SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Just For Feet, Inc.
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(Name of Issuer)
Common Stock, par value $0.0001 per share
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(Title of Class of Securities)
48213P106
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(CUSIP Number)
Sneaker Guarantee LLC
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
(617) 227-1050
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 2, 1998
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(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D,
and is filing this schedule because of Rule 13d-1(b)(3) or (4), check
the following box [ ].
SCHEDULE 13D
CUSIP No. 48213P106
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(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Sneaker Guarantee LLC
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) (x)
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS
OO
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) ( )
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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(7) SOLE VOTING POWER
NUMBER OF
SHARES ___________________________________
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY 1,849,946 (See Item 5)
EACH ___________________________________
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON ___________________________________
WITH (10) SHARED DISPOSITIVE POWER
1,849,946 (See Item 5)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,849,946 (See Item 5)
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(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES ( )
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 6.1% (See
Item 5)
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(14) TYPE OF REPORTING PERSON
OO
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SCHEDULE 13D
CUSIP No. 48213P106
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(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Thomas H. Lee Equity Fund III, L.P.
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) (x)
- ---------------------------------------------------------------------------
(3) SEC USE ONLY
- ---------------------------------------------------------------------------
(4) SOURCE OF FUNDS
OO
- ---------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) ( )
- ---------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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(7) SOLE VOTING POWER
NUMBER OF
SHARES _________________________________
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY 1,849,946 (See Item 5)
EACH _________________________________
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON
WITH _________________________________
(10) SHARED DISPOSITIVE POWER
1,849,946 (See Item 5)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,849,946 (See Item 5)
- ---------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES ( )
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 6.1% (See
Item 5)
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(14) TYPE OF REPORTING PERSON
PN
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SCHEDULE 13D
CUSIP No. 48213P106
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(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THL Equity Advisors III Limited Partnership
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) (x)
- ---------------------------------------------------------------------------
(3) SEC USE ONLY
- ---------------------------------------------------------------------------
(4) SOURCE OF FUNDS
OO
- ---------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) ( )
- ---------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
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(7) SOLE VOTING POWER
NUMBER OF
SHARES ___________________________________
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY 1,849,946 (See Item 5)
EACH ___________________________________
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON
WITH ___________________________________
(10) SHARED DISPOSITIVE POWER
1,849,946 (See Item 5)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,849,946 (See Item 5)
- ---------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES ( )
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 6.1% (See
Item 5)
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(14) TYPE OF REPORTING PERSON
PN
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SCHEDULE 13D
CUSIP No. 48213P106
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(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THL Equity Trust III
- ---------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) (x)
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS
N/A
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) ( )
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
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(7) SOLE VOTING POWER
NUMBER OF
SHARES ___________________________________
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY 1,849,946 (See Item 5)
EACH ___________________________________
REPORTING (9) SOLE DISPOSITIVE POWER
PERSON
WITH ___________________________________
(10) SHARED DISPOSITIVE POWER
1,849,946 (See Item 5)
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,849,946 (See Item 5)
- ---------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES ( )
- ---------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 6.1% (See
Item 5)
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(14) TYPE OF REPORTING PERSON
OO
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ITEM 1. SECURITY AND ISSUER.
The class of equity securities to which this statement relates
is the common stock, par value $0.0001 per share (the "Common Stock"), of
Just For Feet, Inc. ("JFF"). The principal executive offices of JFF are
located at 7400 Cahaba Valley Road, Birmingham, Alabama 35242.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (c) and (f)
This statement is being jointly filed by the following persons
(collectively, the "Reporting Persons") pursuant to Rule 13d-(1)(f) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"):
(1) Sneaker Guarantee LLC, a Delaware limited liability company
("Sneaker"), by virtue of its direct beneficial ownership of 926,355
shares of Common Stock (the "Shares"), and 926,355 warrants, each of
which has a five-year term and represents the right to purchase
.99701626 of a share of Common Stock at an exercise price of $21.59
per share, subject to antidilution adjustment (the "Warrants").
(2) Thomas H. Lee Equity Fund III, L.P., a Delaware limited
partnership ("Equity Fund III"), by virtue of its direct beneficial
ownership of an 85.8% equity interest in Sneaker, which represents a
majority controlling interest in Sneaker;
(3) THL Equity Advisors III Limited Partnership, a Massachusetts
limited partnership ("Advisors III"), as sole general partner of
Equity Fund III and as sole Manager of Sneaker; and
(4) THL Equity Trust III, a Massachusetts business trust ("Trust
III"), as sole general partner of Advisors III.
The address of each of the Reporting Persons is c/o Thomas H.
Lee Company ("THL"), 75 State Street, Boston, Massachusetts 02109.
Attached as Schedule I to this Schedule 13D is information
concerning certain officers and directors of Trust III.
(d) None of the Reporting Persons or any of their executive officers,
directors or trustees have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) during the last five
years.
(e) None of the Reporting Persons or any of their executive officers,
directors or trustees have been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction during the last five years
as a result of which any such persons was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a Common Stock and Warrant Purchase Agreement dated
as of July 2, 1998 (the "Purchase Agreement") a copy of which is attached
hereto as Exhibit A and is incorporated herein by reference, by and between
JFF and Sneaker, JFF agreed to sell to Sneaker (i) an aggregate of 926,355
shares of Common Stock, par value $.0001 per share, of JFF and (ii) an
aggregate of 926,355 Warrants, each of which has a five-year term and
represents the right to purchase .99701626 of a share of Common Stock at an
exercise price of $21.59 per share, subject to antidilution adjustment, in
exchange for a cash payment by Sneaker in an aggregate amount equal to
approximately $20,000,000.
Capital contributions in the amount of $20,000,000 were paid to
Sneaker pursuant to the Amended and Restated Limited Liability Company
Agreement of Sneaker Guarantee LLC dated as of June 30, 1998, a copy of
which is attached hereto as Exhibit B and is incorporated herein by
reference, by and among Equity Fund III, Thomas H. Lee Foreign Fund III,
L.P., a Delaware limited partnership ("Foreign Fund III"), and THL-CCI
Limited Partnership, a Massachusetts limited partnership ("THL-CCI"), for
the purpose of providing Sneaker with the necessary funds to purchase the
Shares and the Warrants from JFF. The following amounts were paid by each
of the following entities as capital contributions to Sneaker: (i)
approximately $17,158,415 by Equity Fund III; (ii) approximately $1,061,710
by Foreign Fund III; and (iii) approximately $1,779,880 by THL-CCI. Equity
Fund III, Foreign Fund III and THL-CCI each obtained these funds through
capital contributions from their respective investors. Foreign Fund III and
THL-CCI are affiliates of Equity Fund III.
ITEM 4. PURPOSE OF TRANSACTION.
Sneaker acquired the securities of JFF pursuant to the Purchase
Agreement for general investment purposes.
Pursuant to Section 5.1 of the Purchase Agreement, Sneaker is
permitted to designate one nominee for election to JFF's Board of Directors
until such time as (i) Sneaker has disposed of 75% or more of the Shares
and Warrants to persons other than members or affiliates of Sneaker or
stockholders or subordinated creditors of Sneaker Stadium, Inc., a Delaware
corporation ("Sneaker Stadium"), immediately prior to the acquisition of
Sneaker Stadium by JFF or (ii) THL, together with its affiliates, ceases to
own a majority of the member interests in, or otherwise directly or
indirectly control, Sneaker. Harold Ruttenberg, Chairman and Chief
Executive Officer of JFF, has agreed to vote shares of Sneaker Stadium
owned by him, or as to which the power to vote is controlled by him, for
such nominee. In addition, Sneaker and JFF have agreed to certain corporate
monitoring and board of directors visitation rights exercisable by Sneaker
for so long as Sneaker or a permitted transferee remains a holder of Shares
or Warrants or so long as any member of Sneaker is a creditor of JFF or
Sneaker Stadium. Sneaker has agreed to cause the transfer of the Warrant
with respect to 20,000 shares of Common Stock, or instruments or rights
intended to provide equivalent value as the Warrant with respect to such
20,000 shares of Common Stock, to certain subordinated creditors of Sneaker
Stadium.
Equity Fund III, Foreign Fund III and THL-CCI may transfer a
portion of their respective equity interests in Sneaker to former
stockholders of Sneaker Stadium and certain subordinated creditors of
Sneaker Stadium.
Except as discussed above, the Reporting Persons have no
current plans or proposals which relate to or would result in any of the
following:
(a) the acquisition by any person of additional securities of
the issuer, or the disposition of securities of JFF;
(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the issuer or any of its
subsidiaries;
(c) a sale or transfer of a material amount of assets of the
issuer or of any of its subsidiaries;
(d) any change in the present board of directors or management
of JFF, including any plans or proposals to change the number or term
of directors or to fill any existing vacancies on the board;
(e) any material change in the present capitalization or
dividend policy of JFF;
(f) any other material change in JFF's business or corporate
structure;
(g) changes in JFF's charter or bylaws or other actions which
may impede the acquisition of control of JFF by any person;
(h) causing a class of securities of JFF to be delisted from a
national securities exchange or to cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
securities association;
(i) a class of equity securities of JFF becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Exchange Act; or
(j) any action similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b)
As of the date hereof, by virtue of its beneficial ownership of
926,355 shares of Common Stock and 926,355 Warrants, Sneaker beneficially
owns 1,849,946 shares of Common Stock within the meaning of Rule 13d-3
under the Exchange Act. Such 1,849,946 shares of Common Stock represent
approximately 6.1% of the total number of shares of Common Stock issued and
outstanding as of July 2, 1998 and without giving effect to the exercise of
the Warrants. For purposes of this Schedule 13D, Sneaker has shared voting
and shared dispositive power with respect to the Shares and the Warrants.
As of the date hereof, by virtue of its direct beneficial ownership of an
85.8% equity interest in Sneaker which represents a majority controlling
interest in Sneaker, Equity Fund III has shared voting and shared
dispositive power with respect to the Shares and the Warrants. As of the
date hereof, Advisors III, as sole general partner of Equity Fund III and
as sole Manager of Sneaker, has shared voting and shared dispositive power
with respect to the Shares and the Warrants. As of the date hereof, Trust
III, as sole general partner of Advisors III, has shared voting and shared
dispositive power with respect to the Shares and the Warrants.
(c) None of the Reporting Persons, nor, to the best knowledge
of the Reporting Persons, any of their officers, directors or trustees, has
effected any transactions in the Common Stock during the past 60 days
except as described herein.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
The responses to Items 3, 4 and 5 of this Schedule 13D and the
Exhibits to this Schedule 13D are incorporated herein by reference and Item
6 is qualified in its entirety by reference thereto.
Pursuant to a Registration Rights Agreement dated as of July 2,
1998 (the "Registration Rights Agreement"), a copy of which is attached
hereto as Exhibit A to Exhibit A and is incorporated herein by reference,
by and among JFF, Harold Ruttenberg (solely for purposes of Section 4.6(b)
thereof), Sneaker and THL (solely in its capacity as Investors' Agent), a
copy of which is Exhibit A to the Purchase Agreement (attached as Exhibit A
hereto), JFF has granted Sneaker one demand registration right with respect
to the Shares and the Common Stock underlying the Warrants, one demand
right (exercisable commencing July 2, 1999, subject to the transfer
restrictions described below) with respect to the Warrants, the Common
Stock underlying the Warrants or both and unlimited piggyback registration
rights for the Shares and the Common Stock underlying the Warrants.
Neither the Shares nor the Warrants may be transferred without
the consent of JFF until January 31, 2000. After such date, the Shares
and/or Warrants may only be transferred in a public market sale or in a
transaction in which Shares and/or Warrants are being transferred by those
holding a majority in interest of the then outstanding Shares and/or
Warrants (with respect to the Warrants, based on the number of shares of
Common Stock for which the Warrants are then exercisable) (the "Majority
Holder"). Specifically, the Shares and/or Warrants may only be sold in
lock-step with the Majority Holder, and the Majority Holder may require
other holders of Shares and/or Warrants to transfer all or a portion of the
Shares and/or Warrants then held by them. These transfer restrictions do
not apply to (i) the pledge transaction described below or (ii) transfers
by Sneaker to its members or affiliates. Members of Sneaker, in general,
are not permitted to distribute the Shares and/or Warrants to their
respective members, limited partners, general partners or affiliates.
Equity Fund III is currently the Majority Holder.
Pursuant to a Guaranty (the "Guaranty") dated as of July 2,
1998 by and between Sneaker and Banque Nationale de Paris ("Banque
Nationale"), as agent for itself and certain creditors of Sneaker Stadium ,
a copy of which is attached hereto as Exhibit C and is incorporated herein
by reference, Sneaker has provided to the senior lenders of Sneaker Stadium
a guaranty of remaining payment obligations under certain outstanding
Sneaker Stadium indebtedness of up to $13,730,410.47 (expected to be paid
in 2002, if at all), together with certain related fees and expenses in
excess of that amount (the "Guaranty Indebtedness"). Pursuant to a Pledge
and Security Agreement (the "Pledge Agreement") dated as of July 2, 1998 by
and between Sneaker and Banque Nationale, as agent on behalf of itself and
certain creditors of Sneaker Stadium, a copy of which is attached hereto as
Exhibit D and is incorporated herein by reference, Sneaker has made a
pledge of the Shares to secure this guaranty.
Except for the agreements described in this Schedule 13D, to
the best knowledge of the Reporting Persons, there are no other contracts,
arrangements, understandings or relationships (legal or otherwise) among
the persons named in Item 2 and between such persons and any person with
respect to any securities of JFF, including, but not limited to, transfer
or voting of any of the securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A: Common Stock and Warrant Purchase
Agreement dated as of July 2, 1998 by and
between JFF and Sneaker.
Exhibit B: Amended and Restated Limited Liability
Company Agreement of Sneaker Guarantee LLC
dated as of June 30, 1998 by and among Equity
Fund III, Foreign Fund III and THL-CCI.
Exhibit C: Guaranty dated as of July 2, 1998 by and
between Sneaker and Banque Nationale, as
agent for itself and certain creditors of
Sneaker Stadium.
Exhibit D: Pledge and Security Agreement dated as of
July 2, 1998 by and between Sneaker and
Banque Nationale, as agent on behalf of
itself and certain creditors of Sneaker
Stadium.
Exhibit E: Joint Filing Agreement dated July 13, 1998
by and among the Reporting Persons.
After reasonable inquiry and to the best knowledge and belief
of each of the undersigned, each such person certifies that the information
set forth in this statement is true, complete and correct.
SNEAKER GUARANTEE LLC
By: THL Equity Advisors III Limited Partnership,
its Manager
By: THL Equity Trust III, its General Partner
Date: July 13, 1998 By /s/ Wendy Masler
____________________________________________
Name: Wendy Masler
Title: Treasurer
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited Partnership
its General Partner
By: THL Equity Trust III, its General Partner
Date: July 13, 1998 By /s/ Wendy Masler
____________________________________________
Name: Wendy Masler
Title: Treasurer
THL EQUITY ADVISORS III LIMITED PARTNERSHIP
By: THL Equity Trust III, its General Partner
Date: July 13, 1998 By /s/ Wendy Masler
_____________________________________________
Name: Wendy Masler
Title: Treasurer
THL EQUITY TRUST III
Date: July 13, 1998 By /s/ Wendy Masler
_____________________________________________
Name: Wendy Masler
Title: Treasurer
SCHEDULE I
THL Equity Trust III
Each of the following officers and trustees of THL Equity Trust III
is a United States citizen and is employed by the Thomas H. Lee Company, 75
State Street, Boston, Massachusetts 02109.
Officers:
Chairman Thomas H. Lee
1 Old Farm Road, Lincoln, MA 01773
President David V. Harkins
8 Corn Point Road, Marblehead, MA 01945
Vice Presidents C. Hunter Boll
45 Fletcher Street, Winchester, MA 01890
Thomas R. Shepherd
172 Harvard Road, Stow, MA 01775
Anthony J. DiNovi
3 Ravine Road, Wellesley, MA 02181
Thomas M. Hagerty
256 Beacon Street, Apt. #4, Boston, MA 02116
Joseph J. Incandela
139 Abbott Road, Wellesley Hills, MA 02181
Scott A. Schoen
191 Kings Grant Road, Weston, MA 02493
Warren C. Smith, Jr.
38 Coolidge Lane, Dedham, MA 02026
Scott M. Sperling
4 Moore Road, Wayland, MA 01778
Seth W. Lawry
370 Concord Road Weston, MA 02493
Treasurer Wendy L. Masler
11 Waverly Street, #3, Brookline, MA 02115
Asst. Treasurer Andrew D. Flaster
4 Fairfield Dr., Lexington, MA 02420
Clerk Wendy L. Masler
11 Waverly Street, #3, Brookline, MA 02115
Asst. Clerks Charles W. Robins, Esq.
50 Lehigh Road, Wellesley, MA 02181
Trustees:
Thomas H. Lee 1 Old Farm Road, Lincoln, MA 01773
David V. Harkins 8 Corn Point Road, Marblehead, MA 01945
C. Hunter Boll 45 Fletcher Street, Winchester, MA 01890
Thomas R. Shepherd 172 Harvard Road, Stow, MA 01775
Anthony J. DiNovi 3 Ravine Road, Wellesley, MA 02181
Thomas M. Hagerty 256 Beacon Street, Apt. #4, Boston, MA 02116
Warren C. Smith, Jr. 38 Coolidge Lane, Dedham, MA 02026
Scott M. Sperling 4 Moore Road, Wayland, MA 01778
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COMMON STOCK AND WARRANT PURCHASE AGREEMENT
BETWEEN
JUST FOR FEET, INC.
AND
SNEAKER GUARANTEE LLC
JULY 2, 1998
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TABLE OF CONTENTS
Page
ARTICLE I GENERAL DEFINITIONS . . . . . . . . . . . . . . . . . 1
Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . 6
ARTICLE II SALE AND PURCHASE OF UNITS; PAYMENT
AND DELIVERIES; CLOSING . . . . . . . . . . . . . . . 6
Section 2.1 Sale and Purchase of Units . . . . . . . . . . . . . . 6
Section 2.2 Payment and Deliveries . . . . . . . . . . . . . . . . 6
Section 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY . . . . . . . . . . . . . . . . . . . . . 7
Section 3.1 Corporate Organization . . . . . . . . . . . . . . . . 7
Section 3.2 Authorization; Validity . . . . . . . . . . . . . . . 8
Section 3.3 No Violation . . . . . . . . . . . . . . . . . . . . . 8
Section 3.4 Consents . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.5 SEC Documents . . . . . . . . . . . . . . . . . . . . 9
Section 3.6 Liabilities . . . . . . . . . . . . . . . . . . . . . 10
Section 3.7 No Material Adverse Change . . . . . . . . . . . . . . 10
Section 3.8 Capitalization . . . . . . . . . . . . . . . . . . . . 10
Section 3.9 Registration Rights . . . . . . . . . . . . . . . . . 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE INVESTORS . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . 11
Section 4.2 Authorization; Validity . . . . . . . . . . . . . . . 11
Section 4.3 No Violation . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Consents . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.5 Investment Representations, Etc. . . . . . . . . . . . 12
ARTICLE V BOARD REPRESENTATION AND OTHER COVENANTS . . . . . . . 14
Section 5.1 Board Designee . . . . . . . . . . . . . . . . . . . . 14
Section 5.2 Observer and Monitoring Rights . . . . . . . . . . . . 15
Section 5.3 Lock-Up . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 17
Section 6.1 Amendments; Assignment . . . . . . . . . . . . . . . . 17
Section 6.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.4 Severability . . . . . . . . . . . . . . . . . . . . . 18
Section 6.5 Parties . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.6 Entire Agreement . . . . . . . . . . . . . . . . . . . 18
Section 6.7 Equitable Relief . . . . . . . . . . . . . . . . . . . 18
Section 6.8 Governing Law . . . . . . . . . . . . . . . . . . . . 19
Section 6.9 Notices . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.10 Section Titles . . . . . . . . . . . . . . . . . . . . 20
Section 6.11 Number and Person . . . . . . . . . . . . . . . . . . 20
Section 6.12 Non-Compete . . . . . . . . . . . . . . . . . . . . . 20
Section 6.13 Counterparts . . . . . . . . . . . . . . . . . . . . . 21
Exhibits
Exhibit A - Form of Registration Rights Agreement
Exhibit B - Form of Warrant
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this
"Agreement") is made as of the 2nd day of July, 1998, between Just For
Feet, Inc., a Delaware corporation (the "Company"), and Sneaker Guarantee
LLC, a Delaware limited liability company (the "Investor"), and for
purposes of Section 5.2 and Article VI only, Thomas H. Lee Company ("THL"),
and, for purposes of Sections 5.1, 5.4, 6.1 through 6.11 and 6.13 only,
Harold Ruttenberg.
The Company desires to sell to the Investor, and the Investor
desires to purchase from the Company, securities of the Company consisting
of 926,355 units (the "Units"), each comprised of one share of Common Stock
and one Warrant to purchase .99701626 of a share of Common Stock, upon the
terms and subject to the conditions set forth herein.
In consideration of the foregoing and the respective
representations, warranties, covenants and agreements hereinafter set
forth, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
GENERAL DEFINITIONS
Section 1.1 Defined Terms. Capitalized terms, when used herein,
shall have the following meanings (unless defined elsewhere in this
Agreement):
"Affiliate" means, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries controls,
or is under common control with, or is controlled by, such Person. As
used in this definition and in Section 5.1, "control" means the power,
directly or indirectly, to direct or cause the direction of management
or policies of a Person (through ownership of voting securities or other
equity interests, by contract or otherwise).
"Agreement" means this Common Stock and Warrant Purchase Agreement,
as the same may be from time to time amended, modified or supplemented.
"Board" means the Company's Board of Directors.
"Business Day" means any day other than a Saturday or Sunday on
which banks are not authorized or required to close in New York, New
York.
"Certificate of Formation" means the Certificate of Formation of
the Investor filed by the Investor with the Secretary of State of the
State of Delaware, as it may be amended from time to time.
"Closing" means the consummation of the transaction contemplated in
this Agreement.
"Closing Date" means the date of this Agreement.
"Common Shares" means, collectively, the Purchased Shares and the
Warrant Shares.
"Common Stock" means the Common Stock, par value $.0001 per
share, of the Company.
"Company" means Just For Feet, Inc., a Delaware corporation, and
its successors.
"Consents" has the meaning specified in Section 3.4 of this
Agreement.
"Contingent Payment Agreement" means the Contingent Payment
Agreement to be dated as of the Closing Date, in substantially the form
attached as Schedule I to the Sneaker Merger Agreement.
"Employee Options" means those stock options that have been or may
be issued, as determined by the Company's Board of Directors, to
employees of the Company pursuant to the Company's stock option plans
adopted by the Company's Board of Directors.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles set forth in
the Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination; and the requisite that
such principles be applied on a consistent basis shall mean that the
accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Investor" has the meaning specified in the first paragraph of this
Agreement.
"Investor LLC Agreement" means the Limited Liability Company
Agreement of the Investor dated the date hereof, as it may be amended
from time to time.
"JFF Merger Corp." means JFF Merger Corp., a Delaware corporation
and, immediately prior to consummation of the merger provided for in the
Sneaker Merger Agreement, a wholly owned subsidiary of the Company.
"Lien" means any interest in any property or asset in favor of a
Person other than the owner of the property or asset and securing an
obligation owed to such Person, whether such interest is based on the
common law, statute or contract, including, but not limited to, the
security interest lien arising from a mortgage, encumbrance, pledge,
conditional sale, security agreement or trust receipt, or a lease,
consignment or bailment for security purposes.
"Majority Holders" has the meaning specified in Section 5.3 of this
Agreement.
"Material Adverse Effect" means a material adverse effect on the
business, properties, assets, results of operations or financial
condition of the Company and its Subsidiaries taken as a whole.
"Member" means any Person who is a member of the Investor,
including any Person who is admitted as such a member after the date
hereof in accordance with the Investor LLC Agreement.
"Merger" means the merger of Merger Sub with and into Sneaker
pursuant to the Sneaker Merger Agreement.
"Merger Sub" means JFF Merger Corp., a Delaware corporation and a
wholly owned subsidiary of the Company.
"Other Agreements" means the Warrants, the Registration Rights
Agreement and all certificates and other instruments executed by or on
behalf of the Company prior to or at the Closing and delivered to the
Investors pursuant to this Agreement.
"Permitted Holder" has the meaning specified in Section 5.3 of this
Agreement.
"Permitted Transaction" has the meaning specified in Section 5.3 of
this Agreement.
"Permitted Transaction Purchasers" has the meaning specified in
Section 5.3 of this Agreement.
"Permitted Transaction Seller" has the meaning specified in Section
5.3 of this Agreement.
"Permitted Transferees" has the meaning specified in Section 5.1 of
this Agreement.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization or
any other entity or organization, including a government or any agency
or political subdivision thereof.
"Preferred Stock" means the Preferred Stock, par value $.0001 per
share, of the Company.
"Purchase Price" has the meaning specified in Section 2.1 of this
Agreement.
"Purchased Shares" means the 926,355 shares of Common Stock
included in the Units to be purchased by the Investors hereunder.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among the Company and the Investor, substantially in
the form of Exhibit A hereto, to be entered into at the Closing.
"Ruttenberg" means Harold Ruttenberg.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" has the meaning specified in Section 3.5 of this
Agreement.
"Securities" means, collectively, the Warrants and the Common
Shares, and any securities into which or for which such securities shall
be changed, converted or exchanged.
"Securities Act" means the Securities Act of 1933, as amended.
"Sneaker" means Sneaker Stadium, Inc., a Delaware corporation.
"Sneaker Merger Agreement" means the Agreement and Plan of Merger
dated as of July 2, 1998 among the Company, Merger Sub and Sneaker.
"Subsidiary" has the meaning specified in Rule 12b-2 under the
Exchange Act.
"THL" has the meaning specified in the first paragraph of this
Agreement.
