<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. __)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
b(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
JUST FOR FEET, INC.
---------------------------------
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
--------------------------------
(Name of Person(s) Filing Proxy Statement if
other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________
2) Aggregate number of securities to which transaction applies:
____________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
_______________________________________________________________________
4) Proposed maximum aggregate value of transaction:_______________________
5) Total fee paid:________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_____________________________________________
2) Form, Schedule or Registration Statement No.:_______________________
3) Filing Party:_______________________________________________________
4) Date Filed:_________________________________________________________
- ----------------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
1
<PAGE>
July [27], 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
your Company, which will be held on Monday, August 17, 1998 at 10:00 a.m.
Central Time, at the Company's offices, 7400 Cahaba Valley Road, Birmingham,
Alabama.
The formal notice of the meeting and the proxy statement appear on the
following pages and describe the matters to be acted upon. Time will be
provided during the meeting for discussion.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed notice of
the meeting and proxy statement, please complete, sign, date and return the
enclosed proxy card at your earliest convenience. Returning the signed and
dated proxy card will not prevent you from voting in person at the meeting
should you later decide to do so.
Sincerely,
Harold Ruttenberg
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
JUST FOR FEET, INC.
7400 Cahaba Valley Road
Birmingham, Alabama 35242
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held August 17, 1998
To the Holders of Common Stock of JUST FOR FEET, INC.:
Notice is hereby given that a Special Meeting of Shareholders of Just For
Feet, Inc., a Delaware corporation (the "Company"), will be held at the offices
of the Company, 7400 Cahaba Valley Road, Birmingham, Alabama, on Monday, August
17, 1998 at 10:00 a.m. Central Time for the following purposes:
(1) To approve an amendment to the Company's 1997 Employee Incentive Plan to
increase the number of shares available for issuance pursuant to such Plan
from 1,400,000 shares to 2,900,000 shares; and
(2) To conduct such other business as may properly come before the meeting or
any adjournment thereof.
Only shareholders of record as of the close of business on July 22, 1998
will be entitled to notice of and to vote at the meeting or any adjournment
thereof.
By Order of the Board of Directors
Scott C. Wynne
Secretary
Birmingham, Alabama
July [27], 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED
PROXY IN THE ACCOMPANYING POSTAGE PAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU
MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
JUST FOR FEET, INC.
SPECIAL MEETING OF SHAREHOLDERS
August 17, 1998
______________________________________________
PROXY STATEMENT
______________________________________________
This proxy statement and form of proxy, which are first being mailed to
shareholders on or about July [27], 1998, are furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Just For Feet,
Inc. (the "Company"), for use at the Special Meeting of Shareholders of the
Company to be held at the offices of the Company, 7400 Cahaba Valley Road,
Birmingham, Alabama, on Monday, August 17, 1998, at 10:00 a.m. Central Time and
at any or all adjournments or postponements thereof. The address of the
principal executive offices of the Company is 7400 Cahaba Valley Road,
Birmingham, Alabama 35242 and the Company's telephone number is (205) 408-3000.
The cost of this solicitation will be borne by the Company. In addition to
the mails, proxies may be solicited by officers and regular employees of the
Company, without remuneration, by personal interviews, telephone and facsimile.
It is anticipated that banks, brokerage houses and other custodians, nominees
and fiduciaries will forward soliciting material to beneficial owners of stock
entitled to vote at the meeting, and such persons will be reimbursed for the
out-of-pocket expenses incurred by them in this connection.
Any proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition, any
proxy given pursuant to this solicitation may be revoked prior to the meeting by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed proxy for the same shares bearing a later date. Proxies which are
returned properly executed and not revoked will be voted and will be voted in
accordance with the shareholder's directions specified thereon. Where no
direction is specified, proxies will be voted FOR the amendment to the 1997
Employee Incentive Plan and, on other matters properly presented for a vote, in
accordance with the judgment of the persons acting under the proxies.
Abstentions and broker non-votes are counted as present for the purpose of
determining the presence of a quorum for the transaction of business. For the
purpose of determining the number of shares voting on a particular proposal,
abstentions are counted as shares voting, whereas broker non-votes are not
counted as shares voting.
Only shareholders of record at the close of business on July 22, 1998 will
be entitled to notice of and to vote at the Special Meeting or any adjournments
thereof. As of July 22, 1998, the Company had outstanding __________ shares of
Common Stock. Each share of Common Stock issued and outstanding on such record
date is entitled to one vote.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Based solely on information made available to the Company, the following
table sets forth certain information as of July [22], 1998 with respect to the
beneficial ownership of the Company's Common Stock by (i) each person known by
the Company to own beneficially more than five percent (5%) of the Company's
Common Stock, (ii) each director of the Company, (iii) each of the executive
officers of the Company whose cash compensation exceeded $100,000 for fiscal
1997 (the "Named Executive Officers"), and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
Shares of
Common Stock Percent of
Beneficial Owner Beneficially Owned(1) Outstanding Shares
- ------------------------------------------------- --------------------- -------------------
<S> <C> <C>
Harold Ruttenberg(2) 5,439,730 17.5%
Pamela B. Ruttenberg(3) 1,841,002 6.1
Banc One Corporation(4) 3,108,243 10.0
Sneaker Guarantee LLC(5) 1,849,946 6.0
State of Wisconsin Investment Board(6) 1,772,000 5.7
Karl B. Friedman, as Trustee for the
Pamela B. Ruttenberg Irrevocable
Children's Trust(7) 521,910 1.7
Harold and Pamela Ruttenberg Foundation 375,845 1.2
Adam J. Gilburne(8) 217,513 *
Ruttenberg Family Foundation(9) 137,686 *
Eric L. Tyra(10) 56,000 *
Alex M. Bond (11) 20,000 *
Don-Allen Ruttenberg(12) 129,818 *
Scott C. Wynne(13) 128,604 *
Randall L. Haines(14) 62,837 *
Michael P. Lazarus(15) 656,049 2.1
Edward S. Croft, III (16) 53,671 *
Bart Starr, Sr.(17) 42,810 *
David F. Bellet(18) 38,100 *
Warren C. Smith, Jr.(19) 1,849,946 6.0
All executive officers and
directors as a group (12 persons)(20) 8,694,478 26.8%
-----
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, each person has sole voting and investment
power as to all such shares. Shares of Common Stock underlying options to
purchase Common Stock which are exercisable within 60 days of April 17,
1998 are deemed to be outstanding for the purpose of computing the
outstanding Common Stock owned by the particular person and by the group,
but are not deemed outstanding for any other purpose.
(2) Harold Ruttenberg and Pamela B. Ruttenberg are husband and wife. Includes
3,085,197 shares owned directly by Harold Ruttenberg, 1,841,002 shares held
by him as Trustee under a Voting Trust Agreement for the benefit of Pamela
B. Ruttenberg which terminates in 2003, 375,845 shares held by the Harold
and Pamela Ruttenberg Foundation and 137,686 shares held by the Ruttenberg
Family Foundation. Mr. Ruttenberg serves on the Board of Directors of each
of such foundations and in such capacity shares voting and investment power
with respect to shares owned by such foundations. Mr. Ruttenberg's address
is 7400 Cahaba Valley Road, Birmingham, Alabama 35242.
-2-
<PAGE>
(3) Represents shares held by Harold Ruttenberg as Voting Trustee for Pamela B.
Ruttenberg, with respect to which Mr. Ruttenberg has voting power. Mrs.
Ruttenberg retains the power to dispose of such shares. Mrs. Ruttenberg's
address is 7400 Cahaba Valley Road, Birmingham, Alabama 35242.
(4) Based upon a statement on Schedule 13G dated January 7, 1998 filed by Banc
One Corporation ("Banc One") as a parent bank holding company for several
subsidiary commercial banks. The Schedule 13G states that of the 3,108,243
shares beneficially owned, Banc One has sole voting power with respect to
2,989,456 shares, shared voting power with respect to 69,887, sole
dispositive power with respect to 2,696,378 shares and shared dispositive
power with respect to 40,365 shares. The Company makes no representation as
to the accuracy or completeness of the information reported. Banc One's
business address is 100 East Broad Street, Columbus, Ohio 43215.
(5) Includes presently exercisable warrants to purchase 923,591 shares of
Common Stock.
(6) Based upon a statement on Schedule 13G dated January 26, 1998 filed by the
State of Wisconsin Investment Board, a public pension fund (the "Wisconsin
Investment Board"). The Wisconsin Investment Board has sole voting and
dispositive power with respect to all shares. The Company makes no
representation as to the accuracy or completeness of the information
reported. The mailing address of the Wisconsin Investment Board is P.O. Box
7842, Madison, Wisconsin 53707.
(7) Trust is for the benefit of the three adult children of Harold and Pamela
Ruttenberg. The shares held in the trust are allocated pro rata among the
three children. Mr. Friedman disclaims beneficial ownership of the shares
in the trust.
(8) Includes 90,322 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 274,313 shares subject
to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(9) Shares held by the Ruttenberg Family Foundation for the benefit of the
Birmingham Jewish Federation. The Ruttenbergs disclaim beneficial ownership
of the shares held by such Foundation.
(10) Represents shares subject to outstanding options to purchase Common Stock
which are exercisable within 60 days. Excludes 194,000 shares subject to
outstanding options to purchase Common Stock which will become exercisable
at various dates in the future.
