendment to the Company's Amended and
Restated Certificate of Incorporation to increase the number of authorized
capital shares to 75,000 shares, consisting of 70,000 shares of common
stock and 5,000 of preferred stock, and to eliminate Series A preferred
shares then existing (the "Charter Amendment"). Notice of the 1996 meeting
was first given to shareholders on May 8, 1996. The Revised Alabama
Business Corporation Act, together with the Constitution of the State of
Alabama of 1901, requires at least thirty days notice to shareholders
prior to increasing the number of authorized shares. The Company
inadvertently provided the shareholders with only twenty days notice. The
Company believes, based in part upon opinions of counsel, that the
inadvertent failure to provide notice of the 1996 annual meeting in a
timely manner does not render the Charter Amendment void, and that the
Charter Amendment and subsequent share issuances are valid. However, the
Company has included in its 1998 Proxy Statement a resolution ratifying
the Charter Amendment and related share issuances. In the event
shareholders fail to ratify the charter Amendment and the share issuances
at its 1998 Annual Meeting, the Company will continue to treat the Charter
Amendment and the share issuances as valid and may in the future seek a
judicial declaration that the Charter Amendment and the share issuances
are valid.
-35-
<PAGE>
11. STOCK OPTION PLANS
The Company maintains its Employee Incentive Stock Option Plan which
provides for the grant of options covering an aggregate of 4,500 shares of
the Company's common stock to Company employees. Options may be granted at
prices which are equal to or greater than the fair market value of the
shares at the date of grant and become exercisable over periods of
generally one to five years. Options expire ten years from the date of the
grant. At January 31 1998, the Company had 652 options available for
future grants under this plan.
In June 1995, the Company adopted the Non-Employee Director Stock Option
Plan. This plan provides for the issuance of stock options to non-employee
directors of up to 281 shares of the Company's common stock. Options may
be granted at prices which are equal to or greater than the fair market
value of the shares at the date of grant and become exercisable ratably
over the three years commencing on the first anniversary date of the
grant. At January 31, 1998 the Company had 39 options available for future
grants under this plan.
In June 1997, the Company adopted its 1997 Employee Incentive Plan which
provides for the grant of incentive and non-qualified stock options, stock
appreciation rights, restricted stock or performance awards covering an
aggregate of 1,400 shares of the Company's common stock to eligible (as
defined by the Plan) Company employees. Options may be granted at prices
which are equal to or greater than the fair market value (as defined by
the Plan) of the shares at the date of grant, except for options granted
to employees who own directly or indirectly more than ten percent of the
total combined outstanding shares of all classes of stock. Grants to such
employees are to be priced at 110% of the fair market value of the shares
at the date of grant. Options become exercisable over periods of generally
one to five years and expire ten years from the date of the grant. During
the year ended January 31, 1998, 100 options were granted under this plan
to a director of the Company under a personal services contract;
compensation expense related to this grant was not significant. At January
31, 1998, the Company had 75 options available for future grants under
this plan.
Information regarding these option plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
<S> <C> <C>
At February 1, 1995 1,820 $ 5.77
Granted 874 13.55
Exercised (97) 4.52
Forfeited (95) 8.48
-----
At January 31, 1996 2,502 8.43
Granted 1,381 25.78
Exercised (557) 3.38
Forfeited (280) 21.21
-----
At January 31, 1997 3,046 16.08
Granted 3,019 14.72
Exercised (160) 4.99
Forfeited (752) 13.71
Cancelled (930) 25.69
-----
At January 31, 1998 4,223 13.93
=====
</TABLE>
-36-
<PAGE>
The following table summarizes information about stock options outstanding
and exercisable at January 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- -----------------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER EXERCISE REMAINING NUMBER EXERCISE
PRICE OUTSTANDING PRICE LIFE (YEARS) EXERCISABLE PRICE
<S> <C> <C> <C> <C> <C>
$ 1.48 - $ 5.13 240 $ 2.96 6.1 222 $ 2.86
$ 8.69 - $13.84 1,567 10.87 8.2 493 9.24
$14.09 - $14.75 1,145 14.71 9.3 5 14.33
$15.44 - $19.42 990 16.99 8.9 138 17.13
$20.00 - $37.08 281 26.08 8.2 118 24.97
---------- ---------
4,223 976
========== =========
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123
Accounting for Stock-Based Compensation. Accordingly, no compensation
cost has been recognized in the Company's financial statements for the
stock option plans. The weighted average fair value of options granted
during the years ended January 31, 1998, 1997 and 1996 was $5.10, $9.86
and $4.05, respectively. Had compensation cost for the Company's option
plans been determined based on the fair value at the grant date for
awards during the years ended January 31, 1998, 1997 and 1996 consistent
with the provisions of that statement, the Company's net earnings (and
basic and diluted earnings per share) prior to the cumulative effect of
the change in accounting principle would have been reduced to $17,031
($0.58 basic and $0.56 diluted earnings per share), $12,668 ($0.46 basic
$0.44 diluted earnings per share) and $9,003 ($0.37 basic and $0.35
diluted earnings per share), respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions for
the years ended January 31, 1998 and 1997, respectively: expected
volatility of 30% and 34%; risk-free interest rate of 6.2% and 6.5%;
expected lives of 4.5 and 4.6 years and no dividends paid during the life
of the options.
12. LITIGATION
In June 1997, a lawsuit was filed by a shareholder (individually and on
behalf of others) against the Company and certain of its current and
former officers, a former director and two of the four managing
underwriters in the Company's June 1996 public offering of common stock.
The suit alleges that the Company's registration statement and prospectus
used in such offering contained certain misleading financial information.
The Company and its named officers and directors deny liability on the
claims (the dollar amount of which is currently unspecified) and are
vigorously defending the suit.
* * * * *
-37-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
There has been no occurrence requiring a response to this Item.
PART III
Except as to information with respect to executive officers which is
contained in a separate heading under Item 1 to this Form 10-K, the information
required by Part III of Form 10-K is, pursuant to General Instruction G(3) of
Form 10-K, incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's 1998 Annual
Meeting of Shareholders (the "Proxy Statement"). The Company will, within 120
days of the end of its fiscal year, file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- --------------------------------------------------
The information concerning directors and executive officers of the
Registrant is set forth in the Proxy Statement under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance," which
information is incorporated herein by reference. The name, age and position of
each executive officer of the Company is set forth under the heading "Executive
Officers" in Item 1 of this Report.
ITEM 11. EXECUTIVE COMPENSATION.
- -------- ----------------------
The information concerning executive compensation is set forth in the Proxy
Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- --------------------------------------------------------------
The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "Security
Ownership of Certain Beneficial Owners and Management," which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- ----------------------------------------------
The information concerning certain relationships and related transactions
is set forth in the Proxy Statement under the headings "Certain Transactions"
and "Compensation Committee Interlocks and Insider Participation," which
information is incorporated herein by reference.
-38-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
- -------- ----------------------------------------------------------------
(a)(1) Financial Statements.
---------------------
The following financial statements and auditors' report have been filed
with Item 8 in Part II of this report:
Independent Auditors' Report
Consolidated Balance Sheets as of January 31, 1998 and 1997
Consolidated Statements of Earnings for the years ended
January 31, 1998, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years ended
January 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
January 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
------------------------------
All financial statement schedules are omitted as the required
information is inapplicable.
(3) Exhibits.
---------
The exhibits listed below are filed with or incorporated by reference
into this Report. 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 ("1994 S-1"), (ii) the Company's
Registration Statement on Form S-1 under the Securities Act of 1933,
Registration No. 33-87414 (the "1995 S-1") or (iii) the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 1997 (the "1997 10-K").
Unless otherwise indicated, the exhibit number corresponds to the exhibit number
in the referenced document.
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
*2.1 Asset Purchase Agreement dated March 17, 1997 by and between
Owensboro Investment Company, Inc. and Just For Feet, Inc. (1997
10-K)
*2.2 Stock Purchase Agreement dated March 17, 1997 by and among Just
For Feet, Inc., Premium Sports, Inc. and John Gasser (1997 10-K)
*2.3 Agreement and Plan of Merger dated March 17, 1997, by and among
Just For Feet, Inc., an Alabama corporation, IAC Acquisition
Corporation, a Michigan corporation and wholly owned subsidiary
of Just For Feet, Imperial Acquisition Corporation, a Michigan
corporation, and certain of the shareholders of Imperial
Acquisition Corporation (1997 10-K)
-39-
<PAGE>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
*3(i) Amended and Restated Certificate of Incorporation of Just For
Feet, Inc. (1994 S-1, Exhibit 3(a))
*3(ii) Amended and Restated Bylaws of Just For Feet, Inc. (1994 S-1,
Exhibit 3(b))
*4 Specimen of Common Stock Certificate of the Company. (1994 S-1)
*9 Voting Trust Agreement dated August 10, 1993, by and among the
Company, Pamela Beryl Ruttenberg and Harold Ruttenberg. (1994
S-1)
10.1 Just For Feet. Inc. 1997 Employee Incentive Plan
*10.2 Employment Agreement dated November 6, 1996, between the Company
and Alex Bond (1997 10-K)
10.3 Employment Agreement dated May 1, 1997, between the Company and
Eric L. Tyra
10.4.1 Employment Agreement dated January 8, 1998 between the Company
and Adam J. Gilburne
10.5 Master Revolving Promissory Note dated January 26, 1998 in the
principal amount of $40,000,000 payable to Compass Bank
*10.6 Just For Feet, Inc. Employee Incentive Stock Option Plan, as
amended. (1994 S-1, Exhibit 10(g))
*10.6.1 Amendment No. 2 to the Just For Feet, Inc. Employee Incentive
Stock Option Plan. (1994 S-1)
*10.6.2 Amendment No. 3 to the Just For Feet, Inc. Employee Incentive
Stock Option Plan (1997 10-K)
*10.7 Franchise Agreement dated November 20, 1989, between Casual Wear
II, Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(h))
*10.8 Franchise Agreement dated May 19, 1992, between Casual Wear II,
Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(i))
*10.9 Franchise Agreement dated April 1, 1993, between Casual Wear II,
Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(k))
10.10 Promissory Note dated February 3, 1997 in the principal amount of
$6,000,000 payable to Compass Bank, as amended.
-40-
<PAGE>
*10.11 Loan Agreement dated January 15, 1988, by and between Harold
Ruttenberg, Pamela B. Ruttenberg (Borrowers), Casual Wear, Inc.
(Guarantor) and Warrior Savings Bank, together with Note in the
amount of $400,000 and Guaranty Agreement. (1994 S-1, Exhibit
10(bb))
*10.12 Loan Agreement dated December 1, 1988, by and between Harold
Ruttenberg, Pamela B. Ruttenberg (Borrowers), Casual Wear, Inc.
(Guarantor) and Warrior Savings Bank, together with Note in the
amount of $200,000 and Guaranty Agreement. (1994 S-1, Exhibit
10(cc))
*10.13 Purchase and Sale Agreement dated July 14, 1993, between Florida
Mall Peripheral Associates and the Company. (1994 S-1, Exhibit
10(dd))
*10.14 Sales Contract dated January 18, 1994, between Harold Ruttenberg
and Pam Ruttenberg and the Company. (1994 S-1, Exhibit 10(jj))
10.15 Personal Service Agreement dated August 22, 1997 between the
Company and Bart Starr, Sr.
10.16 Promissory Note dated August 22, 1997 in the principal amount of
$5,000,000 payable to General Electric Capital Corporation
10.16.1 Security Agreement dated August 21, 1997 between Just For Feet,
Inc. and General Electric Capital Corporation
21 Subsidiaries
23.1 Consent of Deloitte & Touche LLP
24.1 Power of Attorney of Randall L. Haines
24.2 Power of Attorney of Michael P. Lazarus
24.3 Power of Attorney of Bart Starr
24.4 Power of Attorney of Edward S. Croft, III
24.5 Power of Attorney of David F. Bellet
(b) Reports on Form 8-K.
-------------------
-41-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
JUST FOR FEET, INC.
Date: April 24, 1998 By: /s/ Harold Ruttenberg
-----------------------------------------------
Harold Ruttenberg
Chairman of the Board,
President and Chief Executive Officer
Date: April 24, 1998 By: /s/ Eric L. Tyra
-----------------------------------------------
Eric L. Tyra
Executive Vice President - Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Harold Ruttenberg Chairman of the Board, April 24, 1998
- -------------------------- President and Chief
Harold Ruttenberg Executive Officer
/s/ Eric L. Tyra Executive Vice President - April 24, 1998
- -------------------------- Finance and Chief Financial
Eric L. Tyra Officer
* Director April 24, 1998
- --------------------------
Michael P. Lazarus
* Director April 24, 1998
- --------------------------
Bart Starr, Sr.
* Director April 24, 1998
- --------------------------
Randall L. Haines
* Director April 24, 1998
- --------------------------
David F. Bellet
* Director April 24, 1998
- --------------------------
Edward S. Croft, III
*By: /s/ Eric L. Tyra
------------------
Eric L. Tyra, as Attorney-in-Fact pursuant to
Powers of Attorney filed as exhibits to this Report
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Number Description Page Number
- -------------- ------------------------------- -----------
10.1 Just For Feet. Inc. 1997 Employee Incentive Plan
10.3 Employment Agreement dated May 1, 1997, between the Company
and Eric L. Tyra
10.4.1 Employment Agreement dated January 8, 1998 between the
Company and Adam J. Gilburne
10.5 Master Revolving Promissory Note dated January 26, 1998 in
the principal amount of $40,000,000 payable to Compass Bank
10.10 Promissory Note dated February 3, 1997 in the principal
amount of $6,000,000 payable to Compass Bank, as amended.
10.15 Personal Service Agreement dated August 22, 1997 between the
Company and Bart Starr, Sr.
10.16 Promissory Note dated August 22, 1997 in the principal
amount of $5,000,000 payable to General Electric Capital
Corporation
10.16.1 Security Agreement dated August 21, 1997 between Just For
Feet, Inc. and General Electric Capital Corporation
21 Subsidiaries
23.1 Consent of Deloitte & Touche LLP
24.1 Power of Attorney of Randall L. Haines
24.2 Power of Attorney of Michael P. Lazarus
24.3 Power of Attorney of Bart Starr
24.4 Power of Attorney of Edward S. Croft, III
24.5 Power of Attorney of David F. Bellet
<PAGE>
EXHIBIT 10.1
JUST FOR FEET, INC.
1997 EMPLOYEE INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Just For Feet, Inc. 1997 Employee Incentive
Plan (the "Plan"). The purpose of the Plan is to enable Just For Feet, Inc. (the
"Company") and its Subsidiaries and Affiliates to attract and retain employees
who contribute to the Company's success by their ability, ingenuity and
industry, and to enable such employees to participate in the long-term success
and growth of the Company through an equity interest in the Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
a. "Affiliate" means any corporation (other than a Subsidiary),
partnership, joint venture or any other entity in which the Company owns,
directly or indirectly, at least a 10 percent beneficial ownership interest.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty, any of which is harmful to the business or reputation
of the Company or any Subsidiary or Affiliate.
d. "Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto and the Treasury Regulations and rulings promulgated
thereunder.
e. "Committee" means a committee of the Board appointed for the purpose
of administering the Plan, which committee shall at all times consist of two or
more Non-Employee Directors.
f. "Commission" means the U.S. Securities and Exchange Commission.
g. "Company" means Just For Feet, Inc., a corporation organized under the
laws of the State of Alabama (or any successor corporation).
h. "Disability" means total and permanent disability as determined under
the Company's long term disability program or, if the Company has no such
program, shall mean total and permanent disability as defined in Section
22(e)(3) of the Code or any successor thereto.
i. "Eligible Employee" means a person regularly employed by the Company
or a Subsidiary and who is responsible for or contributes to the management,
growth and/or profitability of the business of the Company or a Subsidiary.
j. "Eligible Participant" means directors, officers, employees,
consultants and advisors of the Company or a Subsidiary and other persons who
may not otherwise be eligible to receive Incentive Stock Options pursuant to
Section 5 of the Plan.
<PAGE>
k. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor thereto.
l. "Fair Market Value" means, as of any given date, the mean between the
high "bid" and low "ask" prices as of the close of business for the Company's
Stock in the over-the-counter market, as reported by the Nasdaq Stock Market (or
other national quotation service), or, if the Stock is registered on a national
securities exchange, the closing price of the Stock on such national securities
exchange or, if neither traded in the over-the-counter market nor listed on a
national securities exchange, then the fair market value as determined by the
Board or the Committee, but in no case less than the par value of such Stock.
m. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
n. "Non-Employee Director" means a member of the Board who is not a
regular salaried employee of the Company or one of its Subsidiaries. As it
relates to the members of the Committee, "Non-Employee Director" shall have the
meaning set forth in Rule 16b-3(b) (3) as promulgated by the Commission under
the Securities Exchange Act of 1934, as amended, or any successor definition
adopted by the Commission.
o. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
p. "Performance Award" means an award of shares of Stock or cash pursuant
to Section 9 contingent upon achieving certain performance goals.
q. "Plan" means this 1997 Employee Incentive Plan.
r. "Restricted Stock" means an award of shares of Stock that are subject
to restrictions under Section 8.
s. "Stock" means the Common Stock, par value $.0001 per share, of the
Company.
t. "Stock Appreciation Right" means a right granted under Section 7 which
entitles the holder to receive a cash payment or an award of Stock in an amount
equal to the difference between (i) the Fair Market Value of the Stock covered
by such right at the date the right is granted, unless otherwise determined by
the Board or the Committee pursuant to Section 7 and (ii) the Fair Market Value
of the Stock covered by such right at the date the right is exercised multiplied
by the number of shares covered by the right.
u. "Stock Option" means any option to purchase shares of Stock granted to
Eligible Employees or Eligible Participants under the Plan.
v. "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last
-2-
<PAGE>
corporation in the unbroken chain) owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Board or the Committee. The Board or
the Committee shall have the power and authority to grant to Eligible Employees
or Eligible Participants, pursuant to the terms of the Plan: (i) Incentive Stock
Options; (ii) Non-Qualified Stock Options; (iii) Stock Appreciation Rights; (iv)
Restricted Stock; or (v) Performance Awards.
In particular, the Board or the Committee shall have the authority:
(i) to select the Eligible Employees or Eligible Participants to whom
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, or Performance Awards or a combination of the foregoing from
time to time will be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, or
Performance Awards or a combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder including, but not limited to,
any restriction on any Stock Option or other award and/or the shares of Stock
relating thereto based on performance and/or such other factors as the Board or
the Committee may determine, in its sole discretion, and any vesting
acceleration features based on performance and/or such other factors as the
Board or the Committee may determine, in its sole discretion;
(v) to determine whether, to what extent and under what circumstances
Stock and other amounts payable with respect to an award under this Plan shall
be deferred either automatically or at the election of a participant, including
providing for and determining the amount (if any) of deemed earnings on any
deferred amount during any deferral period.
Subject to Section 11, the Board or the Committee shall have the authority
to adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable; to interpret
the terms and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.
All decisions made by the Board or the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
Plan participants.
-3-
<PAGE>
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 1,400,000. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.
If any shares of Stock that have been subject to option cease to be subject
to option, or if any shares subject to any Restricted Stock award granted
hereunder are forfeited or such award is otherwise terminated, such shares shall
again be available for distribution in connection with future awards under the
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Stock Options granted under the Plan and
in the number of shares subject to Restricted Stock awards granted under the
Plan as may be determined to be appropriate by the Board or the Committee, in
its sole discretion, provided that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also be used
to determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Incentive Stock Options shall be granted only to Eligible Employees. Non-
Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Awards may be granted to Eligible Employees and Eligible
Participants. The optionees and participants under the Plan shall be selected
from time to time by the Board or the Committee, in its sole discretion, from
among those eligible, and the Board or the Committee shall determine, in its
sole discretion, the number of shares covered by each award or grant.
SECTION 5. INCENTIVE STOCK OPTIONS.
Incentive Stock Options may be granted either alone or in addition to other
awards granted under the Plan. Any Incentive Stock Option granted under the
Plan shall be in such form as the Board or the Committee may from time to time
approve, and the provisions of Incentive Stock Option awards need not be the
same with respect to each optionee.
The Board or the Committee shall have the authority to grant any Eligible
Employee Incentive Stock Options (with or without Stock Appreciation Rights)
except that Incentive Stock Options shall not be granted to employees of an
Affiliate. To the extent that any Stock Option does not qualify as an Incentive
Stock Option, it shall constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. Notwithstanding the foregoing, in the event an optionee
-4-
<PAGE>
voluntarily disqualifies an option as an Incentive Stock Option within the
meaning of Section 422 of the Code, the Board or the Committee may, but shall
not be obligated to, make such additional grants, awards or bonuses as the Board
or the Committee shall deem appropriate, to reflect the tax savings to the
Company which results from such disqualification.
Incentive Stock Options granted under the Plan shall be evidenced by
agreements to be consistent with and subject to the following terms and
conditions and shall contain such additional terms and conditions, consistent
with the terms of the Plan, as the Board or the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
under an Incentive Stock Option shall be the Fair Market Value of the Stock
on the date of the grant of the Incentive Stock Option; provided, however,
that the option price per share of an Incentive Stock Option granted to an
individual who, at the time the option is granted, owns directly or
indirectly more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of a subsidiary (a "Ten Percent
Owner"), shall be not less than one hundred ten percent (110%) of the Fair
Market Value on the date the option is granted.