"Units" has the meaning specified in the preambles of this
Agreement.
"Warrants" means the warrants included in the Units to be purchased
by the Investor hereunder, to purchase an aggregate of 923,591 shares of
Common Stock, substantially in the form of Exhibit B hereto, and any
warrant or warrants issued in exchange or substitution therefor.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
Section 1.2 Other Definitional Provisions. All definitions
contained in this Agreement are equally applicable to the singular and
plural form of the term defined. The words "hereof," "herein," and
"hereunder" and words of like or similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all Article and
Section references pertain to this Agreement and all Exhibit references
pertain to Exhibits to this Agreement, which are hereby incorporated herein
for all purposes. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP.
ARTICLE II
SALE AND PURCHASE OF UNITS;
PAYMENT AND DELIVERIES; CLOSING
Section 2.1 Sale and Purchase of Units. Upon the terms set forth
in this Agreement, and in reliance upon the representations and warranties
contained herein, at the Closing, the Company will issue and sell to the
Investor, and the Investor will purchase and accept from the Company, the
Units for an aggregate consideration of twenty million dollars
($20,000,000) (the "Purchase Price"). The parties agree that (i) no
services were rendered by the Investor (or by any Member or any Affiliate
of the Investor or of any Member) to the Company, Sneaker or any of their
Subsidiaries in connection with the purchase of the Units,(ii) the Purchase
Price shall be allocated $15 million to the Purchased Shares and $5 million
to the Warrants and (iii) they shall prepare and file all tax returns on a
basis consistent with the foregoing and shall take no position inconsistent
with the foregoing in any proceeding before any taxing authority or for any
other tax purpose.
Section 2.2 Payment and Deliveries. At the Closing (a) the
Company is delivering to the Investor (i) a duly executed stock
certificate, registered in the name of the Investor, representing the
Purchased Shares, (ii) a duly executed Warrant, registered in the name of
the Investor, representing the right to purchase 923,591 Warrant Shares,
and (iii) the Other Agreements duly executed by the Company, and an opinion
or opinions of counsel for the Company, and other documents, in the
respective forms previously agreed between the Company and the Investor,
against (b) the delivery by the Investor, to the Company of (i) the
Purchase Price, by wire transfer(s) of immediately available funds in
accordance with the Company's instructions, which instructions shall have
been given in writing to the Investor no later than three (3) Business Days
prior to the Closing and (ii) an opinion of counsel for the Investor, and a
certificate executed by the Investor, in the respective forms previously
agreed between the Company and the Investor.
Section 2.3 Closing. The Closing is taking place on the date
hereof concurrently with the execution and delivery of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investor as
follows:
Section 3.1 Corporate Organization. (a) The Company and each of
its Subsidiaries is a duly incorporated and validly existing corporation
(or other Person) in good standing under the laws of the jurisdiction of
its organization; (b) the Company and each of its Subsidiaries has all
necessary corporate power (or comparable power, in the case of a Subsidiary
that is not a corporation) to own the property and assets it uses in its
business and otherwise to carry on its business; and (c) the Company and
each of its Subsidiaries is duly licensed or qualified and in good standing
in each jurisdiction in which the nature of the business transacted by it
or the nature of the property owned or leased by it makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified would not reasonably be expected to have a Material Adverse
Effect. The Company is not in violation of any term of its Certificate of
Incorporation or of its Bylaws, each as currently in effect. The Company
has previously delivered to the Investors true and correct copies of its
Certificate of Incorporation and Bylaws as currently in effect and true and
correct copies of forms of such documents as will be in effect at and as of
the Closing (after consummation of the Reincorporation Merger).
Section 3.2 Authorization; Validity.
(a) The Company has the corporate power and authority to
execute, deliver and perform its obligations under, and to consummate the
transactions contemplated by, this Agreement and the Other Agreements, and
has taken all necessary corporate action to authorize the execution,
delivery and performance by the Company of, and consummation by the Company
of the transactions contemplated by, this Agreement and the Other
Agreements. This Agreement has been, and upon the execution and delivery
by the Company of the Other Agreements such Other Agreements will be, duly
and validly executed and delivered by the Company and constitutes or, in
the case of the Other Agreements, will constitute, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their respective terms.
(b) The issuance, sale and delivery of the Securities in
accordance with this Agreement or the Warrants, as applicable, have been
duly authorized by all requisite corporate action on the part of the
Company, and, when issued, sold and delivered in accordance with this
Agreement or the Warrants, as applicable, will be duly and validly issued
and, in the case of the Common Shares, fully paid and nonassessable, and
such issuance, sale and delivery will not give rise to any preemptive
rights on the part of any Person. When so issued, sold and delivered, the
Securities will be free and clear of any and all Liens, claims or
encumbrances imposed by action of the Company, except as provided in this
Agreement.
Section 3.3 No Violation. Neither the execution, delivery nor
performance by the Company of this Agreement and the Other Agreements, nor
compliance by the Company with the terms and provisions hereof and thereof,
nor the consummation by it of the transactions contemplated herein or
therein, will (a) contravene any applicable provision of any law, statute,
rule or regulation, or any applicable order, writ, injunction or decree of
any court or governmental instrumentality, (b) conflict with or result in
any breach of any term, covenant, condition or other provision of, or
constitute a default under (except where such conflict, breach or default
would not reasonably be expected to have a Material Adverse Effect), or
result in the creation or imposition of (or the obligation to create or
impose) any Lien other than pursuant to this Agreement upon any of the
property or assets of the Company under the terms of any contractual
obligation to which the Company is a party or by which it or any of its
properties or assets are bound or to which it may be subject, or (c)
violate or conflict with any provision of the Certificate of Incorporation
or the Bylaws of the Company.
Section 3.4 Consents. All consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, all
governmental agencies, authorities or instrumentalities or any other Person
("Consents") required to be obtained or made by the Company in connection
with the execution, delivery and performance by the Company of this
Agreement and the Other Agreements, and the consummation by the Company of
the transactions contemplated hereby and thereby, have been obtained or
made and are in full force and effect, except for (i) governmental Consents
contemplated by the Registration Rights Agreement in connection with any
registration pursuant thereto of Securities under the Securities Act and
(ii) such Consents the failure of which to be obtained or made would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 3.5 SEC Documents. The Company has timely filed each
report, schedule, registration statement and definitive proxy statement
required to be filed by the Company with the SEC since January 1, 1996
(such documents are referred to herein as the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the applicable rules and regulations of the SEC
thereunder, and none of the SEC Documents, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in
the SEC Documents complied, as of their respective dates, in all material
respects with all applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP consistently applied (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present in all material respects the
consolidated financial position of the Company as at the dates thereof and
the consolidated results of its operations, cash flows and changes in
financial position for the periods indicated therein.
Section 3.6 Liabilities. All liabilities or obligations of the
Company of any nature (whether accrued, absolute, contingent or otherwise)
which were incurred after January 31, 1998 were incurred in the ordinary
course of business, and individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Material Adverse Effect.
Section 3.7 No Material Adverse Change. Except as disclosed in
the SEC Documents filed prior to the date of this Agreement and furnished
to the Investors, since January 31, 1998 the Company has not suffered or,
to the Company's knowledge, been threatened with, any change having, or
that would reasonably be expected to have, a Material Adverse Effect.
Section 3.8 Capitalization. The authorized capital stock of the
Company consists of 70,000,000 shares of Common Stock and 5,000,000 shares
of Preferred Stock. As of June 29, 1998, there were outstanding (a)
30,171,921 shares of Common Stock, (b) Employee Options to purchase an
aggregate of 3,790,711 shares of Common Stock, (c) non-employee director
options to purchase 252,500 shares of Common Stock and (d) no shares of
Preferred Stock. There are currently 6,181,250 shares of Common Stock
reserved for issuance pursuant to the Company's Stock Option Plans. Except
as described above in this Section 3.8 or as contemplated by this Agreement
or the Other Agreements, and except for changes occurring after June 29,
1998 resulting from (x) the exercise of Employee Options outstanding on
such date or (y) the grant of Employee Options in the ordinary course of
business and the exercise of such Employee Options, as of the date hereof
there are no outstanding (i) shares of capital stock or other securities of
the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or other securities of the Company
or (iii) options, rights, subscriptions, warrants, calls, unsatisfied
preemptive rights, or other agreements to acquire or otherwise receive from
the Company, and no obligation, commitment or arrangement of the Company to
issue, transfer or sell, any capital stock or other securities of, or
securities convertible into or exchangeable for capital stock or other
securities of the Company.
Section 3.9 Registration Rights. Except for the Registration
Rights Agreement, neither the Company nor any of its Subsidiaries is under
any contractual obligation to register any of its presently outstanding
securities or any of its securities that may hereafter be issued.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants to the Company as follows:
Section 4.1 Organization. The Investor has been duly organized as
a limited liability company, and is validly existing and in good standing,
under the laws of the State of Delaware.
Section 4.2 Authorization; Validity.
(a) The Investor has the requisite limited liability company
power and authority to execute, deliver and perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Other Agreements to which the Investor is a party. The execution, delivery
and performance by the Investor of this Agreement and the Other Agreements
to which the Investor is a party, and the consummation by the Investor of
the transactions contemplated hereby and thereby have been duly authorized
by the Investor. This Agreement and the Other Agreements to which the
Investor is a party have been duly and validly executed and delivered by
the Investor and constitute valid and binding obligations of the Investor,
enforceable against it in accordance with their respective terms.
Section 4.3 No Violation. Neither the execution, delivery nor
performance by the Investor of this Agreement and the Other Agreements to
which the Investor is a party, nor compliance by the Investor with the
terms and provisions hereof and thereof, nor the consummation by the
Investor of the transactions contemplated herein or therein, will (a)
contravene any applicable provision of any law, statute, rule or
regulation, or any applicable order, writ, injunction or decree of any
court or governmental instrumentality, (b) conflict with or result in any
breach of any term, covenant, condition or other provision of, or
constitute a default under (except where such conflict, breach or default
would not reasonably be expected to materially impair the Investor's
ability to consummate the transactions contemplated by this Agreement), the
terms of any contractual obligation to which the Investor is a party or by
which the Investor or any of the Investor's properties or assets are bound
or to which the Investor may be subject, or (c) violate or conflict with
any provision of the Certificate of Formation or the Investor LLC
Agreement.
Section 4.4 Consents. All Consents required to be obtained or
made by the Investor in connection with the execution, delivery and
performance by the Investor of, and the consummation by the Investor of the
transactions contemplated by, this Agreement or the Other Agreements to
which the Investor is a party have been obtained or made and are in full
force and effect, except for (i) governmental Consents contemplated by the
Registration Rights Agreement in connection with any registration pursuant
thereto of Securities under the Securities Act and (ii) such Consents the
failure of which to be obtained or made, would not, individually or in the
aggregate, reasonably be expected to materially impair the Investor's
ability to consummate the transactions contemplated by this Agreement.
Section 4.5 Investment Representations, Etc.
(a) Purchase for Investment. The Securities to be purchased
by the Investor pursuant to this Agreement or upon exercise of the Warrants
will be acquired for investment only and not with a view to any public
distribution thereof in violation of any of the requirements of the
Securities Act or the rules and regulations thereunder.
(b) Securities Not Registered. The Investor understands that
the Securities have not been registered under the Securities Act in
reliance upon exemptions contained in the Securities Act and applicable
regulations promulgated thereunder or interpretations thereof, and cannot
be offered for sale, sold or otherwise transferred unless such sale or
transfer is so registered or qualifies for exemption from registration
under the Securities Act.
(c) Sophistication. The Investor has such knowledge and
experience in financial and business matters that the Investor is capable
of evaluating the merits and risks of its investment in the Securities; and
the Investor understands and is able to bear any economic risks associated
with such investment (including the necessity of holding the Securities for
an indefinite period of time, inasmuch as the Securities have not been, and
may not in the foreseeable future be, registered under the Securities Act,
and including the risk of the loss of the Investor's entire investment in
the Securities).
(d) Accredited Investor. The Investor is an "accredited
investor" within the meaning of such term as defined in Rule 501(a)(8) of
Regulation D of the SEC, 17 CFR section 230.501(a)(8).
(e) Legends. The Investor understands and agrees that
certificates representing the Securities will bear conspicuous legends in
substantially the respective forms set forth below (in addition to any
other legend required by law):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR
APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), AND SHALL NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER
OR NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT BY REGISTRATION OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UPON THE ISSUANCE TO THE
COMPANY OF A FAVORABLE OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL
NOT BE VIOLATION OF THE 1933 ACT AND THE STATE ACTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER CONTAINED IN A COMMON STOCK AND WARRANT
PURCHASE AGREEMENT DATED AS OF JULY 2, 1998 (THE "PURCHASE AGREEMENT"),
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH
THE PURCHASE AGREEMENT, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT
THE PRINCIPAL EXECUTIVE OFFICES OF JUST FOR FEET, INC.
Notwithstanding the foregoing, the certificate(s) representing any
Securities need not continue to bear the first of the foregoing legends
(and the Company agrees to cause such legend to be removed from such
certificate(s) at the request of the holder thereof) if (i) the sale or
other transfer of such Securities referred to in such legend is in
accordance with the provisions of Rule 144 promulgated under the Securities
Act (or any other rule permitting public sale without registration under
the Securities Act) or (ii) the opinion of counsel referred to above is to
the effect that such Investor and any subsequent transferee (other than an
Affiliate of the Company) would be entitled to transfer such Securities in
a public sale without registration under the Securities Act.
Notwithstanding the foregoing, from and after February 1, 2000 the
certificate(s) representing any Securities need not continue to bear the
second of the foregoing legends (and the Company agrees, from and after
such date, to cause such legend to be removed from such certificate(s) at
the request of the holder thereof) if Section 5.3 hereof, by its terms, is
no longer applicable to such Securities.
ARTICLE V
BOARD REPRESENTATION AND OTHER COVENANTS
Section 5.1 Board Designee. By action of the Board, the Company
shall elect to the Board, effective as of the Closing, a person designated
by the Investor (an "Investor Designee"). The Investor Designee to be
elected as of the Closing shall be Warren C. Smith, Jr. Until such time as
(x) the Investor has disposed (directly, including through a disposition of
the Warrants) of, in the aggregate, seventy-five percent (75%) or more of
the Common Shares to Persons other than its Members or Affiliates, or any
Person who or which was a stockholder or subordinated creditor of Sneaker
immediately prior to the effectiveness of the Merger ("Permitted
Transferees") or (y) THL, together with its Affiliates, ceases to own a
majority of the member interests in the Investor and to control, directly
or indirectly, the Investor, (a) the Company shall nominate and recommend
to the Company's stockholders for election, and Ruttenberg shall vote or
cause to be voted (or execute or cause to be executed written consents with
respect to) all shares of capital stock of the Company held at the time by
Ruttenberg or over which Ruttenberg possesses voting discretion in favor of
the election, to the Board of an Investor Designee and (b) the Investor may
require that an Investor Designee be removed and/or replaced by another
Investor Designee, in which event (i) if stockholder action is necessary to
effect such removal and/or replacement, the Company and Ruttenberg,
respectively, shall take the actions referred to in clause (a) above in
favor of such removal or replacement, as applicable, and (ii) in the case
of such a replacement Investor Designee in connection with the death,
resignation or removal of an existing Investor Designee, the Company, by
action of its Board of Directors, shall cause such replacement Investor
Designee to be elected to the Board to fill the vacancy caused by such
death, resignation or removal. The Company's obligations set forth in the
last sentence of this Section 5.1 with respect to the nomination,
recommendation or election of a particular Investor Designee shall be
subject to any fiduciary duty principles which may be applicable to the
members of the Board in connection therewith.
Section 5.2 Observer and Monitoring Rights. From and after the
Closing and so long as the Investor or any Permitted Transferee holds any
Securities or so long as any Member is a creditor of the Company or Sneaker
or potentially entitled to payments pursuant to the Contingent Payment
Agreement, if the Investor no longer has the right to designate a member of
the Board pursuant to Section 5.1 hereof, the Company will (a) permit a
representative designated by the Investor to attend all meetings of the
Board to observe such meetings, (b) provide such representative with copies
of all materials provided to members of the Board, at the same time as such
notices or materials are provided to such members and (c) if requested by
the Investor, cause knowledgeable officers of the Company to meet, not more
frequently than quarterly, upon reasonable advance notice, with
representatives of the Investor or THL to discuss the business, affairs,
finances, accounts and prospects of the Company. The Company may require
that any such representative designated pursuant to this Section 5.2
execute a confidentiality agreement in customary form and reasonably
acceptable to such representative with respect to confidential information
of the Company made available to such representative pursuant to this
Section 5.2, which agreement shall include an acknowledgment of such
representative that in such capacity such representative may obtain
material non-public information concerning the Company, and, accordingly,
will be subject to any applicable restrictions pursuant to Rule 10b-5 under
the Exchange Act in connection with such representative's possession of
such information. The Investor and THL each acknowledges that the
provisions of this Section 5.2 shall not be construed to provide the
Investor, any Member or any Affiliate thereof or THL with any right to
participate in meetings of the Board or to exercise any control over the
affairs of the Company or its Subsidiaries.
Section 5.3 Lock-Up. Without the prior written consent of the
Company, the Investor may not transfer or otherwise dispose of any
Securities prior to January 31, 2000. After such date, the Investor may
only transfer or otherwise dispose of Securities (including pursuant to the
Registration Rights Agreement) in a transaction in which Securities are
being transferred by Persons (which may include the Investor) holding a
majority in interest of the then outstanding Securities (with respect to
the Warrants, based on the number of Warrant Shares for which the Warrants
are then exercisable) (the "Majority Holders"). Any such transaction is
referred to herein as a "Permitted Transaction". Subject to any applicable
restrictions set forth in the Registration Rights Agreement, upon notice
from the Majority Holders of a proposed Permitted Transaction, each other
Person which then holds Securities (a "Permitted Holder") shall be entitled
to, and upon request by the Majority Holders will (and the Company may, by
notice to the Majority Holders, require that the Majority Holders so
request), transfer in such Permitted Transaction, on the same terms as
those on which the Majority Holders are transferring Securities, the same
portion of such Permitted Holder's Securities as the portion of the
Securities then held by the Majority Holders being transferred in such
Permitted Transaction ; provided, that if the purchaser(s) in such
Permitted Transaction (the "Permitted Transaction Purchasers") desire to
purchase less than all of the Securities to be sold in such Permitted
Transaction in accordance with this Section 5.3, the number of Securities
to be so sold shall be reduced to the number of such Securities to be
purchased by the Permitted Transaction Purchasers, on a pro rata basis with
respect to each Person selling Securities in such Permitted Transaction
(each such Person, a "Permitted Transaction Seller"), based on the number
of Securities then held by such Permitted Transaction Seller (with respect
to any Warrants held by a Permitted Transaction Seller, based on the number
of Warrant Shares for such Warrants are then exercisable) relative to the
number of Securities then held by all Permitted Transaction Sellers.
Notwithstanding the foregoing, the restrictions on transfer set forth in
this Section 5.3 shall not apply to any (i) transfer or other disposition
of Securities by the Investor to any Permitted Transferee (provided any
such Permitted Transferee agrees in writing to be bound by the first
sentence of this Section 5.3 to the extent applicable to the Investor and
to the provisions of this Section 5.3 applicable to a Permitted Holder),
(ii) any bona-fide pledge of, or grant of a security interest in, any
Securities to any senior creditor of Sneaker as of immediately prior to the
Closing, or any foreclosure upon, or sale or other disposition of, such
Securities by such creditor or any assignee or transferee of the claim or
interest of such creditor pursuant to any debt restructuring agreement, or
any agent acting for any of the foregoing, or (iii) any sale of Securities
after January 31, 2000 pursuant to a public offering or otherwise on a
public trading market.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Amendments; Assignment.
(a) This Agreement may not be amended except by an instrument
in writing signed by (i) the Company and the Investor, (ii) Ruttenberg, if
such amendment affects Ruttenberg's obligations hereunder, and (iii) THL,
if such amendment affects THL's obligations hereunder. The Company may not
assign or transfer this Agreement or any rights hereunder. The Investor
may, subject to the provisions of Section 5.3 hereof, assign, transfer or
otherwise dispose of, at any time or times, any or all of the Securities
and in connection therewith, transfer or assign, in whole or in part, the
Investor's rights, title, interests, remedies, powers, and/or duties
thereunder and under this Agreement and the Registration Rights Agreement.
This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the Investor.
Section 6.2 Expenses. Each party will bear its own legal and
other expenses with respect to this Agreement and the transaction
contemplated hereby.
Section 6.3 Waiver. The failure of a party, at any time or times
hereafter, to require strict performance of any provision of this Agreement
shall not waive, affect or diminish any right of such party thereafter to
demand strict compliance and performance therewith. None of the
undertakings, agreements, warranties, covenants and representations
contained in this Agreement shall be deemed to have been waived, unless
such waiver is set forth in an instrument in writing duly executed by the
waiving party.
Section 6.4 Severability. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
Section 6.5 Parties. Subject to the provisions of Section 6.1
hereof, this Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the Company, the Investor,
Ruttenberg and THL.
Section 6.6 Entire Agreement. This Agreement and the Other
Agreements constitute the entire agreement of the parties with respect to
the subject matter hereof and thereof and may not be modified or
supplemented by any prior or contemporaneous oral understanding.
Section 6.7 Equitable Relief. Each of the parties (including
Ruttenberg and THL) recognizes that, in the event a party fails to perform,
observe or discharge any of its obligations under this Agreement, any
remedy of law may prove to be inadequate relief to the other party or
parties, and, therefore, each of the parties agrees that such other party
or parties shall be entitled to temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages.
Section 6.8 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
giving effect to the conflicts of law principles thereof.
Section 6.9 Notices. Any notice required to be given hereunder
shall be sufficient if in writing, and sent by facsimile transmission (with
a confirmatory copy sent by overnight courier), by courier service (with
proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid), addressed as follows:
If to the Investor, at: Sneaker Guarantee LLC
c/o Thomas H. Lee Company
75 State Street
26th Floor
Boston, MA 02109
Attn: Warren C. Smith, Jr.
Telecopy: (617) 227-3514
with a copy to: Skadden, Arps, Slate
Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, MA 02108
Attn: Louis A. Goodman, Esq.
Kent A. Coit, Esq.
Telecopy: (617) 573-4822
If to the Company, at: Just For Feet, Inc.
7400 Cahaba Valley Road
Birmingham, AL 35242
Attn: Eric L. Tyra
Telecopy: (205) 408-3170
with a copy to: Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attn: Lawrence A. Cagney, Esq.
Telecopy: (212) 909-6836
and
Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, GA 30309
Attn: Jay Schwartz
Telecopy: (404) 685-6932
if to Ruttenberg, at: Just For Feet, Inc.
7400 Cahaba Valley Road
Birmingham, AL 35242
Attn: Harold Ruttenberg
Telecopy: (205) 408-3163
with a copy to: Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, GA 30309
Attn: Jay Schwartz
Telecopy: (404) 685-6932
or to such other address as any party shall specify by written notice so
given, and any such notice hereunder shall be deemed to have been delivered
as of the date received.
Section 6.10 Section Titles. The section titles contained in this
Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties
hereto.
Section 6.11 Number and Person. Wherever the word, or words, the
Company, Subsidiary, Investor, it, itself, or any other such descriptive
words referring to the parties hereto are used, they shall be construed to
apply to the singular or plural, as the case may be.
Section 6.12 Non-Compete. THL agrees that from and after the
Closing Date until the later of the time the Board no longer includes an
Investor Designee or the expiration of the Investor's right to designate a
representative pursuant to Section 5.2 hereof, THL will not, and will not
allow any of its controlled Affiliates to, invest in any Person the
principal business of which is branded athletic footwear retailing, except
for investments resulting in ownership by THL and such Affiliates of less
than 5% of the equity of any such Person and which involve no designee or
representative of THL or any such Affiliate being an officer or director,
or otherwise involved in the management, of such Person.
Section 6.13 Counterparts. This Agreement may be executed in a
number of identical counterparts, each of which, for all purposes, is to be
deemed an original, and all of which collectively constitute one agreement.
A facsimile or photocopy of an executed counterpart of this Agreement shall
be sufficient to bind the party or parties whose signature(s) appear
thereon.
Signature Page Follows
IN WITNESS WHEREOF, this Common Stock and Warrant Purchase
Agreement has been duly executed and delivered as of the day and year first
written above.
JUST FOR FEET, INC.
By: /s/ Eric L. Tyra
----------------------------------
Name: Eric L. Tyra
Title: Executive Vice President
SNEAKER GUARANTEE LLC
By: THOMAS H. LEE COMPANY as Manager
By: /s/ Warren C. Smith, Jr.
----------------------------------
Name: Warren C. Smith, Jr.
Title: Managing Director
For purposes of Section 5.2 and
Article VI only:
THOMAS H. LEE COMPANY
By: /s/ Warren C. Smith, Jr.
---------------------------------
Name: Warren C. Smith, Jr.
Title: Managing Director
For purposes of Sections 5.1, 5.4, 6.1
through 6.11 and 6.13 only:
/s/ Harold Ruttenberg
------------------------------------
Harold Ruttenberg
EXHIBIT A
FORM OF REGISTRATION
RIGHTS AGREEMENT
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of July 2, 1998 (this
"Agreement") by and among Just for Feet, Inc., a Delaware corporation (the
"Company"), Harold Ruttenberg, solely for purposes of Section 4.6(b)
hereof, Sneaker Guarantee LLC, a Delaware limited liability company ("SGL"
and together with direct and indirect transferees of SGL in accordance with
Section 1.3 hereof, the "Investors"), and Thomas H. Lee Company, solely in
its capacity as Investors' Agent (as defined in Section 7.2 hereof).