(11) Represents shares subject to outstanding options to purchase Common Stock
which are exercisable within 60 days. Excludes 180,000 shares subject to
outstanding options to purchase Common Stock which will become exercisable
at various dates in the future.
(12) Includes 40,479 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 115,000 shares
subject to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(13) Includes 80,958 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 115,000 shares
subject to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(14) Includes 62,500 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 2,500 shares subject
to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(15) Includes 62,500 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 2,500 shares subject
to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future. Also includes 593,549 shares
held by Weston Presidio Capital II, L.P. Mr. Lazarus is a general partner
of a limited partner of the partnership that owns the shares and may be
deemed to share beneficial ownership of such shares.
(16) Includes 52,500 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 27,500 shares subject
to outstanding options to purchase Common Stock which will become
exercisable at various dates in the future.
(17) Includes 31,250 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days. Excludes 87,500 shares to
outstanding options to purchase Common Stock which will become exercisable
at various dates in the future.
(18) Includes 27,500 shares subject to outstanding options to purchase Common
Stock which are exercisable within 60 days and an aggregate of 600 shares
owned by Mr. Bellet's two daughters, with respect to which shares Mr.
Bellet disclaims beneficial ownership. Excludes 15,000 shares subject to
outstanding options to purchase Common Stock which will become exercisable
at various dates in the future.
(19) Mr. Smith was appointed to the Board of Directors upon the consummation of
the Company's acquisition of Sneaker Stadium, Inc. on July 2, 1998. The
number of shares shown as beneficially owned by Mr. Smith includes 926,355
shares of Common Stock and warrants to purchase 923,591 shares of the
Company's Common Stock held by Sneaker Guaranty LLC. Mr. Smith serves as a
managing director of the manager of the limited liability company that owns
the shares and as such may be deemed to beneficially own such shares.
(20) Includes outstanding options to purchase an aggregate of 524,009 shares of
Common Stock held by executive officers and directors which are exercisable
within 60 days. Excludes 1,013,313 shares subject to outstanding options
to purchase Common Stock which will become exercisable at various dates in
the future.
There are no arrangements known to the Company, the operation of which may,
at a subsequent date, result in a change in control of the Company.
-3-
<PAGE>
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company for fiscal 1997, 1996 and 1995 to or
on behalf of the Company's Chief Executive Officer and the Named Executive
Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------- ---------------
Securities
Name and Principal Fiscal Other Annual Underlying
Position Year Salary Bonus Compensation Options
- -------------------- ------- --------- ---------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Harold Ruttenberg 1997 $400,000 - - -
Chairman, President and 1996 382,052 - $17,650(1) -
Chief Executive 1995 391,666 - - -
Officer
Adam J. Gilburne 1997 $271,153 - - 200,000 shares(2)
Executive Vice 1996 198,077 $50,000 - 100,000 shares
President; 1995 150,000 - - -
President-Superstore
Division
Don-Allen Ruttenberg 1997 $123,692 - - 100,000 shares(2)
Executive Vice 1996 100,000 - - 100,000 shares
President - 1995 85,615 - - -
New Store Development
Scott C. Wynne 1997 $123,692 - - 100,000 shares(2)
Executive Vice 1996 100,000 - - 100,000 shares
President - 1995 88,692 - - -
Operations and
Secretary
Alex M. Bond(3) 1997 $210,232 - 20,574(4) 200,000 shares
Executive Vice
President-
Strategic Development
Eric L. Tyra(5) 1997 $177,075 - 25,043(4) 250,000 shares
Executive Vice
President
and Chief Financial
Officer
</TABLE>
- --------------------------
(1) Represents premiums paid by the Company for term life insurance on behalf
of the Named Executive Officer.
(2) Includes options to purchase 100,000 shares that were repriced (by
cancellation and regrant) in fiscal 1997 from options originally granted in
fiscal 1996. See "Options."
(3) Mr. Bond joined the Company in February 1997.
(4) Represents amounts paid to the Named Executive Officer for moving and
temporary living expenses associated with the officer's relocation to
Birmingham, Alabama upon joining the Company.
(5) Mr. Tyra joined the Company in May 1997.
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
On January 8, 1998, the Company entered into an employment agreement with
Adam J. Gilburne. The agreement, which expires on January 7, 2003, provides that
Mr. Gilburne will serve as President, Superstore Division of the Company and
receive an annual base salary of $300,000. The agreement provides that Mr.
Gilburne is eligible to receive a performance-based bonus of up to 50% of his
annual salary. He also received an incentive stock option to purchase 100,000
shares of Common Stock at $12.94 per share. In the event of the termination of
his employment following a Change in Control of the Company (as defined in the
agreement), Mr. Gilburne is entitled, subject to certain conditions, to receive
a lump sum cash payment equal to two times the base salary then in effect under
the agreement plus any awarded but unpaid bonus. Mr. Gilburne's employment
agreement contains covenants of non-disclosure and non-competition.
-4-
<PAGE>
On November 6, 1996, the Company entered into an employment agreement with
Alex M. Bond. The agreement, which expires January 31, 1999, provides that Mr.
Bond will serve as Executive Vice President - Strategic Development of the
Company at an annual salary of $150,000, plus a $50,000 per year living
allowance. The agreement provides that Mr. Bond is eligible to receive a
performance-based bonus of up to $200,000 per year. Pursuant to the agreement,
Mr. Bond was granted an incentive stock option to purchase 200,000 shares of the
Company's Common Stock at $14.50 per share. Mr. Bond's employment agreement
contains covenants of non-disclosure and non-competition.
On May 1, 1997, the Company entered into an employment Agreement with Eric
L. Tyra. The agreement, which expires May 18, 2002, provides that Mr. Tyra will
serve as Executive Vice President and Chief Financial Officer of the Company at
an annual salary of $250,000, plus a $35,000 per year living allowance. The
agreement provides that Mr. Tyra is eligible to receive a performance-based
bonus of up to $125,000 per year. In addition, the agreement provides that Mr.
Tyra shall receive a bonus of $500,000 in the event he is employed by the
Company on May 18, 2002 or if he has been terminated prior to such date
otherwise than "for cause" (as defined in the agreement). Pursuant to the
agreement, Mr. Tyra was granted an incentive stock option to purchase 200,000
shares of the Company's Common Stock at $17.00 per share. In the event of the
termination of his employment following a Change in Control of the Company (as
defined in the agreement), Mr. Tyra is entitled, subject to certain conditions,
to receive a lump sum cash payment equal to two times the base salary then in
effect under the agreement plus any awarded but unpaid bonus. Mr. Tyra's
employment agreement contains covenants of non-disclosure and non-competition.
OPTIONS
The following table provides information regarding option grants in fiscal
1997 to the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1997
<S> <C> <C> <C> <C> <C> <C>
Individual Grants
---------------------------------------------------------
% of Total Potential Realizable Value
Number of Options At Assumed Annual Rates
Securities Granted to of Stock Price
Underlying Employees Exercise Appreciation for Option
Options in Fiscal Price(2) Expiration Term (3)
Name Granted (#) Year(1) ($/SHARE) Date 5% 10%
- -------------------------- ------------ ------------- ----------- ---------- ---------- ------------
Harold Ruttenberg......... - - - - - -
Adam J. Gilburne.......... 100,000(4) 3.5% 14.75 4/29/07 $ 927,620 $2,350,770
100,000(5) 3.5% 12.94 1/8/08 813,790 2,062,303
Don-Allen Ruttenberg...... 100,000(4) 3.5% 14.75 4/29/07 927,620 2,350,770
Scott C. Wynne............ 100,000(4) 3.5% 14.75 4/29/07 927,620 2,350,770
Eric L. Tyra.............. 200,000(6) 6.9% 17.00 5/1/07 2,138,242 5,418,724
50,000(7) 1.7% 12.94 1/8/08 406,895 1,031,151
Alex M. Bond.............. 200,000(8) 6.9% 14.50 4/17/07 1,823,794 4,621,853
- -----------------------
</TABLE>
(1) The Company granted options to purchase an aggregate of 2,896,000 shares to
employees in the year ended January 31, 1998.
(2) Stock options were granted with an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant.
(3) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of the
Company's Common Stock appreciates in value from the date of grant at the 5%
and 10% annual rates prescribed by the Commission and therefore are not
intended to forecast possible future appreciation, if any, of the price of
the Company's Common Stock.
-5-
<PAGE>
(4) Represents the regrant of options originally granted on December 16, 1996
and subsequently cancelled. Options vest annually in equal increments over
a four-year period beginning on April 29, 2002.
(5) Vests with respect to 20,000 per year beginning March 1, 1999.
(6) Vests with respect to 20,000 shares on May 19, 1997 and 36,000 shares on
each of May 19, 1998, 1999, 2000, 2001 and 2002.
(7) Vests on January 8, 2003.
(8) Vests with respect to 20,000 shares on each of April 17, 1998 and 1999 and
with respect to 32,000 shares on each of April 17, 2000, 2001, 2002, 2003
and 2004.
