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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended January 30, 1999
Commission File No. 0-23570
JUST FOR FEET, INC.
A Delaware Corporation
(IRS Employer Identification No. 52-2098043)
7400 Cahaba Valley Road
Birmingham, Alabama 35242
(205) 408-3000
Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:
None
Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:
Common Stock, par value $.0001 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the Common Stock of the registrant held by
nonaffiliates of the registrant (18,556,831 shares) on April 12, 1999 was
$206,537,529. For the purposes of this response, officers, directors and
holders of 5% or more of the registrant's Common Stock are considered the
affiliates of the registrant at that date.
The number of shares outstanding of the registrant's Common Stock, par value
$.0001 per share, as of April 12, 1999: 31,205,430 shares.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held in 1999 are incorporated by reference into
Part III of this Report, with the exception of information regarding executive
officers required under Item 10 of Part III, which information is included in
Part I, Item 1.
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PART I
Item 1. Business.
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The Private Securities Litigation Reform Act of 1995 provides a safe harbor
to encourage companies to provide prospective information so long as it is
identified as forward-looking and accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed. Forward-looking statements are related
to the plans and objectives of management for the future operations, economic
performance, of projections of revenues, income, earnings per share, capital
expenditures, dividends, capital structure, or other financial items. In the
following discussion and elsewhere in this report, statements containing words
such as "expect," "anticipate," "believe," "goal," "objective," or similar words
are intended to identify forward-looking statements. The Company undertakes no
obligation to update such forward-looking statements, and it wishes to identify
important factors that could cause actual results to differ materially from
those projected in the forward-looking statements contained in the following
discussion and elsewhere in this report. The risks and uncertainties that may
affect the operations, performance, development and results of the Company's
business include but are not limited to the following: (1) heightened
competition, particularly intensified price competition; (2) general economic
and business conditions which are less favorable than expected; (3)
unanticipated changes in industry trends; and (4) other risks detailed herein
and from time to time in the Company's other reports.
General
Just For Feet is the leading operator of "category killer" large format
superstores specializing in brand-name athletic and outdoor footwear and
apparel. Just For Feet, which began with a single mall-based store in 1977,
opened its first superstore in 1988 and since that time has focused on
developing and refining its superstore concept. As of January 30, 1999, there
were 132 Just For Feet superstores operating in 27 states and Puerto Rico,
including 12 superstores operated by Just For Feet's only superstore franchisee.
In July 1998, the Company significantly accelerated its superstore expansion
strategy in the Northeast and Mid-Atlantic states by acquiring Sneaker Stadium,
an operator of 39 athletic footwear and apparel superstores. As of January 30,
1999, we had completed the conversion of 21 of the acquired superstores to the
Just For Feet superstore format, closed one former Sneaker Stadium superstore
and are scheduled to complete the conversion of 13 additional acquired
superstores by the end of the first quarter of this fiscal year.
In 1997, we entered the smaller format specialty store market of the athletic
and outdoor footwear and apparel industry with the acquisitions of Athletic
Attic and Imperial Sports, each a privately owned athletic and outdoor footwear
and apparel retailer. As of January 30, 1999, there were 141 Company-owned and
42 franchised specialty stores in 21 states and Puerto Rico.
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Just For Feet Superstores
We try to distinguish our superstores by focusing on the following core
strengths:
Dominant Selection of Brand-Name Athletic and Outdoor Footwear. Just For Feet
seeks to offer a larger selection of brand-name athletic and outdoor footwear
in terms of styles, sizes and price points than any of its competitors. The
prototype 15,000 to 20,000 square foot Just For Feet superstore has
approximately three to four times the selling space of leading mall-based
specialty athletic footwear retailers. This large store format enables each
Just For Feet superstore to offer a dominant selection of name-brand athletic
and outdoor footwear. Just For Feet superstores carry approximately 2,500 to
4,500 styles of athletic and outdoor footwear as compared to an estimated 200
to 700 styles typically offered by conventional mall-based athletic footwear
retailers, department stores and sporting goods superstores. Just For Feet
carries most of the leading athletic and outdoor footwear brands including
Nike, Reebok, New Balance, Adidas, Fila, K-Swiss, Asics, Converse, Timberland
and Rockport. Just For Feet seeks to offer virtually all styles in the brands
it carries. The Company's superstores sell shoes for almost every sport and
recreational activity, including:
. running . golf
. basketball . football
. cross training . baseball
. tennis . soccer
. aerobics . walking
. hiking . wrestling
Just For Feet superstores carry shoes in sizes ranging from infants' size one
to men's size 22. In addition to offering most sizes in most styles, Just For
Feet superstores carry a complete selection of widths in those styles which are
offered in multiple widths.
The store layout permits customers to locate shoes by brand (e.g., Nike,
Reebok, New Balance) or category (e.g., running, basketball, tennis). One shoe
of each regularly stocked style is located in the appropriate branded concept
shop and the other is presented on a full three-wall display arranged by
category which surrounds the fitting area at the back of the store. These
displays, which emphasize current, in-season products, are complemented by the
"Combat Zone," where Just For Feet regularly highlights special values on
close-outs and other special-purchase merchandise and liquidates old or slow
moving inventory.
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Superior Customer Service and Technical Sales Assistance. We believe that
providing a high level of customer service is vital to our competitive
advantage. Our goal is to offer a level of customer service and technical
expertise superior to that of our competition. Just For Feet is committed to
making shopping for athletic and outdoor footwear an enjoyable experience
through the employment of knowledgeable, well-trained and energetic sales
associates. Because of the large selection of footwear carried, and to further
differentiate our superstores from other retailers, we devote substantial time
and resources to training and testing our employees in footwear technology, the
performance attributes of Just For Feet's merchandise and common foot problems.
In addition, new superstore managers and other superstore management personnel
undergo an intensive two- to three-week training program at "Just For Feet
University" to enhance their understanding of all aspects of Just For Feet's
business. Over 800 employees attended Just For Feet University during fiscal
1998. Each superstore employee receives ongoing training through frequent
clinics sponsored by vendors and consultation with Just For Feet's technical
specialists. Just For Feet also utilizes satellite technology for broadcasting
between corporate headquarters and individual superstores. Management believes
that satellite technology is an effective and cost-efficient way to facilitate
communication and continuing education throughout Just For Feet superstores.
Just For Feet strives to staff its superstores with a high ratio of sales
associates to customers. Because Just For Feet superstores sell almost every
athletic shoe offered by leading brands, sales associates are able to act as
problem solvers for customers and to recommend the ideal shoe with less risk of
losing a sale. Just For Feet seeks to retain its nucleus of well-trained sales
personnel through bonus payments, a broad based stock option program and
opportunities for advancement.
Entertaining Shopping Experience. The Company strives to create an exciting
and high-energy shopping experience in its superstores through the use of:
. bright colors,
. upbeat music,
. an enclosed "half-court" basketball court for use by customers,
. a multi-screen video bank, and
. appearances by sports celebrities.
The prototype Just For Feet superstore typically features 15 to 20 separate
branded "concept shops," each displaying the brand's product line. These
concept shops are typically built and periodically updated by the vendors to
tie into their national advertising campaigns. Each Just For Feet superstore
benefits from the upscale appearance of the branded fixturing.
Extensive Advertising and Promotion. We use extensive television and print
advertising to generate customer store visits. We typically run television
advertisements on the local affiliate of each of ABC, CBS, NBC and Fox, as well
as other cable and broadcast networks, up to six days per week in many of our
superstore markets. Print advertisements and promotional circulars often are
published weekly in local newspapers. As we add new superstores in existing
markets, we have benefitted, and we believe we will continue to benefit, from
print and television synergies and cost efficiencies. We strive to make each
new superstore opening a major retail event by widely advertising through
newspaper and television. We use unique promotional events which add to the fun
and excitement of shopping in Just For Feet superstores, including appearances
by sports celebrities such as former NFL quarterbacks Bart Starr (who is also a
director of the Company) and Jim Kelly.