The Company and SGL have entered into a Common Stock and Warrant
Purchase Agreement dated as of July 2, 1998 (the "Purchase Agreement")
providing for the sale by the Company and the purchase by SGL of 926,355
units (the "Units"), each consisting of one share of Common Stock, par
value $.0001 per share, of the Company (the "Common Stock") and one warrant
for the purchase of .99701626 of a share of Common Stock (the "Warrants"),
upon the terms and subject to the conditions contained therein.
Capitalized terms used and not defined herein have the meanings ascribed to
such terms in the Purchase Agreement.
The Company and SGL desire to provide for certain registration
rights with respect to the Common Stock and Warrants being acquired by SGL
pursuant to the Purchase Agreement and with respect to the shares of Common
Stock purchasable upon exercise of the Warrants (together with any other
securities issued in respect of or in exchange for such Common Stock or
Warrants by way of distribution or in connection with a split or
combination of Common Stock or Warrants, or a merger, consolidation or
other reorganization or recapitalization, the "Registrable Securities").
SGL is entering into this Agreement and makes the covenants of
the Investors herein for and on behalf of itself and any other Investors.
In consideration of the foregoing and the respective covenants
and agreements set forth herein and in the Purchase Agreement, the parties
hereby agree as follows.
Section 1. Exercisability of Registration Rights.
1.1 Effectiveness of Registration Rights. The registration
rights set forth in Sections 2 and 3 hereof shall be effective on the date
hereof, except as expressly set forth below.
1.2 Duration of Registration Rights. The registration rights
set forth in Sections 2 and 3 hereof shall not be exercisable by the
Investors if and to the extent that the Investors are restricted from
transferring or disposing of the Registrable Securities under Section 5.3
of the Purchase Agreement. Registrable Securities shall cease to be such
when: (a) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act of 1933, as
amended (the "Securities Act"), and such securities shall have been
disposed of in accordance with such registration statement; (b) such
securities shall have been distributed pursuant to Rule 144 (or any
successor provision to such Rule) under the Securities Act; or (c) such
securities shall have ceased to be outstanding.
1.3 Permitted Transferees; Exercise of Rights. Any Investor
(including without limitation (x) Banque Nationale de Paris, for itself
and as agent for itself and for Merrill Lynch Senior Floating Rate Fund,
Inc., Merrill Lynch Prime Rate Portfolio and Merrill Lynch Debt Strategies
Portfolio, together with its successors and assigns (the "Sneaker
Lenders"), (y) direct and indirect transferees of the Sneaker Lenders and
(z) other permitted direct or indirect transferees of SGL under the
Purchase Agreement) may transfer the registration rights granted hereunder
by transferring all or a portion of the Registrable Securities (subject to
and in accordance with the terms and conditions of the Purchase Agreement)
and sending a written notice thereof to the Company. The written notice
shall comply with Section 7.6 hereof, be signed by both the transferor
Investor and the transferee and include an executed counterpart of this
Agreement pursuant to which the transferee: (a) shall become a party to
this Agreement, (b) shall be deemed to be an Investor for all purposes
hereunder and (c) shall be bound by all the provisions hereof applicable to
the Investors. Except as set forth herein, the Investors may jointly
exercise the registration rights granted hereunder in such manner and in
such proportion as they shall agree among themselves.
Section 2. Registration on Request.
2.1 Notice. Subject to the terms and conditions set forth
herein, upon written notice by the Investors, executed and delivered for
them and on their behalf only by the Investors' Agent, requesting that the
Company effect the registration under the Securities Act of some or all of
the Registrable Securities held by them, which notice shall specify the
intended method or methods of disposition of such Registrable Securities,
the Company will use its reasonable best efforts to effect (at the earliest
possible date) the registration, under the Securities Act, of such
Registrable Securities for disposition in accordance with the intended
method or methods of disposition stated in such request, provided that:
(a) if the Company shall have previously effected a
registration with respect to Registrable Securities pursuant to Section 3
hereof, the Company shall not be required to effect a registration pursuant
to this Section 2 until a period of 120 days shall have elapsed from the
effective date of the most recent such previous registration;
(b) if, upon receipt of a registration request pursuant to
this Section 2, the Company is advised in writing (with a copy to the
Investors) by the underwriter or proposed underwriter for a contemplated
Company Offering (as defined below) that, in such firm's opinion, a
registration at the time and on the terms requested would adversely affect
any public offering of securities (other than in connection with employee
benefit and similar plans) by the Company (a "Company Offering") that had
been contemplated by the Company prior to the date of the aforesaid written
notice from the Investors requesting registration, subject to Section
4.3(d) hereof, the Company shall not be required to effect a registration
pursuant to this Section 2 until the earliest of (i) the later of (A) 120
days after the completion of such Company Offering or (B) the termination
of any "black-out" or "lock-up" period required by the underwriters, if
any, to be applicable to the Investors in connection with such Company
Offering, (ii) 30 days after abandonment of such Company Offering or (iii)
four months after the date of the aforesaid written notice from the
Investors requesting registration;
(c) if the Investors are advised in writing by the managing
underwriter of the offering that the number of Registrable Securities
(treating the Warrants, for these purposes, on an as-exercised basis)
offered by the Investors in a registration under this Section 2 is greater
than the number of securities which can be offered without adversely
affecting the offering, the Investors agree to reduce pro rata the number
of Registrable Securities offered for the account of the Investors to a
number deemed satisfactory by the managing underwriter;
(d) if, within 15 days after the date of the aforesaid
written notice from the Investors requesting registration under this
Section 2.1, the Company determines in good faith, and delivers written
notice to the Investors (and the Investors acknowledge that any notice
given by the Company to the Investors pursuant to this Section 2.1(d) shall
constitute material, nonpublic information), that the filing of a
registration statement would require the disclosure of material
information, which disclosure would have a significant adverse impact on
the (i) Company's business, (ii) a contemplated financing, strategic or
other material transaction involving the Company or (iii) any bona fide
negotiation as to such a contemplated transaction which was in process
prior to, and is ongoing at, the date of the written notice to the
Investors pursuant to this Section 2.1(d), subject to Section 4.3(d)
hereof, the Company shall not be required to effect a registration pursuant
to this Section 2 until the earlier of (x) the date upon which such
material information is disclosed to the public or ceases to be material or
would no longer have the impact described above or (y) 90 days after the
Company makes such good faith determination;
(e) the Company shall not be required to effect a
registration pursuant to this Section 2 if the U.S. Securities and Exchange
Commission ("SEC"), applicable law or regulation or the managing
underwriter of the offering requires the Company to include in the
registration statement financial statements audited as of any date other
than the end of its fiscal year;
(f) the Company shall not be required to register any
Registrable Securities under this Section 2 unless (i) the proposed
approximate aggregate offering price of the Registrable Securities to be
registered shall be at least $10,000,000 or (ii) if any of the Registrable
Securities are being offered for the account of the Sneaker Lenders, the
Registrable Securities proposed to be offered constitute at least 1% of the
Common Stock outstanding at the time registration is requested under this
Section 2.1;
(g) prior to the effectiveness of any registration
statement effected pursuant to this Section 2, if the managing underwriter
of the offering advises the Investors that it is inadvisable to proceed
with the offering, the Investors shall have the right to cause the Company
to withdraw any such registration and, if the Investors pay all
Registration Expenses in connection with any such withdrawn registration,
obtain one additional registration right for purposes of paragraph (i) of
this Section 2.1;
(h) the Investors shall be permitted to select the
underwriters of any offering of Registrable Securities for which a
registration is effected under this Section 2; subject to the consent of
the Company, which shall not be unreasonably withheld; and
(i) the Investors shall have the right to exercise
registration rights pursuant to this Section 2: (i) once as to the Common
Stock included in the Units and the Common Stock underlying the Warrants
included in the Units; (ii) once (at any time after July 2, 1999) with
respect to the Warrants included in the Units, the Common Stock underlying
those Warrants or both; and (iii) once with respect to each withdrawn
registration in accordance with paragraph (g) of this Section 2.1 and each
Blackout Termination Right provided for by Section 4.3(b) hereof.
2.2 Registration Expenses.
(a) As used in this Agreement, "Registration Expenses"
shall include all expenses incident to the Company's performance of or
compliance with the registration requirements set forth in this Agreement
including, without limitation, the following: (i) the fees, disbursements
and expenses of the Company's counsel (United States and foreign) and
accountants in connection with the registration of Registrable Securities
to be disposed of under the Securities Act; (ii) all expenses in connection
with the preparation, printing and filing of the registration statement,
any preliminary prospectus or final prospectus, any other offering document
and amendments and supplements thereto and the mailing and delivering of
copies thereof to the underwriters and dealers; (iii) the cost of printing
or producing any agreement(s) among underwriters, underwriting agreement(s)
and blue sky or legal investment memoranda, any selling agreements and any
other documents in connection with the offering, sale or delivery of
Registrable Securities to be disposed of; (iv) all expenses in connection
with the qualification of Registrable Securities to be disposed of for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment
surveys; and (v) the filing fees incident to securing any required review
by the National Association of Securities Dealers ("NASD") of the terms of
the sale of Registrable Securities to be disposed of.
(b) Other than as provided for in Section 2.1(g) hereof,
the Company (as between the Company and the Investors) will pay all
Registration Expenses in connection with any registration pursuant to this
Section 2, except that (i) the Company shall not bear underwriting
discounts or commissions attributable to Registrable Securities or transfer
taxes applicable to Registrable Securities and (ii) the Company shall be
required to pay the fees and disbursements of one, but only one, firm of
legal counsel retained by the Investors in connection with any such
registration.
2.3 Third Person Shares. The Company shall have the right to
register equity securities (as defined in the Securities Exchange Act of
1934, as amended (the "Exchange Act")) for sale for the account of any
person in any registration of Registrable Securities requested pursuant to
this Section 2; provided that the Company shall not have the right to
register such securities to the extent that the Investors are advised in
writing (with a copy to the Company) by the underwriter for the offering of
Registrable Securities for which a registration is effected under this
Section 2 that, in such firm's opinion, registration of such securities
would adversely affect in a significant manner the offering and sale of
Registrable Securities then contemplated by the Investors.
Section 3. Incidental Registration.
3.1 Notice and Registration. If the Company proposes to
register for public sale under the Securities Act (whether proposed to be
offered for sale by the Company or any other person) any of its equity
securities (the "Other Securities") on a form and in a manner which would
permit registration of Registrable Securities for sale to the public under
the Securities Act, the Company will give prompt written notice to the
Investors of its intention to do so, and upon the written request of the
Investors, delivered to the Company for and on behalf of the Investors only
by the Investors' Agent, within 20 Business Days (as defined below) after
the giving of any such notice (which request shall specify Registrable
Securities intended to be disposed of by the Investors and the intended
method of disposition thereof), the Company will use its reasonable best
efforts to effect, in connection with the registration of the Other
Securities, the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the
Investors, to the extent required to permit the disposition (in accordance
with the intended method or methods thereof as aforesaid) of Registrable
Securities so to be registered; provided that:
(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date
of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register the Other
Securities, the Company may, at its election, give written notice of such
determination to the Investors, and thereupon the Company shall be relieved
of its obligation to register such Registrable Securities in connection
with the registration of such Other Securities (but not from its obligation
to pay Registration Expenses to the extent incurred in connection therewith
as provided in Section 3.2 hereof), without prejudice, however, to the
rights (if any) of the Investors immediately to request that such
registration be effected as a registration under Section 2 hereof;
(b) the Company will not be required to effect any
registration of Registrable Securities pursuant to this Section 3 if no
securities of any other selling stockholder are to be included in such
registration and the Company shall have been advised in writing (with a
copy to the Investors) by a recognized independent investment banking firm
selected by the Company and reasonably acceptable to the Investors that, in
such firm's opinion, a registration at that time of any of the Registrable
Securities proposed to be offered would adversely affect in a significant
manner the proposed Company Offering;
(c) if the Company shall have been advised in writing (with
a copy to the Investors) by the managing underwriter of the offering of the
Other Securities that the number of securities (treating the Warrants and
other options, warrants or rights, as well as convertible and exchangeable
securities, for these purposes, on an as-exercised, as-converted or as-
exchanged basis) offered by the Investors and other selling stockholders,
if any, in a registration under this Section 3 is greater than the number
of securities which can be offered without adversely affecting the
offering, (i) the Company may reduce pro rata the number of securities
(including without limitation Registrable Securities) offered for the
account of selling stockholders to a number deemed satisfactory by the
managing underwriter and (ii) in the event that the Company so reduces the
number of securities offered for the account of selling stockholders, the
Investors agree to reduce pro rata the number of Registrable Securities
offered for their account accordingly;
(d) the Company may, in its sole discretion, delay any
offering of Other Securities for which a registration is effected under
this Section 3 by giving written notice of the delay to the Investors;
provided, however, that if (i) the registration statement with respect to
the offering is not yet effective and the delay extends for more than 30
days from the date of the written notice of delay under this Section 3.1(d)
or (ii) the registration statement with respect to the offering has been
declared effective by the SEC and the closing of the offering is delayed
for at least 12 hours, the Investors may withdraw their Registrable
Securities from the offering, and thereupon the Company shall be relieved
of its obligation to register such Registrable Securities (but not from its
obligation to pay Registration Expenses to the extent incurred in
connection therewith as provided in Section 3.2 hereof), without prejudice,
however, to the rights (if any) of the Investors immediately to request
that such registration be effected as a registration under Section 2
hereof;
(e) the Company shall not be required to register any
Registrable Securities under this Section 3 unless the approximate proposed
aggregate offering price of the Registrable Securities to be registered
shall be at least (i) $1,500,000 in the event that the Investors are the
only selling stockholders for whom or which securities are being registered
or (ii) $100,000 in the event that the Investors are not the only selling
stockholders for whom or which securities are being registered; and
(f) the Company shall not be required to effect any
registration of Registrable Securities under this Section 3 incidental to
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, subscription offers, dividend reinvestment
plans or stock option or other employee benefit plans.
No registration of Registrable Securities effected under this Section 3
shall relieve the Company of its obligation to effect a registration of
Registrable Securities pursuant to Section 2. For purposes of this
Agreement, "Business Day" means any day other than a Saturday, Sunday or a
day on which the SEC is not open to receive filings.
3.2 Registration Expenses. The Company (as between the Company
and the Investors) will pay all Registration Expenses in connection with
any registration pursuant to this Section 3, except that (a) the Company
shall not bear underwriting discounts or commissions attributable to
Registrable Securities or transfer taxes applicable to Registrable
Securities and (b) the Company shall be required to pay the fees and
disbursements of one, but only one, firm of legal counsel retained by the
Investors in connection with any such registration.
Section 4. Registration Procedures.
4.1 Registration and Qualification. If and whenever the
Company is required to use its reasonable best efforts to effect the
registration of any Registrable Securities under the Securities Act as
provided in Sections 2 and 3 hereof, the Company will promptly as is
practicable:
(a) prepare, file with the SEC and use its reasonable best
efforts to cause to become effective a registration statement under the
Securities Act with respect to the Registrable Securities to be offered;
(b) furnish to the Investors copies of any such
registration statement, any prospectus included therein and any amendment
or supplement thereto (including all documents incorporated by reference
therein prior to the effectiveness of such registration statement), which
documents (other than documents incorporated by reference) will be subject
to the review of the Investors for a period of at least five business days,
and (i) with respect to a registration under Section 2 hereof, the Company
shall not file with the SEC any such registration statement, prospectus,
amendment or supplement to which any Investor with securities covered by
the registration statement shall reasonably object within five business
days of receipt thereof and (ii) with respect to a registration under
Section 3 hereof, prior to filing with the SEC any such registration
statement, prospectus, amendment or supplement, the Company will consider
the reasonable objections of any Investor which are conveyed to the
Company;
(c) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities until such
time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the Investors set
forth in such registration statement or, in the case of registration
statements not governed by Rule 415 under the Securities Act, the
expiration of three months after such registration statement becomes
effective, if earlier;
(d) if any person becomes an Investor subsequent to the
time that a registration statement governed by Rule 415 becomes effective,
upon request by the new Investor or the Investors' Agent, add such Investor
to the registration statement through a supplement to the prospectus
included in the registration statement or, if required by applicable law,
rule or regulation, a post-effective amendment to include such Investor as
a selling securityholder in a distribution under such registration
statement;
(e) furnish to the Investors and to any underwriter of such
Registrable Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such registration statement (including each preliminary prospectus and
any summary prospectus) in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such
registration statement or prospectus and such other documents as the
Investors or such underwriter may reasonably request;
(f) use its reasonable best efforts to register or qualify
all Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such United States jurisdictions
as the Investors, acting solely through the Investors' Agent, or any
underwriter of such Registrable Securities shall reasonably request and do
any and all other acts and things which may be reasonably necessary or
advisable to enable the Investors or any underwriter to consummate the
disposition in such jurisdictions of the Registrable Securities covered by
such registration statement; provided that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction where it is not so qualified or to subject
itself to taxation in any such jurisdiction or to consent to general
service of process in any such jurisdiction;
(g) (i) furnish to the Investors, addressed to them, an
opinion of counsel for the Company, dated the date of the closing under the
underwriting agreement, covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel
delivered to underwriters in underwritten public offerings of securities
and such other matters as the Investors may reasonably request, and (ii) if
permitted by applicable accounting standards, use its reasonable efforts to
furnish to the Investors, addressed to them, a "cold comfort" letter signed
by the independent public accountants who have certified the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement
(and the prospectus included therein), and with respect to events
subsequent to the date of such financial statements, as are customarily
covered in accountants' letters delivered to underwriters in underwritten
public offerings of securities and such other matters as the Investors may
reasonable request; and
(h) (i) immediately notify the Investors at any time when a
prospectus relating to a registration pursuant to Section 2 or 3 hereof is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and (ii) at the request of the
Investors, acting solely through the Investors' Agent, prepare and furnish
to the Investors a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchaser of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading. The Investors agree not to sell Registrable
Securities registered under Section 2 or Section 3 hereof if they have been
notified of the happening of an event under clause (i) of this Section
4.1(g) until the Investors have received such copies of the supplement or
amendment as aforesaid and are further notified by the Company that the
prospectus included in the registration statement, as then in effect, no
longer includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and the three-month time period set forth in
paragraph (b) of this Section 4.1, if applicable, shall be extended for a
number of days equal to the number of days the Investors are prohibited
from selling such Registrable Securities under this Section 4(g).
The Company may require the Investors to furnish to the Company such
information regarding the Investors and the distribution of such securities
as the Company may from time to time reasonably request in writing and as
shall be required by law or by the SEC or the NASD in connection with any
registration.
4.2 Underwriting.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration requested
hereunder, the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such
representations, warranties, covenants and indemnities by the Company and
such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including
without limitation indemnities and contribution substantially to the effect
and to the extent provided in Section 6 hereof and the provision of an
opinion of counsel and, if applicable, a "cold comfort" letter, in each
case to the effect and to the extent provided in Section 4.1(f) hereof.
The Investors on whose behalf Registrable Securities are to be distributed
by such underwriters shall be parties to any such underwriting agreement,
and the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such Investors.
(b) In the event that any registration pursuant to Section
3 hereof shall involve, in whole or in part, an underwritten offering, the
Company may require Registrable Securities requested to be registered
pursuant to Section 3 to be included in such underwriting on the same terms
and conditions as shall be applicable to the Other Securities being sold
through underwriters under such registration. In such case, the Investors
on whose behalf Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement. Such
agreement shall contain such representations, warranties, covenants and
indemnities by such Investors and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including without limitation indemnities and contribution
substantially to the effect and to the extent provided in Section 6 hereof,
provided that the amount of any indemnification provided by such Investors
shall be limited to the net proceeds to such Investors from the offering
under such registration. The representations and warranties in such
underwriting agreement by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to
and for the benefit of such Investors.
(c) In the event that any registration shall involve an
underwritten offering of Registrable Securities with an aggregate current
market value (calculated based on the per share closing price of the Common
Stock on the trading day immediately prior to the day on which notice of
registration is given by the Investors under Section 2.1 or Section 3.1)
equal to or in excess of $30,000,000, the Company will (i) market the
Registrable Securities to be offered with the same diligence the Company
would devote to the marketing of a primary registration of its securities
and (ii) cause its management to participate in any efforts by the
underwriters to market the Registrable Securities to be offered, if and as
required by the underwriters.
4.3 Blackout Periods. (a) Except as restricted below, at any
time when a registration statement effected pursuant to Section 2 hereunder
relating to Registrable Securities is effective, upon written notice from
the Company to the Investors that either:
(i) the Company has determined to engage in
a Company Offering and has been advised in writing (with a copy
to the Investors) by the underwriter or proposed underwriter of
the Company Offering that, in such firm's opinion, the Investors'
sale of Registrable Securities pursuant to the registration
statement would adversely affect the Company's own immediately
planned Company Offering (a "Transaction Blackout") or
(ii) the Company has determined in good
faith, and delivers written notice to the Investors, that the
Investors' sale of Registrable Securities pursuant to the
registration statement would require disclosure of material
information, which disclosure would have a significant adverse
impact on (A) the Company's business, (B) a contemplated
financing, strategic or other material transaction involving the
Company or (C) any bona fide negotiation as to such a
contemplated transaction which was in process prior to, and is
ongoing at, the date of written notice to the Investors pursuant
to this Section 4.3(a)(ii) (an "Information Blackout"),
the Investors shall suspend sales of Registrable Securities pursuant to
such registration statement until the earlier of:
(A) (1) in the case of a Transaction Blackout,
the earliest of (a) the later of (i) 120 days after the
completion of such Company Offering, or (ii) the
termination of any "black-out" or "lock-up" period
required by the underwriters to be applicable to the
Investors, if any, in connection with such Company
Offering, (b) 30 days after abandonment of such Company
Offering and (c) four months after the date of the
Company's written notice of the Transaction Blackout or
(2) in the case of an Information Blackout, the earlier
of (a) the date upon which such material information is
disclosed to the public or ceases to be material or
would no longer have the impact described in Section
4.3(a)(ii) hereof and (b) 90 days after the Company
makes such determination; and
(B) such time as the Company notifies the
Investors that sales pursuant to such registration
statement may be resumed;
provided, that the Company may not impose a Transaction Blackout during any
underwritten public offering and that the Company shall only be permitted
to deliver one notice of a Transaction Blackout or Information Blackout
within any 180-day period. For purposes of this Agreement, the number of
days from a suspension of sales of the Investors under this Section 4.3(a)
until the day when such sales may be resumed hereunder is called a "Sales
Blackout Period."
(b) Any delivery by the Company of notice of a Transaction
Blackout or Information Blackout during the 90 days immediately following
effectiveness of any registration statement effected pursuant to Section 2
hereof shall give the Investors the right, by notice to the Company within
20 Business Days after the end of the applicable Sales Blackout Period, to
cancel such registration and obtain one additional registration right (a
"Blackout Termination Right") for purposes of Section 2.1(i).
(c) If there is a Transaction Blackout or an Information
Blackout and the Investors do not exercise their cancellation right, if
any, pursuant to paragraph (b) of this Section 4.3, or if such cancellation
right is not available, the three-month time period set forth in Section
4.1(b), if applicable, shall be extended for a number of days equal to the
number of days in the Sales Blackout Period.
(d) The Company only shall be permitted to delay
registration of Registrable Securities pursuant to Section 2(b) or Section
2(d) hereof or impose a Sales Blackout Period pursuant to paragraph (a) of
this Section 4.3 if, in the aggregate, the Company's exercise of such
rights under Sections 2(b), 2(d) and 4.3 results in four months or less of
delayed registrations or sales within any 365-day period.
4.4 Public Trading. In connection with the registration of any
offering of Registrable Securities under this Agreement, the Company agrees
to use its reasonable best efforts to (a) effect the quotation or listing
of such Registrable Securities through or on the Nasdaq National Market,
any other market of The Nasdaq Stock Market or any securities exchange
through or on which shares of the Common Stock are then quoted or listed or
(b) otherwise facilitate the public trading of such Registrable Securities.
4.5 Warrant Agreement. The Company covenants and agrees that on
or prior to the closing of the first registered public offering of the
Warrants, if reasonably necessary to facilitate such public offering, the
Company will (a) enter into a Warrant Agreement with a warrant agent (the
"Warrant Agreement") containing customary terms and conditions consistent
with the terms of the Warrants with respect to the execution, registration,
transfer, split-up and exchange of certificates representing the Warrants
and, as appropriate, including other terms and conditions currently set
forth in the Warrant and (b) exchange then outstanding certificates
representing the Warrants for new certificates representing the Warrants
issued in accordance with the Warrant Agreement.
4.6 Lock-up. (a) If any registration of Registrable Securities
under the Securities Act pursuant to Section 2 or Section 3 involves an
underwritten offering, the Company agrees, if so required by the managing
underwriter: (i) not to effect any sale or distribution of any of its
equity securities or securities convertible into or exchangeable or
exercisable for any of such equity securities during a period commencing on
the effective date of such registration and ending not more than 90 days
thereafter, except (A) as part of and pursuant to such underwritten
offering or (B) in connection with (1) a stock option plan, stock purchase
plan, savings plan or similar plan or (2) an acquisition, merger or
exchange offer; and (ii) to use its reasonable best efforts to cause its
officers and directors other than Harold Ruttenberg to agree not to effect
any sale or distribution (other than a private sale to a transferee who or
which agrees to the same restrictions to which the transferor is subject)
of any (x) equity securities of the Company owned or controlled by any of
them or their respective family members or (y) securities convertible into
or exchangeable or exercisable for any of such equity securities owned or
controlled by any of them or their respective family members, in each such
case during a period commencing on the effective date of such registration
and ending not more than 90 days thereafter, except as part of and pursuant
to such underwritten offering.
(b) If any registration of Registrable Securities under the
Securities Act pursuant to Section 2 or Section 3 involves an underwritten
offering, Harold Ruttenberg agrees, if so required by the managing
underwriter, not to effect any sale or distribution (other than a private
sale to a transferee who or which agrees to the same restrictions to which
the transferor is subject) of any equity securities of the Company owned or
controlled by him or his respective family members or securities
convertible into or exchangeable or exercisable for any of such equity
securities owned or controlled by him or his respective family members
during a period commencing on the effective date of such registration and
ending not more than 90 days thereafter, except as part of and pursuant to
such underwritten offering.