The following table provides information regarding options exercised by the
Named Executive Officers during fiscal 1997 and the value of options outstanding
at January 31, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
Fiscal Year-End Option Values
<S> <C> <C> <C> <C>
Number of
Securities
Underlying
Unexercised Value of Unexercised
Options at Fiscal In-the-money options
Year End at Fiscal Year End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- ----------------------- --------------- ------------- ------------------ ---------------------
Harold Ruttenberg - - - -
Adam J. Gilburne 72,245 $1,670,666 90,322/274,313 $912,252/$621,124
Don-Allen Ruttenberg 40,478 $ 597,050 40,479/115,000 $ 407,672/$82,050
Scott C. Wynne - - 80,958/115,000 $ 815,343/$82,050
Eric L. Tyra - - 20,000/230,000 $ 0/$65,500
Alex M. Bond - - 20,000/180,000 $ 0/$0
</TABLE>
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive directors fees of $1,000 for
each meeting of the Board or a committee thereof attended. All directors receive
reimbursement of reasonable out-of-pocket expenses incurred in connection with
meetings of the Board. No director who is an officer or employee of the Company
receives compensation for services rendered as a director. The Company
maintains a stock option plan for the benefit of its non-employee directors.
The Just For Feet, Inc. Non-Employee Director Stock Option Plan (the "Directors
Plan") currently reserves 281,250 shares of Common Stock for issuance pursuant
to the exercise of options granted under such plan. The Directors Plan provides
for an initial one-time grant of options to purchase 25,000 shares to all non-
employee directors (with the exception of Mr. Bart Starr). In addition, the
Directors Plan provides that each year on the first day of the Company's fiscal
year, each then non-employee director automatically will be granted options to
purchase 2,500 shares of Common Stock at an exercise price equal to the fair
market value of the Common Stock on the grant date.
-6-
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Harold Ruttenberg, President and Chief Executive Officer of the Company,
has served as a member of the Compensation Committee of the Board of Directors
since that committee was appointed in August 1993. During the period from
February 1, 1994 through January 1, 1997, the Company made advances totaling
$183,000 to Mr. Ruttenberg for certain personal expenses. Mr. Ruttenberg has
agreed to repay such amount to the Company without interest.
Randall L. Haines, a member of the Compensation Committee during fiscal
1997, is president of Compass Bank - Birmingham. The Company has a revolving
line of credit at Compass Bank, pursuant to which the Company may borrow up to
$40,000,000 for general corporate purposes. Amounts outstanding under the line
of credit bear interest at a floating rate above LIBOR (LIBOR plus 1.25% at
January 31, 1998) and are unsecured. As of January 31, 1998, there was
$15,667,000 outstanding under such line of credit. The line of credit expires on
July 1, 1999.
On January 29, 1998, the Company borrowed $75,000,000 from Compass Bank on
a short-term basis to fund the purchase price of $75,000,000 in face amount of
U.S. Treasury Bills. The securities were purchased by the Company in connection
with the Company's annual Alabama shares tax planning. The loan bore interest
at 6.88% per annum. The Company sold the Treasury Bills in early February 1998
and thereupon repaid the loan in full.
Management believes that each of the above transactions was entered into on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties at the time such transactions were negotiated.
PROPOSAL ONE
AMENDMENT TO
1997 EMPLOYEE INCENTIVE PLAN
On May 14, 1997, the Board of Directors of the Company adopted, subject to
the approval of the Company's shareholders, the Just For Feet, Inc. 1997
Employee Incentive Plan for eligible directors, officers, employees, consultants
and advisors of the Company and its subsidiaries. The Company's shareholders
approved the plan on June 24, 1997 and the Board of Directors subsequently
amended and restated the plan to effect certain technical amendments (the plan,
as amended and restated, is referred to as the "Plan"). The purpose of the Plan
is to enable the Company to attract and retain quality employees and to allow
such employees to participate in the long-term growth of the Company. There are
currently 7 directors, 11 officers and approximately 850 employees, consultants
and advisors eligible for participation in the Plan. The Plan provides for
incentive awards in the form of (i) incentive stock options, (ii) non-qualified
stock options, (iii) stock appreciation rights ("SARs"), (iv) restricted stock,
or (v) performance awards of stock, cash or a combination of stock and cash.
The Plan currently authorizes a maximum of 1,400,000 shares for issuance
pursuant to awards made under the Plan.
THE PROPOSED AMENDMENT
The Board of Directors believes it to be in the best interest of the
Company and its shareholders to increase the number of shares available for
issuance pursuant to awards made under the Plan. On July 1, 1998, the Board of
Directors approved, subject to shareholder approval at the Special Meeting, an
amendment to the Plan to increase the number of shares available for issuance
under the Plan by 1,500,000 shares, from 1,400,000 shares to 2,900,000 shares.
The Company's rapid growth since the adoption of the Plan has resulted in the
grant of awards covering nearly all of the shares of Common Stock available
under the Plan. As of July 7, 1998, there remained 47,880 shares available for
issuance under the Plan. The proposed increase in the number of authorized
shares would ensure the uninterrupted continuation of the Plan as the Company
continues its expansion.
-7-
<PAGE>
A copy of the proposed amendment to the Plan is attached to this Proxy
Statement as Exhibit A and incorporated herein by reference. The Board of
Directors of the Company recommends that shareholders vote FOR the foregoing
amendment. The amendment must be approved by a majority of the shares present
in person or by proxy at the meeting and entitled to vote on the matter.
DESCRIPTION OF THE PLAN
Shares Reserved for the Plan. The shares of the Company's Common Stock to
----------------------------
be awarded to eligible participants under the Plan may be made available either
from authorized and unissued shares or treasury shares. The maximum number of
shares currently reserved and made available for distribution under the Plan is
1,400,000. If for any reason shares of stock awarded or subject to purchase by
exercising an option under the Plan are not delivered or are reacquired by the
Company, such shares may again be available for award under the Plan.
Incentive Awards. All Awards. The Plan authorizes the Board of Directors
----------------
or Stock Option Committee to award eligible participants incentive stock
options, non-qualified stock options, stock appreciation rights, restricted
stock, performance awards or any combination thereof (collectively referred to
as "Awards"). Each Award granted under the Plan will be represented by an Award
Agreement in a form approved by the Board of Directors or Stock Option
Committee. The Award Agreement shall be subject to and incorporate the terms
and conditions required under the Plan or as required by the Board of Directors
or Stock Option Committee for the form of the Award granted and such other terms
and conditions as the Board of Directors or Stock Option Committee may specify.
Stock Options. The Plan authorizes the Board of Directors or Stock Option
Committee to grant eligible participants incentive and non-qualified options to
purchase shares of Common Stock. In the case of incentive stock options, the
exercise price must be at least 100 percent of the fair market value of the
shares on the date the option is granted. Options granted under the Plan may be
exercised according to a prescribed vesting schedule during the period of ten
years after the date the options were granted. The option price may be paid in
cash or such other consideration as the Board of Directors or Stock Option
Committee deems appropriate, including stock already owned by the optionee, or,
with respect to nonqualified options, restricted stock, or a combination of cash
and such other consideration having a total fair market value equal to the
purchase price. Options granted under the Plan may only be transferred by will
or by the laws of descent and distribution. During the optionee's lifetime,
options are exercisable only by the optionee.
Stock Appreciation Rights. SARs may be granted under the Plan in
conjunction with stock options or in tandem with stock options granted under the
Plan, or may be granted alone. SARs granted in conjunction or in tandem with
stock options generally are exercisable only at such time and to the extent that
the stock options to which they relate are exercisable. Upon exercise of an
SAR, a participant shall be entitled to receive an amount in cash or shares of
Common Stock equal in value to the excess of the fair market value of one share
of stock over the exercise price per share specified in the related option or
SAR, multiplied by the number of shares in respect of which the SAR is
exercised.
Restricted Stock. Shares of restricted stock may be issued either alone or
in addition to other awards granted under the Plan. The grant of restricted
stock may be conditioned upon the attainment of specified performance goals.
Recipients of restricted shares have the right to vote the shares and receive
dividends on such shares, but are not permitted to transfer such shares until
termination of all restrictions or six months after the date of the award.
Administration of the Plan. The Plan is administered by the Board of
--------------------------
Directors or the Stock Option Committee, which committee must consist of two or
more non-employee directors.
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<PAGE>
Amendment and Termination of the Plan. The Board of Directors may amend,
-------------------------------------
alter or discontinue the Plan, but no amendment, alteration or discontinuation
may be made which would impair the right of an optionee or participant under a
stock option, SAR, restricted stock or performance award, without the optionee's
or participant's consent, or which, without the approval of the shareholders of
the Company would: (i) increase the total number of shares reserved under the
Plan or (ii) change the category or class of employees eligible to receive
Incentive Stock Options under the Plan. The Company's Board of Directors may
also suspend the granting of options pursuant to the Plan at any time and may
terminate the Plan at any time; provided, however, no such suspension or
termination shall modify or amend any option granted before such suspension or
termination unless the affected participant consents in writing to such
modification or amendment or there is a dissolution or liquidation of the
Company.