(b) Option Term. The term of each Incentive Stock Option shall be
fixed by the Board or the Committee, but no Incentive Stock Option shall be
exercisable more than ten years after the date such option is granted.
Notwithstanding the foregoing, no Incentive Stock Option granted to a Ten
Percent Owner shall be exercisable more than five (5) years from the date
of grant of the option.
(c) Exercisability. Subject to paragraph (g) of this Section 5,
Incentive Stock Options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Board or
the Committee at grant. If the Board or the Committee provides, in its
discretion, that any Incentive Stock Option is exercisable only in
installments, the Board or the Committee may waive such installment
exercise provision at any time in whole or in part based on performance
and/or such other factors as the Board or the Committee may determine in
its sole discretion.
(d) Method of Exercise. Incentive Stock Options may be exercised in
whole or in part at any time during the option period, by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price, in cash,
by check or such other instrument as may be acceptable to the Board or the
Committee. As determined by the Board or the Committee, in its sole
discretion, at or after grant, payment in full or in part may also be made
in the form of unrestricted Stock owned by the optionee (based on the Fair
Market Value of the Stock on the date the option is exercised). An
optionee shall have the right to dividends or other rights of a stockholder
with respect to shares subject to the option only when the optionee has
given written notice of exercise and has paid in full for such shares.
(e) Non-transferability of Options. No Incentive Stock Option shall
be transferable by the optionee otherwise than by will or by the laws of
descent and distribution.
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All Incentive Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.
(f) Termination of Employment. In the event that an optionee during
his or her lifetime ceases to be an employee of the Company or of any
Subsidiary of the Company for any reason (including retirement) other than
death or Disability, any Incentive Stock Option or unexercised portion
thereof which was otherwise exercisable on the date of termination of
employment shall expire unless exercised within a period of three (3)
months from the date on which the optionee ceased to be an employee, but in
no event after the term provided in the optionee's stock option agreement.
In the event that an optionee ceases to be an employee of the Company or of
any Subsidiary of the Company for any reason (including retirement) other
than death or Disability prior to the time that an option is exercisable,
his or her Incentive Stock Option shall terminate immediately and be null
and void.
In the event that an optionee during his or her lifetime ceases
to be an employee of the Company or any Subsidiary of the Company by reason
of death or Disability, any Incentive Stock Option or unexercised portion
thereof which was otherwise exercisable on the date such optionee ceased
employment shall expire unless exercised within a period of one (1) year
from the date on which the optionee ceased to be an employee, but in no
event after the term provided in the optionee's stock option agreement. In
the event that an optionee during his or her lifetime ceases to be an
employee of the Company or any Subsidiary of the Company by reason of death
or Disability, any Incentive Stock Option or portion thereof which was not
exercisable on the date such optionee ceased employment shall become
immediately exercisable for a period of six (6) months from the date on
which the optionee ceased to be an employee, but in no event after the term
provided in the optionee's stock option agreement. In the event of the
death of an optionee, the option shall be exercisable by his or her
personal representatives, heirs or legatees, as provided herein.
(g) Limit on Value of Incentive Stock Options First Exercisable
Annually. To the extent that the aggregate Fair Market Value (determined at
the time the option is granted) of shares of Stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year (under all of the Company's option plans) exceeds
$100,000, such options shall be treated as Non-Qualified Stock Options.
(h) Restriction on Transfer of Underlying Shares. Each optionee shall
hold the shares purchased by him pursuant to the exercise of a Stock Option
granted under this Plan until the expiration of sixty (60) days from the
date of exercise. The Board or the Committee may waive the restriction
imposed by this paragraph and may, in its sole discretion, as a condition
to such waiver, require the optionee to sell such shares to the Company at
the original exercise price.
SECTION 6. NON-QUALIFIED STOCK OPTIONS.
The Board or the Committee may grant to Eligible Employees or Eligible
Particpants options under the Plan which are not Incentive Stock Options under
the provisions of Section 422 of the Code. Such Non-Qualified Stock Options
shall be evidenced by agreements in such form and
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consistent with this Plan as the Board or the Committee shall approve from time
to time, which agreements shall contain in substance the same terms and
conditions as set forth in Section 5 hereof with respect to Incentive Stock
Options; provided, however, that, subject to Section 14(f) hereof, the
limitations set forth in Sections 5(a), 5(b), 5(f), 5(g) and 5(h) shall not be
applicable to Non-Qualified Stock Options. Payment of the option exercise price
for a Non-Qualified Stock Option may be made in the form of Restricted Stock
owned by the optionee, in which case the shares received upon the exercise of
such Non-Qualified Stock Option shall be restricted or deferred, as the case may
be, in accordance with the original term of the Restricted Stock award in
question, except that the Board or the Committee may direct that such
restrictions or deferral provisions shall apply only to the number of such
shares equal to the number of shares of Restricted Stock surrendered upon the
exercise of such option. No shares of unrestricted Stock shall be issued until
full payment therefor has been made.
SECTION 7. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise When Granted in Conjunction With Stock Options.
Stock Appreciation Rights may be granted in conjunction with all or part of any
Stock Option granted under the Plan and may contain terms and conditions
different from those of the related Stock Option, except as otherwise provided
below. In the case of a Non-Qualified Stock Option, such rights may be granted
either at or after the time of the grant of such Non-Qualified Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of the grant of such Incentive Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise provided by the Board or the Committee at the time of grant, a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related Stock Option shall only be reduced if and to the
extent that the number of shares covered by the exercise or termination of the
related Stock Option exceeds the number of shares not covered by the Stock
Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance
with paragraph (d) of this Section 7, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (d) of this Section 7. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Grant and Exercise When Granted in Tandem With Stock Option. Stock
Appreciation Rights may be granted in tandem either at the time of grant of a
Non-Qualified Stock Option or at any time during the term of such Stock Option.
A Stock Appreciation Right may be exercised at any time to the extent that
the Stock Option to which it relates is then exercisable, and shall be subject
to the conditions applicable to such Stock Option. When a Stock Appreciation
Right is exercised in accordance with Section 7(d), the Stock Option to which it
relates shall cease to be exercisable to the extent of the number of shares with
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respect to which the Stock Appreciation Right is exercised. Similarly, when an
option is exercised, the Stock Appreciation Right relating to the shares covered
by such Stock Option exercise shall terminate. Any Stock Appreciation Right
which is outstanding on the last day of the term of the Stock Option to which it
is related shall be automatically exercised on such date for cash or Stock, as
determined by the Board or the Committee, without any action by the optionee.
(c) Grant and Exercise When Granted Alone. Stock Appreciation Rights may
be granted at the discretion of the Board or the Committee in a manner not
related to an award of a Stock Option. A Stock Appreciation Right granted under
this Section 7(c) is not exercisable for a period of six months from the date of
grant, unless a longer period is otherwise determined by the Board or the
Committee. The Stock Appreciation Right, granted under Section 7(c), shall be
exercisable in accordance with Section 7(d) over a period not to exceed ten
years. Any Stock Appreciation Right which is outstanding on the last day of the
exercisable period shall be automatically exercised on such date for cash or
Stock, as determined by the Board or the Committee, without any action by the
holder.
(d) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Board or the Committee, including
the following:
(i) Stock Appreciation Rights granted pursuant to Section 7(a) and
7(b) shall be exercisable only at such time or times and to the extent that
the Stock Options to which the Stock Appreciation Rights relate shall be
exercisable in accordance with the provisions of Sections 5 and 6 and this
Section 7 of the Plan; provided, however, that any Stock Appreciation Right
granted subsequent to the grant of the related Stock Option shall not be
exercisable during the first six months of the term of the Stock
Appreciation Right, except that this additional limitation shall not apply
in the event of death or Disability of the optionee prior to the expiration
of the six-month period.
(ii) Upon the exercise of a Stock Appreciation Right granted
pursuant to Section 7(a) or 7(b), an optionee shall be entitled to receive
an amount in cash or shares of Stock equal in value to the excess of the
Fair Market Value of one share of Stock over the option price per share
specified in the related Stock Option multiplied by the number of shares in
respect of which the Stock Appreciation Right shall have been exercised,
with the Board or the Committee having the right to determine the form of
payment. Upon the exercise of a Stock Appreciation Right granted pursuant
to Section 7(c), the holder shall be entitled to receive an amount in cash
or shares of Stock equal in value to the excess of the Fair Market Value of
one share of Stock at the date of such exercise over the Fair Market Value
of one share of Stock at the date the Stock Appreciation Right was granted
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Board or the
Committee having the right to determine the form of payment.
(iii) No Stock Appreciation Right shall be transferable by the holder
otherwise than by will or the laws of descent and distribution. All Stock
Appreciation Rights shall be exercisable, during the holder's lifetime,
only by the holder.
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(iv) Upon the exercise of a Stock Appreciation Right granted
pursuant to Section 7(a) or Section 7(b), the Stock Option or part thereof
to which such Stock Appreciation Right is related shall be deemed to have
been exercised for the purpose of the limitation set forth in Section 3 of
the Plan on the number of shares of Stock to be issued under the Plan.
(v) A Stock Appreciation Right granted in connection with an
Incentive Stock Option pursuant to Section 7(a), may be exercised only if
and when the market price of the Stock subject to the Incentive Stock
Option exceeds the exercise price of such Stock Option.
(vi) In its sole discretion, the Board or the Committee may provide,
at the time of grant of a Stock Appreciation Right under this Section 7,
that such Stock Appreciation Right can be exercised only in the event of a
"Change of Control" and/or a "Potential Change of Control" (as defined in
Section 13 below).
(vii) The Board or the Committee, in its sole discretion, may also
provide that in the event of a "Change of Control" and/or a "Potential
Change of Control" (as defined in Section 13 below) the amount to be paid
upon the exercise of a Stock Appreciation Right shall be based on the
"Change of Control Price" (as defined in Section 13 below).
(viii) Any exercise by a participant of all or a portion of a Stock
Appreciation Right for cash, may only be made during the period beginning
on the third business day following the date of the Company's release of
its quarterly or annual summary statements of sales and earnings to the
public and ending on the twelfth business day following such date;
provided, however, that the foregoing shall not apply to any exercise by a
participant of a Stock Appreciation Right for cash where the date of
exercise is automatic or fixed in advance under the Plan and is outside the
control of the participant.
SECTION 8. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under the Plan. The Board or the
Committee shall determine the Eligible Employees or Eligible Participants to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the price, if any, to be paid by the
recipient of Restricted Stock, the time or times within which such awards may be
subject to forfeiture, and all other conditions of the awards. However, in no
event shall any restriction, including risk of forfeiture, attach to the
Restricted Stock for a term to exceed ten years from the date such Stock was
granted. The Board or the Committee may also condition the grant of Restricted
Stock upon the attainment of specified performance goals, or such other criteria
as the Board or the Committee may determine, in its sole discretion. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement") and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions.
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(i) Awards of Restricted Stock must be accepted within a period of
60 days (or such shorter period as the Board or the Committee may specify)
after the award date by executing a Restricted Stock Award Agreement and
paying whatever price, if any, is required.
(ii) Each participant who is awarded Restricted Stock shall be
issued a stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of the participant, and
shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Just For Feet, Inc. 1997 Employee Incentive Plan
and a Restricted Stock Agreement entered into between the registered
owner and Just For Feet, Inc. Copies of such Plan and Agreement are
on file in the offices of Just For Feet, Inc., 7400 Cahaba Valley
Road, Birmingham, Alabama 35242."
(iii) The Board or the Committee shall require that the stock
certificates evidencing such shares be held in custody by the Company until
the restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 8 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and Restricted Stock
Award Agreements, during the period of six months after the award or such
longer period as may be set by the Board or the Committee commencing on the
grant date (the "Restriction Period"), the participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
awarded under the Plan. Within these limits, and subject to Section 14(f)
hereof, the Board or the Committee may, in its sole discretion, provide for
the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part based on performance and/or such
other factors as the Board or the Committee may determine, in its sole
discretion.
(ii) Except as provided in paragraph (c)(i) of this Section 8, the
participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a stockholder of the Company, including the right to
receive any dividends.
Dividends paid in cash with respect to shares of Restricted Stock
shall not be subject to any restrictions or subject to forfeiture.
Dividends paid in stock of the Company or stock received in connection with
a stock split with respect to Restricted Stock shall be subject to the same
restrictions as on such Restricted Stock. Certificates for shares of
unrestricted Stock shall be delivered to the participant promptly after,
and only after, the period of forfeiture shall expire without forfeiture in
respect of such shares of Restricted Stock.
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(iii) Subject to the provisions of the Restricted Stock Award
Agreement and this Section 8, upon termination of employment for any reason
during the Restriction Period, all shares still subject to restriction
shall be forfeited by the participant, and the participant shall only
receive the amount, if any, paid by the participant for such forfeited
Restricted Stock.
(iv) In the event of special hardship circumstances of a participant
whose employment is involuntarily terminated (other than for Cause), the
Board or the Committee may, in it sole discretion, waive in whole or in
part any or all remaining restrictions with respect to such participant's
shares of Restricted Stock.
SECTION 9. PERFORMANCE AWARDS.
(a) Administration. Shares of Stock or a payment in cash may be
distributed under the Plan upon the attainment of achievement objectives to a
participant as a Performance Award. The Board or the Committee shall determine
the Eligible Employees or Eligible Participants to whom the Performance Award is
granted, the terms and conditions of the achievement objectives, the term of the
performance period, and the level and form of the payment of the Performance
Award.
(b) Achievement Objectives. The Board or the Committee, at its sole
discretion may establish, under this Section 9, achievement objectives either in
terms of Company-wide objectives or in terms of objectives that are related to
the specific performance of the participant or the division, subsidiary,
department or function within the Company in which the participant is engaged.
A minimum level of achievement at the discretion of the Board or the Committee,
may be established.
If at the end of the performance period the specified objectives have been
attained, the participant is deemed to have fully earned the Performance Award.
If such achievement objectives have not been attained, the participant is deemed
to have partly earned the Performance Award and becomes eligible to receive a
portion of the total award, as determined by the Board or the Committee. If a
required minimum level of achievement has not been met, the participant is
entitled to no portion of the Performance Award. The Company may adjust the
payment of awards or the achievement objectives if events occur or circumstances
arise which would cause a particular payment or set of achievement objectives to
be inappropriate as a measure of performance.
(c) Terms and Conditions. A participant to whom a Performance Award has
been granted is given achievement objectives to be reached over a specified
period, the "performance period." Generally this period shall be not less than
one year but in no case shall the period exceed five years.
Any participant granted a Performance Award pursuant to this Section 9 who
by reason of death, disability or retirement terminates his position with the
Company before the end of the performance period is entitled to receive a
portion of any earned Performance Award.
A participant who terminates his position with the Company for any other
reason forfeits all rights under the Performance Award.
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SECTION 10. LOAN PROVISIONS.
With the consent of the Board or the Committee, the Company may make, or
arrange for, a loan or loans to an Eligible Employee or Eligible Participants
with respect to the exercise of any Stock Option granted under the Plan and/or
with respect to the payment of the purchase price, if any, of any Restricted
Stock awarded hereunder. The Board or the Committee shall have full authority
to decide whether to make a loan or loans hereunder and to determine the amount,
term and provisions of any such loan or loans, including the interest rate to be
charged in respect of any such loan or loans, whether the loan or loans are to
be with or without recourse against the borrower, the terms on which the loan is
to be repaid and the conditions, if any, under which the loan or loans may be
forgiven.
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the right of an
optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, or Performance Award theretofore granted, without the
optionee's or participant's consent, or which without the approval of the
shareholders would (a) except as expressly provided in this Plan, increase the
total number of shares reserved for the purpose of the Plan; or (b) change the
category or class of employees eligible to receive Incentive Stock Options under
the Plan.
The Plan may at any time or from time to time be terminated, modified or
amended by the affirmative vote of not less than a majority of the votes
entitled to be cast thereon by the Company's stockholders. The Board or the
Committee may amend the terms of any award or option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any holder without his consent. Subject to Section 14(f) hereof, the Board or
the Committee may also substitute new Stock Options for previously granted Stock
Options including options granted under other plans applicable to the
participant and previously granted Stock Options having higher option prices.
SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing set forth herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Board or the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or a payment in lieu of or with respect
to awards hereunder, provided, however, that the existence of such trusts or
other arrangements is consistent with the unfunded status of the Plan.
SECTION 13. CHANGE OF CONTROL.
The following acceleration and valuation provisions shall apply in the
event of a "Change of Control" as defined in this Section 13:
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(a) In the event of a "Change of Control" as defined in paragraph (b) of
this Section 13, unless otherwise determined by the Board or the Committee in
writing at or after grant, but prior to the occurrence of such Change of
Control:
(i) any Stock Appreciation Rights and any Stock Options awarded
under the Plan which have been outstanding for at least six months, if not
previously exercisable and vested shall become fully exercisable and
vested;
(ii) with the exception of the six month restriction in Section
8(c)(i), the restrictions and deferral limitations applicable to any
Restricted Stock award under the Plan shall lapse and such shares and
awards shall be deemed fully vested; and
(iii) the value of all outstanding Stock Options, Stock Appreciation
Rights, Restricted Stock or Performance Awards shall, to the extent
determined by the Board or the Committee at or after grant, be cashed out
on the basis of the "Change of Control Price" (as defined in paragraph (c)
of this Section 13) as of the date the Change of Control occurs, or such
other date as the Board or the Committee may determine prior to the Change
of Control.
(b) For purpose of paragraph (a) of this Section 13, a "Change of Control"
means the happening of any of the following:
(i) when any "person," as such term used in Section 13(d) and 14(d)
of the Exchange Act (other than Harold Ruttenberg or any affiliate of
Harold Ruttenberg, the Company or a Subsidiary or any Company employee
benefit plan (including its trustee)), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly
of securities of the Company representing 50.01 percent or more of the
combined voting power of the Company's then outstanding securities;
(ii) when, during any period of two consecutive years during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board cease, for any reason other than death, to
constitute at least a majority thereof, unless each director who was not a
director at the beginning of such period was elected by, or on the
recommendation of, at least two-thirds of the directors at the beginning of
such period; or
(iii) the occurrence of a transaction requiring stockholder approval
for the acquisition of the Company by an entity other than the Company or a
Subsidiary through purchase of assets, or by merger, or otherwise.
(c) For purposes of this Section 13, "Change of Control Price" means the
highest price per share paid in any transaction reported on the Nasdaq Stock
Market or the New York Stock Exchange Composite Tape, whichever then applies to
the Stock, or paid or offered in any transaction related to a potential or
actual Change of Control of the Company at any time during the preceding 60 day
period as determined by the Board or the Committee, except that in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, such price shall
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be based only on transactions reported for the date on which the Board or the
Committee decides to cash out such options.
SECTION 14. GENERAL PROVISIONS.
(a) All certificates for shares of Stock delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the Board or the
Committee may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the Board or the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee of the Company, any Subsidiary or any Affiliate,
any right to continued employment with the Company, a Subsidiary or an
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company, a Subsidiary or an Affiliate to terminate the employment of any
of its employees at any time.
(c) Each participant shall, no later than the date as of which the value
of an award first becomes includable in the gross income of the participant for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Board or the Committee regarding payment of, any federal,
state, or local taxes of any kind required by law to be withheld with respect to
the award. The obligations of the Company under the Plan shall be conditional on
such payment or arrangements and the Company (and, where applicable, its
Subsidiaries and Affiliates), shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant. A participant may irrevocably elect to have the withholding tax
obligations or, in the case of all awards hereunder except Stock Options which
have related Stock Appreciation Rights, if the Board or the Committee so
determines, any additional tax obligation with respect to any awards hereunder
satisfied by (a) having the Company withhold shares of Stock otherwise
deliverable to the participant with respect to the award or (b) delivering to
the Company shares of unrestricted Stock.
(d) At the time of grant or purchase, the Board or the Committee may
provide in connection with any grant or purchase made under this Plan that the
shares of Stock received as a result of such grant or purchase shall be subject
to a right of first refusal, pursuant to which the participant shall be required
to offer the Company any shares that the participant wishes to sell, with the
price being the then Fair Market Value of the Stock, subject to provisions of
Section 14 hereof and to such other terms and conditions as the Board or the
Committee may specify at the time of grant.
(e) No member of the Board or the Committee, nor any officer or employee
of the Company acting on behalf of the Board or the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Board or the
Committee and each and any officer or employee of the Company
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acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(f) Notwithstanding any provision herein to the contrary, the Board or the
Committee shall not grant or award Non-Conforming Awards (as defined below)
which, in the aggregate, represent in excess of ten percent (10%) of the total
number of shares of Stock reserved and available for distribution under the Plan
(as such number may be amended by the shareholders of the Company from time to
time). As used herein, "Non-Conforming Awards" means (i) Non-Qualified Stock
Options granted pursuant to Section 6 hereof with an option price less than the
Fair Market Value of the Stock on the date of grant; (ii) Stock Options granted
in exchange for the cancellation of previously granted Stock Options including
options granted under other plans applicable to the participant and previously
granted Stock Options having higher option prices, as contemplated by the second
paragraph of Section 11 hereof; (iii) awards of Restricted Stock pursuant to
Section 8 hereof with a Restricted Period (as defined in Section 8(c)(1)) of
less than one year for performance-based awards and three years for tenure-based
awards; and (iv) awards of Restricted Stock with respect to which the Restricted
Period has been accelerated or waived by the Board or the Committee pursuant to
Section 8(c)(1) hereof, except in the event of a Change of Control of the
Company or the retirement, death or Disability of a participant."