(c) If (i) any registration of Registrable Securities under
the Securities Act pursuant to Section 2 or Section 3 involves an
underwritten offering, (ii) Harold Ruttenberg has executed and delivered an
agreement with the Company relating to such registration as provided for in
Section 4.6(b) hereof and (iii) each officer or director who owns or
controls at least 50,000 shares of Common Stock (subject to adjustment for
stock splits, stock combinations and the like) has executed and delivered
an agreement with the Company relating to such registration as provided for
in Section 4.6(a)(ii) hereof, the Investors agree, if so required by the
managing underwriter, not to effect any sale or distribution (other than a
private sale to a transferee who or which agrees to the same restrictions
to which the transferor is subject) of any of their equity securities of
the Company or securities convertible into or exchangeable or exercisable
for any of such equity securities during a period commencing on the
effective date of such registration and ending not more than 90 days
thereafter, except as part of and pursuant to such underwritten offering.
Section 5. Preparation; Reasonable Investigation.
5.1 Preparation; Reasonable Investigation. In connection with
the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company will give the
Investors and the underwriters, if any, and their respective counsel and
accountants, such reasonable and customary access after reasonable notice
to its books and records and such opportunities to discuss the business of
the Company with its officers and the independent public accountants who
have certified its financial statements and perform such other diligence as
shall be necessary, in the opinion of the Investors and such underwriters
or their respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
Section 6. Indemnification.
6.1 Indemnification and Contribution.
(a) In the event of any registration of any Registrable
Securities hereunder, the Company agrees to indemnify and hold harmless the
Investors, their respective directors, officers or partners (as
applicable), each person who participates as an underwriter in the offering
or sale of such securities, each officer and director of each underwriter
and each person, if any, who controls any such Investor or any such
underwriter within the meaning of the Securities Act or the Exchange Act
against any losses, claims, damages, liabilities and expenses, joint or
several, to which such person may be subject under the Securities Act or
otherwise insofar as such losses, claims, damages, liabilities or expenses
(or actions or proceedings in respect thereof) arise out of are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus included therein, any amendment or supplement thereto or any
document incorporated by reference therein or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company
will reimburse each such person for any legal or any other expenses
reasonably incurred by such person in connection with investigating or
defending any such loss, claim, liability, action or proceeding; provided
that the Company shall not be liable in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus or final prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the
Investors expressly for inclusion in such registration statement,
prospectus, amendment or supplement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
any such Investor, director, officer, partner or person and shall survive
the transfer of such securities by any such Investor. The Company also
agrees to provide for contribution substantially in accordance with the
terms and provisions of Section 6.2 hereof.
(b) In the event of any registration of any Registrable
Securities hereunder, the Investors agree to indemnify and hold harmless
(in the same manner and to the same extent as set forth in clause (a) of
this Section 6.1) the Company, each director of the Company, each officer
of the Company who shall sign such registration statement, each person who
participates as an underwriter in the offering or sale of such securities,
each officer and director of each underwriter, and each person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act or the Exchange Act, with respect to any statement in or
omission from such registration statement, any preliminary prospectus or
final prospectus included therein, or any amendment or supplement thereto,
if such statement or omission was made in reliance upon and in conformity
with written information furnished by or on behalf of the Investors to the
Company expressly for inclusion in such registration statement, prospectus,
amendment or supplement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling person and shall survive the
transfer of the Registrable Securities by any such Investors. The
Investors will reimburse each such person for any legal or any other
expenses reasonably incurred by such person in connection with
investigating or defending any loss, claim, liability, action or proceeding
for which indemnification is provided under this Section 6.1(b). The
Investors also agree to provide for contribution substantially in
accordance with the terms and provisions of Section 6.2 hereof.
(c) Notwithstanding the provisions of paragraphs (a) and
(b) of this Section 6.1, no Investor shall be required to provide
indemnification in any amount in excess of the net proceeds received by
such Investor in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to indemnification from any person who was not guilty of such
fraudulent misrepresentation. The Investors' obligations to indemnify
pursuant to Section 6.1(b) are several and not joint, and each Investor's
obligation to indemnify is limited to its respective net proceeds from the
offering. The term "person," as used in this Section 6.1 and elsewhere in
this Agreement shall mean a natural person, corporation, partnership or
other entity.
6.2 Contribution. If the indemnification provided for in
Section 6.1 hereof is required by its terms but is for any reason held to
be unavailable to or otherwise insufficient to hold harmless an indemnified
party under Section 6.1 hereof in respect to any losses, claims, damages,
liabilities or expenses referred to therein, then each applicable
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to therein (a) in such proportion as is appropriate to
reflect the relative benefits received by the Company, the Investors and
the underwriters from the offering or (b) if the allocation provided by
clause (a) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in
clause (a) above but also the relative fault of the Company, the Investors
and the underwriters in connection with the statements or omissions or
inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits
received by the Company, the Investors and the underwriters shall be deemed
to be in the same proportion, in the case of the Company and the Investors,
as the total price paid to the Company and to the Investors, respectively,
for the securities sold by them to the underwriters (net of underwriting
commissions and discounts but before deducting expenses), and in the case
of the underwriters, as the underwriting commissions or discounts received
by them bears to the total of such amounts paid to the Company and to the
Investors and received by the underwriters as underwriting commissions or
discounts. The relative fault of the Company, the Investors and the
underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company, the Investors or the underwriters and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company
and the Investors agree that it would not be just and equitable if
contribution pursuant to this Section 6.2 were determined solely by pro
rata allocation (even if the underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 6.2,
no Investor shall be required to contribute any amount in excess of the net
proceeds received by such Investor in the offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Investors' obligations to
contribute pursuant to this Section 6.2 are several and not joint, and each
Investor's obligation to contribute is limited to its respective net
proceeds from the offering.
Section 7. Miscellaneous.
7.1 Legends; Stop Transfer Restriction. The Investors hereby
acknowledge that each of the certificates representing Registrable
Securities shall be subject to stop transfer instructions against the
transfer of certificates legended in accordance with Section 4.3(b) of the
Purchase Agreement. Such stop transfer instructions and legend shall be
applicable to any disposition of Registrable Securities while transfer of
such Registrable Securities is restricted by the Securities Act. The
Company agrees that, upon receipt of a written request from the Investors,
executed and delivered for them and on their behalf only by the Investors'
Agent, addressed to the Company and its transfer agent and accompanied by
an opinion of counsel reasonably acceptable to the Company to the effect
that some or all of the Registrable Securities may lawfully be publicly
offered and sold in the United States without registration under the
Securities Act, the Company will, or will cause its transfer agent or
warrant agent (if any) to, remove such legend from certificates
representing such Registrable Securities, and will make inapplicable to
such Registrable Securities such stop transfer instructions.
7.2 Investors' Agent. Each of the Investors (including
transferees which become Investors hereunder in accordance with Section 1.3
hereof) by its execution and delivery of this Agreement or the counterpart
referenced in Section 1.3, designates and appoints Thomas H. Lee Company as
such Investor's agent, attorney-in-fact and representative, with full power
of substitution (in such capacity, the "Investors' Agent"), and in such
capacity, Thomas H. Lee Company is hereby authorized and directed to take
all such actions and exercise all such rights, power or authority
(including, without limitation, the power and authority, on behalf of the
Investors, to execute and deliver any certificate, notice or instructions
hereunder), and make any decision or determination as are required,
authorized or permitted by this Agreement to be performed, exercised or
made by such Investor or by the Investors' Agent. Any such action taken or
exercise of rights, power or authority, and any decision or determination
made by the Investors' Agent consistent therewith, shall be absolutely and
irrevocably binding on each Investor as if such Investor personally had
taken such action, exercised such rights, power or authority or made such
decision or determination in such Investor's individual capacity.
(a) Each of the Investors agrees that each party hereto may
conclusively rely without further investigation on the instructions and
decisions of the Investors' Agent acting in such capacity on behalf of any
Investor and that, as between each Investor and each other party hereto,
all actions of the Investors' Agent acting in such capacity shall be
conclusive and binding on each Investor. Each Investor acknowledges that
the foregoing appointment and designation shall be deemed to be coupled
with an interest, shall be irrevocable and, in the case of any Investor who
is an individual, shall survive the death or incapacity of such Investor.
The Investors' Agent shall not be liable to any Investor for the
performance of any act or the failure to act under or in connection with
this Agreement, and the Investors shall indemnify and hold harmless the
Investors' Agent from any liability in connection with its acting as such,
so long as it acted or failed to act in good faith in what it reasonably
believed to be the scope of its authority and for a purpose which it
reasonably believed to be in the best interests of the Investors.
(b) A successor to the Investors' Agent may be chosen by
those persons holding at least a majority in interest of the Registrable
Securities then outstanding, provided that notice thereof is given by the
new Investors' Agent to the Company. Any such successor shall, for
purposes of this Agreement, be deemed to be, from the time of the
appointment thereof in accordance with the terms hereof, the Investors'
Agent and from and after such time, the term "Investors' Agent" as used
herein shall be deemed to refer to such successor. No appointment of a
successor shall be effective unless such successor agrees in writing to be
bound by the terms of this Agreement.
(c) The Investors' Agent shall be permitted to retain
counsel, consultants and other advisors and shall be entitled to
reimbursement from the Investors of its reasonable out-of-pocket expenses
including without limitation the reasonable, documented fees and expenses
incurred by the Investors' Agent for payment to, or in connection with, the
retention of such counsel, consultants or other advisors.
(d) The provisions of this Section 7.2 shall in no way
impose any obligations on the Company. In particular, notwithstanding any
notice received by the Company to the contrary (except any notice of the
appointment of a successor Investors' Agent in accordance with Section
7.2(c) above, the Company (i) shall be fully protected in relying upon and
shall be entitled to rely upon, actions, decisions and determinations of
the Investors' Agent and (ii) shall be entitled to assume that all actions,
decisions and determinations of the Investors' Agent are fully authorized
by the Investors.
7.3 No Inconsistent Agreements. The Company has not entered
into, and shall not on or after the date of this Agreement enter into, any
agreement with respect to its securities that compromises, negates or
violates the rights expressly granted to the Investors under this
Agreement.
7.4 Governing Law. This agreement shall be construed, performed
and enforced in accordance with, and governed by, the laws of the State of
New York, without giving effect to the principles of conflicts of law
thereof which may require application of the laws of a different
jurisdiction.
7.5 Severability. In the event that any part of this Agreement
is declared by any court or other judicial or administrative body to be
null, void or unenforceable, said provision shall survive to the extent it
is not so declared, and all of the other provisions of this Agreement shall
remain in full force and effect.
7.6 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier service (with
proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid), addressed as follows:
If to the Investors, at: Thomas H. Lee Company
75 State Street, 26th Floor
Boston, MA 02109
Attn: Warren C. Smith, Jr.
Telecopy: (617) 227-3514
with a copy to: Skadden, Arps, Slate
Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, MA 02108
Attn: Louis A. Goodman, Esq.
Kent A. Coit, Esq.
Telecopy: (617) 573-4822
If to the Company, at: Just For Feet, Inc.
7400 Cahaba Valley Road
Birmingham, AL 35242
Attn: Eric L. Tyra
Telecopy: (205) 408-3170
with a copy to: Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attn: Lawrence A. Cagney, Esq.
Telecopy: (212) 909-6836
and
Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, GA 30309
Attn: Jay Schwartz, Esq.
Telecopy: (404) 685-6932
if to Harold Ruttenberg, at: Just For Feet, Inc.
7400 Cahaba Valley Road
Birmingham, AL 35242
Attn: Harold Ruttenberg
Telecopy: (205) 408-3163
with a copy to: Smith, Gambrell & Russell
1230 Peachtree Street, N.E.
Suite 3100
Atlanta, GA 30309
Attn: Jay Schwartz, Esq.
Telecopy: (404) 685-6932
or to such other address as any party shall specify by written notice so
given, and any such notice hereunder shall be deemed to have been delivered
as of the date received.
7.7 Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants or conditions hereof may be
waived, only by a written instrument executed by or on behalf of the
parties hereto (with the Investors' Agent acting on behalf of the
Investors), or in the case of a waiver, by the party waiving compliance.
Any waiver by any party of any condition, or of the breach of any
provision, term or covenant contained in this Agreement, in any one or more
instances, shall not be deemed to be, nor construed as, a further or
continuing waiver of any such condition, or of the breach of any other
provision, term or covenant of this Agreement.
7.8 Remedies. Any person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically or to
recover damages or to exercise any other remedy available to it at law or
equity. These rights and remedies shall be cumulative, and the exercise of
any right or remedy provided herein shall not preclude any party from
exercising any other right or remedy provided herein. Each party hereto
agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it or any of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
7.9 Headings and Interpretation. The headings in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein," "hereof,"
"hereunder" and "hereinafter" refer to this Agreement as a whole and not to
the particular sentence or paragraph where they appear, unless the context
otherwise requires. References in this Agreement to Sections or Schedules
shall be to Sections of or Schedules to this Agreement, unless otherwise
indicated. Unless the context otherwise requires, (i) terms used in the
plural include the singular, and vice versa, (ii) words in the masculine
gender include the feminine and neuter, and vice versa, and (iii) the use
of "or" is intended to be inclusive.
7.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same instrument.
The parties hereto have caused this Agreement to be executed by
their respective officers or partners thereunto duly authorized as of the
date first above written.
JUST FOR FEET, INC.
By__________________________________________
Name:
Title:
____________________________________________
Harold Ruttenberg
(solely for purposes of Section 4.6(b) hereof)
SNEAKER GUARANTEE LLC
By: THOMAS H. LEE COMPANY as Manager
By_________________________________________
Name:
Title:
INVESTORS' AGENT:
----------------
THOMAS H. LEE COMPANY
By________________________________________
Name:
Title:
EXHIBIT B
FORM OF WARRANT
THIS WARRANT, AND THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE,
HAVE NOT BEEN REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT") , OR APPLICABLE STATE SECURITIES LAWS (THE "STATE
ACTS"), AND SHALL NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE
TRANSFERRED (WHETHER OR NOT FOR CONSIDERATION) BY THE HOLDER EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UPON THE ISSUANCE TO JUST FOR
FEET, INC. OF A FAVORABLE OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO JUST FOR FEET, INC. TO THE EFFECT THAT ANY SUCH TRANSFER
SHALL NOT BE A VIOLATION OF THE 1933 ACT AND THE STATE ACTS.
THIS WARRANT, AND THE SECURITIES FOR WHICH THIS WARRANT IS EXERCISABLE, ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN A COMMON STOCK AND
WARRANT PURCHASE AGREEMENT DATED AS OF JULY 2, 1998 (THE "PURCHASE
AGREEMENT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE PURCHASE AGREEMENT, A COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL EXECUTIVE OFFICES OF JUST FOR FEET, INC.
WARRANT
to Purchase
923,591
Shares
of
Common Stock (par value $.0001 per share)
of
JUST FOR FEET, INC.
Initial Price: $21.59 per share
This certifies that, for value received, SNEAKER GUARANTEE LLC
("Investor"), or its registered assigns (Investor or any such registered
assigns, a "Holder"), is entitled to purchase, subject to the provisions of
this Warrant, from JUST FOR FEET, INC., a Delaware corporation (the
"Company"), at any time on or after the July 2, 1998 and before July 2,
2003 (the "Expiration Date"), an aggregate of 923,591 shares, as adjusted
from time to time as hereinafter set forth (the "Warrant Number"), of fully
paid and nonassessable shares of common stock, par value $.0001 per share
("Common Stock"), of the Company at a purchase price of $21.59 per share
(as adjusted from time to time as hereinafter set forth, the "Warrant
Price"). This Warrant is one of the Warrants referred to in the Common
Stock and Warrant Purchase Agreement, dated as of July 2, 1998 (the
"Execution Date"), by and among the Company, Investor and the other
investors set forth on Exhibit A thereto (the "Purchase Agreement"). This
Warrant and such other Warrants, and any warrant or warrants issued in
exchange or substitution therefor, are sometimes referred to herein
collectively as the "Warrants."
Section 1. Definitions. Capitalized terms used and not
otherwise defined herein shall have the respective meanings ascribed to
such terms in the Purchase Agreement.
Section 2. Exercise of Warrant. (a) Subject to the
provisions hereof, this Warrant may be exercised, in whole or in part (with
respect to all or that portion of the shares of Common Stock subject to
this Warrant as to which this Warrant has not previously been exercised),
at any time on or after the Closing Date and before the Expiration Date, by
presentation and surrender of this Warrant to the Company at the office or
agency of the Company maintained for that purpose pursuant to Section 10
hereof (the "Warrant office or agency"), together with the Form of
Subscription annexed hereto completed and duly executed and accompanied by
payment to the Company, for the account of the Company, of the Warrant
Price for the number of shares of Common Stock specified in such Form of
Subscription. Except as provided below in Section 2(b), the Warrant Price
for the number of shares of Common Stock specified in the Form of
Subscription shall be payable in United States dollars by certified check
or wire transfer of immediately available funds to an account designated by
the Company for this purpose.
(b) Upon any exercise of this Warrant, the Holder may, at
its option, instruct the Company, by appropriate designation in the Form of
Subscription accompanying the surrender of this Warrant at the time of such
exercise, to apply to the payment of the aggregate Warrant Price required
by Section 2(a) to be paid upon such exercise such number of the shares of
Common Stock otherwise issuable to such Holder upon such exercise as shall
be specified in such Form of Subscription, in which case an amount equal to
the excess of the aggregate Average Market Price of such specified number
of shares of Common Stock on the date of such exercise over the portion of
the aggregate Warrant Price required by Section 2(a) to be paid upon such
exercise which is attributable to such specified number of shares of Common
Stock shall be deemed to have been paid to the Company and the number of
shares of Common Stock issuable upon such exercise shall be reduced by such
specified number.
(c) Upon proper exercise of this Warrant as provided above,
Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to Holder.
Upon any exercise of this Warrant for less than all of the shares of Common
Stock then issuable as provided in this Warrant, the Company will issue a
new Warrant of like tenor and date for the balance of such shares so
issuable. The Company shall pay all expenses, and any and all stamp or
similar taxes that may be payable in connection with the preparation,
issuance and delivery of stock certificates or any new Warrant(s) as
provided herein, except that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issue
and delivery of shares of the Common Stock in a name other than that of
Holder who shall have surrendered the same in exercise of the subscription
right evidenced thereby, and no such issuance or delivery shall be made
unless and until the person requesting such issuance has paid to the
Company such tax or has established to the satisfaction of the Company that
such tax has been paid.
(d) All shares of Common Stock issued upon exercise of this
Warrant shall be duly authorized, validly issued, fully paid and
nonassessable, and the issuance and delivery of such shares upon such
exercise will not give rise to any preemptive rights on the part of any
person or entity.
Section 3. Reservation of Shares; Preservation of Rights of
Holder. The Company hereby agrees that there shall be reserved for
issuance and/or delivery upon exercise of this Warrant, free from
preemptive rights, such number of shares of duly authorized but unissued or
treasury shares of Common Stock, or other stock or securities deliverable
pursuant to Section 7(g) hereof, as shall be required for issuance or
delivery upon exercise of this Warrant. The Company further agrees that it
will not, by amendment of its Certificate of Incorporation or through
reorganization, consolidation, merger, dissolution or sale of assets, or by
any other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by the Company. Without limiting the
generality of the foregoing, the Company agrees that before taking any
action that would cause an adjustment reducing the Warrant Price below the
then par value of Common Stock issuable upon exercise hereof, the Company
will from time to time take all such action necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares
of such Common Stock at the Warrant Price as so adjusted.
Section 4. Fractional Shares. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of this
Warrant but shall pay for any such fraction of a share in cash or by
certified or official bank check at the Warrant Price.
Section 5. Loss of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and
deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this Warrant so lost,
stolen, destroyed or mutilated shall be at any time enforceable by anyone.
Section 6. Rights of Holder. Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder of the Company.
Section 7. Antidilution Provisions. The Warrant Price and
the Warrant Number shall be subject to adjustment from time to time as
provided in this Section 7.
(a) In case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in Common
Stock, the Warrant Price in effect at the close of business on the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced to a price determined by
multiplying such Warrant Price by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and the denominator shall
be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective at the opening of business on the day following the date fixed
for such determination. In the event that such dividend or distribution is
not so paid or made, the Warrant Price shall again be adjusted to be the
Warrant Price which would then be in effect if such date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution had not been fixed, but such subsequent adjustment shall not
affect the number of shares of Common Stock issued upon any exercise of
this Warrant prior to the date such subsequent adjustment is made. For the
purposes of this Section 7(a), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock.
(b) In case the Company shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or purchase
shares of Common Stock at a price per share less than the Average Market
Price of Common Stock (as defined below) on the date fixed for the
determination of stockholders entitled to receive such rights or warrants,
the Warrant Price in effect at the close of business on the date fixed for
such determination shall be reduced to a price determined by multiplying
such Warrant Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Average Market Price, and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for
such determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective at the opening
of business on the day following the date fixed for such determination. To
the extent that shares of Common Stock are not delivered after the
expiration of such rights or warrants, the Warrant Price shall be
readjusted to the Warrant Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. In the event that such rights or warrants are not so issued,
the Warrant Price shall again be adjusted to be the Warrant Price which
would then be in effect if the date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been
fixed, but such subsequent adjustment shall not affect the number of shares
of Common Stock issued upon any exercise of the Warrant prior to the date
such subsequent adjustment is made. For the purposes of this Section 7(b),
the number of shares of Common Stock at any time outstanding shall not
include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of
shares of Common Stock. As used herein the term "Average Market Price" of
the Common Stock shall mean the average of the daily reported closing sales
prices, regular way, per share of the Common Stock on The NASDAQ Stock
Market ("NASDAQ") or, if the Common Stock is not principally traded on
NASDAQ, such other market on which the Common Stock is listed or
principally traded, for the 10 consecutive trading days prior to the date
of determination. In the event that the Common Stock is not traded on any
market or exchange the "Average Market Price" of the Common Stock shall
mean the fair market value of the Common Stock as determined in good faith
by the Company's Board of Directors (the "Board of Directors").
(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Warrant
Price in effect at the close of business on the date upon which such
subdivision becomes effective shall be proportionately reduced, and
conversely, in case outstanding shares of Common Stock shall each be
combined into a smaller number of shares of Common Stock, the Warrant Price
in effect at the close of business on the date upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective at the opening of
business on the day following the date upon which such subdivision or
combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its indebtedness or
assets (including securities, but excluding (i) any rights or warrants referred
to in Section 7(b) hereof, and (ii) any dividend or distribution referred to
in Section 7(a) hereof), then either (at the option of the Company) (A) the
Company shall elect to include Holder in such distribution (as of the
record date for such distribution) as if Holder had exercised this Warrant
for Common Stock immediately prior to such record date (such exercise
assumed to be made at the Warrant Price in effect without regard to the
adjustment provided in the following clause (B)), or (B) the Warrant Price
shall be reduced to a price determined by multiplying the Warrant Price in
effect at the close of business on the date fixed for the determination of
stockholders entitled to receive such distribution by a fraction of which
the numerator shall be the Average Market Price per share of Common Stock
on the date fixed for such determination less the fair market value (as
reasonably determined in good faith by the Board of Directors) on such date
of the portion of the assets or evidences of indebtedness so to be
distributed applicable to one share of Common Stock and the denominator
shall be the Average Market Price of Common Stock on the date fixed for
such determination, such adjustment to become effective at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such distribution. In the event that such
dividend or distribution is not so paid or made, the Warrant Price shall
again be adjusted to be the Warrant Price which would then be in effect if
such date fixed for the determination of stockholders entitled to receive
such dividend or other distribution had not been fixed, but such subsequent
adjustment shall not affect the number of shares of Common Stock issued
upon any exercise of this Warrant prior to the date such subsequent
adjustment is made. If the Company makes an election under clause (A) of
this Section 7(d) with respect to any such distribution payable on this
Warrant (an "Elected Company Dividend"), the Company may in lieu of such
distribution elect to pay to the Holder the fair market value (determined
as provided above) of such Elected Company Dividend in cash (the "Cash
Equivalent").
(e) The reclassification (including any reclassification
upon a consolidation or merger in which the Company is the continuing
corporation, but not including any transactions for which an adjustment is
provided in Section 7(g) hereof) of Common Stock into securities other than
Common Stock shall be deemed to involve (i) a distribution of such
securities other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be "the date
fixed for the determination of stockholders entitled to receive such
distribution" within the meaning of Section 7(d) hereof), and (ii) a
subdivision or combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such reclassification into
the number of shares of Common Stock outstanding immediately thereafter
(and the effective date of such reclassification shall be deemed to be "the
date upon which such becomes subdivision effective" or "the date upon which
such combination becomes effective," as the case may be, within the meaning
of Section 7(c) hereof).
(f) The Company may make such reductions in the Warrant
Price, in addition to those required by Sections 7 (a), (b), (c), (d) and
(e) hereof, as it considers to be advisable in order that any event treated
for Federal income tax purposes as a dividend of stock or stock rights
shall not be taxable to the recipients.
(g) In case of any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person
into the Company (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock) or any sale or transfer of all or substantially all
of the assets of the Company, the Holder shall have the right thereafter,
during the period this Warrant shall be outstanding, to exercise this
Warrant only for the kind and amount (if any) of securities, cash or other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock which would have been
purchasable if this Warrant had been exercised immediately prior to such
consolidation, merger or transfer (and the Person formed by such
consolidation or resulting from such merger or which acquires such assets,
as the case may be, shall execute and deliver to the Holder a new Warrant
satisfactory in form and substance to Holder, providing for the foregoing).