OUTSTANDING OPTIONS UNDER THE PLAN
As of July 7, 1998, the Company had outstanding options under the Plan, to
purchase an aggregate of 1,208,769 shares of Common Stock. On July 7, 1998 the
market value of the Company's Common Stock was $28.88 per share and the
aggregate market value of the Common Stock underlying such options was
$34,909,429. The following table indicates the amount of options held by the
(i) Named Executive Officers; (ii) all current executive officers as a group;
(iii) all current directors who are not executive officers as a group; (iv) each
nominee for election as director; and (v) all employees, including all current
officers who are not executive officers, as a group:
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares
Name Position Underlying Option
- -------------------------- ------------------------------------------------- --------------------
Harold Ruttenberg Chairman, President and Chief Executive Officer -
Eric L. Tyra Executive Vice President and Chief Financial 50,000
Officer
Adam J. Gilburne Executive Vice President; President Superstore 100,000
Division
Alex M. Bond Executive Vice President - Strategic Development -
Don-Allen Ruttenberg Executive Vice President - New Store Development -
Scott C. Wynne Executive Vice President - Operations and -
Secretary
Bart Starr Sr. Director 100,000
Michael P. Lazarus Director -
Randall L. Haines Director -
David F. Bellet Director -
Edward S. Croft, III Director -
Warren C. Smith, Jr. Director -
All current directors who
are not executive
officers as a group 100,000
All executive officers as
a group 150,000
All employees, including
all current officers who
are not executive
officers, as a group 1,058,769
</TABLE>
-9-
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. All incentive stock options granted or to be
-----------------------
granted under the Plan which are designated as incentive stock options are
intended to be incentive stock options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Under the provisions of Section 422 of the Code, neither the holder of an
incentive stock option nor the Company will recognize income, gain, deduction or
loss upon the grant or exercise of an incentive stock option. An optionee will
be taxed only when the stock acquired upon exercise of his incentive stock
option is sold or otherwise disposed of in a taxable transaction. If at the
time of such sale or disposition the optionee has held the shares for the
required holding period (two years from the date the option was granted and one
year from the date of the transfer of the shares to the optionee), the optionee
will recognize long-term capital gain or loss, as the case may be, based upon
the difference between his exercise price and the net proceeds of the sale.
However, if the optionee disposes of the shares before the end of such holding
period, the optionee will recognize ordinary income on such disposition in an
amount equal to the lesser of:
(a) gain on the sale or other disposition; or
(b) the amount by which the fair market value of the shares on the date of
exercise exceeded the option exercise price, with any excess gain being capital
gain, long-term or short-term, depending on whether or not the shares had
previously been held for more than one year on the date of sale or other taxable
disposition.
The foregoing discussion and the reference to capital gain or loss
treatment therein assume that the option shares are a capital asset in the hands
of the optionee. A sale or other disposition which results in the recognition
of ordinary income to the optionee will also result in a corresponding income
tax deduction for the Company.
The Plan permits an optionee to pay all or part of the purchase price for
shares acquired pursuant to exercise of an incentive stock option by
transferring to the Company other shares of the Company's Common Stock owned by
the optionee. Section 422 of the Code provides that an option will continue to
be treated as an incentive stock option even if an optionee exercises such
incentive stock option with previously acquired stock of the corporation
granting the option. Accordingly, except as noted below with respect to certain
"statutory option stock," an optionee who exercises an incentive stock option in
whole or in part by transferring to the Company shares of the Company's Common
Stock will recognize no gain or loss upon such exercise.
Section 424(c)(3) of the Code provides that if "statutory option stock" is
transferred in connection with the exercise of an incentive stock option, and if
the holding period requirements under Section 422(a)(1) of the Code are not met
with respect to such statutory option stock before such transfer, then ordinary
income will be recognized as a result of the transfer of statutory option stock.
However, the incentive stock option stock acquired through the exchange of
statutory option stock will still qualify for favorable tax treatment under
Section 422 of the Code.
Incentive stock options offer two principal tax benefits: (1) the
possibility of converting ordinary income into capital gain to the extent of the
excess of fair market value over option price at the time of exercise, and (2)
the deferral of recognition of gain until disposition of the stock acquired upon
the exercise of the option.
At present, the maximum tax rate on capital gains is 28% (20% for property
held for more than 18 months), while the maximum tax rate on ordinary income is
39.6%. Thus, the conversion of ordinary income into capital gain produces some
tax benefit for certain taxpayers. However, the benefit of income deferral
generally provided by incentive stock options is reduced for some taxpayers
since the excess of the fair market value of shares acquired through the
exercise of an incentive stock option over the exercise price is taken into
-10-
<PAGE>
account in computing an individual taxpayer's alternative minimum taxable
income. Thus, the exercise of an incentive stock option could result in the
imposition of an alternative minimum tax liability.
In general, an option granted under the Plan which is designated as an
incentive stock option will be taxed as described above. However, in some
circumstances an option which is designated as an incentive stock option will be
treated as a non-qualified stock option and the holder taxed accordingly. For
example, a change in the terms of an option which gives the employee additional
benefits may be treated as the grant of a new option. Unless all the criteria
for treatment as an incentive stock option are met on the date the "new option"
is considered granted (such as the requirement that the exercise price of the
option be not less than the fair market value of the stock as of the date of the
grant), the option will be treated and taxed as a non-qualified stock option.
Non-Qualified Stock Options. All options granted or to be granted under
---------------------------
the Plan which do not qualify as incentive stock options are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
A participant in the Plan will recognize taxable income upon the grant of a
non-qualified stock option only if such option has a readily ascertainable fair
market value as of the date of the grant. In such a case, the recipient will
recognize taxable ordinary income in an amount equal to the excess of the fair
market value of the option as of such date over the price, if any, paid for such
option. No income would then be recognized on the exercise of the option, and
when the shares obtained through the exercise of the option are disposed of in a
taxable transaction, the resulting gain or loss would be capital gain or loss
(assuming the shares are a capital asset in the hands of the optionee).
However, under the applicable Treasury Regulations, the non-qualified stock
options issued under the Plan will not have a readily ascertainable fair market
value unless at the time such options are granted similar options of the Company
are actively traded on an established market. The Company presently has no such
actively traded options.
Upon the exercise of a non-statutory option not having a readily
ascertainable fair market value, the optionee recognizes ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the option exercise price for those shares. The Company is not
entitled to an income tax deduction with respect to the grant of a non-statutory
stock option or the sale of stock acquired pursuant thereto. The Company
generally is permitted a deduction equal to the amount of ordinary income the
optionee is required to recognize as a result of the exercise of a non-statutory
stock option.
The Plan permits the Committee to allow an optionee to pay all or part of
the purchase price for shares acquired pursuant to an exercise of a non-
statutory option by transferring to the Company other shares of the Company's
Common Stock owned by the optionee. If an optionee exchanges previously
acquired Common Stock pursuant to the exercise of a non-qualified stock option,
the Internal Revenue Service has ruled that the optionee will not be taxed on
the unrealized appreciation of the shares surrendered in the exchange. In other
words, the optionee is not taxed on the difference between his or her cost basis
for the old shares and their fair market value on the date of the exchange, even
though the previously acquired shares are valued at the current market price for
purposes of paying all or part of the option price.
SARs and Performance Awards. On the exercise of an SAR or the receipt by a
---------------------------
Plan participant of a payment with respect to a Performance Award, the
participant generally will recognize taxable ordinary income in an amount equal
to the sum of the cash and the fair market value of the stock (determined as of
the date of exercise of the SAR, or the date of receipt of a payment with
respect to the Performance Award, whichever is applicable), if any, received.
However, the amount of ordinary income recognized and the timing of the
recognition of that income may be different if the Plan participant receives
stock with respect to which there is a substantial risk of forfeiture (such as
Restricted Stock) in connection with the exercise of an SAR or a payment with
respect to a Performance Award. The computation of the ordinary income to be
recognized and the timing of the income recognition with respect to the receipt
-11-
<PAGE>
of stock with a substantial risk of forfeiture is discussed below in connection
with Restricted Stock. A Plan participant will not recognize a loss on the
termination of an unexercised SAR received under the Plan.
Restricted Stock. Generally, and except as noted below, the grant of
----------------
Restricted Stock is not taxable at the time of the grant. Instead, at the time
Restricted Stock vests or becomes transferable, an employee will recognize
ordinary income equal to (i) the excess of the fair market value of such
Restricted Stock on the date the shares vest or become transferable over (ii)
the price, if any, paid for such Restricted Stock. For this purpose, Restricted
Stock will be deemed to be transferable only if the transferee's rights in the
Restricted Stock are not subject to a substantial risk of forfeiture. An
employee may, however, elect to recognize income as of the date of grant of the
Restricted Stock, in an amount equal to (i) the excess of the fair market value
of the Restricted Stock on the date of grant over (ii) the price, if any, paid
for the Restricted Stock. If such an election is made, no additional income
will be recognized at the time the stock vests or becomes transferable. In the
event of a subsequent forfeiture of the shares, an employee making such an
election may be able to recognize a capital loss with respect to the amount, if
any, paid for such Restricted Stock, but only to the extent such amount exceeds
the amount realized by such employee on such forfeiture. The employee will not
be able to recognize a loss for tax purposes with respect to the excess of fair
market value over the purchase price which was previously included in income.
The use of Restricted Stock as all or a portion of the exercise price of a non-
qualified stock option will not result in gain or loss to the optionee to the
extent that such optionee receives through the exercise of such option shares of
stock having restrictions and conditions substantially similar to those
applicable to such Restricted Stock. Dividends paid on the shares of Restricted
Stock before they vest will be taxed to the employee either as additional
compensation or, if the employee has made the election described above, as
dividend income.
Basis and Holding Period of Shares. In most cases, the basis in shares
----------------------------------
acquired upon exercise of a non-qualified option or SAR, upon an award of
Restricted Stock or upon payment with respect to a Performance Award, will be
equal to the fair market value of the shares on the employee's income
recognition date, and the holding period for determining gains and losses on a
subsequent disposition of such shares will begin on such date. In the case of
an incentive stock option, the basis of the shares acquired on exercise of the
option will be equal to the option's exercise price, and the holding period of
the shares will begin on the date the incentive stock option is exercised.