Superstore Operating Strategy. A key component of our operating strategy is
to continue to emphasize and build on our significant competitive strengths and
by focusing on the following:
In-Store Warehousing. Rather than operating a centralized distribution center
for our superstores, we typically devote approximately 45% of the square
footage of each superstore to warehouse space. Each superstore receives
shipments directly from vendors and stocks merchandise in an area behind (or
above) the selling floor not visible to customers. Our decentralized
distribution system enables us to:
. receive merchandise at each superstore on a timely basis,
. avoid the time and expense of handling merchandise twice,
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. maintain deep inventory positions in core styles, and
. stock our superstores more fully in advance of peak selling periods.
Utilizing Sophisticated Management Information Systems. We believe that we
have sophisticated information systems that assist us in optimizing our
superstore operations. Control of our merchandising activities is currently
maintained by a fully-integrated point-of-sale inventory and management
information system which permits management to monitor inventory and store
operations on a daily or more frequent basis. Bar-coding of merchandise and use
of scanners at receiving and point-of-sale allows the inventories of all stores
to be automatically adjusted and sales automatically logged as customers check
out. Purchasing, tracking and receiving systems assist in the efficient and
timely distribution of merchandise to each superstore. Systems are in place to
permit review, on a daily or more frequent basis, of sales information by
store, category, vendor or employee in order to focus on store needs and
employee productivity. In-store information systems are linked directly to the
corporate office.
Competitive Pricing. We believe that providing a wide selection of
competitively priced, brand-name footwear provides superior value to our
customers. While we are not a discount retailer, we guarantee that we will
match any competitor's advertised price and offer a family frequent buyer
program under which our superstores give participating customers the thirteenth
pair of shoes free (up to the average purchase price of the previous twelve
pairs). In addition, Just For Feet offers a limited selection of close-out
merchandise and slow-moving inventory at prices generally ranging from 33% to
70% below manufacturers' suggested retail prices displayed in an area at the
front of each superstore called the "Combat Zone." Management believes the
ability to offer a wide selection of close-out or discontinued merchandise
compared to that offered in speciality stores provides it with a competitive
advantage over such stores in attracting the high value/low price conscious
customer due to the space constraints on the ability of speciality stores to
stock both new and discontinued merchandise.
Superstore Growth Strategy. We are also focused on the following growth
strategies:
Superstore Expansion. We intend to strengthen our position as the leading
operator of athletic and outdoor footwear superstores by opening approximately
25 new superstores in each of fiscal 1999 and 2000. We opened 26 superstores in
fiscal 1998 (excluding 21 converted Sneaker Stadium superstores) and have
opened five superstores in fiscal 1999 through March 15, 1999 (excluding three
converted former Sneaker Stadium superstores). We plan to reopen 13 additional
converted Sneaker Stadium superstores during the first quarter of fiscal 1999.
In addition to our prototype superstores, we currently operate high visibility,
high profile "flagship" superstores which provide added entertainment features
at Caesar's Palace in Las Vegas and on Long Island in New York, and plan to
open new flagship superstores in fiscal 1999 in Times Square in New York and
Union Square in San Francisco. Flagship superstores, which are not necessarily
larger than the prototypical Just For Feet superstore, provide added
entertainment features designed to generate and maintain customer excitement
and are located in high profile locations. We will continue to open superstores
in new and existing markets, including those markets with the potential for
multiple sites, which allows us to take advantage of advertising and operating
efficiencies. We have either executed or negotiated leases with respect to all
superstores scheduled to open during fiscal 1999 and are actively reviewing
numerous additional sites for fiscal 2000.
Through our July 1998 acquisition of Sneaker Stadium, we significantly
accelerated our superstore expansion into the Northeast and Mid-Atlantic states,
areas not previously significantly served by Just For Feet, although targeted
for expansion by management. The Company closed one of the acquired Sneaker
Stadium superstores and has converted 21 of the acquired superstores to the Just
For Feet name, format and systems and reopened those stores as Just For Feet
superstores, and anticipates converting and reopening 13 additional Sneaker
Stadium superstores as Just For Feet superstores by the end of April 1999. We
believe that the profitability of the acquired stores will be enhanced upon
conversion and operation by Just For Feet management. Management expects to
improve profitability by leveraging Just For Feet's vendor relationships to
provide broader and deeper inventories and better pricing than previously
available and by implementing Just For Feet's advanced management information
systems, staff training and store management structure.
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The Company's superstore expansion strategy is to open superstores in new and
existing markets, including those markets with the potential for multiple
sites, which enables the Company to take advantage of advertising and operating
efficiencies. In addition, Just For Feet will continue to open superstores in
smaller markets which can only accommodate one superstore.
We generally seek to open one Just For Feet superstore in a chosen market for
every 300,000 to 400,000 residents. As a result, multiple superstores opened in
larger markets, such as Atlanta, Dallas, Denver, Houston, Kansas City and
Phoenix, derive significant benefit from advertising and operating
efficiencies. More recently, we have also focused on operating single
superstores in mid-sized metropolitan markets such as Montgomery, Alabama and
Jackson, Mississippi. In addition, we continue to evaluate select opportunities
to expand internationally.
Because our vendors drop ship merchandise directly to the superstores, Just
For Feet's expansion plans are dependent more on the attractiveness of
individual superstore sites than the logistical constraints that would be
imposed by a central distribution center. Just For Feet plans to open primarily
free-standing superstores in high traffic, high visibility locations typically
on outparcels of or adjacent to shopping malls. Our superstore expansion
strategy is to concentrate our efforts on opening Company-operated superstores.
We lease all but three of our existing superstores and intend to lease all
new superstores. We estimate that our total cash requirements to open each new
prototype superstore, including store fixtures and equipment, leasehold
improvements, net working capital and store opening costs, typically range from
$1.5 to $2.5 million, depending on the extent of vendor and landlord assistance
and the size and projected volume of the store. The total cash outlay required
to open a flagship superstore typically ranges from $2.5 to $4.0 million.
Development and Expansion of Electronic Commerce Capabilities. In 1998, we
launched our on-line shopping website (www.feet.com). The website is designed to
permit customers to view and receive technical information on merchandise and to
place orders over the Internet. In fiscal 1999, we will begin the process of
significantly expanding our website to provide enhanced customer service
functions, increased product selection and a flexible order fulfillment
capability. We believe e-commerce capability provides us with incremental sales
opportunities, helps prevent the potential loss of sales at existing stores to
competitors possessing e-commerce capabilities and provides us with the
opportunity to take market share from our competitors not possessing such
capabilities. Such sales may, to some extent, displace sales from our existing
stores. The expanded website will be designed to permit customers to browse
color images of selected merchandise on-line by brand, style or function and to
make purchases. As part of our commitment to customer service, we permit in-
store returns or exchanges on electronic purchases and are continually
evaluating alternative delivery options to expedite order fulfillment. The
website is designed to interface with our information systems. We intend to
utilize our television and print advertisements to increase awareness of our
website as part of our regular advertising and, individually or in conjunction
with our vendors, may offer exclusive promotions through our site.
Superstore Operations
Just For Feet employs a three-tiered management system for superstore
operations, presently consisting of regional directors, divisional directors
and a store director for each store. Each superstore is managed by a store
director, two store managers, an office manager, an operations manager and up
to seven assistant managers, depending on the sales volume of the store. Store
directors report to a district director, who in turn reports to a regional
director.