If the holders of the Common Stock may elect from choices the kind or
amount of securities, cash or other property receivable upon such
consolidation, merger, sale or transfer, then for the purpose of this
Section 7(g) the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer shall be
deemed to be the choice specified by Holder, which specification shall be
made by Holder by the later of (i) 20 business days after Holder is
provided with a final version of all information required by law or
regulation to be furnished to holders of Common Stock concerning such
choice, or if no such information is required, 20 business days after the
Company notifies Holder of all material facts concerning such specification
and (ii) the last time at which holders of Common Stock are permitted to
make their specification known to the Company. If Holder fails to make any
specification, Holder's choice shall be deemed to be whatever choice is
made by a plurality of holders of Common Stock not affiliated with the
Company or the other Person party to the merger or consolidation or, if no
such holders exist, as specified by the Board of Directors in good faith.
The new Warrant referred to above shall provide for adjustments which, for
events subsequent to the effective date of such new Warrant, shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 7. The above provisions of this Section 7 (g) shall similarly
apply to successive consolidations, mergers, sales or transfers.
(h) Whenever there shall be any change in the Warrant Price
hereunder, then there shall be an adjustment (to the nearest hundredth of a
share) in the number of shares of Common Stock purchasable upon exercise of
the Warrant, which adjustment shall become effective at the time such
change in the Warrant Price becomes effective and shall be made by
multiplying the number of shares of Common Stock purchasable upon exercise
of this Warrant immediately before such change in the Warrant Price by a
fraction of which the numerator is the Warrant Price immediately before
such change and the denominator is the Warrant Price immediately after such
change.
(i) No adjustment in the Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least 1%
in such price; provided, however, that any adjustments which by reason of
this Section 7 (i) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. Notwithstanding the
foregoing, any adjustment required by this Section 7 (i) shall be made
prior to the Expiration Date.
(j) In any case in which this Section 7 shall require that
an adjustment shall become effective on the day following a record date for
an event, the Company may defer until the occurrence of such event (i)
issuing to Holder, if the Warrant is exercised after such record date and
before the occurrence of such event, the additional Common Stock (and
associated Elected Company Dividend or Cash Equivalent, if any) issuable
upon exercise by reason of the adjustment required by such event over and
above Common Stock (and associated Elected Company Dividend or Cash
Equivalent, if any) issuable upon such exercise before giving effect to
such adjustment and (ii) paying to Holder any amount in cash in lieu of a
fractional share of Common Stock pursuant Section 4 above; provided, that,
upon request of Holder, the Company shall deliver to Holder a due bill or
other appropriate instrument evidencing Holder's right to receive such
additional Common Stock and such cash, upon the occurrence of the event
requiring such adjustment.
Section 8. Notice of Adjustment of Warrant Price. Whenever
the Warrant Price is adjusted as herein provided, the Company shall compute
the adjusted Warrant Price in accordance with Section 7 and shall prepare a
certificate signed by the Treasurer of the Company (or other responsible
financial officer) setting forth the adjusted Warrant Price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed at the Warrant office or agency of the
Company and a copy delivered as soon as practicable to Holder at its last
address as it shall appear upon the register provided for in Section 2 or
as otherwise provided in Section 11.
Section 9. Notice Regarding Dividend, Subscription Rights,
Reclassifications, Dissolutions. In case:
(a) the Company shall declare a dividend (or any other
distribution) on Common Stock; or
(b) the company shall authorize the granting to the holders
of Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or
(c) of any reclassification of Common Stock (other than a
subdivision or combination of its outstanding shares of Common Stock), or
of any consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company;
or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed at its Warrant office or agency,
and shall cause to be delivered to Holder at its last address as it shall
appear upon the register provided for in Section 2, at least 30 days (or 15
days in any case specified in clause (a) or (b) above) prior to the
applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such
dividend, distribution or issuance of rights or warrants, or, if a record
is not be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution or rights or warrants are to
be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding
up is expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
Section 10. Transfers; Maintenance of Office or Agency. (a)
Except as otherwise provided in the Purchase Agreement, this Warrant and
all rights hereunder are transferable, as to all or any of the number of
shares of Common Stock purchasable upon its exercise, by the Holder hereof
in person or by duly authorized attorney, upon surrender of this Warrant at
the Warrant office or agency, together with the Form of Assignment attached
hereto duly executed. The Company shall deem and treat the registered
Holder of this Warrant at any time as the absolute owner hereof for all
purposes and shall not be affected by any notice to the contrary. If this
Warrant is transferred with respect to less than all of the shares of
Common Stock for which this Warrant is then exercisable, the Company shall
at the time of surrender of this Warrant for such transfer, issue to the
transferee a Warrant covering the number of shares of Common Stock as to
which this Warrant was transferred and to the transferor a Warrant covering
the remaining shares of Common Stock for which this Warrant is exercisable.
(b) The Company will maintain a Warrant office or agency in
the Borough of Manhattan, The City of New York, where this Warrant may be
presented or surrendered for split-up, combination, registration of
transfer, or exchange, and where notices or demands to or upon the Company
in respect of the Warrant may be served.
Section 11. Notices. Notices under this Warrant by the
Company to Investor and by Investor to the Company shall be provided in the
manner, and to the respective addresses of the Company and Investor, set
forth in the Purchase Agreement.
Section 12. Registration Rights. The Warrants and the shares
of Common Stock issuable upon exercise of the Warrants are the subject of a
Registration Rights Agreement, dated as of the date hereof, by and among
the Company, Investor and the other signatories thereto granting certain
rights to require the registration under the Securities Act of 1933, as
amended, of the Warrants and the shares of Common Stock issuable upon
exercise of the Warrants.
Section 13. Purchase Agreement. The Warrants and the shares
of Common Stock issuable upon the exercise of the Warrants are subject to
the terms and provisions of the Purchase Agreement including without
limitation certain restrictions on transfer set forth in Section 5.3
thereof.
Section 14. Governing Law. This Warrant shall be governed by,
and interpreted in accordance with, the laws of the State of Delaware,
without regard to the principles of conflicts of law thereof.
Dated: July 2, 1998 JUST FOR FEET, INC.
(Seal)
By_____________________________________
Name:
Title:
ATTEST:
________________________________
Secretary
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To: JUST FOR FEET, INC.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, _____(1)____ shares of
Common Stock of JUST FOR FEET, INC., and herewith makes payment of the
aggregate Warrant Price of $__________ therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to
______________, whose address is __________________.
[Pursuant to Section 2(b) of the within Warrant, the undersigned registered
holder of the within Warrant hereby instructs JUST FOR FEET, INC. to apply,
in accordance with such Section 2(b), to the payment of the aggregate
Warrant Price set forth above ___(2)___ shares of Common Stock for which
this Warrant is being exercised, and acknowledges that the number of shares
of Common Stock which will be issued to the undersigned pursuant to this
exercise shall be reduced by such ____(2)____ shares.] (3)
Dated: ___________________ ____________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
____________________________________________
(Street Address)
____________________________________________
(City) (State) (Zip Code)
__________________________
(1) Insert here the number of shares for which the Warrant is being
exercised, without making any adjustment for any other stock or other
securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the
case of partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the
Holder surrendering the Warrant.
(2) Insert number of shares of Common Stock to be applied to payment of the
aggregate Warrant Price pursuant to Section 2(b).
(3) To be included and completed in order to effect a "cashless" exercise
pursuant to Section 2(b) of the Warrant.
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto ________________ the right
represented by such Warrant to purchase __________ shares of Common Stock
of JUST FOR FEET, INC. to which such Warrant relates, and appoints
__________________ Attorney to make such transfer on the books of JUST FOR
FEET, INC. maintained for such purpose, with full power of substitution in
the premises.
Dated: __________________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of Warrant)
__________________________________________
(Street Address)
__________________________________________
(City) (State) (Zip Code)
Signed in the presence of:
_____________________________
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
SNEAKER GUARANTEE LLC
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(this "Agreement") of SNEAKER GUARANTEE LLC (the "Company") is effective
as of the 30th day of June, 1998 (the "Effective Date") by and among
each of the Persons (as hereinafter defined) executing this Agreement as
Members (as hereinafter defined) as of the Effective Date and each Person
subsequently admitted as a Member of the Company.
RECITAL
The Members formed a limited liability company in
accordance with the provisions of the Delaware Limited Liability Company
Act, as amended from time to time, and any successor statute (the "Act"),
and desire to enter into a written agreement pursuant to the Act governing
the affairs of the Company and the conduct of its business. On July 13,
1998 THL Equity Advisors III Limited Partnership was elected to replace
Thomas H. Lee Company as Manager, and the Members authorized an amendment
and restatement of this Agreement to reflect such election. Accordingly,
in consideration of the mutual covenants contained herein and for other
good and valuable consideration, the Members agree as follows:
ARTICLE I
Definitions
1.1 Defined Terms. As used herein, the following terms shall have
the meanings set forth below:
"Additional Member" shall mean a Person who has acquired Units from
the Company after the Effective Date and been admitted as a Member of the
Company pursuant to Section 9.2 hereof.
"Affiliate" shall mean, with respect to any Person, (a) any Person
directly or indirectly controlling, controlled by or under common control
with such Person and (b) any officer or director of such Person. For
purposes of this definition, the term "control" (including without
limitation any derivations thereof) shall mean possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of a Person or entity, whether through the ownership of voting
securities, by contract or otherwise.
"Agreed Value" shall mean the fair market value of contributed
property, as determined by the Manager using any reasonable method of
valuation.
"Assignee" shall mean a transferee of Units who has not been
admitted as a Substitute Member.
"Bankruptcy" shall mean, with respect to any Person, the occurrence
of any of the following events: (a) the filing by such Person of a
petition in bankruptcy or for relief under applicable bankruptcy laws; (b)
the filing against such Person of any such petition (unless such petition
is dismissed within ninety (90) days from the date of filing thereof); (c)
entry against such Person of an order for relief under applicable
bankruptcy laws; (d) written admission by such Person of its inability to
pay its debts as they mature, or an assignment by such Person for the
benefit of creditors; or (e) appointment of a trustee, conservator or
receiver for the property or affairs of such Person.
"BNP" shall have the meaning set forth in Section 2.3 hereof.
"Business Day" shall mean each day of the calendar year other than
a Saturday, a Sunday or a day on which banks are required or authorized to
close in the State of Delaware.
"Capital Account" shall mean the account maintained for a Member or
Assignee determined in accordance with Article V hereof.
"Capital Contribution" shall mean any contribution of cash or
obligation to contribute cash to the Company made by or on behalf of a
Member.
"Certificate of Formation" shall mean the certificate of formation
of the Company filed in the Office of the Secretary of State of the State
of Delaware pursuant to the Act and through which the Company has been
formed.
"Claims" shall have the meaning set forth in Section 12.2 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding law).
"Corporation" shall have the meaning set forth in Section 2.3
hereof.
"Covered Person" and "Covered Persons" shall have the meanings set
forth in Section 12.1 hereof.
"Debt Restructuring Agreement" shall have the meaning set forth in
Section 2.3 hereof.
"Distribution" shall mean a transfer of cash or property by the
Company to a Member on account of Units as described in Article VI hereof.
"Guaranty" shall have the meaning set forth in Section 2.3 hereof.
"Indemnified Person" and "Indemnified Persons" shall have the
meanings set forth in Section 12.2 hereof.
"Initial Members" shall mean those Persons who have executed this
Agreement as Members as of the Effective Date.
"Losses" shall mean, for each Taxable Year, an amount equal to the
Company's taxable loss for such Taxable Year, determined in accordance with
Code Section 703(a).
"Majority of Members" shall mean Members owning a majority of the
issued and outstanding Units.
"Manager" shall mean each Person elected by the Members as a
Manager pursuant to Section 4.1(b) hereof. A Manager need not be a Member.
"Member" shall mean an Initial Member, Substitute Member or
Additional Member, as the case may be; and "Members" shall mean the Initial
Members, Substitute Members and Additional Members, collectively.
"Permitted Transfer" shall have the meaning set forth in Section
8.1 hereof.
"Permitted Transferee" shall mean, with respect to any Member,
(i) an Affiliate of such Member, (ii) a spouse, child or other descendant
of such Member or a trust for the benefit thereof, (iii) upon the death of
such Member, such Member's personal representative, executor,
administrator, testamentary trustees, legatees or beneficiaries, (iv) any
holder of indebtedness of or an equity interest in Sneaker immediately
prior to the closing of the acquisition of Sneaker by the Corporation or
(v) any other Member.
"Person" shall mean an individual, trust, estate, corporation,
partnership, limited liability company or any other incorporated or
unincorporated entity permitted to be a member of a limited liability
company under the Act.
"Pledge and Security Agreement" shall have the meaning set forth in
Section 2.3 hereof.
"Profits" shall mean, for each Taxable Year, an amount equal to the
Company's taxable income for such Taxable Year, determined in accordance
with Code Section 703(a).
"Purchase Agreement" shall have the meaning set forth in
Section 2.3 hereof.
"Registration Rights Agreement" shall have the meaning set forth in
Section 2.3 hereof.
"Regulations" shall mean, except where the context indicates
otherwise, the permanent and temporary regulations of the Department of the
Treasury promulgated under the Code, as such regulations may be lawfully
changed from time to time (including without limitation corresponding
provisions of succeeding regulations).
"Sneaker" shall mean Sneaker Stadium, Inc., a Delaware corporation.
"Substitute Member" shall mean an Assignee who has been admitted to
all of the rights of membership pursuant to Section 9.3 hereof.
"Taxable Year" shall mean the taxable year of the Company as
determined for federal income tax purposes.
"Transfer" shall mean, as a noun, any voluntary or involuntary
transfer, sale, assignment, pledge, encumbrance or other disposition; and,
as a verb, voluntarily or involuntarily to sell, assign, transfer, grant,
give away, hypothecate, pledge, encumber or otherwise dispose of, and shall
include any transfer by will, gift or intestate succession.
"Unit" shall mean an equity interest in the Company as described in
Section 5.1 hereof.
ARTICLE II
The Limited Liability Company
2.1 Formation. The Members have formed the Company as a limited
liability company pursuant to the provisions of the Act. A Certificate of
Formation for the Company has been filed in the Office of the Secretary of
State of the State of Delaware in conformity with the Act. The Company
and, if required, each of the Members shall execute or cause to be executed
from time to time all other instruments, certificates, notices and
documents and shall do or cause to be done all such acts and things
(including without limitation keeping books and records and making
publications or periodic filings) as may now or hereafter be required for
the formation, valid existence and, when appropriate, termination of the
Company as a limited liability company under the laws of the State of
Delaware.
2.2 Name. The name of the Company shall be "Sneaker Guarantee
LLC," and its business shall be carried on in such name with such
variations and changes as the Manager shall determine or deem necessary to
comply with requirements of the jurisdictions in which the Company's
operations are conducted.
2.3 Business Purposes. The Company is formed for the purposes of:
(a) entering into (i) a Common Stock and Warrant Purchase Agreement dated
as of July 2, 1998 by and among the Company, Just For Feet, Inc., a
Delaware corporation (the "Corporation") and, for certain limited purposes,
Thomas H. Lee Company and Harold Ruttenberg (the "Purchase Agreement") and
(ii) a related Registration Rights Agreement dated as of the same date
among the Company, the Corporation, Thomas H. Lee Company, solely in its
capacity as Investors' Agent, and, for limited purposes, Harold Ruttenberg
(the "Registration Rights Agreement"); (b) entering into (i) a Debt
Restructuring Agreement dated as of July 2, 1998 by and among Sneaker, the
Company, Banque Nationale de Paris, for itself and as agent for itself and
for other financial institutions listed therein ("BNP"), and Thomas H. Lee
Company (the "Debt Restructuring Agreement"), (ii) a related Guaranty in
favor of BNP dated as of the same date (the "Guaranty") and (iii) a related
Pledge and Security Agreement to BNP dated as of the same date (the "Pledge
and Security Agreement"); (c) acquiring, holding and selling or otherwise
disposing of stocks, and options, warrants, rights or other securities
convertible, exchangeable or exercisable for stocks, issued by the
Corporation; and (d) receiving, holding and selling, disbursing or
otherwise disposing of cash or other property received as dividends,
distributions or other passive type of income in connection therewith.
2.4 Company Powers. The Company and the Manager (acting on behalf
of the Company) shall possess and may exercise all of the powers and
privileges granted by the Act or by any other law or by this Agreement,
together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion or
attainment of the business purposes of the Company specified in Section 2.3
hereof, including without limitation the power:
(a) to acquire, hold, manage, own, sell, transfer, convey,
assign, exchange, license, pledge or otherwise dispose of the Company's
interest in assets or any property held by the Company, including without
limitation stocks, bonds, notes or other similar interests issued by the
Corporation and, upon the consent of a Majority of Members, by any other
Person;
(b) to engage personnel and to establish, have, maintain or
close one or more offices within or without the State of Delaware and in
connection therewith to rent or acquire office space;
(c) to open, maintain and close bank and brokerage accounts,
including without limitation the power (i) to set up escrow accounts, (ii)
to draw checks or other orders for the payment of moneys and (iii) to
invest such funds as are temporarily not otherwise required for Company
purposes;
(d) to bring and defend actions and proceedings at law or in
equity or before any governmental, administrative or other regulatory
agency, body or commission;
(e) to hire consultants, custodians, attorneys, accountants
and such other agents, officers and employees of the Company as it may deem
necessary or advisable and to authorize each such agent or employee to act
for and on behalf of the Company;
(f) to make all elections, investigations, evaluations and
decisions, binding the Company thereby, that may, in the sole judgment of
the Manager, be necessary or appropriate to further the business purposes
of the Company;
(g) to enter into, perform and carry out contracts and
agreements of every kind necessary or incidental to the accomplishment of
the Company's business purposes (including without limitation the Purchase
Agreement, the Registration Rights Agreement, the Debt Restructuring
Agreement, the Guaranty and the Pledge and Security Agreement) and to take
or omit to take such other action in connection with the business of the
Company as may be necessary or desirable to further the business purposes
of the Company; and
(h) to carry on any other activities necessary to, in
connection with or incidental to any of the foregoing or the Company's
business.
2.5 Registered Office and Agent. The location of the registered
office of the Company shall be 1013 Centre Road, Wilmington, Delaware
19805. The Company's registered agent at such address shall be
Corporation Service Company. The Manager may, from time to time, change
the Company's registered office or registered agent and shall forthwith
amend the Certificate of Formation to reflect such change.
2.6 Term. The existence of the Company commenced on the date of
the filing of the Certificate of Formation in the Office of the Secretary
of State of the State of Delaware in accordance with the Act and, subject
to the provisions of Articles X and XI below, the Company shall have
perpetual existence.
2.7 Principal Place of Business. The principal place of business
of the Company shall be located at 1013 Centre Road, Wilmington, Delaware
19805 or at such other location as the Manager may, from time to time,
select.
2.8 Title to Company Property. Legal title to all property of the
Company shall be held, vested and conveyed in the name of the Company, and
no real or other property of the Company shall be deemed to be owned by the
Members individually. The Units of each Member shall constitute personal
property.
2.9 Business Transactions of the Members and Managers with the
Company. In accordance with Section 18-107 of the Act, each Member and
Manager may lend money to, borrow money from, act as a surety, guarantor or
endorser for, guarantee or assume one or more obligations of, provide
collateral for and transact other business with the Company and, subject to
applicable law, shall have the same rights and obligations with respect to
any such matter as a Person who is not a Member or Manager.
2.10 Fiscal Year. The fiscal year of the Company (the "Fiscal
Year") for financial statement purposes shall end on December 31 of each
year, or such other date as may be determined by the Manager from time to
time.
ARTICLE III
The Members
3.1 The Members. The name, address, facsimile number and Capital
Contribution of, and number of Units held by, each Member are set forth on
Schedule A hereto, which shall be amended from time to time to reflect (a)
the admission of each Additional Member or Substitute Member, (b) any
additional Capital Contribution or acquisition of additional Units by an
existing Member or (c) the cessation of a Member pursuant to Section 9.4
hereof.
3.2 Member Meetings.
(a) Actions by the Members; Meetings. The Members may vote,
approve a matter or take any action by the vote of Members at a meeting, in
person or by proxy, or without a meeting by the written consent of Members
pursuant to subparagraph (b) below. Meetings of the Members may be called
by the Manager and shall be held upon at least two (2) days' prior written
notice of the time and place of such meeting given by the Manager. Notice
of any meeting may be waived by any Member before or after any meeting.
Meetings of the Members may be conducted in person or by conference
telephone facilities.
(b) Action by Written Consent. Any action required or
permitted under the Act or this Agreement to be taken by the Members, and
any action otherwise referred to the Members for their approval by the
Manager, may be taken by the Members without a meeting if authorized by the
written consent of Members holding such number of Units as would be
required to approve such action under the Act or this Agreement if such
action had been approved at a duly convened meeting of Members. In no
instance where action is authorized by written consent shall a meeting of
Members be called or notice be given; however, a copy of the action taken
by written consent shall be sent promptly to all Members and filed with the
records of the Company.
(c) Quorum; Voting. For any meeting of Members, the presence
in person or by proxy of a Majority of Members shall constitute a quorum
for the transaction of any business. Except as otherwise provided in this
Agreement, the affirmative vote of a Majority of Members shall constitute
approval of any action. Except as set forth in this Agreement, each Member
shall be entitled to vote on all matters upon which Members have the right
to vote ratably in proportion to the number of Units held by such Member.
3.3 No Liability of Members. All debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and
no Member shall be obligated personally for any such debt, obligation or
liability of the Company solely by reason of being a Member.
3.4 Power to Bind the Company. No Member (acting in its capacity
as such) shall have any authority to bind the Company to any third party
with respect to any matter, except pursuant to a resolution expressly
authorizing such action which resolution is duly adopted by the Manager.
ARTICLE IV
Management of the Company
4.1 Management by Manager.
(a) Subject to such matters as are expressly reserved
hereunder or under the Act to the Members for decision, the business and
affairs of the Company shall be managed by a Manager who or which shall be
responsible for policy-setting, approving the overall direction of the
Company and making all decisions affecting the business and affairs of the
Company. In furtherance, and not in limitation, of the foregoing, the
Manager shall have the power to acquire, hold, manage, own, sell, transfer,
convey, assign, exchange, license, pledge or otherwise dispose of the
Company's interest in assets or any property held by the Company, including
without limitation stocks, and options, warrants, rights or other
securities convertible, exchangeable or exercisable for stocks, issued by
the Corporation. The Manager shall be THL Equity Advisors III Limited
Partnership, a Massachusetts limited partnership, to serve in accordance
with Section 4.1(b) hereof.
(b) Each Manager shall be elected by a Majority of Members and
shall serve until its successor has been duly elected and qualified, or
until its earlier removal, resignation, death, dissolution, Bankruptcy or
disability. A Majority of Members may remove any Manager from any capacity
with the Company at any time, with or without cause. A Manager may resign
at any time upon written notice to the Members.
(c) In the event of the resignation, removal, death,
dissolution, Bankruptcy or disability of a Manager, a Majority of Members
shall elect its successor.
4.2 Power to Bind Company. The Manager (acting in its capacity as
such) shall have the authority to bind the Company with respect to any
matter.
ARTICLE V
Capital Structure and Contributions
5.1 Authorized Units. Subject to the provisions of this
Agreement, the Company is authorized to issue equity interests in the
Company designated as "Units" at varying prices per Unit as the Manager
shall approve. The total number of Units which the Company shall have
authority to issue is one thousand (1,000) Units. Each Unit shall be
identical in all respects (including without limitation with regard to the
rights of Members to vote, to receive Distributions from time to time and
to receive Distributions on liquidation of the Company) with each other
Unit.
5.2 Issuance of Units. The Company is authorized to issue Units
in exchange for Capital Contributions in such amount as may be determined
by the Manager. The Capital Contribution of, and number of Units issued
to, the Initial Members and the address for notice purposes hereunder of
each Member are listed on Schedule A hereto, which shall be amended from
time to time by the Manager as required to reflect (a) issuances of Units
to new Members, (b) changes in the number of Units held by Members, (c)
additional Capital Contributions from any Member and (d) the addition or
withdrawal of Members. The number of Units held by each Member shall not
be affected by either (i) any issuance by the Company of Units to other
Members or (ii) any change in the Capital Account of such Member (other
than such changes to reflect additional Capital Contributions from such
Member in exchange for new Units). Fractional Units may be issued, as
determined by the Manager.
5.3 Capital Contributions. No interest shall accrue on any
Capital Contribution, and no Member shall have the right to withdraw or be
repaid any Capital Contribution, except as provided in this Agreement. If
any Member withdraws from the Company pursuant to Section 9.5 hereof, such
Member shall remain obligated for any unpaid Capital Contributions and
shall not be entitled to a return of its Capital Contribution. The value
of any Additional Member's Capital Contribution and the terms upon which
such Capital Contribution shall be made shall be as agreed upon by the
Manager.
5.4 Additional Contributions. From time to time, the Manager may
determine that the Company requires additional capital and may request each
Member to make an additional Capital Contribution in an amount determined
by the Manager. Notwithstanding the foregoing, no Member shall be
obligated to make an additional Capital Contribution.
5.5 Maintenance of Capital Accounts.
(a) The Company shall establish and maintain Capital Accounts
for each Member and Assignee in accordance with the provisions of
Section 1.704-1(b) of the Regulations, which provides generally that:
(i) to each Member's Capital Account there shall
be credited (A) such Member's Capital Contributions, (B) such Member's
distributive share of Profits and any items in the nature of income or
gain which are specially allocated to it and (C) the amount of any
Company liabilities assumed by such Member or which are secured by any
property distributed to such Member; and
(ii) to each Member's Capital Account there shall
be debited (A) the amount of money and the fair market value of any
property distributed to such Member, (B) such Member's distributive
share of Losses and any items in the nature of expenses or losses
which are allocated to it and (C) the amount of any liabilities of
such Member assumed by the Company or which are secured by any
property contributed by such Member to the Company.