SECTION 15. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date it is approved by a majority vote
of the Company's stockholders.
SECTION 16. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock or Performance
Award shall be granted pursuant to the Plan on or after the tenth anniversary of
the date of stockholder approval, but awards theretofore granted may extend
beyond that date.
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<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st day of
May, 1997 by and between JUST FOR FEET, INC., an Alabama corporation (the
"Company"), and ERIC L. TYRA (the "Executive"), an individual.
For and in consideration of the mutual covenants described below, the
parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ Executive, and Executive
agrees to accept such employment, upon the following terms and conditions.
2. DUTIES. Executive shall assume the responsibilities and perform the
duties of Executive Vice President and Chief Financial Officer of the Company.
Such duties may be revised from time to time at the sole discretion of the Board
of Directors of the Company, and Executive shall perform such duties as the
Company may direct from time to time. Executive agrees to devote his full time
and energy to the furtherance of the business of the Company and shall be loyal
to the Company and use his best efforts to further its interests, and shall not
during the term hereof, without the prior written consent of the Company, work
or perform services in any advisory or other capacity for any individual, firm,
company, or corporation other than for the Company.
3. COMPENSATION.
3.1 Base Salary. The Company shall pay Executive as compensation for all
-----------
the services to be rendered by Executive hereunder a base salary equal to a rate
of $250,000 per year ("Base Salary") for each of the years during the Initial
Term hereof (as hereinafter defined). Thereafter, if this Agreement is extended
pursuant to Section 4(a) below, Executive's base salary shall be subject to
review and increase in the discretion of the Board of Directors. Executive's
salary shall be payable beginning with the period starting May 19, 1997 in equal
monthly installments and shall be prorated on a daily basis for the years in
which Executive commences and terminates his employment pursuant to this
Agreement. The Company's obligation to pay Executive any compensation shall
cease upon termination of Executive's employment with the Company; provided,
however, if Executive's employment is terminated due to his death, Company shall
pay as a lump sum payment to the estate of Executive his Base Salary for one
year.
3.2 Living Allowance. During the Initial Term (as hereinafter defined)
----------------
Company shall pay to Executive as an annual living allowance a sum equal to the
product obtained by multiplying $500,000 times Executive's mortgage interest
rate on the home he purchases in the Birmingham, Alabama area. Said amount
shall be payable in equal monthly installments beginning with the first month
after Executive purchases his home as set forth in the preceding sentence; and
shall be prorated on a daily basis for the years in which Executive commences
and terminates his employment relationship with the Company.
<PAGE>
3.3 Bonus.
-----
(a) Executive shall be eligible to receive a performance-based bonus during
each year of his employment hereunder beginning with the year ending January 31,
1998 equal in an amount up to fifty (50%) percent of Base Salary per year. Such
bonus shall be based on the performance of the Company and shall be calculated
and paid to Executive on the same basis as the Company's Chief Executive Officer
is paid a bonus.
(b) On May 18, 2002, if Executive is employed hereunder or if Executive is
not employed hereunder, if Executive's employment hereunder has been terminated
other than "for cause" (as defined in Section 4.2 below), or voluntarily by
Executive, Company shall pay Executive a bonus of $500,000.00.
3.4 Stock Options. Subject to Executive's execution of and compliance with
-------------
the terms of that certain Just For Feet, Inc. Incentive Stock Option Agreement
substantially in the form attached hereto as Exhibit A, which executed agreement
shall in all respects be in form and substance satisfactory to the Company,
Executive is hereby granted options to acquire 200,000 shares of the common
stock of the Company.
3.5 Other Benefits. Executive shall be entitled to receive health and
--------------
dental insurance benefits, vacation benefits and other benefits substantially
similar to those provided to other executives of the Company. Company shall
have the right to change said benefit program at any time or times.
3.6 Reimbursement of Expenses. In addition to the compensation described
-------------------------
in this Agreement, Employee shall be entitled to reimbursement by Company for
all actual, reasonable and direct expenses incurred by him in the performance of
his duties hereunder, provided such expenses are properly characterized as being
business expenses that are properly tax deductible for Company, and further
provided that such expenses were incurred only in accordance with the policies
and procedures established by the Board of Directors from time to time.
Employee shall provide Company with written documentation of such expenses in
form complying with the records required of Company by the Internal Revenue
Service and appropriate state authorities for tax deductibility purposes in such
cases, and reimbursement for each item of approved expense shall be made within
a reasonable time after receipt by Company of the written documentation thereof.
3.7 Vacation. The Employee shall be entitled to two (2) weeks annual paid
--------
vacation and such holidays as the Board of Directors may approve. In the event
of any termination of employment, Executive shall not be entitled to receive
payment for any unused vacation time.
3.8 Withholdings. All amounts payable to Executive pursuant to this
------------
Agreement shall be subject to all applicable withholdings as required by all
laws.
4. TERM AND TERMINATION.
4.1 Term. This Agreement shall be effective upon the date first set forth
----
above and, unless earlier terminated as provided herein, shall remain in full
force and effect for an initial period which ends on May 18, 2002 (the "Initial
Term"). This Agreement may be renewed on the same terms
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<PAGE>
and conditions for additional successive periods of one (1) year upon the
execution of a written agreement by the parties hereto.
4.2 Termination. Notwithstanding anything contained herein to the
-----------
contrary, the Company may terminate Executive's employment immediately for
cause. For purposes of this Agreement, "for cause" shall mean the occurrence of
the following: (i) the commission of any act of fraud, dishonesty,
misappropriation or moral turpitude on the part of the Executive, (ii) a
material breach by the Executive of, or a material failure by the Executive to
perform, his duties and obligations hereunder, (iii) continued neglect by
Executive in fulfilling his duties as an executive officer of the Company as a
result of alcoholism, addiction to illegal substances, or excessive unauthorized
absenteeism, after written notification from the Board of Directors of such
neglect, setting forth in detail the matters involved and Employee's failure to
cure the problem resulting in such neglect within a reasonable time thereafter,
(iv) the Executive becomes Completely Disabled (as hereinafter defined), or (v)
the death of Executive. For purposes of this Agreement, "Completely Disabled"
shall mean Executive's inability, due to illness, accident or any other physical
or mental incapacity, to perform the duties provided for herein for an aggregate
of 91 days during any period of 180 consecutive days during the term hereof. In
addition, termination of Executive's employment upon the occurrence of any act
specified in (i) through (iii) above shall result, to the extent not otherwise
prohibited by law, in Executive's loss of any benefits provided by the Company.
4.3 Return of Property. Upon termination of employment for any reason,
------------------
Executive shall return immediately to the Company all documents, property, and
other records of the Company, and all copies thereof, within Executive's
possession, custody or control, including but not limited to any materials
containing any Trade Secrets or Confidential Information (each as defined below)
or any portion thereof.
5. RELOCATION EXPENSES.
-------------------
The Company agrees to reimburse Employee for the following expenses incurred
with respect to Employee's relocation from Augusta, Georgia to Birmingham,
Alabama: (i) reasonable expenses incurred for the movement of normal household
goods provided Executive obtains bids from three (3) moving companies and takes
the lowest bid, (ii) actual closing costs and real estate commissions paid with
respect to the sale of Employee's existing home up to a maximum of six (6%)
percent of the sales price, (iii) the costs of temporary living quarters for
Executive in Birmingham, Alabama, not to exceed $_____ per month until the
earlier of: (i) the date Executive sells his home in Augusta, Georgia or (ii)
six (6) months from the date hereof; and (v) the reasonable costs of two (2)
trips for Executive and his spouse to Birmingham, Alabama to search for a new
residence.
To the extent that the amounts payable to Executive pursuant to this Section
5 are taxable to Executive, Company shall pay to Executive an amount equal to
the federal and state income tax payable by Executive on said amounts (grossed
up for taxes).
6. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
6.1 Confidentiality. The Company may disclose to Executive certain Trade
---------------
Secrets and Confidential Information (each as defined below). Executive
acknowledges and agrees that the Trade Secrets and Confidential Information are
the sole and exclusive property of the Company (or a third party providing such
information to the Company) and that the Company or such third party owns
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<PAGE>
all worldwide rights therein under patent, copyright, trade secret, confidential
information, or other property rights laws. Executive acknowledges and agrees
that the disclosure of the Trade Secrets and Confidential Information to
Executive does not confer upon Executive any license, interest or rights of any
kind in or to the Trade Secrets or Confidential Information. Executive may use
the Trade Secrets and Confidential Information solely for the benefit of the
Company while Executive is employed or retained by the Company. Except in the
performance of services for the Company, Executive will hold in confidence and
not reproduce, distribute, transmit, reverse engineer, decompile, disassemble,
or transfer, directly or indirectly, in any form, by any means, or for any
purpose, the Trade Secrets or the Confidential Information or any portion
thereof. Executive agrees to return to the Company, upon request by the Company,
the Trade Secrets and Confidential Information and all materials relating
thereto.
6.2 Duration. Executive's obligations under this Agreement with regard to
--------
the Trade Secrets shall remain in effect for as long as such information shall
remain a trade secret under applicable law. Executive acknowledges that its
obligations with regard to the Confidential Information shall remain in effect
while Executive is employed or retained by the Company and for five (5) years
thereafter. As used herein, "Trade Secrets" means information of the Company,
its licensors, suppliers, customers, or prospective licensors or customers,
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, or a list of actual
or potential customers or suppliers, which (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. As used herein,
"Confidential Information" means information, other than Trade Secrets, that is
of value to its owner and is treated as confidential, including, but not limited
to, future business plans, financial information, marketing strategies and
advertising campaigns, information regarding Company's executives and employees,
and the terms and conditions of this Agreement. For purposes of this Agreement,
"Confidential Information" and "Trade Secrets" shall not include the following:
(i) anything or any information that was or becomes generally available to the
public other than as a result of a disclosure by the Executive, (ii) was
available to the Executive on a nonconfidential basis prior to its disclosure to
the Executive by the Company, (iii) becomes available to the Executive on a
nonconfidential basis from a source other than the Company, provided that such
source is not prohibited from disclosing such information by a contractual or
legal obligation to the Company of such information, or (iv) that the Executive
can conclusively show by documentary evidence was independently developed by the
Executive without use of any information disclosed to Executive by the Company.
Executive and the Company acknowledge that the intent of this Section 5 is not
to restrict Executive's employment following his tenure with the Company, but
rather it is to protect the rights that the Company has in its Trade Secrets and
Confidential Information.
7. COVENANT NOT TO COMPETE.
7.1 Term. Executive will not, during the term of his employment with the
----
Company and for a period of one (1) year after termination for any reason of his
employment with the Company, directly or indirectly, engage in or carry on
within a fifty (50) mile radius of any of the Company's retail outlets existing
upon the date of termination of such employment (the "Territory"), any business,
like or similar to that engaged in by Company, either individually or as a
stockholder, director, officer, consultant, independent contractor, Executive,
agent, member or otherwise of or
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<PAGE>
through any corporation, partnership, association, joint venture, firm,
individual or otherwise, or in any other capacity: The above one (1) year period
shall be extended by any period of time during which Executive is in default of
the covenants contained in this Agreement.
7.2 Remedies. In the event of a breach or threatened breach by Executive
--------
of all or any part of the provisions of Section 7.1, the Company shall be
entitled to an injunction restraining Executive from such breach without
limiting any other rights or remedies available to the Company for such breach
or threatened breach.
7.3 Exclusions. Notwithstanding any provision to the contrary herein
----------
contained, Section 7.1 shall not apply:
(i) Upon the termination of the Executive's employment by the Company
other than for cause within one (1) year following a Sale of the Company; and
(ii) Upon the voluntary termination of employment by the Executive for
any reason within the thirty (30) day period immediately after the one (1) year
period following a Sale of the Company.
7.4 Sale of Company.
---------------
(a) In the event of a Sale of the Company following the execution of this
Agreement, Executive expressly agrees that the terms and conditions set forth in
this Section 7 shall be binding upon Executive and shall be fully enforceable by
the successor to the Company.
(b) For purposes of this Agreement, "Sale of the Company" shall mean (i)
the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (a "Person"), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either the
then outstanding shares of common stock of the Company (the "Outstanding Common
Stock") or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"), or (ii) consummation by the Company of a
reorganization, merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company; unless, following such
acquisition of beneficial ownership or transaction (A) more than 60% of the then
outstanding shares of common stock of the Person resulting from such
reorganization, merger or consolidation, or (B) more than 60% of the then
outstanding shares of common stock of the Person acquiring such beneficial
ownership or assets, and the combined voting power of the then outstanding
voting securities of such Person entitled to vote generally in the election of
directors of such Person, is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such acquisition or transaction, in
substantially the same proportion as their ownership of Outstanding Common Stock
and Outstanding Voting Securities prior to such event.
8. CUSTOMER NON-SOLICITATION. Executive agrees that for a period of
eighteen (18) months immediately following termination of Executive's employment
with the Company for any reason, including, without limitation, voluntary
resignation from employment by Executive (the "Non-Solicitation Period"),
Executive shall not, on Executive's own behalf or on behalf of any
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<PAGE>
person, firm, partnership, association, corporation or business organization,
entity or enterprise, solicit, contact, call upon, communicate with or attempt
to communicate with any customer or prospect of the Company, or any
representative of any customer or prospect of the Company, with a view to
selling or providing any product or service competitive or potentially
competitive with any product or service sold or provided or under development by
the Company during the time of two (2) years immediately preceding cessation of
Executive's employment with the Company, provided that the restrictions set
forth in this paragraph shall apply only to customers or prospects of the
Company, or representatives of customers or prospects of the Company, with which
Executive had contact during such two (2) year period. Executive acknowledges
that the Company provides products and services to customers throughout the
Territory.
9. EMPLOYEE NON-SOLICITATION. Executive agrees that Executive shall not
call upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting any person who is or was an employee of the Company within the Non-
Solicitation Period, for the purpose of having such person work in any other
corporation, association, entity, or business engaged in providing products or
services of the same or similar kind as offered by the Company.
10. EQUITABLE RELIEF. The parties to this Agreement acknowledge that a
breach by Executive of any of the terms or conditions of this Agreement will
result in irrevocable harm to the Company and that the remedies at law for such
breach may not adequately compensate the Company for damages suffered.
Accordingly, Executive agrees that in the event of such breach, the Company
shall be entitled to injunctive relief or such other equitable remedy as a court
of competent jurisdiction may provide. Nothing contained herein will be
construed to limit the Company's right to any remedies at law, including the
recovery of damages for breach of this Agreement.
11. ARBITRATION. Any difference, claim or matter in dispute arising
between the parties out of this Agreement or connected therewith (other than
claims by the Company to enforce the provisions of Paragraphs 7 through 10
hereof) shall be submitted by them to arbitration by a panel of three
arbitrators appointed by and in accordance with the rules of the American
Arbitration association. The determination or decision rendered by the
arbitrators shall be final and absolute. The arbitrators shall apply Alabama law
and the arbitration shall take place in Birmingham, Alabama. The decision of
the arbitrators may be entered as a judgment in any court of the State of
Alabama or elsewhere.
12. CHANGE IN CONTROL OF THE COMPANY.
--------------------------------
12.1 Subject to Section 12.2 hereof, the Company shall pay the Executive the
payments described in this Section 12.1 (the "Change of Control Payments") upon
the termination of the Executive's employment following a Change in Control and
during the term of this Agreement, in addition to any of the then unpaid
compensation and benefits previously required to be paid to Executive through
the date of termination, unless such termination is (i) by the Company for
cause, or (ii) by reason of death, disability (as defined in Section 4.2) or
voluntary resignation or retirement of Executive. The Change of Control
Payments shall be as follows:
(a) In lieu of any further salary payments to the Executive for periods
subsequent to the date of termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the Executive a
lump sum severance payment, in cash, equal to two (2) times
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<PAGE>
the Executive's annual Base Salary in effect immediately prior to the occurrence
of the event or circumstance upon which the notice of termination is based;
(b) The Company shall pay to the Executive a lump sum amount, in cash,
equal to the sum of (i) any annual and quarterly performance or discretionary
bonuses which have been allocated or awarded to the Executive for a completed
fiscal year preceding the date of termination but has not yet been paid
(pursuant to Section 3.3 hereof or otherwise), and (ii) a pro rata portion of
any annual and quarterly performance or discretionary bonuses for the fiscal
year in which the date of termination occurs, determined by multiplying the
Executive's bonuses awarded or paid for the most recently completed fiscal year
by a fraction, the numerator of which shall be the number of full days the
Executive was employed by the Company during the fiscal year in which the
Executive's date of termination occurred and the denominator of which shall be
three hundred and sixty-five (365) days; and
(c) For a twelve (12) month period after the date of termination, the
Company shall arrange to provide the Executive with life, disability, accident
and health insurance benefits substantially similar to those which the Executive
is receiving immediately prior to the notice of termination (without giving
effect to any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason). Benefits otherwise receivable by the
Executive pursuant to this Section 12.1(c) shall be reduced to the extent
comparable benefits are actually received by or made available to the Executive
without cost during the twelve (12) month period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive). If the benefits
provided to the Executive under this Section 12.1.(c) shall result in a
decrease, pursuant to Section 12.2, in the Change of Control Payments and these
Section 12.1(c) benefits are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt of comparable benefits, the Company
shall, at the time of such reduction, pay to the Executive the lesser of (a) the
amount of the decrease made in the Change of Control Payments pursuant to
Section 12.2, or (b) the maximum amount which can be paid to the Executive
without being, or causing any other payment to be, nondeductible by the Company
by reason of section 280G of the Code.
12.2 Notwithstanding any other provisions of this Agreement, in the event
that any payment or benefit received or to be received by the Executive in
connection with and contingent on a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (all such payments and benefits, including the Change of Control
Payments, being hereinafter called "Total Payments") would not be deductible (in
whole or part), by the Company, an affiliate or person making such payment or
providing such benefit, as a result of section 280G of the Code, then, to the
extent necessary to make the remaining portion of the Total Payments deductible
(and after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan, arrangement or
agreement), (A) the cash Change of Control Payments and/or other cash payments
provided for hereunder, in each case, to the extent still unpaid, shall first be
reduced (if necessary, to zero), and (B) all other noncash Change of Control
Payments and/or other noncash benefits provided for hereunder, in each case, to
the extent still unfurnished, shall next be reduced (if necessary, to zero), and
(C) the Executive shall have no right to receive hereunder, and neither the
Company, any person whose actions result in a Change in Control or any person
affiliated with the Company or such person shall be obligated to make, pay or
furnish to the
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<PAGE>
Executive hereunder any payment or benefit in excess of those payments or
benefits provided hereunder as reduced, if applicable, pursuant to clause (A) or
clause (B) above. For purposes of this limitation (i) no portion of the Total
Payments the receipt or enjoyment of which the Executive shall have effectively
waived in writing prior to the date of termination shall be taken into account,
(ii) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (iii) the Change of Control Payments shall be
reduced only to the extent necessary so that the Total Payments (other than
those referred to in clauses (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning of
section 280G(b)(4)(B) of the Code or are otherwise not subject to disallowance
as deductions, in the opinion of the tax counsel referred to in clause (ii); and
(iv) the value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Section 12.2, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate provided in section
1274(b)(2)(B) of the Code from the date of the Executive's receipt of such
excess until the date of such payment.
12.3 The payments and other items provided for in Section 12.1 (other than
Section 12.1(c)) hereof shall be made not later than the fifteenth (15th) day
following the date of termination or the date of exercise by Executive of any of
Executive's rights hereunder; provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in Section 12.2 hereof,
cannot be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the date of termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 12.3, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from outside
counsel, auditors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
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12.4 The Company also shall pay to the Executive all legal and accounting
fees and expenses incurred by the Executive as a result of a termination which
entitles the Executive to the Change of Control Payments (including all such
fees and expenses, if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder). Such payments shall be made within fifteen (15)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
12.5 For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(i) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any persons becomes the beneficial owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired
directly from the Company or its affiliates, as such term is defined
in the rules and regulations of the Securities and Exchange
Commission) representing 50.1% or more of the combined voting power of
the Company's then outstanding securities; or
(II) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at
the beginning of such period constitute the Board and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(I), (III) or (IV) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(III) the shareholders of the Company approve a merger or statutory
share exchange of the Company with any other corporation, other than
(i) a merger or statutory share exchange which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or statutory share exchange, or (ii) a merger or statutory
share exchange effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires more than 25% of
the combined voting power of the Company's then outstanding
securities; or
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(IV) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
(ii) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(iii) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, of any one of the
following acts by the Company, or failures by the Company to act:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as an executive officer of the Company or
a substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately prior to
the Change in Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time;
(III) the relocation of the Company's principal executive
offices to a location outside a forty (40) mile radius from the city
limits of Birmingham, Alabama or the Company's requiring the Executive
to be based anywhere other than the metropolitan area in which the
Executive is based immediately prior to the Change in Control except
for required travel on the Company's business to an extent
substantially consistent with the Executive's present business travel
obligations;
(IV) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the Executive's
current compensation or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation, including but not limited to the Company's stock
option, incentive compensation, bonus and other plans or any
substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to
other participants, as existed at the time of the Change in Control;
or
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
dental, health and accident, or disability
-10-
<PAGE>
plans in which the Executive was participating at the time of the
Change in Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the
Company to provide the Executive with the number of paid vacation days
to which the Executive is entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control;
provided, that, the Executive's right to terminate Executive's employment for
- --------------
Good Reason shall not be affected by the Executive's incapacity due to physical
or mental illness and the Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(iv) "person" shall mean legal person, whether an individual or an
entity, as the context may require.