The sales staff of individual superstores ranges from approximately 60 to 180
employees depending on the size of the store and the time of year. The
Company's policy is to staff its superstores sufficiently to ensure that all
customers receive prompt personalized attention. Store directors and managers
are paid a salary, while all other superstore employees are paid on an hourly
basis. Just For Feet provides an incentive compensation plan for virtually all
employees. Store director and manager incentive plans are based primarily upon
a combination of store sales, payroll level relative to sales and inventory
variance compared to budget. Sales associates are
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eligible for semi-annual bonus payments based on their individual sales
performances. In addition, the Company's incentive plans include grants of
stock options to senior management and store directors, store managers and
assistant store managers and certain store operations personnel.
Just For Feet experiences inventory shrinkage rates which it believes are
below the retail industry average. Management attributes its low shrinkage rate
to stocking footwear off the selling floor, the presence of an operations
manager and security personnel at each superstore, the use of surveillance
systems and the reduced handling of merchandise associated with Just For Feet's
in-store warehousing system.
Just For Feet superstores operate seven days per week. To enhance customer
convenience, normal hours for superstores located on outparcels of shopping
malls are typically thirty minutes prior to the mall's opening until thirty
minutes after the mall's closing. Superstores are open on all holidays except
Christmas, Thanksgiving and Easter.
Athletic Attic and Imperial Sports Specialty Stores
As part of our long-term growth strategy, we entered the smaller format
specialty store market of the athletic and outdoor footwear and apparel
industry with the 1997 acquisitions of Athletic Attic and Imperial Sports.
Athletic Attic, based in Gainesville, Florida, and Imperial Sports, based in
Flint, Michigan, were privately owned athletic and outdoor footwear and apparel
retailers operating an aggregate of 87 stores. The Athletic Attic and Imperial
Sports operations were combined to form our specialty store division. At January
30, 1999, there were 141 Company-owned and 42 franchised specialty stores in 21
states and Puerto Rico.
Specialty Store Business Strategy
We believe the success of our specialty store format will depend on our
implementing the following operating and growth strategies:
Operating Strategy. Our strategy for operating the specialty stores has the
following key components:
Capitalize on Existing Operational Strengths. In operating our specialty
stores, we intend to emphasize three elements that have been successful in our
superstores: selection, service and advertising. Our goal is to operate
specialty stores that have a greater selection of footwear than that of our
competitors' comparably sized specialty stores, and to serve customers with a
highly trained sales staff. In addition, consistent with our focus on training
and store operations and our objective of staffing all our stores with
knowledgeable and friendly sales associates, we are developing a training
program based on the concept and curriculum of Just For Feet University.
Finally, we intend to attract customers to our specialty stores through
aggressive local advertising campaigns which will emphasize, among other things,
the broad selection and customer service at these stores.
Implement Targeted Operational Improvements. We are focused on the following
operational improvements that we believe will provide a solid foundation for
successful operation of the specialty stores:
. implementing the same store level point-of-sale registers and corporate
inventory management systems that we use for our superstore division;
. remodeling, expanding and refixturing certain outdated and smaller stores;
and
. adding inventory to and altering the inventory mix of some stores in an
effort to generate higher sales and better gross margins.
Strategy for Development and Expansion of Specialty Store Operations. We are
focused on the following growth strategies for our specialty store division:
Target a Broad Range of Markets and Locations. We believe that the
development of smaller specialty stores, in conjunction with continued
development of our core superstores, provides us with incremental growth
opportunities. The specialty stores allow us to expand into a much broader
range of markets and real estate locations. The specialty store format allows
us to enter smaller markets where customer demographics may not support the
superstore format. We also use the specialty stores to achieve greater market
penetration in markets
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which are large enough to support superstores as part of our strategy to
maximize market share. Because of their higher initial investment and fixed
costs, Just For Feet superstores require a much higher level of sales in order
to produce an attractive return on investment and consequently require a larger
population base. Whereas approximately 300,000 to 400,000 people in a trade
area are required to generate the high level of sales expected for Just For
Feet superstores, we believe that smaller specialty stores can be successful
with as few as 25,000 people in a trade area.
As part of this strategy, we plan to open a total of 60 new specialty stores
in fiscal 1999 and approximately 50 to 100 new specialty stores in fiscal 2000.
We intend to open all new specialty stores under the name Athletic Attic,
except in those Michigan markets where we believe the Imperial Sports name has
substantial brand identity.
Implement a Differentiating Specialty Store Strategy. We have developed a
strategy for developing athletic specialty stores which we believe is unique
among our primary competitors. We intend to establish a leadership position in
targeted markets by expanding beyond enclosed shopping malls. In addition to
expanding our presence in the same universe of enclosed shopping malls targeted
by our primary competitors, we also will focus on urban and suburban retail
strip centers, which reach potential consumers near where they live and work
and provide the added benefit of lower occupancy costs. Generally, we intend to
enter new specialty store markets by opening higher profile specialty stores in
enclosed shopping malls, then surrounding them with new stores located in
retail strip centers. By concentrating a number of stores in targeted markets,
we will be able to leverage advertising costs. Advertising will be designed to
attract customers to our specialty stores as destination shoppers. We believe
this strategy is facilitated by locating our non-mall based specialty stores in
urban and suburban strip centers and power centers adjacent to "big box"
retailers, although some of our new specialty stores also will be located in
traditional high-traffic mall locations which are not as dependent on
advertising to generate customer traffic.
Continue to Refine our Specialty Store Design. We have developed and will
continue to refine a 4,000 to 6,000 square foot specialty store design that we
believe is attractive, easy for customers to shop in, easy to operate and
relatively inexpensive and simple to build. We believe that this store design,
combined with our strategy of concentrating stores in a targeted market area,
will enable us to achieve lower average store break-even points and a higher
per store return on investment than our primary competitors.
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Management Information Systems
We believe that we have sophisticated information systems that assist us in
optimizing our superstore operations. Control of our merchandising activities
is currently maintained by a fully integrated point-of-sale, inventory and
management information system which permits management to monitor inventory and
store operations on a daily or more frequent basis. Bar-coding of merchandise
and the use of scanners at receiving and point-of-sale allows the inventories
of all stores to be automatically adjusted and sales automatically logged as
customers check out. Purchasing, tracking and receiving systems assist in the
efficient and timely distribution of merchandise to each superstore. Systems
are in place to permit review, on a daily or more frequent basis, of sales
information by store, category, vendor or employee in order to focus on store
needs and employee productivity. In-store information systems are linked in our
superstores directly to the corporate office.
In order to improve operational productivity, facilitate timely decision
making and support our future growth, we have implemented enhanced systems
capabilities utilizing a fully integrated software system on an IBM AS/400
platform, together with store level systems and equipment. Our enhanced systems
provide management with the capability to track gross margin and inventory
levels by superstore on a daily basis. In addition, a Human Resource/Time
Management/Payroll system allows daily analysis of labor costs by location.
Management believes that the enhanced systems will be able to support our
planned growth for the foreseeable future.
For a discussion of Year 2000 compliance, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Year 2000 Readiness."
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Competition
The retail athletic and outdoor footwear industry, which in 1997 had total
sales in the United States of approximately $13 billion, is highly competitive.