(b) This Section and other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Section 1.704-1(b) of the Regulations and shall be interpreted and applied
in a manner consistent with such Regulations. Notwithstanding that a
particular adjustment is not set forth in this Section, the Capital
Accounts of the Members shall be adjusted as required by, and in accordance
with, the capital account maintenance rules of Section 1.704-1(b) of the
Regulations.
5.6 Negative Capital Accounts. No Member shall be required to
make up a Capital Account deficit balance nor pay to any Member the amount
of any such deficit in any such account.
5.7 Sale or Exchange of Units. In the event of a Transfer of some
or all of a Member's Units, the Capital Account of the Transferring Member
(as hereinafter defined) shall become the capital account of the Assignee,
to the extent it relates to the Member's Units so Transferred.
ARTICLE VI
Allocations of Profits and Losses; Distributions
6.1 Allocations of Profits and Losses from Operations. Profits
and Losses shall be allocated among the Members ratably in proportion to
their respective number of Units. Notwithstanding anything herein to the
contrary, the Manager shall have the authority to allocate Profits and
Losses among the Members so that the allocations of Profits and Losses
hereunder have "substantial economic effect" within the meaning of Section
1.704-1 of the Regulations. Solely for federal income tax purposes,
allocations of income, gain, loss and deduction with respect to property
that has a tax basis that differs from its basis for book purposes shall be
allocated in accordance with Code Section 704(c) and the Regulations
thereunder.
6.2 Distributions. The Manager shall determine, in its sole and
absolute discretion, cash available for distribution to Members and the
amount, if any, to be distributed to Members and shall authorize and
distribute to the Members pro rata in proportion to the number of Units
held by each Member, the determined amount when, as and if declared by the
Manager. Available cash, as referred to herein, shall mean the net profits
of the Company after appropriate provision for expenses and liabilities,
including without limitation liabilities that are not deductible for
federal income tax purposes, as determined by the Manager in its sole and
absolute discretion.
6.3 Withholding Taxes. The Company is authorized to withhold from
Distributions to a Member, or with respect to allocations to a Member, and
to pay over to a federal, state or local government, any amounts required
to be withheld pursuant to the Code or any provisions of any other federal,
state or local law. Any amounts so withheld shall be treated as having
been distributed to such Member pursuant to this Article VI for all
purposes of this Agreement and shall be offset against the amounts
otherwise distributable to such Member. If it is determined that the
Company was obligated to withhold any amount in accordance with the
preceding sentence and that the Company failed to do so, then the Member
receiving the Distribution or allocation from which such amounts were
obligated to be withheld will indemnify and hold the Company harmless
against any claim, loss and expenses (including without limitation interest
and penalties, if any) incurred by the Company as a result of its failure
to withhold.
6.4 Limitations on Distributions. No Distribution to Members
shall be declared or paid unless, after giving effect to such Distribution,
the fair market value of all assets of the Company exceeds all liabilities
of the Company, other than liabilities to Members on account of their
Capital Accounts.
6.5 Qualified Income Offset. If any Member unexpectedly receives
any adjustments, allocations or distributions described in Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, items of Company income
and gain shall be specially allocated to each such Member in an amount and
manner sufficient to eliminate, to the extent required by the Regulations,
the Capital Account deficit balance of such Member as quickly as possible,
provided that an allocation pursuant to this Section 6.5 shall be made only
if and to the extent that such Member would have a Capital Account deficit
balance after all other allocations provided for in this Section 6.5 have
been tentatively made as if this Section 6.5 were not in the Agreement.
ARTICLE VII
Accounts
7.1 Books. The Manager shall cause to be maintained complete and
accurate books of account of the Company's affairs at the Company's
principal place of business. Such books shall be kept on such method of
accounting as the Manager shall select.
7.2 Reports. The books of account of the Company shall be closed
after the close of each Fiscal Year, and there shall be prepared and sent
to each Member a statement of the Profits and Losses of the Company for
that period and a statement of such Member's distributive share of income,
gain, loss, deduction and credit for tax purposes.
7.3 Federal Tax Matters. THL/CCI Limited Partnership shall be the
Tax Matters Member, who shall be considered the tax matters partner for
purposes of Section 6231 of the Code. The Tax Matters Member shall cause
to be prepared and shall sign all tax returns of the Company, make any tax
elections for the Company allowed under the Code or the tax laws of any
state or other jurisdiction having taxing jurisdiction over the Company and
monitor any governmental tax authority in any audit that such authority may
conduct of the Company's books and records or other documents.
7.4 Special Basis Adjustment. The Tax Matters Member shall,
without any further consent of the Members being required (except as
specifically required herein), have discretion to make an election for
federal income tax purposes to adjust the basis of property pursuant to
Sections 754, 734(b) and 743(b) of the Code, or comparable provisions of
state, local or foreign law, in connection with Transfers of Units and
Distributions.
ARTICLE VIII
Transfers of Units
8.1 Prohibition; Procedures.
(a) No Member may Transfer all or any portion of its Units,
other than (i) to a Permitted Transferee and (ii) in a transaction effected
in accordance with subsection (b) of this Section 8.1 in which Units are
being transferred by a Majority of Members and which transaction is
approved, prior to the consummation thereof, in writing by the Manager
(each of (i) and (ii) above being referred to herein as a "Permitted
Transfer").
(b) Upon notice from the Manager of a proposed Permitted
Transfer under subsection (a)(ii) of this Section 8.1, all Members shall be
entitled to, and upon request by the Manager each Member will, Transfer in
such Permitted Transfer, on the same terms as those on which the Majority
of Members are Transferring Units, the same portion of such Member's Units
as the portion of the Units held by the Majority of Members being
transferred in such Permitted Transfer; provided, however, that if the
purchaser(s) in such Permitted Transfer (the "Permitted Transfer
Purchasers") desire to purchase less than all of the Units to be sold by
the Members in accordance with this Section 8.1(b), the number of Units to
be sold by the Members shall be reduced to the number of such Units to be
purchased by the Permitted Transfer Purchasers, on a pro rata basis with
respect to each Member, based on the number of Units then held by such
Member relative to the number of Units then held by all Members.
(c) Any attempted Transfer of Units, other than in strict
accordance with this Article VIII, shall be null and void and the purported
transferee shall have no rights as a Member or Assignee hereunder.
8.2 Conditions to Permitted Transfers. A Member shall be entitled
to make a Permitted Transfer of all or any portion of its Units only upon
satisfaction of each of the following conditions:
(a) such Transfer does not cause a termination of the Company
for federal or state income tax purposes;
(b) such Transfer does not require the registration or
qualification of such Units pursuant to any applicable federal or state
securities laws;
(c) such Transfer does not result in a violation of
applicable laws; and
(d) the Manager receives written instruments that are in a
form satisfactory to the Manager, as determined in its sole and absolute
discretion (including without limitation (i) copies of any instruments of
Transfer, (ii) such Assignee's consent to be bound by this Agreement as an
Assignee and (iii) if requested by the Manager, an opinion of counsel to
such Assignee, in form and substance reasonably acceptable to the Manager,
to the effect that the conditions set forth in subsections (a), (b) and (c)
of this Section 8.2 have been satisfied).
8.3 Effect of Transfers. Upon any Permitted Transfer, the
Assignee of the Units Transferred shall be entitled to receive the
Distributions and allocations of income, gain, loss, deduction, credit or
similar items to which the Transferring Member would be entitled with
respect to such Units and shall not be entitled to exercise any of the
other rights of a Member with respect to the Transferring Member's Units,
including without limitation the right to vote, unless and until such
Assignee is admitted to the Company as a Substitute Member pursuant to
Section 9.3 hereof.
ARTICLE IX
Additional and Substitute Members;
Withdrawal of Members
9.1 Admissions; Withdrawals. No Person (other than the Initial
Members) shall be admitted to the Company as a Member except in accordance
with Section 9.2 or 9.3 hereof. Except as otherwise specifically set forth
in Section 9.5 hereof, no Member shall be entitled to withdraw from the
Company. Any purported admission or withdrawal which is not in accordance
with this Article IX shall be null and void. Upon admission of any
Additional or Substitute Member, or upon any Member ceasing to be a Member,
Schedule A hereto shall be revised accordingly to reflect such admission or
cessation.
9.2 Admission of Additional Members. A Person shall become an
Additional Member pursuant to the terms of this Agreement only if and when
each of the following conditions is satisfied:
(a) the Manager, in its sole and absolute discretion,
determines the nature and amount of the Capital Contribution to be made by
such Person;
(b) the Manager has received, on behalf of the Company, such
Person's Capital Contribution as so determined;
(c) a Majority of Members consents in writing to such
admission, which consent may be given or withheld in each Member's sole and
absolute discretion; and
(d) the Manager receives written instruments (including
without limitation such Person's consent to be bound by this Agreement as a
Member) that are in a form satisfactory to the Manager, as determined in
its sole and absolute discretion.
9.3 Admission of Assignees as Substitute Members. An Assignee of
all or any portion of a Member's Units shall become a Substitute Member of
the Company only if and when both of the following conditions are
satisfied:
(a) a Majority of Members consents in writing to such
admission, which consent may be given or withheld in each Member's sole and
absolute discretion; and
(b) the Manager receives written instruments (including
without limitation such Assignee's consent to be bound by this Agreement as
a Member) that are in a form satisfactory to the Manager, as determined in
its sole and absolute discretion.
9.4 Cessation of Member.
(a) Events Resulting in Cessation of Member. Any Member
shall cease to be a Member of the Company upon the earliest to occur of any
of the following events:
(i) such Member's withdrawal from the Company
pursuant to Section 9.5 hereof;
(ii) as to any Member that is not an individual,
the filing of a certificate of dissolution, or its equivalent, for
such Member; or
(iii) the Bankruptcy of such Member.
Upon the death of a Member, his estate shall succeed to his interest in and
as a Member of the Company until an appropriate Permitted Transfer can be
effected in accordance with Article VIII hereof.
(b) Upon any Member ceasing to be a Member pursuant to
subsection (a) of this Section 9.4, such Member or its successor in
interest shall become an Assignee of its Units, entitled to receive the
Distributions and allocations of income, gain, loss, deduction, credit or
similar item to which such Member would have been entitled and shall not be
entitled to exercise any of the other rights of a Member in, or have any
duties or other obligations of a Member with respect to, such Units. No
such Member shall have a right to a return of its Capital Contribution.
9.5 Withdrawal of Members.
(a) Withdrawal Upon Transfer. If a Member has Transferred
all of its Units in one or more Permitted Transfers, then such Member shall
withdraw from the Company on the date upon which each Assignee of such
Units has been admitted as a Substitute Member in accordance with Section
9.3 hereof, and such Member shall no longer be entitled to exercise any
rights or powers of a Member under this Agreement.
(b) Voluntary Withdrawal. In addition to a withdrawal
pursuant to subsection (a) of this Section 9.5, each Member shall have the
right to withdraw from the Company at any time by providing written notice
of withdrawal to the Manager. A withdrawing Member shall have no right to
a return of its Capital Contribution.
ARTICLE X
Events of Dissolution
10.1 Dissolution. The Company shall be dissolved upon the
occurrence of either of the following events (each, an "Event of
Dissolution"):
(a) a Majority of Members votes for dissolution; or
(b) a judicial dissolution of the Company pursuant to Section
18-802 of the Act.
No other event, including without limitation the retirement, withdrawal,
insolvency, liquidation, dissolution, insanity, resignation, expulsion,
Bankruptcy, death, incapacity or adjudication of incompetency of a Member,
shall cause the dissolution of the Company.
ARTICLE XI
Termination
11.1 Liquidation. In the event that an Event of Dissolution shall
occur, the Company shall be liquidated and its affairs shall be wound up.
All proceeds from such liquidation shall be distributed as set forth below,
in accordance with the provisions of Section 18-804 of the Act:
(a) to creditors, including without limitation Members who
are creditors to the extent permitted by law, in satisfaction of the
Company's liabilities; and
(b) to Members in accordance with their positive Capital
Account balances, taking into account all Capital Account adjustments for
the Company's Taxable Year in which the liquidation occurs. Liquidation
proceeds shall be paid within sixty (60) days of the end of the Company's
Taxable Year or, if later, within ninety (90) days after the date of
liquidation. Such Distributions shall be in cash or property (which need
not be distributed proportionately) or partly in both, as determined by the
Manager.
11.2 Final Accounting. In the event of the dissolution of the
Company, prior to any liquidation, a proper accounting shall be made to the
Members from the date of the last previous accounting to the date of
dissolution.
11.3 Cancellation of Certificate. Upon the completion of the
Distribution of the Company's assets upon dissolution, the Company shall be
terminated, all Units shall be cancelled and the Manager shall cause the
Company to execute and file a Certificate of Cancellation in accordance
with Section 18-203 of the Act.
ARTICLE XII
Exculpation and Indemnification
12.1 Exculpation. Notwithstanding any other provisions of this
Agreement, whether express or implied, or obligation or duty at law or in
equity, no Manager and none of the Members, or any officers, directors,
stockholders, partners, employees, representatives, consultants or agents
of either of the foregoing, nor any officer, employee, representative,
consultant or agent of the Company or any of its Affiliates (individually,
a "Covered Person" and, collectively, the "Covered Persons") shall be
liable to the Company or any other Person for any act or omission (relating
to the Company and the conduct of its business, this Agreement, any related
document or any transaction contemplated hereby or thereby) taken or
omitted by a Covered Person in the reasonable belief that such act or
omission was in or was not contrary to the best interests of the Company;
provided, however, that such act or omission does not constitute fraud,
willful misconduct, bad faith, or gross negligence.
12.2 Indemnification. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless each Manager, Member and officer
of the Company and each officer or director of any Member (individually, an
"Indemnified Person" and, collectively, the "Indemnified Persons") from and
against any and all losses, claims, demands, liabilities, expenses,
judgments, fines, settlements and other amounts arising from any and all
actions, suits or proceedings, whether civil, criminal, administrative or
investigative ("Claims"), in which such Indemnified Person may be involved,
or threatened to be involved, as a party or otherwise, by reason of its
management of the affairs of the Company or which relates to or arises out
of the Company or its property, business or affairs. Notwithstanding the
foregoing, an Indemnified Person shall not be entitled to indemnification
under this Section 12.2 with respect to any Claim in which it has engaged
in fraud, willful misconduct, bad faith or gross negligence. Expenses
incurred by an Indemnified Person in investigating or defending any Claim
shall be paid by the Company in advance of the final disposition of such
Claim upon receipt by the Company of an undertaking by or on behalf of such
Indemnified Person to repay such amount if it shall be ultimately
determined that such Indemnified Person is not entitled to be indemnified
by the Company as authorized by this Section 12.2. The Company, upon a
determination by the Manager, may, but shall not be obligated to, provide
indemnification to any stockholders, partners, employees, representatives,
consultants or agents of the Company to the same extent provided to
Indemnified Persons pursuant to this Section 12.2.
ARTICLE XIII
Amendment to Agreement
13.1 Amendments. Amendments to this Agreement shall be approved in
writing upon the consent of a Majority of Members; provided, however, that
during the time any of the Debt Restructuring Agreement, the Guaranty or
the Pledge and Security Agreement remain outstanding and effective, no
amendment of Section 2.3 hereof shall be effected without the consent of
BNP (or, if applicable, any successor or assign of BNP). An amendment
shall become effective as of the date specified in the Members' approval
or, if none is specified as of the date of such approval, as otherwise
provided in the Act.
ARTICLE XIV
General Provisions
14.1 Notices. Unless otherwise specifically provided in this
Agreement, all notices and other communications required or permitted to be
given hereunder shall be in writing and shall be (i) delivered by hand,
(ii) delivered by a nationally recognized commercial overnight delivery
service, (iii) mailed postage prepaid by first-class mail or (iv) by
facsimile, in any such case directed or addressed to each Member at the
address or facsimile number set forth on Schedule A hereto. Such notices
shall be effective: (a) in the case of hand deliveries when received; (b)
in the case of an overnight delivery service, on the next Business Day
after being placed in the possession of such delivery service, with
delivery charges prepaid; (c) in the case of mail, seven (7) days after
deposit in the postal system, first-class mail, postage prepaid; and (d) in
the case of facsimile notices, when electronic confirmation of receipt is
received. Any Member may change its address and facsimile number for
purposes hereunder by written notice to the Company.
14.2 Entire Agreement, etc. This Agreement constitutes the entire
Agreement among the Members hereto relating to the subject matter hereof
and supersedes all prior contracts, agreements and understandings between
them. No course of prior dealings among the Members shall be relevant to
supplement or explain any term used in this Agreement. Acceptance or
acquiescence in a course of performance rendered under this Agreement shall
not be relevant to determine the meaning of this Agreement even though the
accepting or the acquiescing party has knowledge of the nature of the
performance and an opportunity for objection. No provisions of this
Agreement may be waived, amended or modified orally, but only by an
instrument in writing executed by the waiving party. No waiver of any
terms or conditions of this Agreement in one instance shall operate as a
waiver of any other term or condition or as a waiver in any other instance.
14.3 Construction Principles. As used in this Agreement, words
expressing no gender or either gender shall be deemed to include each and
both genders. The singular shall be deemed to include the plural and vice
versa. The captions and article and section headings in this Agreement are
inserted for convenience of reference only and are not intended to have
significance for the interpretation of or construction of the provisions of
this Agreement. The word "or" is used inclusively, unless other indicated.
14.4 Counterparts. This Agreement may be executed in two or more
counterparts by the parties hereto, each of which when so executed will be
an original, but all of which together will constitute one and the same
instrument.
14.5 Severability. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, such provision shall be
ineffective to the extent of such invalidity or unenforceability; provided,
however, that the remaining provisions will continue in full force without
being impaired or invalidated in any way unless such invalid or
unenforceable provision or clause shall be so significant as to materially
affect the Members' expectations regarding this Agreement. Otherwise, the
Members agree to replace any invalid or unenforceable provision with a
valid provision which most closely approximates the intent and economic
effect of the invalid or unenforceable provision.
14.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without
regard to the principles of conflicts of laws thereof.
14.7 Binding Effect. This Agreement shall be binding upon, and
inure to the benefit of, the Members and their permitted successors and
assigns.
14.8 Additional Documents and Acts. Each Member agrees to execute
and deliver such additional documents and instruments and to perform such
additional acts as may be necessary or appropriate to effectuate, carry out
and perform all of the terms, provisions and conditions of this Agreement
and of the transactions contemplated hereby.
14.9 No Third-Party Beneficiary. This Agreement is made solely for
the benefit of the parties hereto, and no other person shall have any
rights, interest, or claims hereunder or otherwise be entitled to any
benefits under or on account of this Agreement as a third-party beneficiary
or otherwise.
14.10 Limited Liability Company. The parties to this Agreement
agree to form a limited liability company and do not intend to form a
partnership under the laws of the State of Delaware or any other laws;
provided, however, that, to the extent permitted by law, the Company will
be treated as a partnership for federal, state and local income tax
purposes.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, each Member has duly executed this Agreement
as of the day first above written.
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By /s/ Warren C. Smith, Jr.
--------------------------------
Name: Warren C. Smith, Jr.
Title: Vice President
THOMAS H. LEE FOREIGN FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, as General Partner
By: THL Equity Trust III,
as General Partner
By /s/ Warren C. Smith, Jr.
---------------------------------
Name: Warren C. Smith, Jr.
Title: Vice President
THL-CCI LIMITED PARTNERSHIP
By: THL Investment Management Corp.,
as General Partner
By /s/ Thomas H. Lee
-----------------------------------
Name: Thomas H. Lee
Title: President of THL Investment
Corp., General Partner
Schedule A
Members of
SNEAKER GUARANTEE LLC
Name, Address and
Facsimile Number of Member Capital Contribution Number of Units
-------------------------- -------------------- ---------------
Thomas H. Lee Equity Fund
III, L.P.
c/o Thomas H. Lee Company
75 State Street, Suite 2600
Boston, Massachusetts 02109 $17,158,415.01 858
Thomas H. Lee Foreign Fund
III, L.P.
c/o Thomas H. Lee Company
75 State Street, Suite 2600
Boston, Massachusetts 02109 $1,061,709.84 53
THL-CCI Limited Partnership
c/o Thomas H. Lee Company
75 State Street, Suite 2600
Boston, Massachusetts 02109 $1,779,879.60 89
GUARANTY
This GUARANTY, dated as of July 2, 1998 (as amended, modified,
or supplemented from time to time, this "GUARANTY") is made by SNEAKER
GUARANTEE LLC, a Delaware limited liability company ("GUARANTOR"), in favor
of BANQUE NATIONALE DE PARIS ("BNP"), for itself and as agent (the "AGENT")
for itself and for Merrill Lynch Senior Floating Rate Fund, Inc., Merrill
Lynch Prime Rate Portfolio and Merrill Lynch Debt Strategies Portfolio
(together with BNP, the "SECURED LENDERS").
PRELIMINARY STATEMENTS.
(1) Sneaker Stadium, Inc., a Delaware corporation (the
"Borrower") has entered into a Credit Agreement dated as of January 17,
1997 (said Agreement, as amended, supplemented or otherwise modified, being
the "CREDIT AGREEMENT") with BNP, for itself and as agent for the Secured
Lenders. Each capitalized term used but not defined herein shall have the
meaning given to it in the Credit Agreement.
(2) As of the date hereof and immediately before giving effect
to this Guaranty, there is $30,613,326.68 outstanding under the Credit
Agreement and the other Loan Documents, including $30 million in
outstanding principal, $507,743.06 in accrued and unpaid interest, and
$105,583.62 in fees and expenses including fees and disbursements of
counsel (collectively, the "EXISTING LENDER INDEBTEDNESS").
(3) The Borrower and Just For Feet, Inc., a Delaware
corporation ("JFF"), have entered into an Agreement and Plan of Merger,
dated as of July 2, 1998 (the "Merger Agreement"), pursuant to which a
wholly-owned subsidiary of JFF will merge with and into the Borrower, with
the Borrower being the surviving entity.
(4) JFF and BNP, for itself and as agent for the Secured
Lenders, have entered into the Contingent Payment Agreement, dated as of
July 2, 1998 (the "CONTINGENT PAYMENT AGREEMENT"), pursuant to which
contingent payments may be made as set forth in the Debt Restructuring
Agreement (as defined below) to the Agent, on behalf of the Secured Lenders
and Thomas H. Lee Company as Representative for the Subordinated Lenders
listed on Schedule I to the Contingent Payment Agreement.
(5) In connection with the transactions contemplated by the
Merger Agreement, the Borrower, the Guarantor, the Agent and the Secured
Lenders have executed the Debt Restructuring Agreement of even date
herewith (the "DEBT RESTRUCTURING AGREEMENT"), pursuant to which the
Secured Lenders have agreed to accept in full satisfaction and discharge of
the Existing Lender Indebtedness:
(a) cash in an amount on the closing of the Merger Agreement equal
to accrued and unpaid interest, fees, and expenses (including
without limitation the reasonable fees and disbursements of
counsel to the Agent and each of the Secured Lenders) in an
amount equal to $613,326.68 (the "BRINGDOWN Amount"),
(b) cash applied to the repayment of the outstanding principal
balance of the Existing Lender Indebtedness in an amount equal
to $6,269,589.53 (the "PRINCIPAL PAYMENT"),
(c) payments, if any, under the Contingent Payment Agreement as set
forth therein and in the Debt Restructuring Agreement,
(d) this non-recourse Guaranty from Guarantor of payment to the Agent
under the Debt Restructuring Agreement on or before July 30,
2002, of cash in an amount equal to the excess of (x)
$20,000,000 over (y) the Principal Amount (the "MINIMUM PAYMENT
AMOUNT"), whether or not the Contingent Payment Agreement
entitles the Agent to receive such amount, and
(e) a pledge of certain common stock of JFF acquired by Guarantor and
Guarantor's rights under a Registration Rights Agreement (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to a Pledge and
Security Agreement securing the Guaranty (the "PLEDGE
AGREEMENT," and together with the Guaranty, the Debt
Restructuring Agreement, the Contingent Payment Agreement and
the Registration Rights Agreement, the "TRANSACTION
DOCUMENTS").
(6) It is a condition precedent to the restructuring of the
Existing Lender Indebtedness and the consummation of the Debt Restructuring
Agreement that, inter alia, the Guarantor shall have (i) entered into the
Pledge Agreement of even date and delivered the Pledged Stock (as defined
in the Pledge Agreement) and (ii) delivered this Guaranty.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Secured Lenders to restructure the Existing Lender
Indebtedness and enter into the Transaction Documents, Guarantor hereby
makes the following representations and warranties to the Agent on behalf
of the Secured Lenders and hereby covenants and agrees with the Agent for
the rateable benefit of the Secured Lenders as follows:
Section 1. Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees the full and prompt payment on the Payment Date (as
hereinafter defined) to the Agent on behalf of each Secured Lender of, and
shall in any event on such date pay:
(a) the Minimum Payment Amount to the extent not theretofore
received by the Agent, whether or not the Agent is entitled to
receive such amount, in whole or in part, under the Contingent
Payment Agreement, and
(b) any and all claims, liabilities, damages, expenses, costs
(including without limitation fees and disbursements of counsel
to the Agent and each of the Secured Lenders) or other
obligations incurred by the Agent or any Secured Lender arising
out of or in connection with (i) the enforcement of any
Transaction Document (including in the context of any dispute
with respect thereto), or (ii) the breach of any
representation, warranty or other provision of any Transaction
Document (collectively, "LIABILITIES"), provided, however, that
unless such enforcement is made against or such breach is by
the Guarantor or THLC, Liabilities shall only include 50% of
such claims, liabilities, damages, expenses, costs or other
obligations
((a) and (b) collectively, the "GUARANTEED OBLIGATIONS"). "PAYMENT DATE"
shall mean, with respect to any Guaranteed Obligation, the first to occur
of (1) July 30, 2002, (2) the date on which any Guaranteed Obligation is
due and payable (which, with respect to any Guaranteed Obligation other
than the Minimum Payment Amount, shall be the date on which demand for
payment is made), and (3) the date of the occurrence of any Event of
Default (as defined below).