13. SEVERABILITY. If any provision or part of any provision of this
Agreement is held invalid or unenforceable by a court of competent jurisdiction,
such holding shall not affect the enforceability of any other provisions or
parts thereof, and all other provisions and parts thereof shall continue in full
force and effect.
14. MISCELLANEOUS. This Agreement shall not be amended or modified except
by a writing executed by both parties. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns. Due to the
personal nature of this Agreement, Executive shall not have the right to assign
Executive's rights or obligations under this Agreement without the prior written
consent of Company. This Agreement shall be governed by the laws of the State
of Alabama without regard to its rules governing conflicts of law. This
Agreement and any attached exhibits represent the entire understanding of the
parties concerning the subject matter hereof and supersede all prior
communications, agreements and understandings, whether oral or written, relating
to the subject matter hereof. All communications required or otherwise provided
under this Agreement shall be in writing and shall be deemed given when
delivered to the address provided below such party's signature (as may be
amended by notice from time to time), by hand, by courier or express mail, or by
registered or certified United States mail, return receipt requested, postage
prepaid. Exhibit A attached hereto is incorporated herein by this reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal effective as of the date first above written.
JUST FOR FEET, INC.
By: /s/ Harold Ruttenberg
----------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
[CORPORATE SEAL]
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<PAGE>
Address:
153 Cahaba Valley Parkway North
Birmingham, Alabama 35124
EXECUTIVE:
/s/ Eric L. Tyra
----------------------------------(SEAL)
ERIC L. TYRA
Address:
605 High Hampton Drive
Martinez, Georgia 30907
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<PAGE>
Exhibit 10.4.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 8th day of
January, 1998 by and between JUST FOR FEET, INC., an Alabama corporation (the
"Company"), and ADAM J. GILBURNE (the "Executive"), an individual.
For and in consideration of the mutual covenants described below, the
parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ Executive, and Executive
agrees to accept such employment, upon the following terms and conditions. The
Agreement supersedes and cancels that certain Employment Agreement between
Company and Executive dated March 15, 1994.
2. DUTIES. Executive shall assume the responsibilities and perform the
duties of President, Superstore Division of the Company. Such duties may be
revised from time to time at the sole discretion of the Board of Directors of
the Company, and Executive shall perform such duties as the Company may direct
from time to time. Executive agrees to devote his full time and energy to the
furtherance of the business of the Company and shall be loyal to the Company and
use his best efforts to further its interests, and shall not during the term
hereof, without the prior written consent of the Company, work or perform
services in any advisory or other capacity for any individual, firm, company, or
corporation other than for the Company.
3. COMPENSATION.
3.1 Base Salary. The Company shall pay Executive as compensation for all
-----------
the services to be rendered by Executive hereunder a base salary equal to a rate
of $300,000 per year ("Base Salary") for each of the years during the Initial
Term hereof (as hereinafter defined). Thereafter, if this Agreement is extended
pursuant to Section 4.1 below, Executive's base salary shall be subject to
review and increase in the discretion of the Board of Directors. Executive's
salary shall be payable beginning with the period starting January 8, 1998 in
equal monthly installments and shall be prorated on a daily basis for the years
in which Executive commences and terminates his employment pursuant to this
Agreement. The Company's obligation to pay Executive any compensation shall
cease upon termination of Executive's employment with the Company; provided,
however, if Executive's employment is terminated due to his death, Company shall
pay to the estate of Executive his Base Salary for one year in twelve (12) equal
monthly payments.
3.2 Bonus.
-----
Executive shall be eligible to receive a performance-based bonus during each
year of his employment hereunder beginning with the year ending January 31, 1998
equal in an amount up to fifty percent (50%) of Base Salary per year. Such
bonus shall be based on the performance of the Company and shall be calculated
and paid to Executive on the same basis as the Company's Chief Executive Officer
is paid a bonus (i.e., if the Chief Executive Officer is paid twenty-five
percent (25%) of his bonus, Executive will be paid twenty-five percent (25%) of
his bonus (12.5%)).
3.3 Stock Options. Subject to Executive's execution of and compliance with
-------------
the terms of that certain Just For Feet, Inc. Incentive Stock Option Agreement
substantially in the form attached
<PAGE>
hereto as Exhibit A, which executed agreement shall in all respects be in form
and substance satisfactory to the Company, Executive is hereby granted options
to acquire 100,000 shares of the common stock of the Company.
3.4 Other Benefits. Executive shall be entitled to receive health and
--------------
dental insurance benefits, vacation benefits and other benefits substantially
similar to those provided to other executives of the Company. Company shall
have the right to change said benefit program at any time or times.
3.5 Reimbursement of Expenses. In addition to the compensation described
-------------------------
in this Agreement, Employee shall be entitled to reimbursement by Company for
all actual, reasonable and direct expenses incurred by him in the performance of
his duties hereunder, provided such expenses are properly characterized as being
business expenses that are properly tax deductible for Company, and further
provided that such expenses were incurred only in accordance with the policies
and procedures established by the Board of Directors from time to time.
Employee shall provide Company with written documentation of such expenses in
form complying with the records required of Company by the Internal Revenue
Service and appropriate state authorities for tax deductibility purposes in such
cases, and reimbursement for each item of approved expense shall be made within
a reasonable time after receipt by Company of the written documentation thereof.
3.6 Vacation. The Employee shall be entitled to two (2) weeks annual paid
--------
vacation and such holidays as the Board of Directors may approve. In the event
of any termination of employment, Executive shall not be entitled to receive
payment for any unused vacation time.
3.7 Withholdings. All amounts payable to Executive pursuant to this
------------
Agreement shall be subject to all applicable withholdings as required by all
laws.
4. TERM AND TERMINATION.
4.1 Term. This Agreement shall be effective upon the date first set forth
----
above and, unless earlier terminated as provided herein, shall remain in full
force and effect for an initial period which ends on January 7, 2003 (the
"Initial Term"). This Agreement may be renewed on the same terms and conditions
for additional successive periods of one (1) year upon the execution of a
written agreement by the parties hereto.
4.2 Termination. Notwithstanding anything contained herein to the
-----------
contrary, the Company may terminate Executive's employment immediately for
cause. For purposes of this Agreement, "for cause" shall mean the occurrence of
the following: (i) the commission of any act of fraud, dishonesty,
misappropriation or moral turpitude on the part of the Executive, (ii) a
material breach by the Executive of, or a material failure by the Executive to
perform, his duties and obligations hereunder, (iii) continued neglect by
Executive in fulfilling his duties as an executive officer of the Company as a
result of alcoholism, addiction to illegal substances, or excessive unauthorized
absenteeism, after written notification from the Board of Directors of such
neglect, setting forth in detail the matters involved and Employee's failure to
cure the problem resulting in such neglect within a reasonable time thereafter,
(iv) the Executive becomes Completely Disabled (as hereinafter defined), or (v)
the death of Executive. For purposes of this Agreement, "Completely Disabled"
shall mean Executive's inability, due to illness, accident or any other physical
or mental incapacity, to perform the duties provided for herein for an aggregate
of 91 days during any period of 180
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<PAGE>
consecutive days during the term hereof. In addition, termination of Executive's
employment upon the occurrence of any act specified in (i) through (iii) above
shall result, to the extent not otherwise prohibited by law, in Executive's loss
of any benefits provided by the Company.
4.3 Return of Property. Upon termination of employment for any reason,
------------------
Executive shall return immediately to the Company all documents, property, and
other records of the Company, and all copies thereof, within Executive's
possession, custody or control, including but not limited to any materials
containing any Trade Secrets or Confidential Information (each as defined below)
or any portion thereof.
5. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
5.1 Confidentiality. The Company may disclose to Executive certain Trade
---------------
Secrets and Confidential Information (each as defined below). Executive
acknowledges and agrees that the Trade Secrets and Confidential Information are
the sole and exclusive property of the Company (or a third party providing such
information to the Company) and that the Company or such third party owns all
worldwide rights therein under patent, copyright, trade secret, confidential
information, or other property rights laws. Executive acknowledges and agrees
that the disclosure of the Trade Secrets and Confidential Information to
Executive does not confer upon Executive any license, interest or rights of any
kind in or to the Trade Secrets or Confidential Information. Executive may use
the Trade Secrets and Confidential Information solely for the benefit of the
Company while Executive is employed or retained by the Company. Except in the
performance of services for the Company, Executive will hold in confidence and
not reproduce, distribute, transmit, reverse engineer, decompile, disassemble,
or transfer, directly or indirectly, in any form, by any means, or for any
purpose, the Trade Secrets or the Confidential Information or any portion
thereof. Executive agrees to return to the Company, upon request by the
Company, the Trade Secrets and Confidential Information and all materials
relating thereto.
5.2 Duration. Executive's obligations under this Agreement with regard to
--------
the Trade Secrets shall remain in effect for as long as such information shall
remain a trade secret under applicable law. Executive acknowledges that its
obligations with regard to the Confidential Information shall remain in effect
while Executive is employed or retained by the Company and for five (5) years
thereafter. As used herein, "Trade Secrets" means information of the Company,
its licensors, suppliers, customers, or prospective licensors or customers,
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, or a list of actual
or potential customers or suppliers, which (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. As used herein,
"Confidential Information" means information, other than Trade Secrets, that is
of value to its owner and is treated as confidential, including, but not limited
to, future business plans, financial information, marketing strategies and
advertising campaigns, information regarding Company's executives and employees,
and the terms and conditions of this Agreement. For purposes of this Agreement,
"Confidential Information" and "Trade Secrets" shall not include the following:
(i) anything or any information that was or becomes generally available to the
public other than as a result of a disclosure by the Executive, (ii) was
available to the Executive on a nonconfidential basis prior to its disclosure to
the Executive by the Company, (iii) becomes available to the Executive on a
nonconfidential basis from
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<PAGE>
a source other than the Company, provided that such source is not prohibited
from disclosing such information by a contractual or legal obligation to the
Company of such information, or (iv) that the Executive can conclusively show by
documentary evidence was independently developed by the Executive without use of
any information disclosed to Executive by the Company. Executive and the Company
acknowledge that the intent of this Section 5 is not to restrict Executive's
employment following his tenure with the Company, but rather it is to protect
the rights that the Company has in its Trade Secrets and Confidential
Information.
6. COVENANT NOT TO COMPETE. Employee acknowledges to Company that before
becoming an employee of Company that Employee was not engaged in any business
like or similar to that engaged in by the Company and that all of Employee's
knowledge concerning the Company's business has been learned and obtained while
an employee of the Company.
6.1 Term. Executive will not, during the term of his employment with the
----
Company and for a period of two (2) years after termination for any reason of
his employment with the Company, directly or indirectly, engage in or carry on
within a fifty (50) mile radius of any of the Company's retail outlets existing
upon the date of termination of such employment (the "Territory"), any business,
like or similar to that engaged in by Company, either individually or as a
stockholder, director, officer, consultant, independent contractor, Executive,
agent, member or otherwise of or through any corporation, partnership,
association, joint venture, firm, individual or otherwise, or in any other
capacity: The above two (2) year period shall be extended by any period of time
during which Executive is in default of the covenants contained in this
Agreement.
6.2 Remedies. In the event of a breach or threatened breach by Executive
--------
of all or any part of the provisions of Section 6.1, the Company shall be
entitled to an injunction restraining Executive from such breach without
limiting any other rights or remedies available to the Company for such breach
or threatened breach.
6.3 Exclusions. Notwithstanding any provision to the contrary herein
----------
contained, Section 6.1 shall not apply:
Upon the termination of the Executive's employment by the Company other
than for cause within one (1) year following a Sale of the Company.
6.4 Sale of Company.
---------------
(a) In the event of a Sale of the Company following the execution of this
Agreement, Executive expressly agrees that the terms and conditions set forth in
this Section 6 shall be binding upon Executive and shall be fully enforceable by
the successor to the Company.
(b) For purposes of this Agreement, "Sale of the Company" shall mean (i) the
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (a "Person"), of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either the
then outstanding shares of common stock of the Company (the "Outstanding Common
Stock") or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"), or (ii) consummation by the Company of a
reorganization, merger or consolidation, or sale or other
-4-
<PAGE>
disposition of all or substantially all of the assets of the Company; unless,
following such acquisition of beneficial ownership or transaction (A) more than
60% of the then outstanding shares of common stock of the Person resulting from
such reorganization, merger or consolidation, or (B) more than 60% of the then
outstanding shares of common stock of the Person acquiring such beneficial
ownership or assets, and the combined voting power of the then outstanding
voting securities of such Person entitled to vote generally in the election of
directors of such Person, is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such acquisition or transaction, in
substantially the same proportion as their ownership of Outstanding Common Stock
and Outstanding Voting Securities prior to such event.
7. CUSTOMER NON-SOLICITATION. Executive agrees that for a period of
eighteen (18) months immediately following termination of Executive's employment
with the Company for any reason, including, without limitation, voluntary
resignation from employment by Executive (the "Non-Solicitation Period"),
Executive shall not, on Executive's own behalf or on behalf of any person, firm,
partnership, association, corporation or business organization, entity or
enterprise, solicit, contact, call upon, communicate with or attempt to
communicate with any customer or prospect of the Company, or any representative
of any customer or prospect of the Company, with a view to selling or providing
any product or service competitive or potentially competitive with any product
or service sold or provided or under development by the Company during the time
of two (2) years immediately preceding cessation of Executive's employment with
the Company, provided that the restrictions set forth in this paragraph shall
apply only to customers or prospects of the Company, or representatives of
customers or prospects of the Company, with which Executive had contact during
such two (2) year period. Executive acknowledges that the Company provides
products and services to customers throughout the Territory.
8. EMPLOYEE NON-SOLICITATION. Executive agrees that Executive shall not
call upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting any person who is or was an employee of the Company within the Non-
Solicitation Period, for the purpose of having such person work in any other
corporation, association, entity, or business engaged in providing products or
services of the same or similar kind as offered by the Company.
9. EQUITABLE RELIEF. The parties to this Agreement acknowledge that a
breach by Executive of any of the terms or conditions of this Agreement will
result in irrevocable harm to the Company and that the remedies at law for such
breach may not adequately compensate the Company for damages suffered.
Accordingly, Executive agrees that in the event of such breach, the Company
shall be entitled to injunctive relief or such other equitable remedy as a court
of competent jurisdiction may provide. Nothing contained herein will be
construed to limit the Company's right to any remedies at law, including the
recovery of damages for breach of this Agreement.
10. ARBITRATION. Any difference, claim or matter in dispute arising
between the parties out of this Agreement or connected therewith (other than
claims by the Company to enforce the provisions of Paragraphs 6 through 9
hereof) shall be submitted by them to arbitration by a panel of three
arbitrators appointed by and in accordance with the rules of the American
Arbitration association. The determination or decision rendered by the
arbitrators shall be final and absolute. The arbitrators shall apply Alabama law
and the arbitration shall take place in Birmingham, Alabama. The decision of
the arbitrators may be entered as a judgment in any court of the State of
Alabama or elsewhere.
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<PAGE>
11. CHANGE IN CONTROL OF THE COMPANY.
--------------------------------
11.1 Subject to Section 11.2 hereof, the Company shall pay the Executive
the payments described in this Section 11.1 (the "Change of Control Payments")
upon the termination of the Executive's employment following a Change in Control
and during the term of this Agreement, in addition to any of the then unpaid
compensation and benefits previously required to be paid to Executive through
the date of termination, unless such termination is (i) by the Company for
cause, or (ii) by reason of death, disability (as defined in Section 4.2) or
voluntary resignation or retirement of Executive. The Change of Control Payments
shall be as follows:
(a) In lieu of any further salary payments to the Executive for periods
subsequent to the date of termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the Executive a
lump sum severance payment, in cash, equal to two (2) times the Executive's
annual Base Salary in effect immediately prior to the occurrence of the event or
circumstance upon which the notice of termination is based which severance
payment shall be paid in twenty-four (24) equal payments on the first (1st) day
of each month beginning on the first (1st) day of the month following
termination;
(b) The Company shall pay to the Executive (i) a lump sum amount, in cash,
equal to the sum of any annual and quarterly performance or discretionary
bonuses which have been allocated or awarded to the Executive for a completed
fiscal year preceding the date of termination but has not yet been paid
(pursuant to Section 3.3 hereof or otherwise), and (ii) a pro rata portion of
any annual and quarterly performance or discretionary bonuses for the fiscal
year in which the date of termination occurs, determined by multiplying the
Executive's bonuses awarded or paid for the most recently completed fiscal year
by a fraction, the numerator of which shall be the number of full days the
Executive was employed by the Company during the fiscal year in which the
Executive's date of termination occurred and the denominator of which shall be
three hundred and sixty-five (365) days which shall be paid in twelve (12) equal
monthly payments on the first (1st) day of each month beginning on the first
(1st) day of the month following termination; and
(c) For a twelve (12) month period after the date of termination, the
Company shall arrange to provide the Executive with life, disability, accident
and health insurance benefits substantially similar to those which the Executive
is receiving immediately prior to the notice of termination (without giving
effect to any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason). Benefits otherwise receivable by the
Executive pursuant to this Section 11.1(c) shall be reduced to the extent
comparable benefits are actually received by or made available to the Executive
without cost during the twelve (12) month period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive). If the benefits
provided to the Executive under this Section 11.1.(c) shall result in a
decrease, pursuant to Section 11.2, in the Change of Control Payments and these
Section 11.1(c) benefits are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt of comparable benefits, the Company
shall, at the time of such reduction, pay to the Executive the lesser of (a) the
amount of the decrease made in the Change of Control Payments pursuant to
Section 11.2, or (b) the maximum amount which can be paid to the Executive
without being, or causing any other payment to be, nondeductible by the Company
by reason of section 280G of the Code.
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<PAGE>
11.2 Notwithstanding any other provisions of this Agreement, in the event
that any payment or benefit received or to be received by the Executive in
connection with and contingent on a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (all such payments and benefits, including the Change of Control
Payments, being hereinafter called "Total Payments") would not be deductible (in
whole or part), by the Company, an affiliate or person making such payment or
providing such benefit, as a result of section 280G of the Code, then, to the
extent necessary to make the remaining portion of the Total Payments deductible
(and after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan, arrangement or
agreement), (A) the cash Change of Control Payments and/or other cash payments
provided for hereunder, in each case, to the extent still unpaid, shall first be
reduced (if necessary, to zero), and (B) all other noncash Change of Control
Payments and/or other noncash benefits provided for hereunder, in each case, to
the extent still unfurnished, shall next be reduced (if necessary, to zero), and
(C) the Executive shall have no right to receive hereunder, and neither the
Company, any person whose actions result in a Change in Control or any person
affiliated with the Company or such person shall be obligated to make, pay or
furnish to the Executive hereunder any payment or benefit in excess of those
payments or benefits provided hereunder as reduced, if applicable, pursuant to
clause (A) or clause (B) above. For purposes of this limitation (i) no portion
of the Total Payments the receipt or enjoyment of which the Executive shall have
effectively waived in writing prior to the date of termination shall be taken
into account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the Code,
including by reason of section 280G(b)(4)(A) of the Code, (iii) the Change of
Control Payments shall be reduced only to the extent necessary so that the Total
Payments (other than those referred to in clauses (i) or (ii)) in their entirety
constitute reasonable compensation for services actually rendered within the
meaning of section 280G(b)(4)(B) of the Code or are otherwise not subject to
disallowance as deductions, in the opinion of the tax counsel referred to in
clause (ii); and (iv) the value of any noncash benefit or any deferred payment
or benefit included in the Total Payments shall be determined by the Company's
independent auditors in accordance with the principles of sections 280G(d)(3)
and (4) of the Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Section 11.2, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate provided in section
1274(b)(2)(B) of the Code from the date of the Executive's receipt of such
excess until the date of such payment.