We compete primarily with sporting goods superstores, athletic footwear
specialty stores, department stores, discount stores, traditional shoe stores,
traditional sporting goods stores and mass merchandisers and other athletic
footwear retailers, several of which have developed their own superstore
concepts. We believe, however, that we operate the only significant superstore
chain in the athletic and outdoor footwear industry. We believe that
competition in the retail athletic footwear industry is based primarily on the
number of styles of brand-name athletic and outdoor shoes offered, pricing and
customer service. We believe that our superstore concept and, to a lesser
extent our specialty store concept, will allow us to carry and display a larger
number of the more popular styles of athletic and outdoor footwear than our
competitors. Additionally, we believe that our pricing strategy and frequent
buyer program encourage repeat shopping and customer loyalty. We may face
periods of intense competition in the future which could have an adverse effect
on our financial results.
Employees
At January 30, 1999, we had approximately 15,000 employees, including those
employed on a part-time or seasonal basis. The number of employees fluctuates
during the year primarily due to seasonality. None of our employees is
represented by a labor union.
We attribute a large portion of our success in generating sales and
maintaining various areas of cost control to our inclusion of virtually all
sales employees in store-level incentive compensation plans. Many employees,
from senior executives to store level management also participate in our
incentive stock option plans. We also contribute to the cost of medical
insurance coverage for those employees who are eligible to participate in our
sponsored plans. All employees also receive discounts on our merchandise. We
consider our relationship with our employees to be good.
Trademarks
The Company owns the following federally registered service marks (in design
form): "Just For Feet," "Just For Feet, World's Largest Athletic Shoe Store,"
"Just For Feet, Where The 13th Pair is FREE!" and "Athletic Attic." The Company
believes its marks are valuable and, accordingly, intends to maintain its marks
and the related registrations. The Company is not aware of any pending claims
of infringement or other challenges to the Company's right to use its marks in
the United States. This Report also mentions several registered trademarks owned
by other companies including Nike(R), Reebok(R), New Balance(R), Adidas(R),
Fila(R), K-Swiss(R), Asics(R), Converse(R), Timberland(R) and Rockport(R).
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Executive Officers
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
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<S> <C> <C>
Harold Ruttenberg 56 Chairman of the Board and Chief
Executive Officer
Helen Rockey 43 President and Chief Operating Officer
Eric L. Tyra 49 Executive Vice President - Finance and
Chief Financial Officer
Adam J. Gilburne 36 Executive Vice President; President -
Superstore Division
Warren Ruttenberg 30 Executive Vice President
Nicholas C. Kartalis 49 Executive Vice President - Superstore
Sales
Don-Allen Ruttenberg 32 Executive Vice President
Scott C. Wynne 32 Executive Vice President - Operations
and Secretary
</TABLE>
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Mr. Harold Ruttenberg is the founder of the Company and has served as
its Chairman and Chief Executive Officer since its inception in 1977. Mr.
Ruttenberg also served as President from the Company's inception to March 1999.
Harold Ruttenberg is the father of Warren and Don-Allen Ruttenberg.
Ms. Rockey was appointed President and Chief Operating Officer in
March 1999. Prior to joining the Company, Ms. Rockey served as President and
Chief Executive Officer of Brooks Sports, Inc., a worldwide athletic footwear,
apparel and accessories company, since 1994. For 11 years prior to joining
Brooks, Ms. Rockey worked in a variety of positions with Nike, Inc.
Mr. Tyra has served as Executive Vice President - Finance and Chief
Financial Officer since May 1997. From January 1994 to May 1997, Mr. Tyra was
Vice President - Finance, Treasurer and Chief Financial Officer of Club Car,
Inc., a manufacturer of golf cars and utility vehicles. From 1991 to 1993, Mr.
Tyra was a Senior Vice President with First Financial Management Corporation,
serving in various financial management positions. Previously, Mr. Tyra was a
partner with Deloitte & Touche LLP.
Mr. Gilburne has served as Executive Vice President of the Company and
President - Superstore Division, since August 1997. Mr. Gilburne served as Vice
President - Store Operations of the Company from March 1994 to December 1994, at
which time he was promoted to Executive Vice President - Merchandising. Mr.
Gilburne previously owned and operated a franchised Just For Feet store in San
Antonio, Texas, which the Company acquired in March 1994. From 1986 until 1993,
Mr. Gilburne was the President of a chain of baby and children's furniture
stores located in Las Vegas, Nevada. Mr. Gilburne submitted his resignation from
all positions with the Company on April 27, 1999, effective May 31, 1999.
Mr. Warren Ruttenberg has served as Executive Vice President
since March 1999. From November 1995 to March 1999, Mr. Ruttenberg served as
Vice President of Sales and from March 1994 to November 1995 served as District
Sales Manager. Warren Ruttenberg is the son of Harold Ruttenberg and the brother
of Don-Allen Ruttenberg.
Mr. Kartalis was appointed Executive Vice President - Superstore Sales
of the Company in January 1999. Mr. Kartalis held various sales and management
positions with Nike, Inc. from 1987 to 1992. Since 1992, Mr. Kartalis has held
executive positions in sales, merchandising and marketing with Danskin, Inc.
(1992-1994), Dick's Clothing and Sporting Goods, Inc. (1994), Apex One, Inc.
(1995) and Avia Group International (1995). From 1996 until he joined the
Company, Mr. Kartalis was a consultant in the retail industry.
Mr. Don-Allen Ruttenberg, who joined the Company in 1987, serves as
Executive Vice President. He served as Executive Vice President - New Store
Development from February 1997 to February 1999, and as Vice President -
Merchandising from January 1994 to February 1997. Since 1987, Mr. Ruttenberg
also has been actively involved in various merchandising aspects of the Company,
focusing on footwear technology. Don-Allen Ruttenberg is the son of Harold
Ruttenberg and the brother of Warren Ruttenberg.
Mr. Wynne has been employed by the Company since 1985 and has served
as Operations Manager since 1990 with specific responsibilities in inventory
control, distribution, management information systems and traffic. He was
elected Vice President-Store Operations in January 1994, Corporate Secretary in
August 1995 and Executive Vice President-Operations in February 1997.
-11-
<PAGE>
Item 2. Properties.
- ------- ----------
At January 30, 1999, the Company operated 120 Just For Feet
superstores (not including the Sneaker Stadium superstores being converted or
the 12 franchised superstores). With the exception of a Birmingham, Alabama
store (which is subject to a ground lease), one store in Orlando, Florida and
one store in Knoxville, Tennessee, all of the Company's superstore facilities
are leased. The Company intends to lease all new superstores. The Company also
operated 141 specialty stores, each of which is leased. Specialty stores are
located primarily in enclosed shopping malls and, to a lesser extent, in retail
strip centers.
Certain leases for existing stores provide for fixed minimum rentals
and provide for contingent rental payments based upon various specified
percentages of sales above minimum levels. Certain leases also contain
escalation clauses for increases in minimum rentals, operating costs and taxes.
Certain other leases provide for future rent increases based upon increases in
the Consumer Price Index. Superstore leases carry varying terms expiring
between 2003 and 2019, excluding applicable renewal periods. Specialty store
leases are typically for shorter initial terms and begin expiring in fiscal
1999, excluding renewal periods.
The Company's corporate headquarters are located in a 42,000 square
foot building completed in May 1997, on approximately 25 acres of Company-owned
land in Birmingham, Alabama. The headquarters facilities also include a 36,000
square foot warehouse. The Company currently is planning the construction of a
second office on the Birmingham corporate campus, expected to cost approximately
$8.0 million over the next two years.
Item 3. Legal Proceedings.