However, if shares of previously acquired stock are surrendered to pay the
exercise price of an incentive stock option or a non-qualified stock option, the
basis and holding period of the shares received in exchange therefor are
determined differently. The basis of the shares surrendered to pay the exercise
price becomes the basis of an equal number of new shares received upon the
exercise of the option, and the holding period of the new shares will include
the holding period of the shares surrendered to pay the exercise price (except
for the purpose of meeting the holding period required by Section 422 of the
Code). The remaining shares received upon the exercise of an incentive option
will have a basis equal to any cash paid on the exercise and any gain recognized
on the disposition of statutory option stock under Section 424(c)(3) of the
Code. The remaining shares received upon the exercise of a non-qualified option
will have a basis equal to the fair market value of such shares less any cash
paid on the exercise (the amount included in the participant's taxable income).
The holding period for such remaining shares will begin on the date such shares
are received by the participant.
As a general rule, the Company will be entitled to a deduction for federal
income tax purposes at the same time and in the same amount that an employee
recognizes ordinary income from awards under the Plan (including the recognition
of ordinary income as the result of a holder of stock obtained through exercise
of an ISO disposing of such stock prior to the expiration of the required
holding period), to the extent such income is considered reasonable compensation
under the Code and generally provided that the Company complies with the
applicable reporting requirements with respect to the ordinary income recognized
by the employee. The Company will not, however, be entitled to a deduction with
-12-
<PAGE>
respect to payments to employees which are contingent upon a Change of Control
if such payments are deemed to constitute "excess parachute payments" pursuant
to Section 280G of the Code and do not qualify as reasonable compensation
pursuant to that Section. In addition, such payment will subject the recipient
to a 20% excise tax. The Company also may not be entitled to a deduction with
respect to payments to certain employees of the Company to the extent that the
total remuneration of such employees is found to be excessive under Section
162(m) of the Code.
General. The Plan is not qualified under Section 401(a) of the Code and is
-------
not subject to the provisions of the Employee Retirement Income Security Act of
1974.
The preceding discussion is based upon federal tax laws and regulations in
effect on the date of this proxy statement, which are subject to change, and
upon an interpretation of the statutory provisions of the Code, its legislative
history and related income tax regulations. Furthermore, the foregoing is only
a general discussion of the federal income tax consequences of the Plan and does
not purport to be a complete description of all federal income tax aspects of
the Plan. Plan participants may also be subject to state and local taxes in
connection with the grant or exercise of options, SARs performance awards or
Restricted Stock granted under the Plan and the sale or other disposition of
shares acquired upon exercise of the options or otherwise received pursuant to
the Plan. EACH EMPLOYEE RECEIVING A GRANT OF OPTIONS, SARS, PERFORMANCE AWARDS
OR RESTRICTED STOCK SHOULD CONSULT WITH HIS OR HER PERSONAL TAX ADVISOR
REGARDING FEDERAL, STATE AND LOCAL CONSEQUENCES OF PARTICIPATING IN THE PLAN.
-13-
<PAGE>
SHAREHOLDER PROPOSALS
Any proposal to be presented at next year's Annual Meeting must be received
at the principal executive offices of the Company not later than December 26,
1998 directed to the attention of the Secretary, for consideration for inclusion
in the Company's proxy statement and form of proxy relating to that meeting.
Any such proposals must comply in all respects with the rules and regulations of
the Securities and Exchange Commission.
OTHER MATTERS
Management does not know of any matters to be brought before the meeting
other than those referred to above. If any other matter properly comes before
the meeting, the persons designated as proxies will vote on each such matter in
accordance with their best judgment.
By Order of the Board of Directors
Scott C. Wynne
Secretary
Birmingham, Alabama
July [27], 1998
-14-
<PAGE>
EXHIBIT A
AMENDMENT NO. 1
TO
AMENDED AND RESTATED EMPLOYEE INCENTIVE STOCK OPTION PLAN
JUST FOR FEET, INC.
WHEREAS, the Board of Directors of Just For Feet, Inc. (the "Company") has
previously adopted, and the shareholders of the Corporation have approved, the
1997 Employee Incentive Plan, as amended (the "Plan") pursuant to which various
types of incentive awards may be issued to eligible directors, officers,
employees, consultants and advisors of the Corporation; and
WHEREAS, the Board of Directors of the Corporation deems it desirable to
amend the Plan so as to increase the number of shares available for issuance
pursuant to awards granted under the Plan;
NOW, THEREFORE, the Plan is amended upon the terms, and subject to the
conditions, set forth herein:
ARTICLE I
AMENDMENT TO PLAN
1.1 Section 3 of the Plan shall be amended by deleting the first sentence
such section in its entirety and substituting therefor the following:
"The total number of shares of stock reserved and available for
distribution under the Plan shall be 2,900,000."
ARTICLE II
EFFECTIVE DATE OF AMENDMENT
2.1 The amendment effected hereby shall be effective for options granted
under the Plan to eligible employees on or after the date this amendment is
approved by the Board of Directors of the Corporation, but subject to approval
of a majority of the shares of Common Stock of the Corporation entitled to vote
thereon represented in person and by proxy at a meeting of shareholders. In the
event shareholder approval of adoption of this amendment is not obtained within
twelve months of the date this amendment is approved by the Board of Directors
of the Corporation, then any option granted in the intervening period to
eligible employees shall be void.
A-1
<PAGE>
APPENDIX A
JUST FOR FEET, INC.
1997 EMPLOYEE INCENTIVE PLAN
SECTION 1. General Purpose of Plan; Definitions.
The name of this plan is the Just For Feet, Inc. 1997 Employee Incentive
Plan (the "Plan"). The purpose of the Plan is to enable Just For Feet, Inc.
(the "Company") and its Subsidiaries and Affiliates to attract and retain
employees who contribute to the Company's success by their ability, ingenuity
and industry, and to enable such employees to participate in the long-term
success and growth of the Company through an equity interest in the Company.
For purposes of the Plan, the following terms shall be defined as set forth
below:
a. "Affiliate" means any corporation (other than a Subsidiary),
partnership, joint venture or any other entity in which the Company owns,
directly or indirectly, at least a 10 percent beneficial ownership interest.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means a felony conviction of a participant or the failure of a
participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty, any of which is harmful to the business or reputation
of the Company or any Subsidiary or Affiliate.
d. "Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto and the Treasury Regulations and rulings promulgated
thereunder.
e. "Committee" means a committee of the Board appointed for the purpose of
administering the Plan, which committee shall at all times consist of two or
more Non-Employee Directors.
f. "Commission" means the U.S. Securities and Exchange Commission.
g. "Company" means Just For Feet, Inc., a corporation organized under the
laws of the State of Alabama (or any successor corporation).
h. "Disability" means total and permanent disability as determined under
the Company's long term disability program or, if the Company has no such
program, shall mean total and permanent disability as defined in Section
22(e)(3) of the Code or any successor thereto.
i. "Eligible Employee" means a person regularly employed by the Company or
a Subsidiary and who is responsible for or contributes to the management, growth
and/or profitability of the business of the Company or a Subsidiary.
j. "Eligible Participant" means directors, officers, employees,
consultants and advisors of the Company or a Subsidiary and other persons who
may not otherwise be eligible to receive Incentive Stock Options pursuant to
Section 5 of the Plan.
<PAGE>
k. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any successor thereto.
l. "Fair Market Value" means, as of any given date, the mean between the
high "bid" and low "ask" prices as of the close of business for the Company's
Stock in the over-the-counter market, as reported by the Nasdaq Stock Market (or
other national quotation service), or, if the Stock is registered on a national
securities exchange, the closing price of the Stock on such national securities
exchange or, if neither traded in the over-the-counter market nor listed on a
national securities exchange, then the fair market value as determined by the
Board or the Committee, but in no case less than the par value of such Stock.
m. "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
n. "Non-Employee Director" means a member of the Board who is not a
regular salaried employee of the Company or one of its Subsidiaries. As it
relates to the members of the Committee, "Non-Employee Director" shall have the
meaning set forth in Rule 16b-3(b) (3) as promulgated by the Commission under
the Securities Exchange Act of 1934, as amended, or any successor definition
adopted by the Commission.
o. "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
p. "Performance Award" means an award of shares of Stock or cash pursuant
to Section 9 contingent upon achieving certain performance goals.
q. "Plan" means this 1997 Employee Incentive Plan.
r. "Restricted Stock" means an award of shares of Stock that are subject
to restrictions under Section 8.
s. "Stock" means the Common Stock, par value $.0001 per share, of the
Company.
t. "Stock Appreciation Right" means a right granted under Section 7 which
entitles the holder to receive a cash payment or an award of Stock in an amount
equal to the difference between (i) the Fair Market Value of the Stock covered
by such right at the date the right is granted, unless otherwise determined by
the Board or the Committee pursuant to Section 7 and (ii) the Fair Market Value
of the Stock covered by such right at the date the right is exercised multiplied
by the number of shares covered by the right.
u. "Stock Option" means any option to purchase shares of Stock granted to
Eligible Employees or Eligible Participants under the Plan.
v. "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
-2-
<PAGE>
SECTION 2. Administration.
The Plan shall be administered by the Board or the Committee. The Board or
the Committee shall have the power and authority to grant to Eligible Employees
or Eligible Participants, pursuant to the terms of the Plan: (i) Incentive Stock
Options; (ii) Non-Qualified Stock Options; (iii) Stock Appreciation Rights; (iv)
Restricted Stock; or (v) Performance Awards.