11.3 The payments and other items provided for in Section 11.1 hereof shall
be made as set forth therein or if not set forth therein not later than the
fifteenth (15th) day following the date of termination or the date of exercise
by Executive of any of Executive's rights hereunder; provided,
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<PAGE>
however, that if the amounts of such payments, and the limitation on such
payments set forth in Section 11.2 hereof, cannot be finally determined on or
before such time, the Company shall pay to the Executive on each payment date an
estimate, as determined in good faith by the Company, of the minimum amount of
such payments to which the Executive is clearly entitled and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined and at the time or times set forth in Section 11.1. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section 11.3, the Company
shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
11.4 The Company also shall pay to the Executive all legal and accounting
fees and expenses incurred by the Executive as a result of a termination which
entitles the Executive to the Change of Control Payments (including all such
fees and expenses, if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder). Such payments shall be made within fifteen (15)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
11.5 For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(i) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any persons becomes the beneficial owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired
directly from the Company or its affiliates, as such term is defined
in the rules and regulations of the Securities and Exchange
Commission) representing 50.1% or more of the combined voting power of
the Company's then outstanding securities; or
(II) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described
in clause (I), (III) or (IV) of this paragraph) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or
-8-
<PAGE>
(III) the shareholders of the Company approve a merger or
statutory share exchange of the Company with any other corporation,
other than (i) a merger or statutory share exchange which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or statutory share exchange, or (ii) a merger or statutory
share exchange effected to implement a recapitalization of the Company
(or similar transaction) in which no person acquires more than 25% of
the combined voting power of the Company's then outstanding
securities; or
(IV) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets.
(ii) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(iii) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, of any one of the
following acts by the Company, or failures by the Company to act:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as an executive officer of
the Company or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time;
(III) the relocation of the Company's principal executive
offices to a location outside a forty (40) mile radius from the city
limits of Birmingham, Alabama or the Company's requiring the Executive
to be based anywhere other than the metropolitan area in which the
Executive is based immediately prior to the Change in Control except
for required travel on the Company's business to an extent
substantially consistent with the Executive's present business travel
obligations;
(IV) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the Executive's
current compensation or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control
-9-
<PAGE>
which is material to the Executive's total compensation, including but
not limited to the Company's stock option, incentive compensation,
bonus and other plans or any substitute plans adopted prior to the
Change in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Executive's participation
relative to other participants, as existed at the time of the Change
in Control; or
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
dental, health and accident, or disability plans in which the
Executive was participating at the time of the Change in Control, the
taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time of the
Change in Control, or the failure by the Company to provide the
Executive with the number of paid vacation days to which the Executive
is entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the
time of the Change in Control;
provided, that, the Executive's right to terminate Executive's employment for
- --------------
Good Reason shall not be affected by the Executive's incapacity due to physical
or mental illness and the Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(iv) "person" shall mean legal person, whether an individual or an
entity, as the context may require.
12. SEVERABILITY. Except as noted below, should any provision of this
Agreement be declared or determined by any court of competent jurisdiction to be
unenforceable or invalid for any reason, the validity of the remaining parts,
terms or provisions of this Agreement shall not be affected thereby and the
invalid or unenforceable part, term or provision shall be deemed not to be a
part of this Agreement. The covenants set forth in this Agreement are to be
reformed pursuant to Section 13 if held to be unreasonable or enforceable, in
whole or in part, and, as written and as reformed, shall be deemed to be part of
this Agreement.
13. REFORMATION. If any of the covenants or promises of this Agreement
are determined by any court of law or equity, with jurisdiction over this
matter, to be unreasonable or unenforceable, in whole or in part, as written,
Employee hereby consents to and affirmatively requests that said court reform
the covenant or promise so as to be reasonable and enforceable and that said
court enforce the covenant or promise as so reformed.
14. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
-10-
<PAGE>
GOVERNED BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF) OF THE STATE OF ALABAMA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
MAY BE BROUGHT IN THE CIRCUIT COURT OF JEFFERSON OR SHELBY COUNTY, ALABAMA, OR
ANY OTHER COURT OF THE STATE OF ALABAMA OR OF THE UNITED STATES OF AMERICA FOR
THE NORTHERN DISTRICT OF ALABAMA, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EMPLOYEE HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
EMPLOYEE HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION,
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING.
15. MISCELLANEOUS. This Agreement shall not be amended or modified except
by a writing executed by both parties. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns. Due to the
personal nature of this Agreement, Executive shall not have the right to assign
Executive's rights or obligations under this Agreement without the prior written
consent of Company. This Agreement and any attached exhibits represent the
entire understanding of the parties concerning the subject matter hereof and
supersede all prior communications, agreements and understandings, whether oral
or written, relating to the subject matter hereof. All communications required
or otherwise provided under this Agreement shall be in writing and shall be
deemed given when delivered to the address provided below such party's
signature (as may be amended by notice from time to time), by hand, by courier
or express mail, or by registered or certified United States mail, return
receipt requested, postage prepaid. Exhibit A attached hereto is incorporated
herein by this reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal effective as of the date first above written.
JUST FOR FEET, INC.
By: /s/ Harold Ruttenberg
----------------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------------
[CORPORATE SEAL]
Address:
7500 Cahaba Valley Parkway
Birmingham, Alabama 35242
-11-
<PAGE>
EXECUTIVE:
/s/ Adam J. Gilburne
--------------------------------------(SEAL)
ADAM J. GILBURNE
Address:
_________________
_________________
-12-
<PAGE>
EXHIBIT 10.5
MASTER REVOLVING PROMISSORY NOTE
--------------------------------
THIS NOTE IS BEING EXECUTED AND DELIVERED IN REPLACEMENT OF THAT CERTAIN
$20,000,000 AMENDED AND RESTATED MASTER REVOLVING PROMISSORY NOTE FROM JUST FOR
FEET, INC. TO COMPASS BANK DATED AS OF JULY 1, 1996.
$40,000,000.00 Birmingham, Alabama
January 26, 1998
FOR VALUE RECEIVED, the undersigned, JUST FOR FEET, INC., an Alabama
corporation (the "Borrower"), hereby promises to pay to the order of COMPASS
BANK (the "Lender", or together with any subsequent assignee, transferee or
holder of this Note, the "Holder"), at its office at 15 South 20th Street,
Birmingham, Alabama 35233, or at such other place as Lender may direct, in
lawful money of the United States of America constituting legal tender in
payment of all debts and dues, public and private, the principal amount of FORTY
MILLION AND NO/100 DOLLARS ($40,000,000.00), or so much thereof as may have been
advanced or re-advanced from time to time, and outstanding hereunder, together
with interest thereon calculated at the rate and in the manner set forth herein
(and any charges and expenses provided for under this Note), all on and in
accordance with the terms and in the manner more particularly set forth below:
1. REVOLVING LINE. Borrower has applied to Lender for a revolving line
--------------
of credit not to exceed an aggregate principal amount at any one time
outstanding of FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00) (the "Revolving
Line"), which Revolving Line is and shall be governed by this Note. Holder is
willing to
1
<PAGE>
extend such Revolving Line to Borrower on the terms and subject to the
conditions set forth herein. Accordingly, in consideration of the foregoing, the
credit to be made available hereunder, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
from the date hereof until July 1, 1999, subject to the terms and conditions of
this Note and so long as no event of default shall have occurred hereunder,
Holder shall make advances and re-advances hereunder available to Borrower which
Borrower agrees to use for general corporate uses. Advances and re-advances
shall be made from time to time hereunder as requested by Borrower's Authorized
Agent (as defined herein) and payments shall be accepted from Borrower in
accordance with and subject to the provisions of this Note. The principal amount
outstanding hereunder may vary from time to time by increases of up to the
maximum principal amount stated above, plus accrued interest (and any other
charges and expenses provided for under this Note), and decreases down to no
outstanding principal or accrued interest (or any other charges or expenses
provided for under this Note). In no event shall Holder have any obligation to
make, and Borrower shall not request, any advances for principal which at any
one time outstanding hereunder collectively exceed the sum of FORTY MILLION AND
NO/100 DOLLARS ($40,000,000.00), or any advances hereunder after the first to
occur of (i) the occurrence of an event of default hereunder, or (ii) July 1,
1999 (the "Revolving Line Termination Date").
2. CERTAIN DEFINITIONS. The following terms shall, for purposes of this
-------------------
Note, have the following meanings:
2
<PAGE>
"AUTHORIZED AGENT" shall mean the Chief Executive Officer or Chief
----------------
Financial Officer of the Borrower or any other agent of Borrower from time to
time designated by Borrower as authorized to request advances and to make the
interest rate elections provided for hereunder.
"BUSINESS DAY" shall mean any day, Monday through Friday, on which Holder
------------
is open for the conduct of its general banking business.
"COMPASS BANK PRIME", as used herein, is a reference rate established by
------------------
Holder for use in computing and adjusting interest, is subject to increase,
decrease or change at Holder's discretion, and is only one of the reference
rates or indices that Holder uses. Holder may lend to others at rates of
interest at, or greater or less than, Compass Bank Prime or the rate(s) provided
herein. Any change in the applicable rate under this Note resulting from a
change in Compass Bank Prime shall take effect on the day of such change.
"EBITDAR COVERAGE RATIO" shall mean the ratio of (a) Borrower's earnings
----------------------
before interest, taxes, depreciation, amortization and rentals to (b) the sum of
Borrower's interest, rentals and current maturities of long term debt; all
determined on a rolling four fiscal quarter basis in accordance with generally
accepted accounting principles consistently applied.
"INTEREST PAYMENT DATE" shall be the first day of each calendar month. If
---------------------
any Interest Payment Date would otherwise be a day which is not a Business Day,
such Interest Payment Date shall be extended to the end of the next succeeding
Business Day.
3
<PAGE>
"LIBOR MARGIN PERCENTAGE" shall be a percentage determined on the date
-----------------------
hereof and on each Interest Adjustment Date based upon Borrower's EBITDAR
Coverage Ratio for the fiscal quarter which immediately preceded Borrower's last
full quarter prior to the date on which the applicable interest rate under this
Note is to be calculated or adjusted, in accordance with the following table:
<TABLE>
<CAPTION>
==================================================================================================================
EBITDAR COVERAGE APPLICABLE LIBOR MARGIN
RATIO PERCENTAGE
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
less than and equal to 2.50 TO 1 1.500%
- -------------------------------------------------------------------------------------------------------------------
greater than 2.50 TO 1 but less than and equal to 3.00 to 1 1.250%
- -------------------------------------------------------------------------------------------------------------------
greater than 3.00 TO 1 but less than and equal to 3.15 to 1 1.125%
- -------------------------------------------------------------------------------------------------------------------
greater than 3.15 TO 1 but less than and equal to 3.30 to 1 1.000%
- -------------------------------------------------------------------------------------------------------------------
less than 3.30 TO 1 .0875%
===================================================================================================================
</TABLE>
"LIBOR RATE" means, at the time of any computation required under this
----------
Note, an interest rate equal to (i) Holder's reasonable estimate of the offering
rate in United States dollars as shown on page 3750 of the Telerate Service at
which United States dollar deposits in the amount of the then unpaid principal
amount of this Note would be, at Holder's request, offered to Holder by brokers
or other intermediaries trading in the London Interbank Market for a period of
one month at approximately 11:00 A.M. (London Time), on the date on which the
LIBOR Rate is to be set and the monthly interest period is to apply; plus (ii)
any then-applicable reserve requirements imposed upon Holder by the Federal
Reserve System or then-applicable assessment rate required to be paid by Holder
from time to time to the Federal Deposit Insurance Corporation (or any
successor) for such corporation's insuring Holder's deposits in the
4
<PAGE>
United States (as additional percentage points); plus (iii) the applicable LIBOR
Margin Percentage.
3. INTEREST PAYMENTS AND MATURITY. Interest, calculated as set forth
------------------------------
below from the date hereof, on the unpaid principal amount hereof shall be paid
on each Interest Payment Date (as herein defined) with the first interest
payment due on February 1, 1998, and monthly thereafter until the maturity date.
The entire unpaid principal balance outstanding hereunder plus accrued interest
(and any charges and expenses provided for under this Note) shall be due and
payable in full on July 1, 1999, which is the maturity date of this Note, unless
such amounts are due sooner pursuant to the terms of this Note.
4. APPLICABLE INTEREST RATE. Unless Compass Bank Prime is applicable
------------------------
pursuant to Section 4 or Section 19 of this Note, the outstanding principal
balance of this Note shall bear interest at a rate equal to the LIBOR Rate as
calculated initially on the date hereof and as calculated and adjusted on the
first day of May, August, November and February of each year (each an "Interest
Adjustment Date"), based upon the applicable LIBOR Margin Percentage. During
any period when Compass Bank Prime is applicable, the applicable interest rate
shall be the greater of (a) Compass Bank Prime from time to time prevailing,
such rate to change as Compass Bank Prime changes, or (b) five percent (5%).
Any principal amounts outstanding hereunder after maturity shall bear interest
at a rate equal to Compass Bank Prime plus two percentage points (2%),
calculated in a manner set forth herein.
5
<PAGE>
5. LIBOR RATE. Unless Compass Bank Prime is applicable pursuant to
----------
Section 4 or Section 19 of this Note, all of the unpaid principal balance of
this Note shall bear interest at a rate equal to the then applicable LIBOR Rate,
which shall be determined as follows:
5.1 On the first day of each month, Holder shall (subject to availability)
determine the LIBOR Rate (as defined herein). The LIBOR Rate so determined
shall be the LIBOR Rate applicable to this Note until the first day of the next
month, at which time Holder shall determine and reset the then effective LIBOR
Rate.
5.2 Notwithstanding the fact that the interest rate hereof is based upon
the London Interbank Market, Borrower agrees that Holder shall not be required
actually to obtain funds from such source at any time.
5.3 Interest shall be paid by Borrower on each respective Interest Payment
Date.
6. 360-DAY YEAR. Irrespective of which rate is the applicable interest
------------
rate under this Note, interest from date on the outstanding unpaid principal
balance of this Note shall be calculated by multiplying the product of the
relevant principal amount and the applicable interest rate by the actual number
of days elapsed, and dividing by 360.
7. FACILITY FEE. Until the later of the Revolving Line Termination Date
------------
or payment in full of this Note, in consideration of the Holder's commitment to
make the Revolving Line available to Borrower, Borrower agrees and shall pay on
each
6
<PAGE>
anniversary to Holder a Facility Fee equal to one quarter of one percent (1/4%)
per annum on the face amount of this Note.
8. NON-USAGE FEE. In consideration of the Holder's commitment to make
-------------
the Revolving Line available, set aside funds sufficient to make advances
thereunder and incurring certain administrative expenses, Borrower agrees to and
shall pay to Holder quarterly (or more often as may be required by the terms
below), in arrears, a contingent commitment fee (calculated as set forth below
on the basis of a 360-day year) which should begin to accrue on the date hereof,
with the payment of such fee being the first day of March, June, September, and
December, beginning March 1, 1998, and a final fee payment being due on the
maturity date of this Note (or on any other date when advances under the
Revolving Line are terminated). Such fee shall be in an amount equal to the
product of (a) 1/8% of the average Unused Availability under the Revolving Line
for the applicable quarter or portion thereof preceding the due date for the
payment of such fee, and (b) the number of days elapsed since the latter of the
date hereof or the date of the last such fee payment (if any), divided by 360.
For purposes of this section, "Unused Availability" shall mean and refer to the
amount by which $40,000,000 exceeds the average balance of Borrower's loan
account for the quarters ending January 31, April 30, July 31 and October 31 of
any year.
9. TRANSACTION STATEMENTS. Subject to the terms and conditions of this
----------------------
Note, advances shall be made at the request of the Authorized Agent. All
advances, payments and appropriate entries and charges hereunder shall be
recorded as debits
7
<PAGE>
and credits upon records maintained by Holder. On a monthly basis, Holder shall
render to Borrower a statement showing all transactions during the immediately
preceding month.
10. PREPAYMENTS. Borrower may prepay without penalty from time to time
-----------
the outstanding principal balance of this Note, or any part thereof, bearing
interest at the LIBOR Rate, or, if applicable, Compass Bank Prime.
11. INDEMNITY. Borrower hereby agrees to indemnify Holder, its officers,
---------
employees, and agents from any cost or loss arising from their actions taken or
omitted to be taken in good faith based upon communications between Borrower and
Holder. The obligations of Borrower under this Section shall survive payment of
this Note.
12. EXPENSES. Holder shall be entitled to recover all expenses incurred
--------
in collecting or attempting to collect this Note, including, without limitation,
court costs and attorneys' fees. The obligations of Borrower under this Section
shall survive payment of this Note.
13. CERTAIN COVENANTS. (a) Borrower shall not cause or allow its Total
-----------------
Debt-to-Tangible Net Worth ratio to exceed 1.0 - to - 1.0 as of the end of each
of Borrower's fiscal quarters. As used in this paragraph 13(a), "Tangible Net
Worth" shall mean Borrower's net worth (determined in accordance with generally
accepted accounting principles) less (A) any and all loans and other advances to
and investments in Borrower's affiliates, subsidiaries, owners, parent,
employees, officers, shareholders, directors or other related entities, (B)
notes, notes receivable, accounts,
8
<PAGE>
accounts receivable, intercompany receivables, and other amounts owing from
Borrower's affiliates, subsidiaries, owners, parent, employees, officers,
shareholders, directors or other related entities; and (C) any and all
intangibles. As used in this paragraph 13(a), "Total Debt" shall mean all of
Borrower's indebtedness and liabilities owing to Holder or to any other person
or entity, howsoever and whensoever created or arising, absolute or contingent,
and joint or several, exclusive of short-term treasury bill-secured debt
incurred over Borrower's fiscal year end for Alabama share tax purposes.
(b) Borrower shall maintain a minimum EBITDAR Coverage Ratio of 2.0 - to -
1 calculated at the end of each of Borrower's fiscal quarters on a rolling four
fiscal quarter basis.
(c) If at any time the amount outstanding under this Note exceeds
$40,000,000, then Borrower shall immediately remit to Holder good funds
sufficient to eliminate such excess.
(d) Borrower shall submit or cause to be submitted to Holder (i) for the
first three (3) quarters during each fiscal year, Borrower's internal unaudited
quarterly financial statements within forty-five (45) days after the close of
each such quarter in each fiscal year including balance sheets as of the close
of such period, income statements, and reconciliations of surplus for such
period, prepared in accordance with generally accepted accounting principles;
(ii) Borrower's audited fiscal year-end financial statements within one hundred
twenty (120) days after the close of each fiscal year, including balance sheets
as of the close of such period, income
9
<PAGE>
statements, and reconciliations of stockholders' equity audited by an
independent certified public accountant and analyzed in accordance with
generally accepted accounting principles; and (iii) such other financial and
related information which Holder reasonably shall request regarding Borrower
when and as requested by Holder. In addition, Borrower shall notify Holder
immediately in writing if any event has occurred which constitutes an event of
default or would constitute an event of default but for the requirement that
notice be given, or time elapse or both, under any of Borrower's loans, notes,
debentures or bonds then outstanding, accompanied by a description of the nature
of such event.
(e) Borrower shall at all times comply with all laws, ordinances, rules
and regulations of any governmental authority or entity governing or affecting
Borrower or any of its property, and shall immediately notify Holder of any and
all actual, alleged or asserted violations of any such laws, ordinances, rules
or regulations which could materially impact Borrower's ability to perform under
this Note.
(f) Promptly after the same shall have become known to Borrower, Borrower
shall notify Holder in writing of any action, suit or proceeding at law or in
equity or by or before any governmental instrumentality or other agency, if
adversely determined, might impair the ability of Borrower to perform its
obligations under this Note.
(g) Borrower shall not (i) liquidate, discontinue or materially reduce its
normal operations with intention to liquidate; or (ii) cause, allow or suffer to
occur (a) the merger or consolidation of or involving Borrower with or into any
corporation,
10
<PAGE>
partnership, or other entity, or (b) the sale, lease, transfer or other disposal
of all or any substantial part of its assets.
(h) Borrower shall pay all reasonable fees and expenses, including,
without limitation, legal fees and expenses, filing fees, insurance premiums and
expenses, appraisal fees, recording costs and taxes actually incurred by Holder
from time to time in connection with the preparation of and closing on this Note
and any related documents. Borrower shall pay to Holder on demand any and all
such fees and expenses together with any and all fees, expenses and costs (i) of
collection or (ii)otherwise incurred or paid by Holder in amending, modifying,
extending or administering this Note or the transactions contemplated hereby or
in protecting or enforcing its rights upon or with respect to this Note.
(i) Borrower shall pay any and all taxes, with the exception of taxes
measured by income, charges and expenses of every kind or description paid or
incurred by Holder under or with respect to this Note, any advances hereunder or
any collateral therefor or the collection of or realization upon the same.
14. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as
------------------------------
follows:
(a) Borrower is a duly organized Alabama corporation, validly existing,
and in good standing under the laws of the State of Alabama and is qualified to
do business and is in good standing in all other jurisdictions where such
qualification is necessary. Borrower (i) has all necessary licenses and
corporate powers and authority to own its assets and conduct its business as now
conducted or presently proposed
11
<PAGE>
to be conducted; and (ii) is duly qualified and in good standing (and will
remain so qualified and in good standing) in every jurisdiction in which it is
or shall be doing business or in which the failure to qualify and remain in good
standing would or could have an adverse effect on its business or properties.
(b) The execution, delivery, and performance of this Note are within
Borrower's corporate powers, have been duly and validly authorized and are not
in contravention of the law or the terms of its charter, by-laws, or other
incorporation papers, or of any indenture, agreement, or undertaking or any law,
regulation or order to which Borrower is a party or by which Borrower or any of
its property is or may be bound. Upon execution and delivery, this Note will be
a valid and binding obligation of Borrower enforceable in accordance with its
terms.