- ------- -----------------
On June 27, 1997, a lawsuit was filed by Donald K. Drucker,
individually and on behalf of all others similarly situated, in the United
States District Court for the Northern District of Alabama against the Company,
Harold Ruttenberg, Don-Allen Ruttenberg, Scott C. Wynne, Adam Gilburne, Robert
C. Wabler, Pamela B. Ruttenberg, William Blair & Company and Montgomery
Securities. The defendants are the Company; its Chairman and Chief Executive
Officer; three other executive officers of the Company; the Company's former
Chief Financial Officer and a former director; another former officer of the
Company; and two of the four managing underwriters in the Company's June 1996
public offering of Common Stock. The individual defendants were selling
shareholders in such offering. The plaintiff purports to represent a class
consisting of all persons who purchased Common Stock of the Company in or
traceable to the June 1996 public offering. The suit alleges that the Company's
registration statement and the prospectus used in such offering contained
materially misleading financial statements. The plaintiffs are seeking an
unspecified amount of damages. On January 7, 1999, the court entered an order
appointing Mr. Drucker as lead plaintiff and approving the selection of lead
counsel. The Company and its named officers and directors deny liability on the
claims and are vigorously defending the suit, which is only in the preliminary
stages.
On April 20, 1999, MBA Marketing Corporation, the sole superstore
franchisee of Just For Feet, Inc., filed a complaint in the United States
District Court for the Southern District of Ohio, Eastern Division, seeking
declaratory judgment, an accounting and monetary damages against Just For Feet,
Inc. and Casual Wear II, Inc. (the "Company"). The complaint alleges that the
Company has breached its obligations under certain franchise agreements between
it and the Plaintiff and seeks actual damages in excess of $82.5 million,
punitive damages in excess of $25 million and the right to terminate the
franchise agreements. The Company denies all allegations contained in the
complaint and will vigorously defend these allegations.
The Company and/or its subsidiaries also are involved in various legal
proceedings that have arisen in the normal course of their business. While it
is not possible to predict the outcome of such proceedings with certainty, the
Company does not believe that the ultimate resolution of those proceedings or
any of the litigation discussed above is likely to have a material adverse
effect on its financial condition or its consolidated results of operations.
-12-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ---------------------------------------------------
No matter was submitted to a vote of security holders of the Company
during the fourth quarter ended January 30, 1999.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------- ---------------------------------------------------------------------
The Company's Common Stock trades on The Nasdaq Stock Market under the
symbol FEET. The following table sets forth, by fiscal quarter, the high and
low sales prices of the Common Stock reported by The Nasdaq Stock Market for the
last eight fiscal quarters ended January 30, 1999.
<TABLE>
<CAPTION>
Fiscal Year Ended January 30, 1999 High Sale Low Sale
- --------------------------------------- --------- --------
<S> <C> <C>
First Quarter ended April 30, 1998 $23.19 $14.50
Second Quarter ended July 31, 1998 29.13 18.50
Third Quarter ended October 31, 1998 23.50 11.13
Fourth Quarter ended January 30, 1999 23.63 12.63
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended January 31, 1998 High Sale Low Sale
- --------------------------------------- --------- --------
<S> <C> <C>
First Quarter ended April 30, 1997 $30.25 $14.00
Second Quarter ended July 31, 1997 22.25 15.88
Third Quarter ended October 31, 1997 20.30 11.88
Fourth Quarter ended January 31, 1998 18.00 12.38
</TABLE>
As of April 12, 1999, the number of shareholders of record of the Company's
Common Stock was approximately 407 and the number of beneficial holders of the
Company's Common Stock was approximately 15,100. The Company has not declared
or paid any cash dividends on its Common Stock. The policy of the Board of
Directors of the Company is to retain earnings for the expansion and development
of the Company's business. Future dividend policy and the payment of dividends,
if any, will be determined by the Board of Directors in light of circumstances
then existing, including the Company's earnings, financial condition,
contractual restrictions and other factors deemed relevant by the Board.
-13-
<PAGE>
Item 6. Selected Financial Data.
- ------- ------------------------
The following income statement data for fiscal 1998, 1997, 1996, 1995 and 1994
have been derived from our audited consolidated financial statements. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations", the
Company's Consolidated Financial Statements and related notes and other
financial information included elsewhere herein. Prior to fiscal 1998, the
Company's fiscal year ended on January 31. Effective for fiscal years beginning
with fiscal 1998, the Company changed its fiscal year end to the Saturday
closest to January 31. Prior to fiscal 1998, references to fiscal year by date
refer to the fiscal year beginning February 1 of that calendar year; for example
"fiscal 1997" began February 1, 1997 and ended on January 31, 1998. "Fiscal
1998" began on February 1, 1998 and ended on January 30, 1999.
On July 2, 1998, we acquired Sneaker Stadium. The acquisition was accounted for
as a purchase and, accordingly, the results of operations of Sneaker Stadium
have been included in our consolidated statement of earnings from the date of
acquisition. Sneaker Stadium incurred significant net losses in each of its last
three fiscal years and the first quarter of fiscal 1998 prior to our acquiring
it in the second quarter of fiscal 1998. As of January 30, 1999, we had
completed the conversion of 21 of the acquired Sneaker Stadium superstores to
the Just For Feet format and expect to complete the conversion of 13 remaining
acquired superstores by the end of the first quarter of fiscal 1999. The
following financial information does not include historical financial
information for Sneaker Stadium or pro forma financial information for such
acquisition, all of which is contained in the Company's Current Report on Form
8-K/A filed with the Securities and Exchange Commission on July 28, 1998.
As is discussed in Note 1 to the Company's Consolidated Financial Statements,
effective February 1, 1996, the Company changed its method of accounting for
store opening costs, which are costs principally for pre-opening employee
salaries and travel which are incremental and directly attributable to the
opening of a new store. Under the new method the Company charges store opening
costs to operations in the month the store opens. Previously, store opening
costs were capitalized and amortized over the twelve months following the store
opening. Pro forma amounts are shown for all periods which are affected to
reflect amounts as if the change had been applied retroactively.
<TABLE>
<CAPTION>
(In thousands, except per share and selected operating data) Fiscal Year
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net sales $774,863 $478,638 $256,397 $119,819 $56,364
Cost of sales 452,330 279,816 147,526 68,969 32,492
- -----------------------------------------------------------------------------------------------------------------
Gross profit 322,533 198,822 108,871 50,850 23,872
Franchise fees, royalties
and other revenue 1,299 1,101 581 485 379
Operating expenses:
Store operating 232,505 139,659 69,329 33,264 16,197
Store opening costs 13,669 6,728 11,240 2,712 700
Amortization of intangibles 2,072 1,200 180 157 155
General and administrative 24,341 18,040 7,878 3,575 2,429
- -----------------------------------------------------------------------------------------------------------------
Operating income 51,245 34,296 20,825 11,627 4,770
Interest (expense) income, net (7,916) (76) 3,918 2,931 376
- -----------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of change in accounting principle 43,329 34,220 24,743 14,558 5,146
Provision for income taxes 16,681 12,817 8,783 4,836 1,928
- -----------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change in
accounting principle 26,648 21,403 15,960 9,722 3,218
Cumulative effect on prior years of
change in accounting principle - - (2,041) - -
- -----------------------------------------------------------------------------------------------------------------
Net earnings $ 26,648 $ 21,403 $ 13,919 $ 9,722 $ 3,218
=================================================================================================================
Basic Earnings Per Share:
Before cumulative effect of change
in accounting principle $ 0.87 $ 0.72 $ 0.58 $ 0.40 $ 0.19
Cumulative effect on prior years of
change in accounting principle - - (0.08) - -
- -----------------------------------------------------------------------------------------------------------------
Net earnings $ 0.87 $ 0.72 $ 0.50 $ 0.40 $ 0.19
=================================================================================================================
Diluted Earnings Per Share:
Before cumulative effect of change
in accounting principle $ 0.84 $ 0.70 $ 0.55 $ 0.38 $ 0.18
Cumulative effect on prior years of
change in accounting principle - - (0.07) - -
- -----------------------------------------------------------------------------------------------------------------
Net earnings $ 0.84 $ 0.70 $ 0.48 $ 0.38 $ 0.18
=================================================================================================================
Weighted Average Shares Outstanding:
Basic 30,737 29,615 27,627 24,246 17,017
Diluted 31,852 30,410 29,096 25,546 17,948
- -----------------------------------------------------------------------------------------------------------------
Pro Forma Amounts Assuming the Change in Accounting
Principle is Applied Retroactively:
Net earnings $ 8,487 $ 2,607
Basic net earnings per share $ 0.35 $ 0.15
Diluted net earnings per share $ 0.33 $ 0.15
=================================================================================================================
Selected Operating Data/(1)/:
Increase in comparable store sales 3.2% 4.5% 24.7% 17.9% 10.2%
Number of comparable stores:
Superstores 62 42 27 15 5
Specialty stores 85
Balance Sheet Data (at end of year):
Working capital $316,798 $155,461 $167,829 $108,304 $64,617
Total assets 689,396 448,352 375,834 243,580 89,505
Long-term obligations 216,203 16,646 6,488 6,696 3,102
Shareholders' equity 325,706 268,084 218,556 149,270 72,983
</TABLE>
/(1)/ Company operated superstores are included in the comparable store sales
calculation beginning generally in the thirteenth month of operation or
upon their acquisition, assuming at least twelve months of prior
operations. The acquired Sneaker Stadium superstores will be included in
the comparable sales base beginning in the fourteenth month after
reopening as a Just For Feet superstore. Specialty stores were not
included in the comparable store sales base until fiscal 1998.