Section 2. Non-Recourse. Notwithstanding any other provision of
this Agreement, all Guaranteed Obligations and any amounts payable under
Section 15 shall be payable out of, and the Agent (and the Secured Lenders
through the Agent) shall have recourse only against and limited to, the
Collateral (as defined in the Pledge Agreement).
Section 3. Events of Default. Each of the following shall
constitute an "EVENT OF DEFAULT" hereunder:
(a) Failure of the Agent to have received the Minimum Payment
Amount on or before July 30, 2002 (whether or not the Agent is
entitled to receive such amount, in whole or in part, under the
Contingent Payment Agreement);
(b) Guarantor shall have breached or defaulted under any provision
of this Guaranty or any Transaction Document to which Guarantor
is a party and shall have failed to remedy the same within 30
days of receiving notice from Agent of such breach;
(c) Guarantor shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or any of its
property, (ii) admit in writing its inability to pay its debts
as they mature, (iii) make a general assignment for the benefit
of creditors, (iv) be adjudicated a bankrupt or insolvent, (v)
file a voluntary petition in bankruptcy or a petition or an
answer seeking or consenting to reorganization or an
arrangement with creditors or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute under the Federal
Bankruptcy Code, 11 U.S.C.ss.ss. 101 et seq; (the "BANKRUPTCY
CODE"), or an answer admitting the -- --- material allegations
of a petition filed against it in any proceeding under any such
law, or take corporate action for the purposes of effecting any
of the foregoing, or (vi) by any act indicate its consent to,
approval of or acquiescence in any order, judgment or decree by
any court of competent jurisdiction or any governmental
authority enjoining or otherwise prohibiting the operation of a
material portion of its business or the use or disposition of a
material portion of its assets; or
(d) (i) An order for relief shall be entered in any involuntary
case brought against Guarantor under the Bankruptcy Code, (ii)
any such case shall be commenced against it and shall not be
dismissed within thirty (30) days after the filing of the
petition, or (iii) an order, judgment or decree under any other
law is entered by any court of competent jurisdiction or by any
other governmental authority on the application of a
governmental authority or of a person other than Guarantor (x)
adjudicating Guarantor bankrupt or insolvent, (y) appointing a
receiver, trustee or liquidator of Guarantor, or of a material
portion of its assets, or (z) enjoining, prohibiting or
otherwise limiting the operation of a material portion of
Guarantor's business or the use or disposition of a material
portion of its assets, and such order, judgment or decree
continues unstayed and in effect for a period of thirty (30)
days from the date entered; or
(e) Any representation or warranty made by the Guarantor in this
Guaranty or any other Transaction Document or in any statement,
schedule, certificate or any other document furnished pursuant
to any Transaction Document, shall prove to have been false or
misleading when made (or, if applicable, when reaffirmed) in
any material respect; or
(f) The entry of a final judgment for the payment of money or
otherwise that would have a material adverse affect on the
financial condition of Guarantor; or the attachment or
garnishment of all or substantially all of the property, goods
or credits of, Guarantor which remains unpaid, unstayed,
undismissed or unbonded for a period of thirty (30) days; or if
any foreclosure is instituted (by judicial proceedings, by
publication of notice pursuant to a power of sale or otherwise)
against a material portion of Guarantor's property under any
mortgage, deed of trust or security agreement granted by
Guarantor and is not dismissed or terminated for a period of
fifteen (15) days; or
(g) If Guarantor fails to promptly notify the Agent, in writing, and
in any event within ten (10) days, of the occurrence of any
event or condition of which Guarantor is aware which
constitutes an Event of Default, or which, with the giving of
notice or passage of time or both, would constitute an Event of
Default, and together with such notice, fails to furnish a
written statement to the Agent setting forth the details of any
action Guarantor proposes to take with respect thereto.
Section 4. Guaranty Absolute. The Guarantor, unconditionally
and irrevocably, guarantees that each Guaranteed Obligation will be paid
when due on its respective Payment Date, regardless of any law, regulation
or order now or hereafter in effect in any jurisdiction affecting any of
such Guaranteed Obligations or the rights of the Agent or any other Secured
Lender with respect thereto. The obligations of the Guarantor under this
Guaranty are independent of the Guaranteed Obligations, and a separate
action or actions may be brought and prosecuted against the Guarantor to
enforce this Guaranty, irrespective of whether any action is brought
against any other party or whether any other party or any other Secured
Lender is joined in any such action or actions. The liability of the
Guarantor under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and the Guarantor hereby irrevocably waives
any defenses it may now or hereafter have in any way relating to, any or
all of the following:
(a) any lack of validity or enforceability of any Transaction
Document or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of any Guaranteed Obligation, the release of any
obligor with respect thereto, or any other release, amendment
or waiver of or any consent to departure from any Transaction
Document;
(c) any taking, exchange, release or non-perfection of any
"Collateral" (as defined in the Pledge Agreement), or any
taking, release or amendment or waiver of, or consent to
departure from, any other guaranty, for any Guaranteed
Obligation;
(d) any manner of sale or application of Collateral, or proceeds
thereof, to the Guaranteed Obligations or any lack of notice in
respect thereof;
(e) any change, restructuring or termination of the corporate
structure or existence of Agent or any Secured Lender; or
(f) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Agent or any other Secured Lender that
might otherwise constitute a defense available to, or a
discharge of, the Borrower, the Guarantor or any other
guarantor or surety.
Without limiting the generality of the foregoing, Guaranteed Obligations
shall include, and the Guarantor shall be liable for, any of the foregoing
that would be owed under any Transaction Document but for the fact that it
is unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the payor. This Guaranty
shall continue to be effective or be reinstated, as the case may be, if at
any time any payment of the Guaranteed Obligations is rescinded or must
otherwise be returned by the Agent, by any Secured Lender or any other
person or entity upon the insolvency, bankruptcy or reorganization of JFF
or the Borrower or any other Secured Lender or otherwise, all as though
such payment had not been made. This Guaranty shall constitute a guaranty of
payment and performance, and not of collection.
Section 5. Security. This Guaranty is secured by the Pledge
Agreement and the liens in and to the Collateral granted to the Agent for the
rateable benefit of the Secured Lenders thereunder.
Section 6. Waivers and Acknowledgments.
(a) The Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to the Guaranteed
Obligations and this Guaranty and any requirement that the
Agent or any other Secured Lender protect, secure, perfect or
insure any lien or any property subject thereto or exhaust any
right or take any action against the Borrower or any other
Person or any Collateral.
(b) The Guarantor hereby waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and
applies to any Guaranteed Obligations, whether existing now or
in the future.
(c) The Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements
contemplated by the Transaction Documents and that the waivers
set forth in this Section 6 are knowingly made in contemplation
of such benefits.
Section 7. Subrogation. The Guarantor will not exercise any
rights that it may now or hereafter acquire against JFF, the Borrower or
any other obligor in respect of any Guaranteed Obligations that arise from
the existence, payment, performance or enforcement of the Guarantor's
obligations under this Guaranty (whether contractual, under Section 509 of
the Bankruptcy Code, as now or hereafter in effect, or any successor
thereto, or otherwise) or any other Transaction Document, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim
or remedy of the Agent or any other Secured Lender against JFF, the
Borrower or any other insider guarantor or any Collateral, whether or not
such claim, remedy or right arises in equity or under contract, statute or
common law, including, without limitation, the right to take or receive
from JFF, the Borrower or any other insider guarantor, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and
until the Guaranteed Obligations and all other amounts payable under this
Guaranty shall have been paid in full in cash. If any amount shall be paid
to the Guarantor in violation of the preceding sentence at any time prior
to the indefeasible and irrevocable payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty,
such amount shall be held in trust for the benefit of the Agent on behalf
of the Secured Lenders and shall forthwith be paid to the Agent to be
credited and applied to the Guaranteed Obligations and all other amounts
payable under this Guaranty, whether matured or unmatured, in accordance
with the terms of the Transaction Documents, or to be held as Collateral
for any Guaranteed Obligations or other amounts payable under this Guaranty
thereafter arising. If (i) the Guarantor shall make payment to the Agent or
any other Secured Lender of all or any part of the Guaranteed Obligations,
and (ii) the Guaranteed Obligations and all other amounts payable under
this Guaranty shall be paid in full in cash, the Agent on behalf of the
Secured Lenders will, at the Guarantor's request and expense, execute and
deliver to the Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to the Guarantor of an interest in the Guaranteed Obligations
resulting from such payment by the Guarantor.
Section 8. Subordination. Any and all rights and claims of the
Guarantor against JFF or the Borrower or any of its property, arising by
reason of any payment by the Guarantor to the Agent pursuant to the
provisions of this Guaranty shall be subordinate and subject in right of
payment to the prior payment and satisfaction of the Guaranteed Obligations
and all other amounts payable under this Guaranty. Any debt of JFF or the
Borrower, now or hereafter held by the Guarantor, is hereby subordinated to
all indebtedness and obligations guaranteed hereby. Upon the occurrence and
during the continuance of an Event of Default, any such indebtedness of JFF
or the Borrower to the Guarantor shall, if the Agent so requests, be
collected, enforced, and received by the Guarantor in trust for the Agent
and held as security for the payment of the Guaranteed Obligations to the
Agent, but without reducing or affecting in any manner the liability of the
Guarantor hereunder.
Section 9. [omitted]
Section 10. Representations and Warranties. The Guarantor
hereby represents and warrants as follows:
(a) The Guarantor (i) is a limited liability company duly organized,
validly existing and in good standing under the laws of Delaware,
(ii) is duly qualified and in good standing as a foreign limited
liability company in each other jurisdiction in which it owns
or leases property or assets or in which the conduct of its
business requires it to so qualify or be licensed and (iii) has
all requisite limited liability company power and authority
(including, without limitation, all governmental licenses,
permits and other approvals) to own or lease and operate its
properties and assets and to carry on its business as now
conducted and as proposed to be conducted.
(b) The Guarantor is a special purpose limited liability company,
formed for the sole and limited purpose of owning the
Collateral and executing this Guaranty, and is without power or
authority under its certificate or operating agreement to incur
or undertake any actions other than the execution of the Common
Stock and Warrant Purchase Agreement dated July 2, 1998 between
JFF, SGL, THLC, and Harold Ruttenberg, the Debt Restructuring
Agreement, the Pledge Agreement, this Guaranty and the
Registration Rights Agreement and to consummate the
transactions contemplated hereby or thereby.
(c) The execution, delivery and performance by the Guarantor of this
Guaranty and each other Transaction Document to which it is a
party, and the consummation of the transactions contemplated
hereby and thereby, are within the Guarantor's powers, have
been duly authorized by all necessary limited liability company
action and do not (i) contravene the Guarantor's certificate of
formation, (ii) violate any law (including, without limitation,
the Securities Exchange Act of 1934 and the Racketeer
Influenced and Corrupt Organizations Chapter of the Organized
Crime Control Act of 1970), rule, regulation (including,
without limitation, Regulation X of the Board of Governors of
the Federal Reserve System), order, writ, judgment, injunction,
decree, determination or award, (iii) conflict with or result
in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or
other instrument binding on or affecting the Guarantor or any
of its properties or assets or (iv) except for the Liens
created under the Transaction Documents, result in or require
the creation or imposition of any Lien upon or with respect to
any of the properties or assets of the Guarantor. The Guarantor
is not in violation of any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or
in breach of any such contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance by the Guarantor
of this Guaranty and each other Transaction Document to which
it is a party, or for the consummation of the transactions
contemplated hereby and thereby, (ii) the grant by the
Guarantor of the Liens granted by it pursuant to the Pledge
Agreement, (iii) the perfection or maintenance of the Liens
created by the Pledge Agreement (including the first priority
nature thereof) or (iv) the exercise by the Agent or any
Secured Lender of its rights under the Transaction Documents or
the remedies in respect of the Collateral pursuant to the
Pledge Agreement.
(e) There is no action, suit, investigation, litigation or proceeding
affecting the Guarantor pending or threatened before any court,
governmental agency or arbitrator that purports to affect the
legality, validity or enforceability of this Guaranty or the
consummation of the transactions contemplated hereby or
thereby.
(f) This Guaranty has been duly executed and delivered by the
Guarantor. This Guaranty is the legal, valid and binding
obligation of the Guarantor, enforceable against the Guarantor
in accordance with its terms.
(g) [omitted]
(h) There are no conditions precedent to the effectiveness of this
Guaranty that have not been satisfied or waived.
(i) The Guarantor has, independently and without reliance upon the
Agent or any Secured Lender and based on such documents and
information as it has deemed appropriate, made its own analysis
and decision to enter into
this Guaranty.
Section 11. Negative Covenants. The Guarantor covenants and
agrees that, so long as any Guaranteed Obligation shall remain unpaid, the
Guarantor will not at any time without the prior written consent of the
Agent enter into or conduct any business, or engage in any activity, other
than:
(a) Discharging certain administrative activities and obligations
otherwise permitted by the Transaction Documents and provided
for in its certificate of formation and operating agreement as
of the date hereof, and making payments with respect to certain
administrative services to the extent contemplated by the
Transaction Documents; and
(b) Performing its obligations under and permitted by each
Transaction Document to which it is a party, including its
obligations under this Guaranty and the
Pledge Agreement.
Section 12. Amendments, Counterparts, Etc.
(a) No amendment or waiver of any provision of this Guaranty and no
any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which
given.
(b) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as
delivery of a manually executed counterpart of this Agreement.
Section 13. Notices, Etc. All notices and other communications
provided for hereunder to any party shall be in writing (including
telegraphic, telecopy or telex communication) and mailed, couriered,
telecopied or delivered to it, addressed to it at the address set forth in
Schedule II to the Debt Restructuring Agreement. All such notices and other
communications shall be effective (a) if mailed, five days after and
excluding the date of mailing, postage prepaid, (b) if couriered, on the
first business day after deposited with a reputable overnight courier
service, fee prepaid, (c) if transmitted by telecopier or delivered by hand
prior to 2 p.m. on any business day, on such day, and otherwise on the next
business day.
Section 14. No Waiver; Remedies. No failure on the part of the
Agent to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
Section 15. Fees; Expenses. The Guarantor hereby agrees to pay
all out-of-pocket costs and expenses of the Agent and the Secured Lenders
in connection with the enforcement of this Guaranty and any amendment,
waiver or consent relating hereto (including, without limitation, the
reasonable fees and disbursements of counsel employed by the Agent and/or
the Secured Lenders).
Section 16. Indemnification. Without limitation on any other
obligations of the Guarantor or remedies of the Agent under this Guaranty,
the Guarantor shall, to the fullest extent permitted by law, indemnify,
defend and save and hold harmless the Agent and each Secured Lender from
and against, and shall pay on demand, any and all losses, liabilities,
damages, costs, expenses and charges (including the reasonable fees and
disbursements of counsel) suffered or incurred by the Agent or such Secured
Lender as a result of any failure of any Guaranteed Obligation to be the
legal, valid and binding obligations or JFF of the Guarantor enforceable
against the Guarantor or JFF in accordance with its terms.
Section 17. Continuing Guaranty; Assignments under the
Transaction Documents. This Guaranty is a continuing guaranty and shall (a)
remain in full force and effect until the indefeasible and irrevocable
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty, (b) be binding upon the Guarantor, its
successors and assigns and (c) inure to the benefit of and be enforceable
by the Agent on behalf of the Secured Lenders and their successors,
transferees and assigns. Without limiting the generality of the foregoing
clause (c), any Secured Lender may assign or otherwise transfer all or any
portion of its rights and obligations under the Transaction Documents to
any other person, or entity subject to Section 5 of the Debt Restructuring
Agreement, and such other person or entity shall thereupon become vested
with all the benefits in respect thereof granted to such Secured Lender
herein or otherwise.
Section 18. Payments by Guarantor. All payments by the
Guarantor hereunder will be made without setoff, counterclaim or other
defense.
SECTION 19. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL,
ETC. (A) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE SECURED
LENDERS AND THE GUARANTOR SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO
BE PERFORMED ENTIRELY IN SUCH STATE. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH
PARTY TO THIS GUARANTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. EACH SUCH PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY
CLAIM THAT ANY SUCH COURTS LACK PERSONAL JURISDICTION OVER SUCH PARTY, AND
AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS GUARANTY BROUGHT IN ANY OF THE AFORESAID COURTS, THAT SUCH
COURT LACKS PERSONAL JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH
PARTY IN ACCORDANCE WITH SECTION 13, SUCH SERVICE TO BECOME EFFECTIVE 30
DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND
AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED
HEREUNDER OR UNDER ANY TRANSACTION DOCUMENT THAT SERVICE OF PROCESS WAS IN
ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE AGENT, ANY SECURED LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY PARTY IN ANY OTHER JURISDICTION.
(B) THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY IN THE COURTS
REFERRED TO IN (A) ABOVE. THE GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIEN FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(C) THE GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS GUARANTY OR
THE ACTIONS OF THE AGENT OR ANY OTHER SECURED LENDER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed and delivered by an officer thereunto duly authorized as
of the date first above written.
SNEAKER GUARANTEE LLC
By: Thomas H. Lee Company
By: /s/ Warren C. Smith, Jr.
----------------------------
Name: Warren C. Smith, Jr.
Title: Managing Director
Accepted and Agreed
BANQUE NATIONALE DE PARIS
(as Agent)
By: /s/ Richard Cushing
--------------------------------
Name: Richard Cushing
Title: VP
By: /s/ Paul Barnes
--------------------------------
Name: Paul Barnes
Title: AVP
GUARANTY
Dated July 2, 1998
made by
SNEAKER GUARANTEE LLC
as Guarantor,
in favor of
BANQUE NATIONALE DE PARIS,
as Agent
on behalf of itself and for
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., MERRILL LYNCH PRIME
RATE PORTFOLIO and MERRILL LYNCH DEBT STRATEGIES PORTFOLIO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT (this "AGREEMENT"), dated as of
July 2, 1998, made by SNEAKER GUARANTEE LLC, a Delaware limited liability
company ("PLEDGOR"), to BANQUE NATIONALE DE PARIS ("BNP"), as collateral
agent (together with any successor agent appointed pursuant to Section
13(j), the "AGENT") for itself and for Merrill Lynch Senior Floating Rate
Fund, Inc., Merrill Lynch Prime Rate Portfolio and Merrill Lynch Debt
Strategies Portfolio (together with BNP, the "SECURED LENDERS").
PRELIMINARY STATEMENTS.
(1) Sneaker Stadium, Inc. (the "BORROWER") has entered into a
Credit Agreement dated as of January 17, 1997 (as amended or modified, the
"CREDIT AGREEMENT") with BNP, for itself and as agent for the Secured
Lenders. Each capitalized term issued but not defined shall have the
meaning given it in the Credit Agreement.
(2) As of the date hereof and immediately before giving effect
to this Agreement, there is $30,613,326.68 outstanding under the Credit
Agreement and the other Loan Documents, including $30 million in
outstanding principal, $507,743.06 in accrued and unpaid interest, and
$105,583.62 in fees and expenses including without limitation fees and
disbursements of counsel (collectively, the "EXISTING LENDER
INDEBTEDNESS").
(3) The Borrower and Just For Feet, Inc., a Delaware
corporation ("JFF"), have entered into an Agreement and Plan of Merger,
dated as of July 2, 1998 (the "MERGER AGREEMENT"), pursuant to which a
wholly-owned subsidiary of JFF will merge with and into the Borrower, with
the Borrower being the surviving entity.
(4) JFF and BNP, for itself and as agent for the Secured
Lenders, have entered into the Contingent Payment Agreement, dated as of
July 2, 1998 (the "CONTINGENT PAYMENT AGREEMENT"), pursuant to which
contingent payments may be made as set forth in the Debt Restructuring
Agreement (as defined below) to the Agent on behalf of the Secured Lenders
and Thomas H. Lee Company as Representative for the Subordinated Lenders
listed on Schedule I to the Contingent Payment Agreement.
(5) In connection with the transactions contemplated by the
Merger Agreement, the Borrower, the Pledgor, the Agent and the Secured
Lenders have executed the Debt Restructuring Agreement of even date
herewith (the "DEBT RESTRUCTURING AGREEMENT"), pursuant to which the
Secured Lenders have agreed to accept in full satisfaction and discharge of
the Existing Lender Indebtedness:
(a) cash in an amount on the closing of the Merger Agreement equal
to accrued and unpaid interest, fees, and expenses (including
without limitation the reasonable fees and disbursements of
counsel to the Agent and each Secured Lender) in an
amount equal to $613,326.68 (the "BRINGDOWN AMOUNT"),
(b) cash applied to the repayment of the outstanding principal
balance of the Existing Lender Indebtedness in an amount equal
to $6,269,589.53 (the "PRINCIPAL PAYMENT")
(c) payments, if any, under the Contingent Payment Agreement as set
forth therein and in the Debt Restructuring Agreement,
(d) a non-recourse guarantee from Pledgor (the "GUARANTY") of payment
to the Agent under the Debt Restructuring Agreement on or
before July 30, 2002, of cash in an amount equal to the excess
of (x) $20,000,000 over (y) the Principal Amount (the "MINIMUM
PAYMENT AMOUNT"), whether or not the Contingent Payment
Agreement entitles the Agent to receive such amount, and
(e) a pledge of the common stock of JFF acquired by Pledgor and all
of Pledgor's rights under a Registration Rights Agreement (the
"REGISTRATION RIGHTS AGREEMENT," this Agreement, together with
the Guaranty, the Debt Restructuring Agreement, the Contingent
Payment Agreement and the Registration Rights Agreement, the
"TRANSACTION DOCUMENTS").
(6) Pledgor is the record and beneficial owner of the shares of
JFF common stock described in Schedule I hereto and issued by JFF (the
"PLEDGED STOCK").
(7) It is a condition precedent to the restructuring of the
Existing Lender Indebtedness and the consummation of the Debt Restructuring
Agreement that, inter alia, the Pledgor shall have (i) entered into the
Guaranty of even date in favor of the Agent on behalf of the Secured
Lenders and (ii) made the pledge, granted the security interests and
delivered the Pledged Stock contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Secured Lenders to restructure the Existing Lender
Indebtedness and to enter into the Debt Restructuring Agreement, Pledgor
hereby agrees with the Agent for the ratable benefit of the Secured Lenders
as follows:
Section 1. Grant and Pledge of Security. Pledgor hereby assigns
and pledges to the Agent for the ratable benefit of the Secured Lenders,
and hereby grants to the Agent for the ratable benefit of the Secured
Lenders a security interest in, the following (collectively, the
"COLLATERAL"):
(a) the Pledged Stock and the certificates representing the
Pledged Stock, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
Pledged Stock as set forth on Schedule I hereto;
(b) all additional shares of stock or other securities issued
by JFF to Pledgor in any manner, and the certificates representing
such additional shares or securities, and all dividends, cash,
instruments and other property from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all
of such securities;
(c) all proceeds of any and all of the foregoing Collateral
(including, without limitation, proceeds that constitute property of
the types described in clauses (a) and (b) of this Section 1 and all
accessions and additions to, all substitutions for and all proceeds,
products, substitutions and replacement of any and all of the
foregoing) and, to the extent not otherwise included, all products
of, profits or other amounts from time to time paid or payable with
respect to any of the foregoing; and
(d) all rights of Pledgor under or in connection with the
Registration Rights Agreement.
Section 2. Secured Obligations. This Agreement secures the full
and prompt payment when due by Pledgor to the Agent on behalf of the
Secured Lenders of the following obligations, liabilities, sums, and
expenses set forth in clauses (a) and (b) (collectively, the "SECURED
OBLIGATIONS"):
(a) payment by Pledgor in cash of the Guaranteed Obligations
(as defined in the Guaranty) on the dates when due as set forth
therein; and
(b) payment on demand of any and all sums advanced by the Agent
in order to preserve the Collateral or preserve its security interest
in the Collateral,
including, without limitation, any such liabilities and expenses incurred
in any proceeding for the collection or enforcement of any rights of the
Agent and the Secured Lenders hereunder or under any other Transaction
Document after an Event of Default (as such term is defined in Section 3),
including the reasonable expenses of retaking, holding, preparing for sale,
selling or otherwise disposing or realizing on the Collateral, or of any
exercise by the Agent or any Secured Lender of its rights hereunder.
Section 3. Events of Default. Events of Default hereunder shall
be those "Events of Default" set forth in Section 3 of the Guaranty.
Section 4. Delivery of Collateral; Cash.
(a) Certificates. All certificates or instruments representing
or evidencing Collateral shall be delivered to and held by or on behalf of
the Agent pursuant hereto, shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and substance satisfactory to the
Agent. The Agent shall have the right, at any time in its discretion and
without notice to Pledgor, to transfer to or register in the name of Agent
or any of its nominees any or all of the Collateral, subject, however, for
so long as no Event of Default has occurred, to the rights of the Pledgor
as beneficial holder thereof as set forth in Section 7. In addition, the
Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
(b) Notices. In connection with the pledge granted hereunder of
the rights of Pledgor under or in connection with the Registration Rights
Agreement, there shall be delivered to and held by or on behalf of the
Agent an executed Notice of Transfer of Registration Rights and Registrable
Securities and an executed Notice of Substitution of Investors' Agent under
the Registration Rights Agreement (together, the "REGISTRATION RIGHTS
AGREEMENT NOTICES"), in the form attached hereto.
(c) Cash. Upon the Agent's receipt of cash in respect of any
Collateral, including, without limitation, any dividends, subject to the
election set forth in Secion 7(a)(ii), the Agent shall apply the same as
set forth in Section 11(b).
Section 5. Representations, Warranties and Covenants. Pledgor
represents, warrants, agrees and covenants as to itself and the Collateral,
which representations, warranties, agreements and covenants shall survive
execution and delivery of this Agreement, as follows:
(a) Pledgor is the beneficial owner of the Collateral free and
clear of any Lien or "adverse claim" (as term is defined in ss.