(c) Subject to any limitations stated therein or in connection therewith,
all balance sheets, earnings statements and other financial data which have been
or may hereafter be furnished to Holder in connection herewith, do or shall
fairly represent the financial condition of Borrower (or other person or entity,
as applicable) as of the dates and results of operations for the periods for
which the same are furnished in accordance with generally accepted accounting
principles consistently applied, and all other information, reports and other
papers and data furnished to Holder shall be accurate, as of the relevant date,
and correct in all material respects and complete insofar as completeness may be
necessary to give Holder a true and accurate knowledge of the subject matter.
12
<PAGE>
(d) Borrower's name is as set forth on the first page of this Note.
Borrower will promptly advise Holder in writing of any change in Borrower's
name, chief executive office or principal place of business.
(e) Borrower is not now in default under any agreement evidencing an
obligation for the payment of money, performance of a service or delivery of
goods, demand for performance under which, or acceleration of the maturity of
which, would render Borrower insolvent or unable to meet its other debts as they
become due or conduct its business as usual.
(f) In the event (i) any of Borrower's warranties or representations shall
prove to be false or misleading, or (ii) anyone in judicial proceedings shall
assert against Holder a claim or defense arising out of any transaction between
itself and Borrower, Borrower agrees to indemnify and hold Holder harmless
against any liability, judgment, cost, attorneys' fees or other expense
whatsoever arising therefrom.
(g) Except for any litigation described on Exhibit A hereto, there are no
judgments, actions, suits, claims, proceedings or investigations existing,
outstanding, pending, or to the best of Borrower's knowledge after due inquiry,
threatened or in prospect, before any court, agency or tribunal, or governmental
authority against or involving Borrower or any guarantor which do or could
materially affect the ability of Borrower to perform its obligations under this
Note.
15. EVENTS OF DEFAULT. Upon the occurrence or existence of any one or
-----------------
more of the following events of default:
13
<PAGE>
(a) failure by Borrower to make any payment of principal, interest or
charges and expenses provided for under this Note as and when the same
is due and payable;
(b) failure by Borrower to pay or perform any other loan, indebtedness,
liability or obligation to Holder as and when due;
(c) failure by Borrower or any other person or entity to observe or comply
with any covenant, obligation, agreement, term or provision contained
or referenced in this Note or in any other document, agreement or
instrument executed in connection with or securing this Note;
(d) the occurrence or continuation of any default or event of default
contained, specified or referenced in any other document, agreement or
instrument executed in connection with or securing this Note;
(e) the occurrence or continuation of any default or event of default with
respect to any indebtedness, obligation or liability of Borrower in
favor of any other creditor or lender, whether or not evidenced by
note, loan, debenture, bond or account, if the effect of such default
or event of default is to allow the creditor or lender to which the
indebtedness, obligation or liability is owed to accelerate the same
such that it shall become due prior to the stated due date thereof;
(f) if any warranty or representation contained herein shall prove false
or misleading in any material respect or if Borrower made or makes any
14
<PAGE>
other material misrepresentation to Holder for the purpose of
obtaining credit or any extension of credit;
(g) issuance by an injunction or attachment against property of, the
general assignment by, judgment against or filing of petition in
bankruptcy by or against Borrower; the filing of an application in any
court for a receiver for Borrower; or the dissolution or liquidation
of Borrower (provided, however, Borrower shall have sixty (60) days to
have dismissed of record any involuntary bankruptcy petition filed
against it); or
(h) calling of a meeting of creditors, appointment of a committee of
creditors or liquidation agents, or offering of a composition or
extension to creditors by, for or of Borrower;
then, or at any time thereafter, Holder may, with or without notice to Borrower,
declare this Note to be forthwith due and payable, as to principal and interest
and related charges and expenses provided for under this Note, without
presentment, demand, protest, or other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in any other instrument
executed in connection with or securing this Note to the contrary
notwithstanding.
16. WAIVERS. With respect to the amounts due under this Note and
-------
Borrower's obligations hereunder, Borrower waives the following:
(a) All rights of exemption of property from levy or sale under execution
or other process for the collection of debts under the Constitution or laws of
the United States or any state thereof; and
15
<PAGE>
(b) Demand, presentment, protest, notice of protest or dishonor, notice of
nonpayment, suit against any party, diligence in collection, and all other
requirements necessary to charge or hold the undersigned liable on any
obligations hereunder. Holder may accept partial payment, or (if this Note is
hereafter secured or collateralized) release or exchange any security or any
collateral without discharging or releasing any of the obligations evidenced
hereby or any unreleased security or collateral.
17. COMPLIANCE WITH LAWS. It is the intention of Holder and Borrower to
--------------------
conform strictly to any applicable usury laws. Accordingly, if the transactions
contemplated hereby would be usurious under any applicable law, then, in that
event, notwithstanding anything to the contrary in this Note or any agreement
entered into in connection with or as security for or guaranteeing this Note, it
is agreed as follows: (a) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved, charged,
or received by Holder under this Note or under any agreement entered into in
connection with or as security for this Note shall under no circumstances exceed
the Highest Lawful Rate (as defined below), and any excess shall be canceled
automatically and, if theretofore paid, shall, at the option of Holder, be
credited by Holder on the principal amount of any indebtedness owed to Holder by
Borrower or refunded by Holder to Borrower, and (b) in the event that the
payment of this Note is accelerated or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to Holder may never include more than the Highest Lawful Rate and
excess interest, if
16
<PAGE>
any, to Holder provided for in this Note or otherwise shall be canceled
automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall, at the option of Holder, be credited by Holder on the
principal amount of any indebtedness owed to Holder by Borrower or refunded by
Holder to Borrower.
"Highest Lawful Rate" means the maximum non-usurious interest rate that at
any time or from time to time may be contracted for, taken, reserved, charged,
or received on amounts due to Holder, under laws applicable to Holder with
regard to this Note that are presently in effect or, to the extent allowed by
law, under such applicable laws that allow a higher maximum non-usurious rate
than applicable laws now allow.
18. GENERAL. Holder shall not by any act, delay, omission or otherwise be
-------
deemed to have waived any of its rights or remedies, and no waiver of any kind
shall be valid unless in writing and signed by Holder. All rights and remedies
of Holder under the terms of this Note, and applicable statutes or rules of law,
shall be cumulative and may be exercised successively or concurrently. Borrower
agrees that, as of the date hereof, there are no defenses, equities or setoffs
in respect to the obligations set forth herein. The obligations of Borrower
hereunder shall be binding upon and enforceable against Borrower and its
successors and assigns. BORROWER AGREES THAT THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF ALABAMA (WITHOUT REGARD TO CHOICE OF
LAW CONSIDERATIONS), INCLUDING, WITHOUT LIMITATION, APPLICABLE USURY LAWS. THIS
NOTE HAS BEEN NEGOTIATED, AND IS BEING EXECUTED AND DELIVERED IN THE STATE OF
ALABAMA, OR IF EXECUTED ELSEWHERE, SHALL
17
<PAGE>
BECOME EFFECTIVE UPON HOLDER'S RECEIPT AND ACCEPTANCE OF THE EXECUTED ORIGINAL
OF THIS NOTE IN THE STATE OF ALABAMA; PROVIDED, HOWEVER, THAT HOLDER SHALL HAVE
NO OBLIGATION TO GIVE, NOR SHALL BORROWER BE ENTITLED TO RECEIVE, ANY NOTICE OF
SUCH ACCEPTANCE FOR THIS NOTE TO BECOME A BINDING OBLIGATION OF BORROWER. IT IS
INTENDED, AND BORROWER AND HOLDER SPECIFICALLY AGREE, THAT THE LAWS OF THE STATE
OF ALABAMA GOVERNING INTEREST SHALL APPLY TO THIS NOTE AND THIS TRANSACTION.
NOTWITHSTANDING THE FOREGOING, NOTHING CONTAINED IN THIS PARAGRAPH SHALL PREVENT
HOLDER FROM BRINGING ANY ACTION OR EXERCISING ANY RIGHTS AGAINST BORROWER, ANY
GUARANTOR, ANY SECURITY FOR THIS NOTE OR ANY OF BORROWER'S OR ANY GUARANTOR'S
PROPERTIES IN ANY OTHER COUNTY, STATE OR JURISDICTION. INITIATING SUCH ACTION OR
PROCEEDING OR TAKING ANY SUCH ACTION IN ANY OTHER STATE OR JURISDICTION SHALL IN
NO EVENT CONSTITUTE A WAIVER BY HOLDER OF ANY OF THE FOREGOING. As used herein,
the terms "Borrower", "Lender", "guarantor" and "Holder" shall be deemed to
include their respective successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law. This Note is given
under the seal of all parties hereto and it is intended that this Note shall
constitute and have the effect of a sealed instrument according to law. Any
provision in this Note which may be unenforceable or invalid under applicable
law shall be ineffective to the extent of such unenforceability or invalidity
without affecting the enforceability or validity of any other provision hereof.
19. YIELD PROTECTION.
----------------
18
<PAGE>
19.1 GENERAL. With respect to LIBOR Rate advances, if any future law,
-------
rule, regulation or directive, or any future judicial or administrative
interpretation of any existing law, rule, regulation or directive
(a) subjects Holder to any tax, duty, charge or withholding on or from
payments due from Borrower (excluding taxation of the overall net
income of Holder or taxation which may be treated as an offset against
such taxation of overall net income), or
(b) imposes or increases any reserve, special deposit or similar
requirement against Holder, or
(c) imposes any other condition, the result of which is to increase the
cost to Holder of making, funding or maintaining loans or reduces any
amount receivable by Holder in connection with loans, or requires
Holder to make any payment calculated by reference to the amount of
loans held or interest received by it,
then, upon demand by Holder, Borrower shall pay to Holder that portion of such
increased expense incurred or reduced amount received which Holder determines is
attributable to making, funding and maintaining LIBOR Rate advances hereunder.
Holder promptly shall notify Borrower upon its becoming aware of any such
increased expense or reduced amount received.
19.2 SURVIVAL OF INDEMNITY. Determination of amounts payable under Section
---------------------
19.1 above in connection with the LIBOR Rate shall be calculated as though
Holder funded the amount of the principal to which the LIBOR Rate applies
through the
19
<PAGE>
purchase of a deposit of the type, amount and maturity corresponding to the
deposit used as a reference in determining the applicable LIBOR Rate for such
principal amount. The obligations of Borrower under Section 19 hereof shall
survive payment of this Note.
19.3 ILLEGALITY AFFECTING LIBOR RATE ADVANCES. If Holder, in its sole
----------------------------------------
discretion, determines that maintenance of any LIBOR Rate would violate any
applicable law, rule, regulation, or directive applicable to Holder, then Holder
may suspend the availability of the LIBOR Rate, including the amount of
principal then outstanding to which the LIBOR Rate then applies, upon notice to
Borrower. In the event of suspension of the LIBOR Rate, the applicable rate
shall be determined by Lender using an index rate which in Lender's sole
judgment is comparable to the LIBOR Rate, or if none is available, the
applicable rate shall be Compass Bank Prime.
19.4 AVAILABILITY OF INTEREST RATE. If Holder, in its reasonable
-----------------------------
discretion, determines that (a) deposits of a type and maturity appropriate to
match the LIBOR Rate to the amount of the unpaid principal under this Note are
not available to Holder, or (b) that the LIBOR Rate does not accurately reflect
the cost to Holder of making the corresponding advance, Holder may suspend the
availability of the LIBOR Rate with respect to future advances and future
interest periods. In the event of suspension of the LIBOR Rate, the applicable
rate shall be determined by Lender using an index rate which in Lender's sole
judgment is comparable to the LIBOR Rate, or if none is available, the
applicable rate shall be Compass Bank Prime.
20
<PAGE>
20. GENERAL. Borrower represents that this Note is enforceable against
-------
Borrower in accordance with its terms and that Borrower has no offsets or claims
against Holder arising, related to or connected with this Note.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed and
delivered by its duly authorized officer in Alabama as of the 26th day of
January 1998, but actually executed on the 26th day of January, 1998.
BORROWER:
---------
ATTEST: JUST FOR FEET, INC.
By /s/ Scott Wynne By /s/ Eric L. Tyra
---------------------- --------------------------------------
Its Secretary Its Executive Vice President
------------------- --------------------------------
(CORPORATE SEAL)
STATE OF ALABAMA
COUNTY OF SHELBY
I, Doris Lee Sewell, a notary public in and for said county in said state,
----------------
hereby certify that Eric L. Tyra, whose name as Executive Vice President of JUST
------------ ------------------------
FOR FEET, INC., a corporation, is signed to the foregoing instrument and who is
known to me, acknowledged before me on this day that, being informed of the
contents of such instrument, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation.
Given under my hand and official seal this the 22nd day of January, 1998.
/s/ Doris Lee Sewell
----------------------------------------------
_______________
[NOTARIAL SEAL] Notary Public
My Commission Expires: August 30,1999
------------------------
21
<PAGE>
EXHIBIT 10.10
PROMISSORY NOTE
$6,000,000.00 FEBRUARY 3, 1997
BIRMINGHAM, ALABAMA
FOR VALUE RECEIVED, the undersigned JUST FOR FEET, INC., an Alabama
corporation (the "Borrower"), hereby promises to pay to the order of COMPASS
BANK (the "Lender"), at its office at 15 South 20th Street, Birmingham, Alabama
35233, or at such other place as Lender may direct, in lawful money of the
United States of America constituting legal tender in payment of all debts and
dues, public and private, together with interest thereon calculated at the rate
and in the manner set forth herein, the principal amount of SIX MILLION AND
NO/100 DOLLARS ($6,000,000.00), or so much thereof as may be advanced and
outstanding hereunder. Payment of principal and interest shall be in accordance
with the following provisions:
1. CONSTRUCTION PHASE. From the date hereof until November 15, 1997 (the
"CONVERSION DATE"), the following provisions shall apply:
(A) Borrower promises to pay interest monthly on or before the 15th day of
each month, on the principal amount owing hereunder from time to time,
computed daily in the manner and at the Applicable Rate set forth
below; the first such interest payment shall be due and payable on
March 15, 1997. (the "CONSTRUCTION PHASE MATURITY DATE").
(B) The applicable interest rate (the "APPLICABLE RATE") during the
Construction Phase shall be determined and paid and shall be equal to
125 basis points (1.25%) in excess of "Libor" (as defined herein) from
time to time in effect (the "ADJUSTED LIBOR RATE"). "LIBOR" refers to
(a) the London Interbank Offered Rate for periods of thirty (30) days
(the "LIBOR ADJUSTMENT PERIOD") as quoted on the Reuter's or Telerate
Information System on the date of determination of the interest rate
(or in the event no such quotation is available on such date, as quoted
on the day most immediately preceding the date of determination on
which such a quotation was available) or (b) in the event the Reuter's
or Telerate Information System ceases to be available to Lender for any
reason or ceases to provide information sufficient to determine the
London Interbank Offered Rate for the applicable Libor Adjustment
Period, the London Interbank Offered Rate for the applicable Libor
Adjustment Period as published in the Wall Street Journal on the date
of determination of the interest rate (or in the event no such
quotation is available on such date, as quoted on the day most
immediately preceding the date of determination on which such a
quotation was available). The interest rate shall be determined as of
the date any selection of the Adjusted Libor Rate becomes effective and
as of the first day following the end of each succeeding Libor
Adjustment Period during the remaining term of this Note for so long as
the Adjusted Libor Rate is the applicable rate in effect (or in the
event no such quotation is available on such date, as quoted on the day
most immediately preceding the date of determination on which such a
quotation was available) (the "INTEREST ADJUSTMENT DATES") and will be
adjusted as of each Interest Adjustment Date to correspond to any
change in Libor.
PROMISSORY NOTE
PAGE 1
<PAGE>
(C) Unless the maturity date of the Note is further extended pursuant to
Section 2 hereof, all principal, interest and other charges hereunder
shall be due and payable on November 15, 1997.
2. TERM PHASE. In the event Borrower satisfies all Conditions for
Conversion to the Term Phase as set forth in Commitment Letter (hereafter
defined), then beginning on the first day of the month next following Borrower's
satisfaction of such Conditions for Conversion to the Term Phase (the "TERM
PHASE CONVERSION DATE") the following provisions shall apply:
(A) At least five (5) days, but no more than ten (10) days prior to the
Term Phase Conversion Date, Borrower shall have a one-time right to
notify Lender in writing of its selection of one of the interest rate
options set forth in Sections 2(b) or 2(c) below which shall be the
applicable interest rate during the Term Phase. In the event that
Lender has not received a written selection from Borrower of an
interest rate option at least three days prior to the Term Phase
Conversion Date, then Borrower shall be deemed to have selected the
Libor Rate Option set forth in Section 2(b) below. Once either of the
interest rate options in Section 2(b) or Section 2(c) has been selected
(or deemed selected), the interest rate option shall not thereafter
change for the term of the loan (provided, that if the Fixed Rate
Option is selected, the applicable rate will revert back to the Libor
Adjusted Rate at the end of sixty months from the commencement of the
Term Phase as set forth below).
(B) LIBOR RATE OPTION. If the provisions of this Section 2(b) shall be
applicable, then the applicable interest rate during the Term Phase of
this Note shall be determined and paid and shall be equal to the
Adjusted Libor Rate as defined in Section 1(b) above.
(C) FIXED RATE OPTION. The Fixed Rate Option shall be based on the fixed
rate market (as determined by Lender in its sole discretion) on the
Term Phase Conversion Date. Borrower understands that Lender will not
be able to quote the fixed rate under this Section 2(c) more than ten
(10) days prior to the Term Phase Conversion Date. If Borrower shall
notify Lender in writing of its selection of the interest rate set
forth in this Section 2(c), then the applicable interest rate during
the period beginning on the Term Phase Conversion Date and ending sixty
(60) months thereafter, shall be a fixed rate per annum and shall be
equal to the fixed rate quoted by the Lender's investment department
(which quoted rate shall be based on the Adjusted Libor Rate swap
equivalent yield as determined and calculated by the Lender's
investment department on the Conversion Date). Borrower understands
that Lender may not be offering the Fixed Rate Option at the time of
the Term Phase Conversion Date and, if such Fixed Rate Option is not
offered at that time, then the interest rate for the Term Phase shall
be the rate set forth in Section 2(b). Upon the expiration of sixty
(60) months from the Term Phase Conversion Date, the applicable
interest rate during the remaining portion of the Term Phase of this
Note shall be determined and paid and shall be equal to the Adjusted
Libor Rate as defined in Section 1(b) above.
(D) If the principal balance of this Note at the Term Phase Conversion Date
is $7,100,000.00, then throughout the Term Phase principal payments
shall be made in monthly installments of Thirty-Nine Thousand Four
Hundred Forty-Four and 44/100 Dollars ($39,444.44), commencing on the
first day of the calendar month following the Term Phase Conversion
Date, and a final installment equal to the total unpaid principal,
interest and other charges, due and payable on the Term Maturity Date
(defined below). If the principal balance of this Note at the Term
Phase Conversion Date is other than $7,100,000.00 (the "Actual
Principal Balance"), then throughout the Term Phase principal payments
shall be made in monthly installments equal to 1/180 of such Actual
Principal Balance. In addition to
PROMISSORY NOTE
PAGE 2
2
<PAGE>
principal, interest shall be paid monthly, commencing on the first day
of the calendar month following the Term Phase Conversion Date.
(E) All principal, accrued and unpaid interest and other outstanding
charges hereunder shall be due and payable on November 15, 2007 (the
"TERM MATURITY DATE").
3. ADDITIONAL PROVISIONS REGARDING INTEREST. The interest rate applicable
under this Note shall not be less than five percent (5%). Interest on all
principal amounts outstanding from time to time hereunder shall be calculated on
the basis of a 360-day year applied to the actual number of days upon which
principal is outstanding, by multiplying the product of the principal amount and
the applicable rate set forth herein by the actual number of days elapsed, and
dividing by 360. In no event shall the rate of interest calculated hereunder
exceed the maximum rate allowed by law. Any principal amounts outstanding
hereunder after maturity or earlier acceleration of this Note shall bear
interest at a floating rate of two percentage points (2%) in excess of Compass
Bank Prime. "COMPASS BANK PRIME", as used in this Note, is a reference rate
established by the Lender for use in computing and adjusting interest, is
subject to increase, decrease, or change at the Lender's discretion, and is only
one of the reference rates or indices that Lender uses. Borrower acknowledges
that the Lender may lend to others at rates of interest at, or greater or less
than, "Compass Bank Prime" or the rate provided herein. Each change in the
interest rate resulting from a change in "Compass Bank Prime" shall become
effective on the day on which such change in "Compass Bank Prime" occurs.