-14-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations.
---------------------
Overview
Just For Feet operates retail stores in the brand-name athletic and outdoor
footwear and apparel market. Just For Feet was founded in 1977 with the opening
of a small mall-based store, and, in 1988, opened its first superstore in
Birmingham, Alabama. As a result of the success and high sales volume generated
by the larger store format, the Company has focused primarily on developing and
refining its superstore concept. In addition to the prototype superstore, the
Company operates high visibility, high profile "flagship" superstores in select
markets which provide added entertainment.
Superstore and Specialty Store Operations
- -----------------------------------------
As of January 30, 1999, there were 120 Just For Feet superstores operating in
23 states and Puerto Rico (excluding the 13 Sneaker Stadium superstores
currently being converted and the 12 superstores operated by Just For Feet's
only franchisee). Of the 120 Company operated superstores, 23 superstores were
opened in fiscal 1997 and 26 superstores were opened in fiscal 1998, along with
21 converted Sneaker Stadium superstores. The Company plans to open
approximately 25 superstores during each of fiscal 1999 and 2000 (excluding
those we acquired from Sneaker Stadium). The Company may accelerate the opening
of new superstores in any one fiscal quarter.
As part of its long-term growth strategy, the Company entered the smaller
specialty store market of the athletic and outdoor footwear and apparel industry
in 1997 through the acquisitions of Athletic Attic and Imperial Sports, which
are now operated as the specialty store division of the Company. Both
acquisitions have been accounted for as purchases and, accordingly, the results
of operations of these acquired businesses are included in the Company's
consolidated statements of earnings from their respective acquisition dates. As
of January 30, 1999, the Company operated 141 company-owned specialty stores in
18 states (excluding 42 franchised specialty stores). The Company opened 51 new
specialty stores in fiscal 1998 and plans to open approximately 60 new specialty
stores in fiscal 1999 and approximately 50-100 in fiscal 2000.
To accommodate the Company's superstore and specialty store expansion
strategy, the Company has increased its corporate staff. In addition, the
specialty stores have a higher general and administrative expense structure as a
percent of net sales than the superstore operations. These factors resulted in
general and administrative costs increasing to 3.8% of sales during fiscal 1997
from 3.1% in fiscal 1996. General and administrative costs decreased to 3.1% of
sales for fiscal 1998 from 3.8% for fiscal 1997 primarily due to leverage from
increasing Company sales.
In recent years, the Company has achieved positive comparable store sales
growth on an annual basis. Comparable store sales increased 3.2% in fiscal 1998,
4.5% in fiscal 1997, 24.7% in fiscal 1996, 17.9% in fiscal 1995, 10.2% in fiscal
1994, and 6.2% in fiscal 1993. No assurance can be given that increases in
comparable store sales will continue. The first quarter of fiscal 1998 was the
first quarter that the Company included the specialty stores in the comparable
store sales base.
Effective February 1, 1996, the Company changed its method of accounting for
store opening costs, which are costs principally for pre-opening salaries and
travel that are incremental and directly attributable to the opening of a new
store. The Company now charges these costs to operations in the month that the
store opens. Previously, store opening costs were capitalized and amortized
over the 12 months following the store opening. The cumulative effect of this
change in accounting principle resulted in a charge to operations at the
beginning of the year ended January 31, 1997 of $2.0 million, net of income
taxes of $1.1 million.
In April 1998, Statement of Position No. 98-5 Reporting on the Cost of Start-
Up Activities (the "SOP") was issued, which requires that costs of start-up
activities and organization costs be expensed as incurred. The Company currently
expenses start-up costs for new stores in the month that the new store opens.
The Company is required to adopt this SOP in the first quarter of fiscal 1999.
If the SOP had been adopted for the year ended January 30, 1999, the cumulative
effect of the change in accounting principle would have resulted in a net charge
to earnings of approximately $600,000 ($0.02 per basic and diluted share), net
of applicable income taxes of approximately $375,000. The effect on the year
ended January 30, 1999 would have been to increase operating expenses by
approximately $2.0 million and decrease net income by approximately $1.3 million
($0.04 per basic and diluted share).
Prior to fiscal 1998, the Company's fiscal year ended on January 31. Effective
for fiscal years beginning with fiscal 1998, the Company changed its fiscal year
end to the Saturday closest to January 31. Prior to fiscal 1998, references to
fiscal year by date refer to the fiscal year beginning February 1 of that
calendar year; for example "fiscal 1997" began February 1, 1997 and ended on
January 31, 1998. "Fiscal 1998" began on February 1, 1998 and ended on January
30, 1999. "Fiscal 1999" began on January 31, 1999 and will end on January 29,
2000.
-15-
<PAGE>
Sneaker Stadium
- ---------------
On July 2, 1998, the Company acquired Sneaker Stadium, Inc., an operator of 39
athletic footwear and apparel superstores located primarily in the Northeast and
Mid-Atlantic United States. Sneaker Stadium incurred significant losses in each
of its last three fiscal years and the first quarter of fiscal 1998, prior to
our acquisition of it. In addition, Sneaker Stadium historically experienced
lower average sales per store and lower gross margins than those typically
experienced by our superstores. The acquisition of Sneaker Stadium increased the
number of superstores operated by us by approximately 44%. The acquired
superstores also are located in geographic areas in which we had not previously
operated a significant number of superstores. We expect the aggregate cost of
remodeling such stores to be approximately $27.0 million, approximately $7.0
million more than our initial cost estimates. Through January 30, 1999, we had
remodeled and reopened 21 former Sneaker Stadium superstores, permanently closed
one store and scheduled 13 former Sneaker Stadium superstores for remodeling
with reopening dates in the first quarter of fiscal 1999.