In particular, the Board or the Committee shall have the authority:
(i) to select the Eligible Employees or Eligible Participants to whom
Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock, or Performance Awards or a combination of the foregoing from
time to time will be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options, Non-
Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, or
Performance Awards or a combination of the foregoing, are to be granted
hereunder;
(iii) to determine the number of shares of Stock to be covered by each such
award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder including, but not limited to, any
restriction on any Stock Option or other award and/or the shares of Stock
relating thereto based on performance and/or such other factors as the Board or
the Committee may determine, in its sole discretion, and any vesting
acceleration features based on performance and/or such other factors as the
Board or the Committee may determine, in its sole discretion;
(v) to determine whether, to what extent and under what circumstances Stock
and other amounts payable with respect to an award under this Plan shall be
deferred either automatically or at the election of a participant,
including providing for and determining the amount (if any) of deemed earnings
on any deferred amount during any deferral period.
Subject to Section 11, the Board or the Committee shall have the authority
to adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable; to interpret
the terms and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.
All decisions made by the Board or the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
Plan participants.
-3-
<PAGE>
SECTION 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 1,400,000. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.
If any shares of Stock that have been subject to option cease to be subject
to option, or if any shares subject to any Restricted Stock award granted
hereunder are forfeited or such award is otherwise terminated, such shares shall
again be available for distribution in connection with future awards under the
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment shall be made in the aggregate
number of shares reserved for issuance under the Plan, in the number and option
price of shares subject to outstanding Stock Options granted under the Plan and
in the number of shares subject to Restricted Stock awards granted under the
Plan as may be determined to be appropriate by the Board or the Committee, in
its sole discretion, provided that the number of shares subject to any award
shall always be a whole number. Such adjusted option price shall also be used
to determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility.
Incentive Stock Options shall be granted only to Eligible Employees. Non-
Qualified Stock Options, Stock Appreciation Rights, Restricted Stock and
Performance Awards may be granted to Eligible Employees and Eligible
Participants. The optionees and participants under the Plan shall be selected
from time to time by the Board or the Committee, in its sole discretion, from
among those eligible, and the Board or the Committee shall determine, in its
sole discretion, the number of shares covered by each award or grant.
SECTION 5. Incentive Stock Options.
Incentive Stock Options may be granted either alone or in addition to other
awards granted under the Plan. Any Incentive Stock Option granted under the
Plan shall be in such form as the Board or the Committee may from time to time
approve, and the provisions of Incentive Stock Option awards need not be the
same with respect to each optionee.
The Board or the Committee shall have the authority to grant any Eligible
Employee Incentive Stock Options (with or without Stock Appreciation Rights)
except that Incentive Stock Options shall not be granted to employees of an
Affiliate. To the extent that any Stock Option does not qualify as an Incentive
Stock Option, it shall constitute a separate Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised, so
as to disqualify either the Plan or any Incentive Stock Option under Section 422
of the Code. Notwithstanding the foregoing, in the event an optionee
voluntarily disqualifies an option as an Incentive Stock Option within the
meaning of Section 422 of the Code, the Board or the Committee may, but shall
not be obligated
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to, make such additional grants, awards or bonuses as the Board or the Committee
shall deem appropriate, to reflect the tax savings to the Company which results
from such disqualification.
Incentive Stock Options granted under the Plan shall be evidenced by
agreements to be consistent with and subject to the following terms and
conditions and shall contain such additional terms and conditions, consistent
with the terms of the Plan, as the Board or the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable
under an Incentive Stock Option shall be the Fair Market Value of the Stock
on the date of the grant of the Incentive Stock Option; provided, however,
that the option price per share of an Incentive Stock Option granted to an
individual who, at the time the option is granted, owns directly or
indirectly more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of a subsidiary (a "Ten Percent
Owner"), shall be not less than one hundred ten percent (110%) of the Fair
Market Value on the date the option is granted.
(b) Option Term. The term of each Incentive Stock Option shall be
fixed by the Board or the Committee, but no Incentive Stock Option shall be
exercisable more than ten years after the date such option is granted.
Notwithstanding the foregoing, no Incentive Stock Option granted to a Ten
Percent Owner shall be exercisable more than five (5) years from the date
of grant of the option.
(c) Exercisability. Subject to paragraph (g) of this Section 5,
Incentive Stock Options shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Board or
the Committee at grant. If the Board or the Committee provides, in its
discretion, that any Incentive Stock Option is exercisable only in
installments, the Board or the Committee may waive such installment
exercise provision at any time in whole or in part based on performance
and/or such other factors as the Board or the Committee may determine in
its sole discretion.
(d) Method of Exercise. Incentive Stock Options may be exercised in
whole or in part at any time during the option period, by giving written
notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price, in cash,
by check or such other instrument as may be acceptable to the Board or the
Committee. As determined by the Board or the Committee, in its sole
discretion, at or after grant, payment in full or in part may also be made
in the form of unrestricted Stock owned by the optionee (based on the Fair
Market Value of the Stock on the date the option is exercised). An
optionee shall have the right to dividends or other rights of a stockholder
with respect to shares subject to the option only when the optionee has
given written notice of exercise and has paid in full for such shares.
(e) Non-transferability of Options. No Incentive Stock Option shall
be transferable by the optionee otherwise than by will or by the laws of
descent and distribution. All Incentive Stock Options shall be
exercisable, during the optionee's lifetime, only by the optionee.
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(f) Termination of Employment. In the event that an optionee during
his or her lifetime ceases to be an employee of the Company or of any
Subsidiary of the Company for any reason (including retirement) other than
death or Disability, any Incentive Stock Option or unexercised portion
thereof which was otherwise exercisable on the date of termination of
employment shall expire unless exercised within a period of three (3)
months from the date on which the optionee ceased to be an employee, but in
no event after the term provided in the optionee's stock option agreement.
In the event that an optionee ceases to be an employee of the Company or of
any Subsidiary of the Company for any reason (including retirement) other
than death or Disability prior to the time that an option is exercisable,
his or her Incentive Stock Option shall terminate immediately and be null
and void.
In the event that an optionee during his or her lifetime ceases
to be an employee of the Company or any Subsidiary of the Company by reason
of death or Disability, any Incentive Stock Option or unexercised portion
thereof which was otherwise exercisable on the date such optionee ceased
employment shall expire unless exercised within a period of one (1) year
from the date on which the optionee ceased to be an employee, but in no
event after the term provided in the optionee's stock option agreement. In
the event that an optionee during his or her lifetime ceases to be an
employee of the Company or any Subsidiary of the Company by reason of death
or Disability, any Incentive Stock Option or portion thereof which was not
exercisable on the date such optionee ceased employment shall become
immediately exercisable for a period of six (6) months from the date on
which the optionee ceased to be an employee, but in no event after the term
provided in the optionee's stock option agreement. In the event of the
death of an optionee, the option shall be exercisable by his or her
personal representatives, heirs or legatees, as provided herein.
(g) Limit on Value of Incentive Stock Options First Exercisable
Annually. To the extent that the aggregate Fair Market Value (determined at
the time the option is granted) of shares of Stock with respect to which
Incentive Stock Options are exercisable for the first time by an individual
during any calendar year (under all of the Company=s option plans) exceeds
$100,000, such options shall be treated as Non-Qualified Stock Options.
(h) Restriction on Transfer of Underlying Shares. Each optionee shall
hold the shares purchased by him pursuant to the exercise of a Stock Option
granted under this Plan until the expiration of sixty (60) days from the
date of exercise. The Board or the Committee may waive the restriction
imposed by this paragraph and may, in its sole discretion, as a condition
to such waiver, require the optionee to sell such shares to the Company at
the original exercise price.
SECTION 6. Non-Qualified Stock Options.
The Board or the Committee may grant to Eligible Employees or Eligible
Particpants options under the Plan which are not Incentive Stock Options under
the provisions of Section 422 of the Code. Such Non-Qualified Stock Options
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shall be evidenced by agreements in such form and consistent with this Plan as
the Board or the Committee shall approve from time to time, which agreements
shall contain in substance the same terms and conditions as set forth in Section
5 hereof with respect to Incentive Stock Options; provided, however, that,
subject to Section 14(f) hereof, the limitations set forth in Sections 5(a),
5(b), 5(f), 5(g) and 5(h) shall not be applicable to Non-Qualified Stock
Options. Payment of the option exercise price for a Non-Qualified Stock Option
may be made in the form of Restricted Stock owned by the optionee, in which case
the shares received upon the exercise of such Non-Qualified Stock Option shall
be restricted or deferred, as the case may be, in accordance with the original
term of the Restricted Stock award in question, except that the Board or the
Committee may direct that such restrictions or deferral provisions shall apply
only to the number of such shares equal to the number of shares of Restricted
Stock surrendered upon the exercise of such option. No shares of unrestricted
Stock shall be issued until full payment therefor has been made.
SECTION 7. Stock Appreciation Rights.
(a) Grant and Exercise When Granted in Conjunction With Stock Options.