4. PREPAYMENT. So long as the applicable interest rate under this Note is
equal to the Adjusted Libor Rate as defined in Section 1(b) above, then this
Note may be prepaid in whole or in part, and without charge, on any Interest
Adjustment Date. If the Fixed Rate Option is selected by Borrower, then so long
as the applicable interest rate is based on the fixed rate set forth in Section
2(c), this Note may be prepaid in whole, but not in part, and any prepayment in
full shall be accompanied by a prepayment fee calculated as follows:
Loan year (of Term Phase) Percentage of principal prepaid
in which prepayment made charged as prepayment fee
------------------------ -------------------------
1st 5%
2nd 4%
3rd 3%
4th 2%
5th 1%
Notwithstanding the foregoing, no prepayment fee shall be charged for a
prepayment in full or in part during a fixed rate period under either of the
circumstances set forth in (A) or (B) below:
A. If Borrower prepays the loan with internally-generated funds that are
not proceeds from another loan transaction; or
B. If:
(i) Borrower desires to further develop the Mortgaged Property with
additional or expanded buildings and facilities (the "ADDITIONAL
DEVELOPMENT FACILITIES"), and intends to finance such further
development with a loan or loans to be secured by a mortgage(s) on
the Additional Development Facilities, and
(ii) either:
(a) Lender will not consent to the release of the
PROMISSORY NOTE
PAGE 3
3
<PAGE>
Additional Development Facilities from its mortgage, or to a
second mortgage from another lender on the Additional
Development Facilities, or
(b) Lender will consent to a second mortgage, but Borrower's
other lender will not accept a second mortgage on the
Additional Development Facilities to secure its loan, or
(c) Lender and Borrower are unable to agree on the financing of
the Additional Development Facilities by Bank,
then, in any of such circumstances (a)-(c), and if
Borrower proceeds with the financing of the Additional Development Facilities
with another lender, Borrower may prepay the Loan in full without a prepayment
fee as a part of the closing on such other financing.
In the event of acceleration of this Note at any time and subsequent involuntary
or voluntary prepayment, and if the Fixed Rate Option is then in effect, any fee
set forth herein for a prepayment of the Note in full shall be applicable.
5. LOAN DOCUMENTS. The indebtedness evidenced hereby is secured by,
inter alia, the Construction Loan Agreement (the "LOAN AGREEMENT") executed by
the Borrower in favor of the Lender as of the date hereof, and which
incorporates the Commitment Letter from Lender to Borrower dated September 24,
1996 (the "COMMITMENT LETTER"), the Future Advance Mortgage, Assignment of Rents
and Leases and Security Agreement from Borrower to Lender dated as of the date
hereof, and the other Loan Documents defined in the Loan Agreement
(collectively, the "LOAN DOCUMENTS").
This Note is included in the indebtedness referred to in the Loan Documents
and is entitled to the benefits of those documents, but neither this reference
to those documents nor any provisions thereof shall affect or impair the
absolute and unconditional obligations of the Borrower to pay the principal of
and interest on this Note when due.
6. EVENTS OF DEFAULT. Upon the occurrence of any one or more of the
following events ("EVENTS OF DEFAULT"):
(A) Default in the payment of the principal of or interest on this
Note, as and when due and payable; and
(B) The occurrence of any Event of Default specified in the Loan
Agreement, the other Loan Documents, or in any other instrument executed in
connection with or securing this Note which is not cured within any cure
period provided with respect thereto (if any),
then, or at any time thereafter during the continuance of any such event, the
Lender may, with or without notice to the Borrower, declare this Note and
indebtedness evidenced hereby to be forthwith due and payable, whereupon this
Note and the indebtedness evidenced hereby shall become forthwith due and
payable, both as to principal and interest, without presentment, demand,
protest, or other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in any of the Loan Documents or in any other
instrument executed in connection with or securing this Note to the contrary
notwithstanding.
7. LATE FEE. Any scheduled payment of principal and/or interest which is
not paid within
PROMISSORY NOTE
PAGE 4
4
<PAGE>
ten (10) days from the date due will be subject to a late charge of five percent
(5%) of such scheduled payment.
8. WAIVERS. Borrower hereby waives demand, presentment for payment,
notice of dishonor, protest, and notice of protest and diligence in collection
or bringing suit and agrees that the Lender may accept partial payment, or
release or exchange security or collateral, without discharging or releasing any
unreleased collateral or the obligations evidenced hereby. Borrower further
waives any and all rights of exemption, both as to personal and real property,
under the constitution or laws of the United States, the State of Alabama or any
other state.
9. ATTORNEYS' FEES. Borrower agrees to pay reasonable attorneys' fees
and costs incurred by the Lender in collecting or attempting to collect this
Note, whether by suit or otherwise.
10. MISCELLANEOUS. As used herein, the terms "BORROWER" and "LENDER"
shall be deemed to include their respective successors, legal representatives
and assigns, whether by voluntary action of the parties or by operation of law.
This Note is given under the seal of all parties hereto, and it is intended that
this Note is and shall constitute and have the effect of a sealed instrument
according to law. This Note has been negotiated, and is being executed and
delivered in Birmingham, in the State of Alabama, or if executed elsewhere,
shall become effective upon the Lender's receipt and acceptance of the executed
original of this Note in the State of Alabama; provided, however, that the
Lender shall have no obligation to give, nor shall Borrower be entitled to
receive, any notice of such acceptance for this Note to become a binding
obligation of Borrower. Borrower hereby submits to jurisdiction in the State of
Alabama. THIS NOTE SHALL BE GOVERNED BY AND BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ALABAMA. IT IS INTENDED, AND THE BORROWER AND THE LENDER
HEREOF SPECIFICALLY AGREE, THAT THE LAWS OF THE STATE OF ALABAMA GOVERNING
INTEREST SHALL APPLY TO THIS NOTE AND TO THIS TRANSACTION. This Note may not be
modified except by written agreement signed by the Borrower and the Lender
hereof, or by their respective successors or assigns.
PROMISSORY NOTE
PAGE 5
5
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be executed, sealed
and delivered as of the date first set forth above.
BORROWER:
ATTEST: JUST FOR FEET, INC.
By: By:
Its: Its:
STATE OF ALABAMA
COUNTY OF JEFFERSON
I, _______________________________________________________, a notary public
in and for said county in said state, hereby certify that_______________________
whose name as __________________________________ of JUST FOR FEET, INC., a
corporation, is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being informed of the contents of such
instrument, he, as such officer and with full authority, executed the same
voluntarily for and as the act of said corporation.
Given under my hand and official seal this 3/rd/ day of February, 1997.
Notary Public
[ Notarial Seal ] My Commission Expires:
PROMISSORY NOTE
PAGE 6
6
<PAGE>
EXHIBIT 10.15
PERSONAL SERVICE AGREEMENT
--------------------------
This PERSONAL SERVICE AGREEMENT (the "Agreement") is made and entered into
as of the 22nd day of August, 1997 by and between JUST FOR FEET, INC., an
Alabama corporation (the "Company") and BART STARR, SR. ("Starr").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Starr previously entered into that certain
Personal Service Agreement dated August 17, 1994 (the "Original Agreement") and
now desire to terminate such Original Agreement and enter into this Agreement to
utilize the services of Starr with respect to certain public relations and
advertising efforts of the Company;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt, adequacy and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Termination of Original Agreement. The Company and Starr hereby
---------------------------------
terminate the Original Agreement, which shall be of no further force or effect
whatsoever.
2. Personal Appearances. Starr agrees that during the term of this
--------------------
Agreement, he will make approximately ten (10) to twelve (12) personal
appearances annually on behalf of the Company. For purposes of this Agreement,
"personal appearances" shall include attendance at new store grand openings and
other store promotional events as shall be agreed upon by the Company and Starr
for the purpose of greeting visitors and customers and providing autographs. The
Company and Starr shall cooperate in the coordination of personal appearances
hereunder, including the selection of events, the timing of Starr's
participation and other matters. The Company shall promptly reimburse Starr for
all reasonable out of pocket expenses incurred by him in connection with
personal appearances hereunder, including expenses for travel, lodging, meals
and rental cars, upon presentation of receipts or vouchers for such expenses.
3. Company "Spokesman" Services. Starr shall also provide services under
----------------------------
this Agreement by participating as "spokesman" for the Company in print or
televised advertisements on such occasions as shall be mutually agreed upon
between the Company and Starr.
4. Grant of Stock Options. In consideration of the services to be
----------------------
rendered by Starr hereunder, the Company shall grant to Starr, as of the date
hereof, a Non-Qualified Stock Option pursuant to the Company's 1997 Employee
Incentive Plan, to purchase 100,000 shares of the Company's Common Stock at an
exercise price of $12.78 per share. Such stock option shall vest immediately as
to 20,000 shares, and, subject to this Agreement being renewed pursuant to
Paragraph 5 hereof and being in full force and effect on such vesting date and
subject to Starr fulfilling his obligations hereunder, the remainder to vest in
increments of 16,000 shares on each of August 22, 1998, 1999, 2000, 2001 and
2002. Such stock option shall be represented by a Non-Qualified Stock Option
Agreement executed by the Company and Starr which shall contain other terms and
conditions customary to non-qualified stock options granted under the Company's
1997 Employee Incentive Plan.
5. Term. This Agreement shall have an initial term of one year and shall
----
renew automatically for successive periods of one year each in the absence of
written notice by either party to the other of the intention to terminate, such
notice to be given no less than thirty (30) days prior to the end of the then-
current period.
<PAGE>
6. Independent Contractor. In connection with all services to be provided
----------------------
hereunder, Starr shall act as an independent contractor and not as an employee
of the Company.
7. Entire Agreement. This Agreement reflects the entire agreement between
---------------
the parties with respect to the subject matter covered and supersedes and
replaces any and all prior agreements with respect to said subject matter.
8. Governing Law. The terms of this Agreement shall be governed by the
-------------
laws of the State of Alabama.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement on
the date set forth above.
"COMPANY"
JUST FOR FEET, INC.
By: /s/ Harold Ruttenberg
----------------------
Harold Ruttenberg
Chairman, President and Chief Executive
Officer
"STARR"
/s/ Bart Starr, Sr.
--------------------
BART STARR, SR.
2
<PAGE>
EXHIBIT 10.16
PROMISSORY NOTE
August 22, 1997
---------------
(DATE)
FOR VALUE RECEIVED, JUST FOR FEET, INC. ("Maker") promises, jointly and
severally, if more than one, to pay to the order of General Electric Capital
Corporation or any subsequent holder hereof (each, a "Payee") at its office
located at 3379 Peachtree Road N.E. 400, Atlanta, GA 30326 or at such other
place as Payee or the holder hereof may designate, the principal sum of Five
Million and 00/100 Dollars ($5,000,000.00), with interest thereon, from the date
hereof through and including the dates of payment, at a fixed interest rate of
Seven and ninety eight one hundredths percent (7.98%) per annum, to be paid in
lawful money of the United States, in Fifty Nine (59) consecutive monthly
installments of principal and interest of One Hundred One Thousand, Three
Hundred Thirty Four and 12/100 Dollars ($101,334.12) each ("Periodic
Installment") and a final installment which shall be in the amount of the total
outstanding principal and interest. The first Periodic Installment shall be due
and payable on September 22, 1998 and the following Periodic Installments and
the final installment shall be due and payable on the same day of each
succeeding month (each, a "Payment Date"). Such installments have been
calculated on the basis of a 360 day year of twelve 30-day months. Each payment
may, at the option of the Payee, be calculated and applied on an assumption that
such payment would be made on its due date.
The acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payee's
right to receive payment in full at such time or at any prior or subsequent
time.
The Maker hereby expressly authorizes the Payee to insert the date value is
actually given in the blank space on the face hereof and on all related
documents pertaining hereto.
This Note may be secured by a security agreement, chattel mortgage, pledge
agreement or like instrument (each of which being hereinafter called a "Security
Agreement").
Time is of the essence hereof. If any installment or any other sum due under
this Note or any Security Agreement is not received within ten (10) days after
the applicable due date, the Maker agrees to pay, in addition to the amount of
each such installment or other sum, a late payment charge of five percent (5%)
of said installment or other sum, but not exceeding any lawful maximum. If (i)
Maker fails to make payment of any amount due hereunder within ten (10) days
after the same becomes due and payable; or (ii) Maker is in default under, or
fails to perform under any term or condition contained in any Security
Agreement, then the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under this Note or the
Security Agreement, at the election of Payee, shall immediately become due and
payable, with interest thereon at the lesser of eighteen percent (18%) per annum
or the highest rate not prohibited by applicable law from the date of such
accelerated maturity until paid (both before and after any judgment).
The Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of an additional sum as a premium equal to the following
percentages of the original principal balance for the indicated period:
<TABLE>
<S> <C> <C>
Prior to the first annual anniversary date of this Note: three percent (3%)
Thereafter and prior to the second annual anniversary date of this Note: two and one half percent (2.5%)
Thereafter and prior to the third annual anniversary date of this Note: two percent (2%)
Thereafter and prior to the fourth annual anniversary date of this Note: one and one half percent (1.5%)
Thereafter and prior to the fifth annual anniversary date of this Note: one percent (1%)
and zero percent (0%) thereafter, plus all other sums due hereunder or under any Security
Agreement.
</TABLE>
It is the intention of the parties hereto to comply with the applicable usury
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Note or any Security Agreement, in no event shall this Note or
any Security Agreement require the payment or permit the collection of interest
in excess of the maximum amount permitted by applicable law. If any such excess
interest is contracted for, charged or received under this Note or any Security
Agreement, or if all of the principal balance shall be prepaid, so that under
any of such circumstances the amount of interest contracted for, charged or
received under this Note or the Security Agreement on the principal balance
shall exceed the maximum amount of interest permitted by applicable law, then in
such event (a) the provisions of this paragraph shall govern and control, (b)
neither Maker nor any other person or entity now or hereafter liable for the
payment hereof shall be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal balance or refunded
to Maker, at the option of the Payee, and (d) the effective rate of interest
shall be automatically reduced to the maximum lawful contract rate allowed under
applicable law as now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that without limitation of the
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<PAGE>
foregoing, all calculations of the rate of interest contracted for, charged or
received under this Note or the Security Agreement which are made for the
purpose of determining whether such rate exceeds the maximum lawful contract
rate, shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading in equal parts during the period of the full
stated term of the indebtedness evidenced hereby, all interest at any time
contracted for, charged or received from Maker or otherwise by Payee in
connection with such indebtedness; provided, however, that if any applicable
state law is amended or the law of the United States of America preempts any
applicable state law, so that it becomes lawful for the Payee to receive a
greater interest per annum rate than is presently allowed, the Maker agrees
that, on the effective date of such amendment or preemption, as the case may be,
the lawful maximum hereunder shall be increased to the maximum interest per
annum rate allowed by the amended state law or the law of the United States of
America.
The Maker and all sureties, endorsers, guarantors or any others (each such
person, other than the Maker, an "OBLIGOR") who may at any time become liable
for the payment hereof jointly and severally consent hereby to any and all
extensions of time, renewals, waivers or modifications of, and all substitutions
or releases of, security or of any party primarily or secondarily liable on this
Note or any Security Agreement or any term and provision of either, which may be
made, granted or consented to by Payee, and agree that suit may be brought and
maintained against any one or more of them, at the election of Payee without
joinder of any other as a party thereto, and that Payee shall not be required
first to foreclose, proceed against, or exhaust any security hereof in order to
enforce payment of this Note. The Maker and each Obligor hereby waive
presentment, demand for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, and all other notices in connection herewith, as
well as filing of suit (if permitted by law) and diligence in collecting this
Note or enforcing any of the security hereof, and agree to pay (if permitted by
law) all expenses incurred in collection, including Payee's actual attorneys'
fees. Maker and each Obligor agree that fees not in excess of twenty percent
(20%) of the amount then due shall be deemed reasonable.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER AND PAYEE
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.) THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.
This Note and any Security Agreement constitute the entire agreement of the
Maker and Payee with respect to the subject matter hereof and supersedes all
prior understandings, agreements and representations, express or implied.
No variation or modification of this Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an
authorized representative of Maker and Payee. Any such waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given.
Any provision in this Note or any Security Agreement which is in conflict with
any statute, law or applicable rule shall be deemed omitted, modified or altered
to conform thereto.
JUST FOR FEET, INC.
By: /s/ Eric L. Tyra
------------------------------------
Eric L. Tyra, Executive Vice President
----------------------------------------
Print name (and title, if applicable)
630734234
----------------------------------------
(Federal tax identification number)
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<PAGE>
EXHIBIT 10.16.1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, made as of August 21, 1997 ("AGREEMENT"), by and
between GENERAL ELECTRIC CAPITAL CORPORATION, a NEW YORK corporation with an
address at 3379 PEACHTREE ROAD N.E. SUITE 400, ATLANTA, GA ("SECURED PARTY"),
and JUST FOR FEET, INC., a CORPORATION organized and existing under the laws of
the State of ALABAMA with its chief executive offices located at 153 CAHABA
VALLEY PARKWAY NORTH, BIRMINGHAM, ALABAMA ("DEBTOR").
In consideration of the promises herein contained and of certain other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:
1. CREATION OF SECURITY INTEREST: Debtor hereby gives, grants and assigns to
Secured Party, its successors and assigns forever, a security interest in and
against any and all property listed on the collateral schedule annexed hereto or
made a part hereof ("COLLATERAL SCHEDULE"), and in and against any and all
additions, attachments, accessories and accessions thereto, any and all
substitutions, replacements or exchanges therefor, and any and all insurance
and/or other proceeds thereof (all of the foregoing being hereinafter
individually and collectively referred to as the "COLLATERAL"). The foregoing
security interest is given to secure the payment and performance of any and all
debts, obligations and liabilities of any kind, nature or description whatsoever
(whether due or to become due) of Debtor to Secured Party under that certain
Promissory Note identified on the Collateral Schedule ("NOTE"), this Agreement,
and/or any related documents (the Note, this Agreement and all such related
documents being hereinafter collectively referred to as the "DEBT DOCUMENTS"),
and any renewals, extensions and modifications of such debts, obligations and
liabilities (all of the foregoing being hereinafter referred to as the
"INDEBTEDNESS").
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR: Debtor hereby
represents, warrants and covenants that: (a) Debtor is, and will remain, duly
organized, existing and in good standing under the laws of the State set forth
in the first paragraph of this Agreement, has its chief executive offices at the
location set forth in such paragraph, and is, and will remain, duly qualified
and licensed in every jurisdiction wherever necessary to carry on its business
and operations; (b) Debtor has adequate power and capacity to enter into, and
to perform its obligations, under each of the Debt Documents; (c) the Debt
Documents have been duly authorized, executed and delivered by Debtor and
constitute legal, valid and binding agreements enforceable under all applicable
laws in accordance with their terms, except to the extent that the enforcement
of remedies may be limited under applicable bankruptcy and insolvency laws; (d)
no approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into, or
performance by, Debtor of any of the Debt Documents, except such as may have
already been obtained; (e) the entry into, and performance by, Debtor of the
Debt Documents will not (i) violate any of the organizational documents of
Debtor or any judgment, order, law or regulation applicable to Debtor, or (ii)
result in any breach of, constitute a default under, or result in the creation
of any lien, claim or encumbrance on any of Debtor's property (except for liens
in favor of Secured Party) pursuant to, any indenture mortgage, deed of trust,
bank loan, credit agreement, or other agreement or instrument to which Debtor is
a party; (f) there are no suits or proceedings pending or threatened in court
or before any commission, board or other administrative agency against or
affecting Debtor which could, in the aggregate, have a material adverse effect
on Debtor, its business or operations, or its ability to perform its obligations
under the Debt Documents; (g) all financial statements delivered to Secured
Party in connection with the Indebtedness have been prepared in accordance with
generally accepted accounting principles, and since the date of the most recent
financial statement, there has been no material adverse change; (h) the
Collateral is not, and will not be, used by Debtor for personal, family or
household purposes; (i) the Collateral is, and will remain, in good condition
and repair and Debtor will not be negligent in the care and use thereof; (j)
Debtor is, and will remain, the sole and lawful owner, and in possession of, the
Collateral, and has the sole right and lawful authority to grant the security
interest described in this Agreement; and (k) the Collateral is, and will
remain, free and clear of all liens, claims and encumbrances of every kind,
nature and description (except for liens in favor of Secured Party).