The initial process of liquidating old inventory, remodeling the acquired
stores, restocking inventory, retraining store personnel and reopening the first
group of former Sneaker Stadium superstores as Just For Feet superstores
encountered unforeseen difficulties, resulting primarily from our attempt to
reopen the stores at Thanksgiving in order to take advantage of the Christmas
shopping season. The aggressive construction schedule did not permit sufficient
time to complete and adequately stock the in-store warehouse in many of the
stores, resulting in those stores opening with only approximately one-half of
the planned inventory. This factor, combined with unusually warm weather in the
Northeast, resulted in lower sales than anticipated and increased expense,
primarily due to on-going construction and fixturing in the stores and the
staffing of such reopened stores at full operational levels. On average,
converted stores did not achieve the operating results we expected for the first
several months of post-reopening activity. Even though we believe we have now
made substantial progress in integrating Sneaker Stadium, the failure to do so
could have a material adverse effect not only on such operations but also on our
consolidated results of operations and financial condition. Even though we
expect all construction and fixturing to be completed on the second group of
converted superstores before they reopen, we currently believe that the
converted superstores will not, at least in the near term, achieve average sales
or average operating results comparable to average results achieved at our
existing mature superstores. Furthermore, there cannot be any assurance that
these converted superstores will ever achieve average sales or average operating
results comparable to the average sales and operating results we have achieved
at our existing mature superstores.
The remaining acquired stores that are to be remodeled and reopened as Just
For Feet superstores must be closed during the remodeling period. During such
remodeling period, we incur rent and other store expenses, including salaries
and wages, without generating any sales at such sites. These expenses, which
would otherwise be recognized as store operating costs, are recognized as store
pre-opening expenses.
The integration of Sneaker Stadium as described above adversely affected our
results of operations for the fourth quarter of fiscal 1998 and may do so in the
future.
In connection with the acquisition, Just For Feet assumed $43.0 million of
existing Sneaker Stadium debt and, if the acquired Sneaker Stadium superstores
attain certain future financial targets, the Company will make additional
payments of up to $33.0 million on or after April 30, 2002. Concurrent with the
acquisition, an affiliate of Thomas H. Lee Company, one of the former owners of
Sneaker Stadium, purchased from the Company 926,355 shares of common stock and
warrants to purchase an additional 923,591 shares of common stock at an exercise
price of $21.59 per share, for a total investment of $20.0 million. The
estimated fair market value of the warrants on July 2, 1998 was $6.7 million
and, for accounting purposes, the warrants were considered part of the
consideration paid by the Company for Sneaker Stadium. The acquisition has been
accounted for as a purchase and, accordingly, the results of operations of
Sneaker Stadium are included in the Company's consolidated statement of earnings
from the July 2, 1998 acquisition date.
-16-
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, income statement
data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
Fiscal Year
--------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 58.4 58.5 57.5
----- ----- -----
Gross profit 41.6 41.5 42.5
Franchise fees, royalties and other revenue 0.2 0.2 0.2
Operating expenses:
Store operating 30.0 29.2 27.0
Store opening costs 1.8 1.4 4.4
Amortization of intangibles 0.3 0.2
General and administrative 3.1 3.8 3.1
----- ----- -----
Operating income 6.6 7.1 8.2
Interest (expense) income, net (1.0) -- 1.5
----- ----- -----
Earnings before income taxes and cumulative effect of change in accounting principle 5.6 7.1 9.7
Provision for income taxes 2.2 2.6 3.4
----- ----- -----
Earnings before cumulative effect of change in accounting principle 3.4 4.5 6.3
Cumulative effect on prior years of change in accounting principle -- -- (0.8)
----- ----- -----
Net earnings 3.4% 4.5% 5.5%
===== ===== =====
</TABLE>
Fiscal 1998 Compared to Fiscal 1997
Impact of Sneaker Stadium Superstore Sales. The Company acquired 39 Sneaker
-------------------------------------------
Stadium superstores on July 2, 1998. During fiscal 1998, 24 of these acquired
superstores ran clearance sales primarily in the July through September 1998
period and were closed. These superstores then underwent renovation and
construction with 21 reopening as Just For Feet superstores in late November
1998. The remaining Sneaker Stadium superstores began clearance sales in early
November 1998 and 12 were closed during January 1999 for remodeling and
construction. The Company plans for 13 of these superstores to reopen as Just
For Feet superstores in the first quarter of fiscal 1999. As a result of the
unusually high volume of sales with lower gross profit from the clearance sales,
consolidated gross profit and store operating expenses, as a percentage of net
sales, have been reduced below typical operating levels.
Net Sales. Net sales increased approximately $296.2 million, or approximately
----------
61.9%, to $774.9 million for fiscal 1998 compared to net sales of $478.6
million for fiscal 1997. This increase was primarily attributable to 26 new
superstores, 21 converted superstores (formerly Sneaker Stadium superstores) and
51 new specialty stores opened during the year, an increase in comparable store
sales of 3.2% and additional sales during the year of $93.4 million from the
Sneaker Stadium superstores acquired in July 1998. The calculation of comparable
store sales included 62 superstores and 85 specialty stores at January 30, 1999.
Gross Profit. Gross profit for fiscal 1998 increased to $322.5 million or
-------------
62.2% from $198.8 million in fiscal 1997 as a result of increased sales. As a
percentage of net sales, gross profit increased to 41.6% for fiscal 1998 from
41.5% for fiscal 1997 primarily as a result of increased vendor discounts and
less promotional activity than in the prior year, offset by the dilutive impact
of the clearance sales at the acquired Sneaker Stadium superstores.
Store Operating Expenses. Store operating expenses increased $92.8 million or
-------------------------
approximately 66.5% to $232.5 million in fiscal 1998 from $139.7 million in
fiscal 1997. The increase was primarily attributable to the operating expenses
of the 26 new superstores and 51 new specialty stores opened during fiscal 1998,
as well as the operating expenses of the 39 Sneaker Stadium superstores acquired
in July 1998. As a percentage of net sales, store operating expenses increased
to 30.0% for fiscal 1998 from 29.2% for fiscal 1997 primarily as a result of
higher payroll and occupancy expenses, as a percentage of net sales, for the
specialty stores and the acquired Sneaker Stadium superstores; increased
superstore regional management payroll and related expenses and the increase in
superstore payroll (partially as a result of the impact of the minimum wage
increase in September 1997), all of which were partially offset by lower net
advertising costs as a percentage of net sales for the Just For Feet
superstores.
Store Opening Costs. Store opening costs are charged to operations in the
--------------------
month the applicable store opens. These costs increased approximately $7.0
million to $13.7 million for fiscal 1998 from $6.7 million for fiscal 1997. This
increase is primarily attributable to costs associated with re-opening 21 of the
acquired Sneaker Stadium superstores, as well as the costs to open 26
superstores and 51 specialty stores in fiscal 1998 as compared to the costs to
open 23 superstores and six specialty stores in fiscal 1997. As a percentage of
net sales, such costs increased to 1.8% for fiscal 1998 from 1.4% in fiscal
1997.
-17-
<PAGE>
Amortization of Intangibles. Amortization of intangibles, which includes
----------------------------
amortization of goodwill and franchise rights, increased to approximately $2.1
million for fiscal 1998 from approximately $1.2 million for fiscal 1997. This
increase is primarily attributable to the amortization of goodwill resulting
from the acquisitions of the specialty stores in fiscal 1997 and Sneaker Stadium
in fiscal 1998.
General and Administrative Expenses. General and administrative expenses
------------------------------------
increased approximately $6.3 million or 34.9%, to $24.3 million for fiscal 1998
from $18.0 million for fiscal 1997. This increase was primarily attributable to
the increase in corporate staff to support the Company's planned growth and the
general and administrative expenses attributed to the Sneaker Stadium
acquisition. As a percentage of net sales, general and administrative expenses
decreased to approximately 3.1% for fiscal 1998 from approximately 3.8% for
fiscal 1997. This decrease was due primarily to the increase in sales and the
reduction in the percentage of such expenses at the specialty store division as
that division continues to rationalize its overhead structure, as well as
management's continued focus on controlling such costs.