8-102(a)(1) of the Uniform Commercial Code as in effect on the date
hereof in the State of New York (the "N.Y. U.C.C.")) of any Person,
and Pledgor shall defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest
therein adverse to the Agent. No effective financing statement or
other instrument similar in effect covering or purporting to cover
all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of the Agent relating to
this Agreement.
(b) Pledgor has not done and will not do any business under any
name other than the one under which it has executed this Agreement.
(c) All of the shares of stock that constitute Pledged Stock
are in certificated form, have been duly authorized and validly
issued and are fully paid and non-assessable. Pledgor has full power,
authority and legal right to pledge the Pledged Stock pledged by it
pursuant to this Agreement.
(d) The Pledged Stock constitute the percentages of (i) the
issued and outstanding shares of stock of JFF and (ii) all shares of
JFF common stock that are outstanding or subject to issuance under
all warranties, options, convertible instruments or other agreements
indicated on Schedule I hereto.
(e) The certificates evidencing the Pledged Stock have been
physically delivered to the Agent, together with duly executed
instruments of transfer or assignment in blank, such that the Agent
has "control" over the Pledged Stock under N.Y. U.C.C.
ss.8-106(b)(2). All other actions necessary or desirable to perfect
and protect the security interest in the Collateral taken as a whole
created under this Agreement have been duly made or taken, and this
Agreement, the pledge of the Collateral pursuant hereto, together
with such filings and other actions, create a valid and perfected
first priority security interest in the Collateral taken as a whole,
securing the payment of the Secured Obligations, and suffice to make
Agent a "protected purchaser" of the Pledged Stock as such term is
defined in N.Y. U.C.C. ss. 8-303.
(f) No consent of any other Person and no authorization,
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other third party is
required (i) for the grant by such Pledgor of the assignment and
security interest granted hereunder, for the pledge by such Pledgor
of the Collateral pursuant hereto or for the execution, delivery or
performance of this Agreement by such Pledgor, (ii) for the
perfection or maintenance of the pledge, assignment and security
interest created hereunder (including the first priority nature of
such pledge, assignment or security interest), except for the filing
of financing and continuation statements under the N.Y. U.C.C. or the
Uniform Commercial Code as in effect on the date hereof in the State
of Delaware (the "DEL. U.C.C."), which financing statements have been
duly delivered for filing, and, upon the filing thereof, will be
effective, under applicable law, to perfect the security interest
granted to the Agent herein, or (iii) for the exercise by the Agent
of its voting or other rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement.
(g) The Agreement is made without any recourse to Pledgor or
any of its assets. Accordingly, Pledgor recognizes and agrees that
Agent has no adequate remedy at law for any breach hereof and agrees
to specific performance of any provision hereof and/or injunctive
relief in respect thereof may granted against Pledgor.
Section 6. Further Assurances. (a) Pledgor agrees that from
time to time, at its own expense, it shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Agent may request, in order to perfect
and protect any pledge, assignment or security interest granted or
purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Pledgor will execute and
file such financing or continuation statements, or amendments thereto, and
such other instruments or notices, as may be necessary or desirable, or as
the Agent may request in its sole discretion, in order to perfect and
preserve the pledge and security interest granted or purported to be
granted hereunder.
(b) Pledgor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral, including, without limitation, the
proceeds thereof (as such term is defined in N.Y. U.C.C. ss. 9-306 and Del.
U.C.C. ss. 9-306), without the signature of such Pledgor where permitted by
law. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient
as a financing statement where permitted by law.
(c) Pledgor shall furnish to the Agent from time to time such
reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
(d) All dividends or other amount that are received by Pledgor
contrary to the provisions of this Agreement shall be received in trust for
the benefit of the Agent, shall be segregated from other funds of the
Pledgor and shall be forthwith paid over to the Agent as Collateral in the
same form as so received (with any necessary indorsement).
(e) The Pledgor warrants that its principal place of business
is located at 1013 Centre Road, Wilmington, Delaware 19805. The Pledgor
shall not change its principal place of business except upon 30 days prior
written notice to the Agent.
Section 7. Rights of Pledgor. (a) So long as no Event of
Default shall have occurred and be continuing:
(i) Pledgor may direct Agent in writing to exercise any and all
voting and other consensual rights pertaining to the Collateral or
any part thereof for any purpose not inconsistent with the terms of
the Transaction Documents; provided, however, that Agent shall be
entitled to refrain from taking such action if, in the Agent's
reasonable judgment, such action could have a material adverse effect
on the value of the Collateral or any part thereof.
(ii) Pledgor may direct Agent in writing to sell any or all of
the Pledged Stock for cash on any date if (x) the net cash to be
received in respect of the Pledged Stock to be sold (on a per share
basis) multiplied by the number of shares of Pledged Stock (whether
or not sold) is equal to or exceeds 110% of the aggregate known
liquidated amount of the Secured Obligations (whether or not the same
are then due and payable) outstanding and not paid as of such date;
and (y) the proceeds thereof shall be, at the election of the
Pledgor, (u) received by the Agent for distribution as set forth in
section 11(b), or (v) delivered to and held by the Agent as cash
Collateral under this Agreement.
(iii) Upon any sale, transfer or other disposition of any
portion of Collateral in accordance with section 7(a)(ii), the Agent
will, at the Pledgor's expense, execute and deliver to Pledgor such
documents as such Pledgor shall reasonably request to evidence the
release of such portion of Collateral from the assignment and
security interest granted hereby; provided, however, that Pledgor
shall have delivered to the Agent, at least three business days prior
to the date of the proposed release, a written request for release
describing the portion of Collateral and the terms of the sale,
transfer or other disposition in reasonable detail, including,
without limitation, the price thereof and any expenses in connection
therewith, together with a form of release for execution by the Agent
and a certificate executed by such Pledgor to the effect that the
transaction is in compliance with this Pledge Agreement and as to
such other matters as the Agent may reasonably request.
(iv) Notwithstanding the foregoing sections 7(a)(i-iii) or any
other provision of this Pledge Agreement, the Agent may act or
refrain from acting hereunder notwithstanding any direction from
Pledgor, and may disregard any direction from Pledgor, if in the
Agent's reasonable judgment such direction would cause Agent to incur
any Liability.
(b) Upon the occurrence and during the continuance of an Event
of Default all rights of Pledgor to direct the Agent to exercise or refrain
from exercising the voting and other consensual rights that it would
otherwise be entitled to exercise pursuant to Section 7(a) shall
automatically cease, and all such rights shall thereupon become vested in
the Agent, which shall thereupon have the sole right to exercise or refrain
from exercising such voting and other consensual rights.
Section 8. Transfers and Other Liens; Additional Shares. (a)
Pledgor agrees not (i) to sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to, any of the
Collateral except as permitted in Section 7, or (ii) to create or suffer to
exist any lien, pledge, security interest or other encumbrance upon or with
respect to any of the Collateral except for the pledge, assignment and
security interest created under this Agreement.
(b) Pledgor shall pledge hereunder, immediately upon its
acquisition (directly or indirectly) thereof, any and all additional shares
of stock or other securities of JFF received by it at any time.
Section 9. Agent Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints the Agent, effective upon the occurrence and during
the continuation of any Event of Default, such Pledgor's attorney-in-fact,
with full authority in the place and stead of such Pledgor and in the name
of such Pledgor or otherwise, from time to time in the Agent's discretion
and, if required by law, upon notice to such Pledgor, to take any action
and to execute any instrument that the Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation:
(a) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral,
(c) to receive, indorse and collect any drafts, other
instruments or documents in connection with clause (a) above, and
(d) to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce
compliance with the rights of the Agent with respect to any of the
Collateral.
Section 10. Registration Rights Agreement. Pledgor covenants
and agrees that it will not exercise any right under the Registration
Rights Agreement to demand registration of any of the Collateral comprising
securities of JFF under the Securities Act of 1933, as amended, unless (I)
each Secured Lender has previously consented thereto in writing or (II) (a)
the registration statement covers all of the Pledged Stock, (b) the closing
sale price (or, in the absense of a closing sale price, the closing bid
price) of JFF common stock reported in The Wall Street Journal for each of
the 20 trading days prior to the date of demand exceeds 110% of the
aggregate known liquidated amount of the Secured Obligations outstanding
and not paid on such date (whether or not the same are then due and
payable), and (c) the registration statement seeks to register such
securities in connection with a transaction which will pay all Secured
Obligations in full and in cash upon the consummation thereof.
Section 11. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured
party upon default under the N.Y. U.C.C. (whether or not the N.Y.
U.C.C. applies to the affected Collateral) and also may without
notice except as specified below, sell the Collateral or any part
thereof at public auction or private sale, at any of the Agent's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Agent may deem commercially reasonable.
At any such sale or auction, Agent may bid for, and become the
purchaser of, the whole or any part of the Collateral offered for
sale. Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to such Pledgor of the
time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The
Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Agent may adjourn
any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
(b) (i) All cash proceeds received by the Agent in respect of
any dividends, sale of, collection from, or other realization upon
all or any part of the Collateral may, in the discretion of the
Agent, be held by the Agent as collateral for, and/or then or at any
time thereafter shall be applied as follows:
(A) FIRST, to the payment of indemnified Liabilities
under Section 14;
(B) SECOND, to the payment of all Secured Obligations
then due and owing other than the Minimum Payment Amount,
(C) THIRD, to the payment of the Minimum Payment Amount,
until all Secured Obligations have been paid in full; and
(D) FOURTH, to the extent proceeds remain after the
application pursuant to the preceding clauses (A), (B) and (C),
and following the termination of this Agreement pursuant to
Section 19 hereof, to the Pledgor or to whomever may be
lawfully entitled to receive such surplus.
(ii) All payments required to be made hereunder to the
Secured Lenders shall be made to the Agent for the account of the
Secured
Lenders.
(iii) For purposes of applying payments received in
accordance with this Section 11(b), the Agent shall be entitled to
rely upon the Secured Lenders for a determination (which the Secured
Lenders agree (or shall agree) to provide upon request of the Agent)
of the outstanding Secured Obligations owed to the Secured Lenders.
(c) The Agent may deliver the Registration Rights Agreement
Notices and exercise all rights of Pledgor under the Registration Rights
Agreement in respect of the Pledged Stock.
Section 12. Right to Redeem. Prior to such time as the Agent
has disposed of or entered into a contract (including, without limitation
delivery of a sell order to a broker or market maker) for the disposition
of the Collateral, or any part thereof, Pledgor may redeem:
(a) on any date, all (but not less than all) of the Collateral
by paying to the Agent cash by wire transfer of immediately available
funds in the aggregate known liquidated amount of all Secured
Obligations outstanding and not paid on such date (whether or not the
same are then due and payable), or
(b) on any date after July 30, 2002, all (but not less than
all) of Pledged Stock if the same is traded on a public market for
which closing sale prices (or, in the absence of a closing sale
price, the closing bid price) are reported in The Wall Street
Journal, by paying to the Agent cash by wire transfer of immediately
available funds in an amount equal to the lesser of (x) the aggregate
known liquidated amount of all Secured Obligations outstanding and not
paid on such date (whether or not the same are then due and payable)
and (y) the Stock Value.
"STOCK VALUE" on any date shall mean the average of the closing sale price
(or, in the absence of a closing sale price, the closing bid price) of JFF
common stock reported in The Wall Street Journal for the twenty (20)
trading days prior to such date, multiplied by the number of shares of JFF
common stock held as Pledged Stock.
Section 13. The Agent. (a) The Secured Lenders, by their
acceptance of the benefits of this Agreement and the Debt Restructuring
Agreement, hereby irrevocably designate BNP to act as the Agent with
respect to this Agreement and as specified in the other Transaction
Documents. Each Secured Lender hereby irrevocably authorizes the Agent to
take such action on its behalf under the provisions of this Agreement and
the other Transaction Documents and any other instruments and agreements
referred to herein or therein and to exercise such powers and to perform
such duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof or thereof and such other powers
as are reasonably incidental thereto. The Agent may perform any of its
duties hereunder and under the other Transaction Documents by or through
its authorized agents or employees.
(b) The Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and in the other Transaction
Documents. The duties of the Agent shall be mechanical and administrative
in nature; the Agent shall not have by reason of this Agreement or any
other Transaction Document a fiduciary relationship in respect of any
Secured Lender; and nothing in this Agreement or any other Transaction
Document, expressed or implied, is intended to or shall be so construed as
to impose upon the Agent any obligations in respect of this Agreement or
any other Transaction Document except as expressly set forth herein or
therein.
(c) The Agent shall not be responsible for insuring the
Collateral or for the payment of taxes, charges or assessments or
discharging of Liens upon the Collateral or otherwise as to the maintenance
of the Collateral. The Agent shall not be required to ascertain or inquire
as to the performance by the Pledgor of any of the covenants or agreements
contained in this Agreement or any other Transaction Document.
(d) The Agent shall be under no obligation or duty to take any
action under this Agreement or any other Transaction Document if taking
such action (i) would subject the Agent to a tax in any jurisdiction where
it is not then subject to a tax or (ii) would require the Agent to qualify
to do business in any jurisdiction where it is not then so qualified,
unless the Agent receives security or indemnity satisfactory to it against
such tax (or equivalent liability), or any liability resulting from such
qualification, in each case as results from the taking of such action under
this Agreement or any other Transaction Document or (iii) would subject the
Agent to in personam jurisdiction in any locations where it is not then so
subject. Notwithstanding any other provision of this Agreement or any other
Transaction Document, neither the Agent nor any of its officers, directors,
employees, affiliates or agents shall, in its individual capacity, be
personally liable for any action taken or omitted to be taken by it in
accordance with this Agreement or any other Transaction Document except for
its own gross negligence or willful misconduct.
(e) Independently and without reliance upon the Agent, each
Secured Lender, to the extent it deems appropriate, has made and shall
continue to make (i) its own independent investigation of the financial
condition and affairs of Pledgor and JFF in connection with the making and
the continuance of the Secured Obligations and the taking or not taking of
any action in connection therewith, and (ii) its own appraisal of the
creditworthiness of Pledgor and JFF, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Secured Lender with any credit or other information with respect thereto,
whether coming into its possession before the extension of any Secured
Obligations or at any time or times thereafter. The Agent shall not be
responsible in any manner whatsoever to any Secured Lender for the
correctness of any recitals, statements, information, representations or
warranties in any Transaction Document or in any document, certificate or
other writing delivered in connection therewith or for the execution,
effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or the other
Transaction Documents or the security interests granted hereunder or
thereunder or the financial condition of Pledgor or be required to make any
inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement or any other Transaction
Document, or the financial condition of Pledgor, or the existence or
possible existence of any Event of Default. The Agent makes no
representations as to the value or condition of the Collateral or any part
thereof, or as to the title of Pledgor thereto or as to the security
afforded by this Agreement.
(f) (i) No Secured Lender shall have the right to cause the
Agent to take any action with respect to the Collateral other than as set
forth herein. If the Agent shall request instructions from the Secured
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement, the Agent shall be entitled to refrain from
such act or taking such action unless and until it shall have received
instructions from each Secured Lender and to the extent requested,
appropriate indemnification in respect of actions to be taken, and the
Agent shall not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, no Secured Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Secured Lenders.
(ii) The Agent shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement or any other
Transaction Document at the request or direction of any of the Secured
Lenders, unless such Secured Lenders shall have offered to the Agent
reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
order or other document or telephone message signed, sent or made by the
proper Person or entity, and, with respect to all legal matters pertaining
to this Agreement or any other Transaction Document and its duties
hereunder or thereunder, upon advice of counsel selected by it.
(h) To the extent the Agent is not reimbursed and indemnified
by Pledgor under this Agreement or any other Transaction Document, the
Secured Lenders will reimburse and indemnify the Agent, in proportion to
their respective outstanding principal amounts of Secured Obligations, for
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in performing its duties hereunder or under any
other Transaction Document, or in any way relating to or arising out of its
actions as Agent in respect of this Agreement or under any other
Transaction Document (including any amounts required to be returned by the
Agent in respect of Collateral), except for those resulting solely from the
Agent's own gross negligence or willful misconduct. The indemnities set
forth in this Section 13(h) shall survive the repayment of the Secured
Obligations, with the respective indemnification at such time to be based
upon the outstanding principal amounts (determined as described above) of
the Secured Obligations at the time of the respective occurrence upon which
the claim against the Agent is based or, if same is not reasonably
determinable, based upon the outstanding principal amounts (determined as
described above) of the Secured Obligations as in effect immediately prior
to the termination of this Agreement. The indemnities set forth in this
Section 13(h) are in addition to any indemnities provided by the Secured
Lenders to the Agent pursuant to the Credit Agreement, with the effect
being that the Secured Lenders shall be responsible for indemnifying the
Agent to the extent the Agent does not receive payments pursuant to this
Section 13(h) from the Secured Lenders (although in such event, and upon
the payment in full of all such amounts owing to the Agent, the respective
Secured Lenders who paid same shall be subrogated to the rights of the
Agent to receive payment from the Secured Lenders).
(i) With respect to its obligations as a lender under the Debt
Restructuring Agreement and any other Transaction Documents to which the
Agent is a party, and to act as agent under one or more of such Transaction
Documents, the Agent shall have the rights and powers specified therein and
herein for a "Secured Lender", or an "Agent", as the case may be, and may
exercise the same rights and powers as though it were not performing the
duties specified herein; and the term "Secured Lender," or any similar term
shall, unless the context clearly otherwise indicates, include the Agent in
its individual capacity. The Agent may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with
the Pledgor or any affiliate or Subsidiary of the Pledgor as if it were not
performing the duties specified herein or in the other Transaction
Documents, and may accept fees and other consideration from Pledgor for
services in connection with the Transaction Documents and otherwise without
having to account for the same to the Secured Lenders.
(j) (i) The Agent may resign from the performance of all of its
functions and duties under this Agreement at any time by giving 20 business
days' prior or written notice to Pledgor and the Secured Lenders. Such
resignation shall take effect upon the appointment of a successor Agent
pursuant to clause (ii) or (iii) of this Section 13(j).
(ii) If a successor Agent shall not have been appointed
within said 20 business day period by the Secured Lenders, the Agent, with
the consent of Pledgor, which consent shall not be unreasonably withheld or
delayed, shall then appoint a successor Agent who shall serve as Agent
hereunder until such time, if any, as the Secured Lenders appoint a
successor Agent as provided above.
(iii) If no successor Agent has been appointed pursuant
to clause (ii) of this Section 13(j) by the 20th business day after the
date of such notice of resignation was given by the Agent, the Secured
Lenders shall then appoint a successor Agent who shall serve as Agent
hereunder until such time, if any, as the Secured Lenders appoint a
successor Agent as provided above.
(k) [omitted].
Section 14. Indemnity and Expenses. Pledgor agrees to indemnify
the Agent and each Secured Lender from and hold the Agent and each Secured
Lender harmless against any and all Liabilities (defined below) arising out
of or in connection with this Agreement (including, without limitation,
enforcement of this Agreement); provided, however, that the payment of such
Liabilities shall be payable out of, and the Agent (and the Secured Lenders
through the Agent) shall have recourse only against and limited to the
Collateral. "LIABILITIES" means any and all claims, liabilities, damages,
expenses, costs (including without limitation fees and disbursements of
counsel to the Agent and each of the Secured Lenders) or other obligations
incurred by the Agent or any Secured Lender arising out of or in connection
with (i) the enforcement of any Transaction Document (including in the
context of any dispute with respect thereto), or (ii) the breach of any
representation, warranty or other provision of any Transaction Document,
provided, however, that unless such enforcement is made against or such
breach is by the Guarantor or THLC, Liabilities shall only include 50% of
such claims, liabilities, damages, expenses, costs or other obligations.
Section 15. Security Interest Absolute. The obligations of
Pledgor under this Agreement are independent of the Secured Obligations,
and a separate action or actions may be brought and prosecuted against such
Pledgor to enforce this Agreement. All rights of the Agent and the pledge
and security interest granted hereunder, and all obligations of Pledgor
hereunder, shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of any Transaction
Document or any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, the Secured Obligations, or any other amendment
or waiver of or any consent to any departure from any Transaction
Document, including, without limitation, any increase in the Secured
Obligations resulting from the extension of additional credit to the
Pledgor or otherwise;
(iii) any taking, exchange, release or nonperfection of any
other collateral, or any taking, release or amendment or waiver of or
consent to departure from any guaranty, including the Guaranty, for
all or any of the Secured Obligations;
(iv) any manner of application of collateral, or proceeds
thereof, to all or any of the Secured Obligations, or any manner of
sale or other disposition of any collateral for all or any of the
Secured Obligations or any other assets of the Pledgor;
(v) any change, restructuring or termination of the corporate
structure or
existence of the Pledgor or any affiliate; or
(vi) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Pledgor or a third-party
grantor of a security interest.
Section 16. Amendments; Waivers; Execution in Counterparts. (a)
No amendment or waiver of any provision of this Agreement, and no consent to
any departure by the Pledgor herefrom, shall in any event be effective
unless the same shall be in writing and signed by the Agent, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(b) No failure on the part of the Agent or any Secured Lender
to exercise, and no delay in exercising, any right, power or privilege
hereunder shall operate as a waiver thereof or consent thereto; nor shall
any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
(c) This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery
of an executed counterpart of a signature page to this Agreement by
telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 17. Notices. All notices and other communications
provided for hereunder to any party shall be in writing (including
telegraphic, telecopy or telex communication) and mailed, couriered,
telecopied or delivered to it, addressed to it at the address set forth in
Schedule II to the Debt Restructuring Agreement. All such notices and other
communications shall be effective (a) if mailed, five days after and
excluding the date of mailing, postage prepaid, (b) if couriered, on the
first business day after deposited with a reputable overnight courier
service, fee prepaid, (c) if transmitted by telecopier or delivered by hand
prior to 2 p.m. on any business day, on such day, and otherwise on the next
business day.
Section 18. Continuing Security Interest; Assignments under the
Debt Restructuring Agreement. This Agreement shall create a continuing
security interest in the Collateral and shall (a) remain in full force and
effect until the indefeasible and irrevocable payment in full in cash of
the Secured Obligations, (b) be binding upon Pledgor, its successors and
assigns and (c) inure, together with the rights and remedies of the Agent
hereunder, to the benefit of the Secured Lenders and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Secured Lender may assign or otherwise transfer
all or any portion of its rights and obligations under the Debt
Restructuring Agreement to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
such Secured Lender herein or otherwise, in each case as provided in
Section 5 of the Debt Restructuring Agreement.
Section 19. Release and Termination. Upon the indefeasible and
irrevocable payment in full in cash of all Secured Obligations, the pledge
and security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Pledgor. Upon any such termination, the
Agent will, at the Pledgor's expense, execute and deliver to Pledgor such
documents as Pledgor shall reasonably request to evidence such termination.
Section 20. Jurisdiction, Etc. (A) THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN SUCH STATE.
UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT, TERMS USED IN
ARTICLE 9 OF THE N.Y. U.C.C. ARE USED HEREIN AS THEREIN DEFINED. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH SUCH PARTY
HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK
PERSONAL JURISDICTION OVER SUCH PARTY, AND AGREES NOT TO PLEAD OR CLAIM, IN
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT BROUGHT IN
ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURTS LACK PERSONAL
JURISDICTION OVER SUCH PARTY. EACH SUCH PARTY FURTHER IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH
HEREIN OR IN THE DEBT RESTRUCTURING AGREEMENT, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH SUCH PARTY HEREBY IRREVOCABLY
WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING
COMMENCED HEREUNDER THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, ANY
SECURED LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY PARTY IN ANY
OTHER JURISDICTION.
(B) EACH PARTY TO THIS AGREEMENT HERETO HEREBY IRREVOCABLY
WAIVES TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY
FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(C) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized, as of the date first above written.
SNEAKER GUARANTEE LLC
as Pledgor
By: Thomas H. Lee Company
By /s/ Warren C. Smith, Jr.
-------------------------------
Name: Warren C. Smith, Jr.
Title: Managing Director
Address:
Telephone:
Telecopier:
BANQUE NATIONALE DE PARIS,
as Agent
By /s/ Richard Cushing, /s/ Paul Barnes
-------------------------------------
Name: Richard Cushing; Paul Barnes
Title: VP; AVP
Schedule I
PLEDGED STOCK
Percentage of
Certificate Number and Shares
Issuing Corporation No. Type of Shares Outstanding Par Value
------------------- ----------- -------------- -------------- ---------
Just For Feet, Inc. A3502 926,355 2.89% $.0001/share
Common Stock
PLEDGE AND SECURITY AGREEMENT
Dated July 2, 1998
made by
SNEAKER GUARANTEE LLC
as Pledgor,
to
BANQUE NATIONALE DE PARIS,
As Agent
on behalf of itself and for
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC., MERRILL LYNCH PRIME
RATE PORTFOLIO and MERRILL LYNCH DEBT STRATEGIES PORTFOLIO
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(k) of the Securities Exchange Act of
1934, as amended, each of the parties hereto agrees with the other parties
that the statement of Schedule 13D pertaining to certain securities of Just
For Feet, Inc. to which this agreement is an exhibit is filed by and on
behalf of each such party and that any amendment thereto will be filed on
behalf of each such party.
SNEAKER GUARANTEE LLC
By: THL Equity Advisors III Limited Partnership,
its Manager
Date: July 13, 1998 By: THL Equity Trust III, as General Partner
By /s/ Wendy Masler
------------------------------------
Name: Wendy Masler
Title: Treasurer
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors III Limited
Partnership, its General Partner
By: THL Equity Trust III, its General
Partner
Date: July 13, 1998 By /s/ Wendy Masler
-------------------------------------
Name: Wendy Masler
Title: Treasurer
THL EQUITY ADVISORS III LIMITED PARTNERSHIP
By: THL Equity Trust III, its General Partner
Date: July 13, 1998 By /s/ Wendy Masler
-------------------------------------
Name: Wendy Masler
Title: Treasurer
THL EQUITY TRUST III
Date: July 13, 1998 By /s/ Wendy Masler
--------------------------------------
Name: Wendy Masler
Title: Treasurer