<PAGE>
3. COLLATERAL: (a) Until the declaration of any default hereunder, Debtor
shall remain in possession of the Collateral; provided, however, that Secured
Party shall have the right to possess (i) any chattel paper or instrument that
constitutes a part of the Collateral, and (ii) any other Collateral which
because of its nature may require that Secured Party's security interest therein
be perfected by possession. Secured Party, its successors and assigns, and
their respective agents, shall, upon reasonable notice to Debtor, have the right
to examine and inspect any of the Collateral at any time during normal business
hours. Upon any request from Secured Party, Debtor shall provide Secured Party
with notice of the then current location of the Collateral. (b) Debtor shall
(i) use the Collateral only in its trade or business, (ii) maintain all of the
Collateral in good condition and working order, (iii) use and maintain the
Collateral only in compliance with all applicable laws, and (iv) keep all of
the Collateral free and clear of all liens, claims and encumbrances (except for
liens in favor of Secured Party). (c) Debtor shall not, without the prior
written consent of Secured Party, (i) part with possession of any of the
Collateral (except to Secured Party or for maintenance and repair), (ii) remove
any of the Collateral from the continental United States, or (iii) sell, rent,
lease, mortgage, grant a security interest in or otherwise transfer or encumber
(except for liens in favor of Secured Party) any of the Collateral. (d) Debtor
shall pay promptly when due all taxes, license fees, assessments and public and
private charges levied or assessed on any of the Collateral, on the use thereof,
or on this Agreement or any of the other Debt Documents. At its option, Secured
Party may discharge taxes, liens, security interests or other encumbrances at
any time levied or placed on the Collateral and may pay for the maintenance,
insurance and preservation of the Collateral or to effect compliance with the
terms of this Agreement or any of the other Debt Documents. Debtor shall
reimburse Secured Party, on demand, for any and all costs and expenses incurred
by Secured Party in connection therewith and agrees that such reimbursement
obligation shall be secured hereby. (e) Debtor shall, at all times, keep
accurate and complete records of the Collateral, and Secured Party, its
successors and assigns, and their respective agents, shall have the right to
examine, inspect, and make extracts from all of Debtor's books and records
relating to the Collateral at any time during normal business hours. (f) Any
third person at any time and from time to time holding all or any portion of the
Collateral shall be deemed to, and shall, hold the Collateral as the agent of,
and as pledge holder for, Secured Party. At any time and from time to time,
Secured Party may give notice to any third person holding all or any portion of
the Collateral that such third person is holding the Collateral as the agent of,
and as pledge holder for, the Secured Party.
4. INSURANCE: The Collateral shall at all times be held at Debtor's risk, and
Debtor shall keep it insured against loss or damage by fire and extended
coverage perils, theft, burglary, and for any or all Collateral which are
vehicles, for risk of loss by collision, and where requested by Secured Party,
against other risks as required thereby, for the full replacement value thereof,
with companies, in amounts and under policies acceptable to Secured Party.
Debtor shall, if Secured Party so requires, deliver to Secured Party policies or
certificates of insurance evidencing such coverage. Each policy shall name
Secured Party as loss payee thereunder, shall provide for coverage to Secured
Party regardless of the breach by Debtor of any warranty or representation made
therein, shall not be subject to co-insurance, and shall provide for thirty (30)
days written notice to Secured Party of the cancellation or material
modification thereof. Debtor hereby appoints Secured Party as its attorney in
fact to make proof of loss, claim for insurance and adjustments with insurers,
and to execute or endorse all documents, checks or drafts in connection with
payments made as a result of any such insurance policies. Proceeds of insurance
shall be applied, at the option of Secured Party, to repair or replace the
Collateral or to reduce any of the Indebtedness secured hereby.
5. REPORTS: (a) Debtor shall promptly notify Secured Party in the event of
(i) any change in the name of Debtor, (ii) any relocation of its chief
executive offices, (iii) any relocation of any of the Collateral, (iv) any of
the Collateral being lost, stolen, missing, destroyed, materially damaged or
worn out, or (v) any lien, claim or encumbrance attaching or being made against
any of the Collateral (other than liens in favor of Secured Party). (b) Should,
for any reason, the Debtor cease to file reports pursuant to section 13 or 15(d)
of the Securities and Exchange Act of 1934 as a publicly traded company, Debtor
agrees to furnish its annual financial statements and such interim statements as
Secured Party may require in form satisfactory to Secured Party. Any and all
financial statements submitted and to be submitted to Secured Party have and
will have been prepared on a basis of generally accepted accounting principles,
and are and will be complete and correct and fairly present Debtor's financial
condition as at the date thereof.
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<PAGE>
6. FURTHER ASSURANCES: (a) Debtor shall, upon request of Secured Party,
furnish to Secured Party such further information, execute and deliver to
Secured Party such documents and instruments (including, without limitation,
Uniform Commercial Code financing statements) and do such other acts and things,
as Secured Party may at any time reasonably request relating to the perfection
or protection of the security interest created by this Agreement or for the
purpose of carrying out the intent of this Agreement. Without limiting the
foregoing, Debtor shall cooperate and do all acts deemed necessary or advisable
by Secured Party to continue in Secured Party a perfected first security
interest in the Collateral, and shall obtain and furnish to Secured Party any
subordinations, releases, landlord, lessor, or mortgagee waivers, and similar
documents as may be from time to time requested by, and which are in form and
substance satisfactory to, Secured Party. (b) Debtor shall, upon reasonable
request of Secured Party, execute and file applications for title, transfers of
title, financing statements, notices of lien and other documents pertaining to
any or all of the Collateral. Debtor shall, if any certificate of title be
required or permitted by law for any of the Collateral, obtain such certificate
showing the lien hereof with respect to the Collateral and promptly deliver same
to Secured Party. (c) Debtor shall indemnify and defend the Secured Party, its
successors and assigns, and their respective directors, officers and employees,
from and against any and all claims, actions and suits (including, without
limitation, related attorneys' fees) of any kind, nature or description
whatsoever arising, directly or indirectly, in connection with any of the
Collateral.
7. EVENTS OF DEFAULT: Debtor shall be in default under this Agreement and
each of the other Debt Documents upon the occurrence of any of the following
"EVENT(S) OF DEFAULT": (a) Debtor fails to pay any installment or other amount
due or coming due under any of the Debt Documents within ten (10) days after
written notice thereof; (b) any attempt by Debtor, without the prior written
consent of Secured Party, to sell, rent, lease, mortgage, grant a security
interest in, or otherwise transfer or encumber (except for liens in favor of
Secured Party) any of the Collateral; (c) Debtor fails to procure, or maintain
in effect at all times, any of the insurance on the Collateral in accordance
with Section 4 of this Agreement; (d) Debtor breaches any of its other
obligations under any of the Debt Documents and fails to cure the same within
thirty (30) days after written notice thereof; (e) any warranty, representation
or statement made by Debtor in any of the Debt Documents or otherwise in
connection with any of the Indebtedness shall be false or misleading in any
material respect; (f) any of the Collateral being subjected to attachment,
execution, levy, seizure or confiscation in any legal proceeding or otherwise;
(g) any default by Debtor under any other agreement between Debtor and Secured
Party; (h) any dissolution, termination of existence, insolvency, or business
failure of Debtor, or any merger, consolidation or change in controlling
ownership which causes a material adverse change in Debtor's financial
condition; (i) the appointment of a receiver for all or of any part of the
property of Debtor or any Guarantor, or any assignment for the benefit of
creditors by Debtor or any Guarantor; (j) the filing of a petition by Debtor or
any Guarantor under any bankruptcy, insolvency or similar law, or the filing of
any such petition against Debtor or any Guarantor if the same is not dismissed
within thirty (30) days of such filing, or if the Debtor is not actively
defending against such petition, or (k) Debtor fails to maintain (i) a net worth
of $75 million, (ii) a cash flow to debt service ratio of 1.5 to 1, or (iii)
either, a $10 million cash balance, a $10 million availability under their bank
facility, or a $10 million combination thereof. As used herein, "net worth"
shall mean the total shareholders equity reported on any financial statements
provided or obtained pursuant to section 13 or 15(d) of the Securities and
Exchange Act of 1934 or Section 5 herein; "cash flow" shall mean the sum of net
income plus depreciation reported on any financial statements provided or
obtained pursuant to section 13 or 15(d) of the Securities and Exchange Act of
1934 or Section 5 herein; and "bank facility" shall mean that Revolving Credit
and Security Agreement dated ___________, 19__ between the Debtor and Compass
Bank.
8. REMEDIES ON DEFAULT: (a) Upon the occurrence of an Event of Default under
this Agreement, the Secured Party, at its option, may declare any or all of the
Indebtedness (including, without limitation, the Note) to be immediately due and
payable, without demand or notice to Debtor or any Guarantor. The obligations
and liabilities accelerated thereby shall bear interest (both before and after
any judgment) until paid in full at the lower of eighteen percent (18%) per
annum or the maximum rate not prohibited by applicable law. (b) Upon such
declaration of default, Secured Party shall have all of the rights and remedies
of a Secured Party under the Uniform Commercial Code, and under any other
applicable law. Without limiting the foregoing, Secured Party shall have
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<PAGE>
the right to (i) notify any account debtor of Debtor or any obligor on any
instrument which constitutes part of the Collateral to make payment to the
Secured Party, (ii) with or without legal process, enter any premises where the
Collateral may be and take possession and/or remove said Collateral from said
premises, (iii) sell the Collateral at public or private sale, in whole or in
part, and have the right to bid and purchase at said sale, and/or (iv) lease or
otherwise dispose of all or part of the Collateral, applying proceeds therefrom
to the obligations then in default. If requested by Secured Party, Debtor shall
promptly assemble the Collateral and make it available to Secured Party at a
place to be designated by Secured Party which is reasonably convenient to both
parties. Secured Party may also render any or all of the Collateral unusable at
the Debtor's premises and may dispose of such Collateral on such premises
without liability for rent or costs. Any notice which Secured Party is required
to give to Debtor under the Uniform Commercial Code of the time and place of any
public sale or the time after which any private sale or other intended
disposition of the Collateral is to be made shall be deemed to constitute
reasonable notice if such notice is given to the last known address of Debtor at
least five (5) days prior to such action. (c) Proceeds from any sale or lease or
other disposition shall be applied: first, to all costs of repossession,
storage, and disposition including without limitation attorneys', appraisers',
and auctioneers' fees; second, to discharge the obligations then in default;
third, to discharge any other Indebtedness of Debtor to Secured Party, whether
as obligor, endorsor, guarantor, surety or indemnitor; fourth, to expenses
incurred in paying or settling liens and claims against the Collateral; and
lastly, to Debtor, if there exists any surplus. Debtor shall remain fully liable
for any deficiency. (d) In the event that any of the Debt Documents are placed
in the hands of an attorney for collection of money due or to become due or to
obtain performance of any provision hereof, Debtor agrees to pay all reasonable
attorneys' fees incurred by Secured Party, and further agrees that payment of
such fees is secured hereunder. (e) Secured Party's rights and remedies
hereunder or otherwise arising are cumulative and may be exercised singularly or
concurrently. Neither the failure nor any delay on the part of the Secured Party
to exercise any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. Secured Party shall not be deemed to have
waived any of its rights hereunder or under any other agreement, instrument or
paper signed by Debtor unless such waiver be in writing and signed by Secured
Party. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion. (f) DEBTOR HEREBY UNCONDITIONALLY
WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY OF THE OTHER DEBT
DOCUMENTS, ANY OF THE INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR
AND SECURED PARTY RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY
RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN
DEBTOR AND SECURED PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE, MEANING THAT
IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
9. MISCELLANEOUS: (a) This Agreement, the Note and/or any of the other Debt
Documents may be assigned, in whole or in part, by Secured Party without notice
to Debtor, and Debtor hereby waives any defense, counterclaim or cross-complaint
by Debtor against any assignee, agreeing that Secured Party shall be solely
responsible therefor. (b) All notices to be given in connection with this
Agreement shall be in writing, shall be addressed to the parties at their
respective addresses set forth hereinabove (unless and until a different address
may be specified in a written notice to the other party), and shall be deemed
given (i) on the date of receipt if delivered in hand or by facsimile
transmission, (ii) on the next business day after being sent by express mail,
and (iii) on the fourth business day after being sent by regular, registered or
certified mail. As used herein, the term "business
4
<PAGE>
day" shall mean and include any day other than Saturdays, Sundays, or other days
on which commercial banks in New York, New York are required or authorized to be
closed. (c) Secured Party may correct patent errors herein and fill in all
blanks herein or in the Collateral Schedule consistent with the agreement of the
parties. (d) Time is of the essence hereof. This Agreement shall be binding,
jointly and severally, upon all parties described as the "Debtor" and their
respective heirs, executors, representatives, successors and assigns, and shall
inure to the benefit of Secured Party, its successors and assigns. (e) This
Agreement and its Collateral Schedule constitute the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
understandings (whether written, verbal or implied) with respect thereto. This
Agreement and its Collateral Schedule shall not be changed or terminated orally
or by course of conduct, but only by a writing signed by both parties hereto.
Section headings contained in this Agreement have been included for convenience
only, and shall not affect the construction or interpretation hereof. (f) This
Agreement shall continue in full force and effect until all of the Indebtedness
has been indefeasibly paid in full to Secured Party. This Agreement shall
automatically be reinstated in the event that Secured Party is ever required to
return or restore the payment of all or any portion of the Indebtedness (all as
though such payment had never been made).
IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally bound
hereby, have duly executed this Agreement in one or more counterparts, each of
which shall be deemed to be an original, as of the day and year first aforesaid.
SECURED PARTY: DEBTOR:
GENERAL ELECTRIC CAPITAL CORPORATION JUST FOR FEET, INC.
By: /s/ Chris Garrett By: /s/ Eric Tyra
---------------------------- ------------------------------
Title: Region Credit Analyst Title: Executive Vice President
------------------------- ---------------------------
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JUST FOR FEET, INC.
Subsidiaries
Premium Sports, Inc. (Florida)
Just For Feet of Texas, Inc. (Alabama)
Just For feet of Nevada, Inc. (Nevada)
Imperial Acquisition Corporation (Michigan)
Just For Feet of Puerto Rico, Inc. (Puerto Rico)
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
333-28041, 333-42313 and 333-06531 of Just For Feet, Inc., and the Registration
Statement regarding the Just For Feet, Inc., Non-Employee Director Stock Option
Plan, on Form S-8, and to the incorporation by reference in Registration
Statements Nos. 333-26345 and 333-28039 of Just For Feet, Inc. on Forn S-3 of
our report dated March 30, 1998 appearing in this Annual Report on Form 10-K of
Just For Feet, Inc. for the year ended January 31, 1998.
/s/ Deloitte & Touche LLP
Birmingham, Alabama
April 23, 1998
<PAGE>
EXHIBIT 24
STATE OF ________________
COUNTY OF _______________
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Randall L. Haines, a Director of
JUST FOR FEET, INC.,an Alabama corporation, do constitute and appoint Harold
Ruttenberg and Eric L. Tyra, jointly and severally, my true and lawful
attorneys-in-fact, each with full power of substitution and resubstitution, for
me in any and all capacities, to sign the Annual Report on Form 10-K for JUST
FOR FEET, INC. for the fiscal year ended January 31, 1998, pursuant to the
requirements of the Securities Exchange Act of 1934, and to file such document
with the Securities and Exchange Commission, together with all exhibits thereto
and other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Annual Report,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 21st day of
April 1998.
/s/Randall L. Haines
-----------------------------
Randall L. Haines
ACKNOWLEDGMENT
--------------
BEFORE me this 21st day of April 1998, came Randall L. Haines, personally
known to me, who in my presence did sign and seal the above and foregoing Power
of Attorney and acknowledged the same as his true act and deed.
Deborah B. Partal
_________________________________
NOTARY PUBLIC
State of Alabama
________________________
My Commission Expires:
2/28/2000
_________________________________
<PAGE>
Exhibit 24.2
STATE OF Massachusetts
__________________
COUNTY OF Suffolk
__________________
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Michael P. Lazarus, a Director of
JUST FOR FEET, INC., an Alabama corporation, do constitute and appoint Harold
Ruttenberg and Eric L. Tyra, jointly and severally, my true and lawful
attorneys-in-fact, each with full power of substitution and resubstitution, for
me in any and all capacities, to sign the Annual Report on Form 10-K for JUST
FOR FEET, INC. for the fiscal year ended January 31, 1998, pursuant to the
requirements of the Securities Exchange Act of 1934, and to file such document
with the Securities and Exchange Commission, together with all exhibits thereto
and other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Annual Report,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 22nd day of
April 1998.
/s/ Michael P. Lazarus
------------------------
Michael P. Lazarus
ACKNOWLEDGMENT
--------------
BEFORE me this 22nd day of April 1998, came Michael P. Lazarus, personally
known to me, who in my presence did sign and seal the above and foregoing Power
of Attorney and acknowledged the same as his true act and deed.
James E. Rice
_________________________________
NOTARY PUBLIC
State of Massachusetts
________________________
My Commission Expires:
6/18/04
_________________________________
<PAGE>
EXHIBIT 24.3
STATE OF Alabama
________________
COUNTY OF Shelby
_______________
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Bart Starr, a Director of JUST FOR
FEET, INC.,an Alabama corporation, do constitute and appoint Harold Ruttenberg
and Eric L. Tyra, jointly and severally, my true and lawful attorneys-in-fact,
each with full power of substitution and resubstitution, for me in any and all
capacities, to sign the Annual Report on Form 10-K for JUST FOR FEET, INC. for
the fiscal year ended January 31, 1998, pursuant to the requirements of the
Securities Exchange Act of 1934, and to file such document with the Securities
and Exchange Commission, together with all exhibits thereto and other documents
in connection therewith, and to sign on my behalf and in my stead, in any and
all capacities, any amendments to said Annual Report, incorporating such changes
as any of the said attorneys-in-fact deems appropriate, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 21st day of
April 1998.
/s/ Bart Starr
-------------------------------
Bart Starr
ACKNOWLEDGMENT
--------------
BEFORE me this 21st day of April 1998, came Bart Starr, personally known to
me, who in my presence did sign and seal the above and foregoing Power of
Attorney and acknowledged the same as his true act and deed.
Doris Lee Sewell
_________________________________
NOTARY PUBLIC
State of Alabama
________________________
My Commission Expires:
8/30/99
_________________________________
<PAGE>
EXHIBIT 24.4
STATE OF Georgia
________________
COUNTY OF Fulton
_______________
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Edward S. Croft, III, a Director of
JUST FOR FEET, INC.,an Alabama corporation, do constitute and appoint Harold
Ruttenberg and Eric L. Tyra, jointly and severally, my true and lawful
attorneys-in-fact, each with full power of substitution and resubstitution, for
me in any and all capacities, to sign the Annual Report on Form 10-K for JUST
FOR FEET, INC. for the fiscal year ended January 31, 1998, pursuant to the
requirements of the Securities Exchange Act of 1934, and to file such document
with the Securities and Exchange Commission, together with all exhibits thereto
and other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Annual Report,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 22nd day of
April 1998.
/s/ Edward S. Croft, III
-------------------------------------------------
Edward S. Croft, III
ACKNOWLEDGMENT
--------------
BEFORE me this 22nd day of April 1998, came Edward S. Croft, III, personally
known to me, who in my presence did sign and seal the above and foregoing Power
of Attorney and acknowledged the same as his true act and deed.
Donna J. Hitchcock
____________________________________
NOTARY PUBLIC
State of Georgia
___________________________
My Commission Expires:
1/20/00
____________________________________
<PAGE>
Exhibit 24.5
STATE OF NEW YORK
----------------
COUNTY OF QUEENS
----------------
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, David F. Bellet, a Director of JUST
FOR FEET, INC.,an Alabama corporation, do constitute and appoint Harold
Ruttenberg and Eric L. Tyra, jointly and severally, my true and lawful
attorneys-in-fact, each with full power of substitution and resubstitution, for
me in any and all capacities, to sign the Annual Report on Form 10-K for JUST
FOR FEET, INC. for the fiscal year ended January 31, 1998, pursuant to the
requirements of the Securities Exchange Act of 1934, and to file such document
with the Securities and Exchange Commission, together with all exhibits thereto
and other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Annual Report,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his substitute or substitutes, may do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 22nd day of
April 1998.
/s/ David F. Bellet
--------------------
David F. Bellet
ACKNOWLEDGMENT
--------------
BEFORE me this 22nd day of April 1998, came David F. Bellet, personally
known to me, who in my presence did sign and seal the above and foregoing Power
of Attorney and acknowledged the same as his true act and deed.
Maria Donaldson
---------------------------------
NOTARY PUBLIC
State of New York
------------------------
My Commission Expires:
7/25/98
---------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JAN-31-1998 JAN-31-1997
<PERIOD-START> FEB-01-1997 FEB-01-1996
<PERIOD-END> JAN-31-1998 JAN-31-1997
<CASH> 82,490 138,785
<SECURITIES> 0 36,927
<RECEIVABLES> 15,840 6,553
<ALLOWANCES> 0 0
<INVENTORY> 206,128 133,323
<CURRENT-ASSETS> 311,167 314,743
<PP&E> 108,487 61,481
<DEPRECIATION> 13,958 6,559
<TOTAL-ASSETS> 448,352 375,834
<CURRENT-LIABILITIES> 155,706 146,914
<BONDS> 0 0
0 0
0 0
<COMMON> 3 3
<OTHER-SE> 268,081 218,556
<TOTAL-LIABILITY-AND-EQUITY> 448,352 375,834
<SALES> 478,638 256,397
<TOTAL-REVENUES> 481,109 261,728<F1>
<CGS> 279,816 147,526
<TOTAL-COSTS> 426,203 228,095<F2>
<OTHER-EXPENSES> 19,240 8,058<F3>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,446 832
<INCOME-PRETAX> 34,220 24,743
<INCOME-TAX> 12,817 8,783
<INCOME-CONTINUING> 21,403 15,960
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 2,041
<NET-INCOME> 21,403 13,919
<EPS-PRIMARY> 0.72 0.50
<EPS-DILUTED> 0.70 0.48
<FN>
<F1>Includes Sales, Franchise fees, royalties and other revenue and interest
income.
<F2>Includes CGS, Store operating and store opening costs.
<F3>Includes Amortization of intangible and general and administrative.
</FN>
</TABLE>