Stock Appreciation Rights may be granted in conjunction with all or part of any
Stock Option granted under the Plan and may contain terms and conditions
different from those of the related Stock Option, except as otherwise provided
below. In the case of a Non-Qualified Stock Option, such rights may be granted
either at or after the time of the grant of such Non-Qualified Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of the grant of such Incentive Stock Option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, except that,
unless otherwise provided by the Board or the Committee at the time of grant, a
Stock Appreciation Right granted with respect to less than the full number of
shares covered by a related Stock Option shall only be reduced if and to the
extent that the number of shares covered by the exercise or termination of the
related Stock Option exceeds the number of shares not covered by the Stock
Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance
with paragraph (d) of this Section 7, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (d) of this Section 7. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Grant and Exercise When Granted in Tandem With Stock Option. Stock
Appreciation Rights may be granted in tandem either at the time of grant of a
Non-Qualified Stock Option or at any time during the term of such Stock Option.
A Stock Appreciation Right may be exercised at any time to the extent that
the Stock Option to which it relates is then exercisable, and shall be subject
to the conditions applicable to such Stock Option. When a Stock Appreciation
Right is exercised in accordance with Section 7(d), the Stock Option to which it
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relates shall cease to be exercisable to the extent of the number of shares with
respect to which the Stock Appreciation Right is exercised. Similarly, when an
option is exercised, the Stock Appreciation Right relating to the shares covered
by such Stock Option exercise shall terminate. Any Stock Appreciation Right
which is outstanding on the last day of the term of the Stock Option to which it
is related shall be automatically exercised on such date for cash or Stock, as
determined by the Board or the Committee, without any action by the optionee.
(c) Grant and Exercise When Granted Alone. Stock Appreciation Rights may
be granted at the discretion of the Board or the Committee in a manner not
related to an award of a Stock Option. A Stock Appreciation Right granted under
this Section 7(c) is not exercisable for a period of six months from the date of
grant, unless a longer period is otherwise determined by the Board or the
Committee. The Stock Appreciation Right, granted under Section 7(c), shall be
exercisable in accordance with Section 7(d) over a period not to exceed ten
years. Any Stock Appreciation Right which is outstanding on the last day of the
exercisable period shall be automatically exercised on such date for cash or
Stock, as determined by the Board or the Committee, without any action by the
holder.
(d) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Board or the Committee, including
the following:
(i) Stock Appreciation Rights granted pursuant to Section 7(a) and
7(b) shall be exercisable only at such time or times and to the extent that
the Stock Options to which the Stock Appreciation Rights relate shall be
exercisable in accordance with the provisions of Sections 5 and 6 and this
Section 7 of the Plan; provided, however, that any Stock Appreciation Right
granted subsequent to the grant of the related Stock Option shall not be
exercisable during the first six months of the term of the Stock
Appreciation Right, except that this additional limitation shall not apply
in the event of death or Disability of the optionee prior to the expiration
of the six-month period.
(ii) Upon the exercise of a Stock Appreciation Right granted pursuant
to Section 7(a) or 7(b), an optionee shall be entitled to receive an amount
in cash or shares of Stock equal in value to the excess of the Fair Market
Value of one share of Stock over the option price per share specified in
the related Stock Option multiplied by the number of shares in respect of
which the Stock Appreciation Right shall have been exercised, with the
Board or the Committee having the right to determine the form of payment.
Upon the exercise of a Stock Appreciation Right granted pursuant to Section
7(c), the holder shall be entitled to receive an amount in cash or shares
of Stock equal in value to the excess of the Fair Market Value of one share
of Stock at the date of such exercise over the Fair Market Value of one
share of Stock at the date the Stock Appreciation Right was granted
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Board or the
Committee having the right to determine the form of payment.
(iii) No Stock Appreciation Right shall be transferable by the holder
otherwise than by will or the laws of descent and distribution. All Stock
Appreciation Rights shall be exercisable, during the holder's lifetime,
only by the holder.
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(iv) Upon the exercise of a Stock Appreciation Right granted pursuant
to Section 7(a) or Section 7(b), the Stock Option or part thereof to which
such Stock Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 3 of the
Plan on the number of shares of Stock to be issued under the Plan.
(v) A Stock Appreciation Right granted in connection with an Incentive
Stock Option pursuant to Section 7(a), may be exercised only if and when
the market price of the Stock subject to the Incentive Stock Option exceeds
the exercise price of such Stock Option.
(vi) In its sole discretion, the Board or the Committee may provide,
at the time of grant of a Stock Appreciation Right under this Section 7,
that such Stock Appreciation Right can be exercised only in the event of a
"Change of Control" and/or a "Potential Change of Control" (as defined in
Section 13 below).
(vii) The Board or the Committee, in its sole discretion, may also
provide that in the event of a "Change of Control" and/or a "Potential
Change of Control" (as defined in Section 13 below) the amount to be paid
upon the exercise of a Stock Appreciation Right shall be based on the
"Change of Control Price" (as defined in Section 13 below).
(viii) Any exercise by a participant of all or a portion of a Stock
Appreciation Right for cash, may only be made during the period beginning
on the third business day following the date of the Company's release of
its quarterly or annual summary statements of sales and earnings to the
public and ending on the twelfth business day following such date;
provided, however, that the foregoing shall not apply to any exercise by a
participant of a Stock Appreciation Right for cash where the date of
exercise is automatic or fixed in advance under the Plan and is outside the
control of the participant.
SECTION 8. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either alone
or in addition to other awards granted under the Plan. The Board or the
Committee shall determine the Eligible Employees or Eligible Participants to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the price, if any, to be paid by the
recipient of Restricted Stock, the time or times within which such awards may be
subject to forfeiture, and all other conditions of the awards. However, in no
event shall any restriction, including risk of forfeiture, attach to the
Restricted Stock for a term to exceed ten years from the date such Stock was
granted. The Board or the Committee may also condition the grant of Restricted
Stock upon the attainment of specified performance goals, or such other criteria
as the Board or the Committee may determine, in its sole discretion. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
(a "Restricted Stock Award Agreement") and has delivered a fully executed copy
thereof to the Company, and has otherwise complied with the then applicable
terms and conditions.
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(i) Awards of Restricted Stock must be accepted within a period of 60
days (or such shorter period as the Board or the Committee may specify)
after the award date by executing a Restricted Stock Award Agreement and
paying whatever price, if any, is required.
(ii) Each participant who is awarded Restricted Stock shall be issued
a stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of the participant, and shall
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Just For Feet, Inc. 1997 Employee Incentive Plan
and a Restricted Stock Agreement entered into between the registered
owner and Just For Feet, Inc. Copies of such Plan and Agreement are
on file in the offices of Just For Feet, Inc., 7400 Cahaba Valley
Road, Birmingham, Alabama 35242."
(iii) The Board or the Committee shall require that the stock
certificates evidencing such shares be held in custody by the Company until
the restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 8 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and Restricted Stock Award
Agreements, during the period of six months after the award or such longer
period as may be set by the Board or the Committee commencing on the grant
date (the "Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock awarded under
the Plan. Within these limits, and subject to Section 14(f) hereof, the
Board or the Committee may, in its sole discretion, provide for the lapse
of such restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on performance and/or such other
factors as the Board or the Committee may determine, in its sole
discretion.
(ii) Except as provided in paragraph (c)(i) of this Section 8, the
participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a stockholder of the Company, including the right to
receive any dividends.
Dividends paid in cash with respect to shares of Restricted Stock
shall not be subject to any restrictions or subject to forfeiture.
Dividends paid in stock of the Company or stock received in connection with
a stock split with respect to Restricted Stock shall be subject to the same
restrictions as on such Restricted Stock. Certificates for shares of
unrestricted Stock shall be delivered to the participant promptly after,
and only after, the period of forfeiture shall expire without forfeiture in
respect of such shares of Restricted Stock.
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(iii) Subject to the provisions of the Restricted Stock Award
Agreement and this Section 8, upon termination of employment for any reason
during the Restriction Period, all shares still subject to restriction
shall be forfeited by the participant, and the participant shall only
receive the amount, if any, paid by the participant for such forfeited
Restricted Stock.
(iv) In the event of special hardship circumstances of a participant
whose employment is involuntarily terminated (other than for Cause), the
Board or the Committee may, in it sole discretion, waive in whole or in
part any or all remaining restrictions with respect to such participant's
shares of Restricted Stock.
SECTION 9. Performance Awards.
(a) Administration. Shares of Stock or a payment in cash may be
distributed under the Plan upon the attainment of achievement objectives to a
participant as a Performance Award. The Board or the Committee shall determine
the Eligible Employees or Eligible Participants to whom the Performance Award is
granted, the terms and conditions of the achievement objectives, the term of the
performance period, and the level and form of the payment of the Performance
Award.
(b) Achievement Objectives. The Board or the Committee, at its sole
discretion may establish, under this Section 9, achievement objectives either in
terms of Company-wide objectives or in terms of objectives that are related to
the specific performance of the participant or the division, subsidiary,
department or function within the Company in which the participant is engaged.
A minimum level of achievement at the discretion of the Board or the Committee,
may be established.
If at the end of the performance period the specified objectives have been
attained, the participant is deemed to have fully earned the Performance Award.
If such achievement objectives have not been attained, the participant is deemed
to have partly earned the Performance Award and becomes eligible to receive a
portion of the total award, as determined by the Board or the Committee. If a
required minimum level of achievement has not been met, the participant is
entitled to no portion of the Performance Award. The Company may adjust the
payment of awards or the achievement objectives if events occur or circumstances
arise which would cause a particular payment or set of achievement objectives to
be inappropriate as a measure of performance.
(c) Terms and Conditions. A participant to whom a Performance Award has
been granted is given achievement objectives to be reached over a specified
period, the "performance period." Generally this period shall be not less than
one year but in no case shall the period exceed five years.
Any participant granted a Performance Award pursuant to this Section 9 who
by reason of death, disability or retirement terminates his position with the
Company before the end of the performance period is entitled to receive a
portion of any earned Performance Award.
A participant who terminates his position with the Company for any other
reason forfeits all rights under the Performance Award.
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SECTION 10. Loan Provisions.
With the consent of the Board or the Committee, the Company may make, or
arrange for, a loan or loans to an Eligible Employee or Eligible Participants
with respect to the exercise of any Stock Option granted under the Plan and/or
with respect to the payment of the purchase price, if any, of any Restricted
Stock awarded hereunder. The Board or the Committee shall have full authority
to decide whether to make a loan or loans hereunder and to determine the amount,
term and provisions of any such loan or loans, including the interest rate to be
charged in respect of any such loan or loans, whether the loan or loans are to
be with or without recourse against the borrower, the terms on which the loan is
to be repaid and the conditions, if any, under which the loan or loans may be
forgiven.
SECTION 11. Amendments and Termination.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made which would impair the right of an
optionee or participant under a Stock Option, Stock Appreciation Right,
Restricted Stock, or Performance Award theretofore granted, without the
optionee's or participant's consent, or which without the approval of the
shareholders would (a) except as expressly provided in this Plan, increase the
total number of shares reserved for the purpose of the Plan; or (b) change the
category or class of employees eligible to receive Incentive Stock Options under
the Plan.
The Plan may at any time or from time to time be terminated, modified or
amended by the affirmative vote of not less than a majority of the votes
entitled to be cast thereon by the Company=s stockholders. The Board or the
Committee may amend the terms of any award or option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any holder without his consent. Subject to Section 14(f) hereof, the Board or
the Committee may also substitute new Stock Options for previously granted Stock
Options including options granted under other plans applicable to the
participant and previously granted Stock Options having higher option prices.
SECTION 12. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing set forth herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Board or the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or a payment in lieu of or with respect
to awards hereunder, provided, however, that the existence of such trusts or
other arrangements is consistent with the unfunded status of the Plan.
SECTION 13. Change of Control.
The following acceleration and valuation provisions shall apply in the
event of a "Change of Control" as defined in this Section 13:
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(a) In the event of a "Change of Control" as defined in paragraph (b) of
this Section 13, unless otherwise determined by the Board or the Committee in
writing at or after grant, but prior to the occurrence of such Change of
Control:
(i) any Stock Appreciation Rights and any Stock Options awarded under
the Plan which have been outstanding for at least six months, if not
previously exercisable and vested shall become fully exercisable and
vested;
(ii) with the exception of the six month restriction in Section
8(c)(i), the restrictions and deferral limitations applicable to any
Restricted Stock award under the Plan shall lapse and such shares and
awards shall be deemed fully vested; and
(iii) the value of all outstanding Stock Options, Stock Appreciation
Rights, Restricted Stock or Performance Awards shall, to the extent
determined by the Board or the Committee at or after grant, be cashed out
on the basis of the "Change of Control Price" (as defined in paragraph (c)
of this Section 13) as of the date the Change of Control occurs, or such
other date as the Board or the Committee may determine prior to the Change
of Control.
(b) For purpose of paragraph (a) of this Section 13, a "Change of Control"
means the happening of any of the following:
(i) when any "person," as such term used in Section 13(d) and 14(d) of
the Exchange Act (other than Harold Ruttenberg or any affiliate of Harold
Ruttenberg, the Company or a Subsidiary or any Company employee benefit
plan (including its trustee)), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly of
securities of the Company representing 50.01 percent or more of the
combined voting power of the Company's then outstanding securities;
(ii) when, during any period of two consecutive years during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board cease, for any reason other than death, to
constitute at least a majority thereof, unless each director who was not a
director at the beginning of such period was elected by, or on the
recommendation of, at least two-thirds of the directors at the beginning of
such period; or
(iii) the occurrence of a transaction requiring stockholder approval
for the acquisition of the Company by an entity other than the Company or a
Subsidiary through purchase of assets, or by merger, or otherwise.
(c) For purposes of this Section 13, "Change of Control Price" means the
highest price per share paid in any transaction reported on the Nasdaq Stock
Market or the New York Stock Exchange Composite Tape, whichever then applies to
the Stock, or paid or offered in any transaction related to a potential or
actual Change of Control of the Company at any time during the preceding 60 day
period as determined by the Board or the Committee, except that in the case of
Incentive Stock Options and Stock Appreciation Rights relating to Incentive
Stock Options, such price shall be based only on transactions reported for the
date on which the Board or the Committee decides to cash out such options.
SECTION 14. General Provisions.
(a) All certificates for shares of Stock delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the Board or the
Committee may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the Board or the
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
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(b) Nothing set forth in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee of the Company, any Subsidiary or any Affiliate,
any right to continued employment with the Company, a Subsidiary or an
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company, a Subsidiary or an Affiliate to terminate the employment of any
of its employees at any time.
(c) Each participant shall, no later than the date as of which the value of
an award first becomes includable in the gross income of the participant for
federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Board or the Committee regarding payment of, any federal,
state, or local taxes of any kind required by law to be withheld with respect to
the award. The obligations of the Company under the Plan shall be conditional
on such payment or arrangements and the Company (and, where applicable, its
Subsidiaries and Affiliates), shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant. A participant may irrevocably elect to have the withholding tax
obligations or, in the case of all awards hereunder except Stock Options which
have related Stock Appreciation Rights, if the Board or the Committee so
determines, any additional tax obligation with respect to any awards hereunder
satisfied by (a) having the Company withhold shares of Stock otherwise
deliverable to the participant with respect to the award or (b) delivering to
the Company shares of unrestricted Stock.
(d) At the time of grant or purchase, the Board or the Committee may
provide in connection with any grant or purchase made under this Plan that the
shares of Stock received as a result of such grant or purchase shall be subject
to a right of first refusal, pursuant to which the participant shall be required
to offer the Company any shares that the participant wishes to sell, with the
price being the then Fair Market Value of the Stock, subject to provisions of
Section 14 hereof and to such other terms and conditions as the Board or the
Committee may specify at the time of grant.
(e) No member of the Board or the Committee, nor any officer or employee of
the Company acting on behalf of the Board or the Committee, shall be personally
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all members of the Board or the Committee
and each and any officer or employee of the Company acting on their behalf
shall, to the extent permitted by law, be fully indemnified and protected by the
Company in respect of any such action, determination or interpretation.
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(f) Notwithstanding any provision herein to the contrary, the Board or the
Committee shall not grant or award Non-Conforming Awards (as defined below)
which, in the aggregate, represent in excess of ten percent (10%) of the total
number of shares of Stock reserved and available for distribution under the Plan
(as such number may be amended by the shareholders of the Company from time to
time). As used herein, "Non-Conforming Awards" means (i) Non-Qualified Stock
Options granted pursuant to Section 6 hereof with an option price less than the
Fair Market Value of the Stock on the date of grant; (ii) Stock Options granted
in exchange for the cancellation of previously granted Stock Options including
options granted under other plans applicable to the participant and previously
granted Stock Options having higher option prices, as contemplated by the second
paragraph of Section 11 hereof; (iii) awards of Restricted Stock pursuant to
Section 8 hereof with a Restricted Period (as defined in Section 8(c)(1)) of
less than one year for performance-based awards and three years for tenure-based
awards; and (iv) awards of Restricted Stock with respect to which the Restricted
Period has been accelerated or waived by the Board or the Committee pursuant to
Section 8(c)(1) hereof, except in the event of a Change of Control of the
Company or the retirement, death or Disability of a participant."
SECTION 15. Effective Date of Plan.
The Plan shall be effective on the date it is approved by a majority vote
of the Company's stockholders.
SECTION 16. Term of Plan.
No Stock Option, Stock Appreciation Right, Restricted Stock or Performance
Award shall be granted pursuant to the Plan on or after the tenth anniversary of
the date of stockholder approval, but awards theretofore granted may extend
beyond that date.
-15-
<PAGE>
APPENDIX B
JUST FOR FEET, INC.
7400 Cahaba Valley Road
Birmingham, Alabama 35242
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR A
SPECIAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints Harold Ruttenberg and Scott C. Wynne, or
either of them, with power of substitution to each, the proxies of the
undersigned to vote the Common Stock of the undersigned at a Special Meeting of
Shareholders of JUST FOR FEET, INC. to be held on Monday, August 17, 1998 at
10:00 a.m. at the Company's offices, 7400 Cahaba Valley Road, Birmingham,
Alabama, and any postponement, rescheduling or adjournment thereof:
1. To approve an amendment to the Company's 1997 Employee Incentive Plan
to increase the number of shares available for issuance pursuant to
such plan from 1,400,000 shares to 2,900,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To vote in accordance with their best judgment with respect to any
other matters that may properly come before the meeting.
(continued and to be signed on reverse)
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" EACH OF THE ABOVE PROPOSALS AND
UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS
PROXY WILL BE SO VOTED.
Please date and sign this Proxy exactly
as name(s) appears on the mailing label.
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---------------------------------------
Print Name(s):
-------------------------
NOTE: When signing as an attorney,
trustee, executor, administrator or
guardian, please give your title as
such. If a corporation or partnership,
give full name by authorized officer. In
the case of joint tenants, each joint
owner must sign.
Dated:
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