Operating Income. Operating income increased 49.4% to $51.2 million for fiscal
-----------------
1998 from $34.3 million for fiscal 1997. Operating income, as a percentage of
net sales, decreased to 6.6% for fiscal 1998 from 7.1% for fiscal 1997 primarily
due to the increases in store operating expenses and store opening costs which
were partially offset by a decrease in general and administrative expenses as a
percentage of net sales, as outlined above.
Interest Expense/Income, Net. Net interest expense was approximately $7.9
-----------------------------
million for fiscal 1998 compared to $76,000 for fiscal 1997. The increase in
net interest expense was primarily due to the increase in debt to fund the
acquisition of Sneaker Stadium and to fund the capital expenditures and working
capital requirements for opening 26 new superstores, 51 new specialty stores and
the renovation and working capital requirements of the acquired Sneaker Stadium
superstores during fiscal 1998.
Provision for Income Taxes. The Company's combined effective federal and state
---------------------------
income tax rate increased to 38.5% for fiscal 1998 as compared to 37.5% for
fiscal 1997 primarily from the impact of non-taxable interest income in fiscal
1997 and the inclusion of non-deductible goodwill resulting from the
acquisitions of Athletic Attic, Imperial Sports and Sneaker Stadium.
Net Income. As a result of the above factors, net income increased
-----------
approximately 24.5% to $26.6 million for fiscal 1998 from $21.4 million for
fiscal 1997.
-18-
<PAGE>
Fiscal 1997 Compared to Fiscal 1996
Net Sales. Net sales increased $222.2 million or approximately 86.7% for
----------
fiscal 1997 to $478.6 million compared to net sales of $256.4 million for fiscal
1996. This increase was primarily attributable to additional sales of $68.9
million from the 23 new superstores opened during the year, an increase in
comparable store sales of 4.5%, and additional sales of approximately $60.5
million from the specialty stores acquired during fiscal 1997. The calculation
of comparable store sales for the year included 42 superstores. The specialty
store division of the Company consists of Athletic Attic and Imperial Sports
which were acquired on March 17, 1997 and May 14, 1997, respectively.
Gross Profit. Gross profit increased to $198.8 million or 82.6% for fiscal
-------------
1997 from $108.9 million in fiscal 1996 as a result of increased sales. As a
percentage of net sales, gross profit decreased to 41.5% for fiscal 1997 from
42.5% for fiscal 1996, primarily as a result of programs utilized to increase
sales and to reduce inventory in the second half of fiscal 1997.
Store Operating Expenses. Store operating expenses increased $70.4 million or
-------------------------
101.6% to $139.7 million in fiscal 1997 from $69.3 million in fiscal 1996. This
increase was primarily attributable to the operating expenses of the 23
superstores opened during fiscal 1997 and the operating expenses of the acquired
specialty stores. As a percentage of net sales, store operating expenses
increased to 29.2% in fiscal 1997 from 27.0% in fiscal 1996 primarily as a
result of increased superstore regional management payroll and related expenses
and increases in superstore level payroll as a result of the impact of minimum
wage increases in October 1996 and September 1997.
Store Opening Costs. Store opening costs are charged to operations in the
--------------------
month the applicable store opens. Twenty-three superstores were opened during
each of fiscal 1997 and 1996. Store opening costs decreased $4.5 million or
40.1% to $6.7 million in fiscal 1997 from $11.2 million in fiscal 1996,
reflecting a reduction in per store opening costs as a result of increased focus
on controlling costs in this area.
Amortization of Intangibles. Amortization of intangibles, which includes
----------------------------
amortization of goodwill and franchise rights, increased to approximately $1.2
million for fiscal 1997 from approximately $0.2 million for fiscal 1996. This
increase was primarily attributable to the amortization of goodwill resulting
from the acquisitions of Athletic Attic and Imperial Sports.
General and Administrative Expenses. General and administrative expenses of
------------------------------------
$18.0 million increased approximately $10.1 million, or 127.8% in fiscal 1997
from $7.9 million in fiscal 1996. As a percentage of net sales, general and
administrative expenses increased to 3.8% in fiscal 1997 as compared to 3.1% for
fiscal 1996, primarily attributable to increased corporate staff and facilities
to support the Company's current and future growth and the acquisitions of the
specialty stores which have higher general and administrative expenses as a
percentage of net sales than the Company had experienced prior to the
acquisitions.
Operating Income. Operating income increased 64.9% to $34.3 million in fiscal
-----------------
1997 from $20.8 million in fiscal 1996 as a result of growth in the superstore
division and the results of operations in the acquired specialty store division.
As a percentage of net sales, operating income decreased from 8.2% in fiscal
1996 to 7.1% in fiscal 1997, due primarily to the percentage decline in gross
profit margin and increases, as a percentage of net sales, in store operating
expenses, general and administrative expenses and amortization of intangibles,
offset by the decline in store opening costs as a percentage of net sales, as
discussed above.
Interest Expense/Income, Net. Net interest expense was approximately $76,000
-----------------------------
in fiscal 1997, compared to net interest income of approximately $3.9 million in
fiscal 1996. The decrease was primarily due to the decrease in cash as a result
of financing the acquisitions of the specialty stores, cash outlays for opening
23 new superstores during fiscal 1997 and the remodeling and information systems
improvements at the specialty store division.
Net Income. As a result of the above factors, net income increased 54.0% to
-----------
approximately $21.4 million in fiscal 1997 from $13.9 million in fiscal 1996.
-19-
<PAGE>
Seasonality and Quarterly Fluctuations
The Company does not experience significant seasonal fluctuations in its
business. However, the highest sales periods for the Company's stores are the
spring, back-to-school and Christmas selling seasons. The Company also generally
experiences lower gross margins during January, February, September and October
due to retail markdowns taken to clear seasonal merchandise. Quarterly results
may fluctuate materially depending on the timing of new store openings and
related store opening expenses, net sales contributed by new stores and
increases or decreases in comparable store sales. The sum of earnings per share
for the quarters will not necessarily equal the earnings per share for the
fiscal years due to rounding. The following table sets forth certain unaudited
results of operations for the Company's last eight fiscal quarters. The
unaudited information includes all normal recurring adjustments which management
considers necessary for a fair presentation of the information shown.
<TABLE>
<CAPTION>
Fiscal 1998
--------------------------------------------------
First Second Third Fourth
(In thousands, except per share and store data) Quarter Quarter Quarter Quarter
- ----------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Net sales $151,921 $175,329 $226,008 $ 221,605
Gross profit 63,618 75,516 91,147 92,252
Earnings before income taxes 9,457 12,969 16,326 4,577
Net earnings $ 5,816 $ 7,976 $ 10,040 $ 2,816
Basic net earnings per common and common equivalent share $ 0.19 $ 0.26 $ 0.32 $ 0.09
Diluted net earnings per common and common equivalent share $ 0.19 $ 0.25 $ 0.32 $ 0.09
Basic weighted average shares outstanding 30,044 30,532 31,180 31,193
Diluted weighted average shares outstanding 31,172 32,199 31,795 32,229
Company superstores at the end of the period 84 90/(1)/ 94/(1)/ 120/(2)/
Company specialty stores at the end of the period 101 109 122 141
</TABLE>
- --------------
/(1)/ Does not include any of the 39 Sneaker Stadium superstores acquired by
the Company on July 2, 1998.
/(2)/ Does not include three Sneaker Stadium superstores in the process of
holding going-out-of-business sales and 13 Sneaker Stadium superstores
under renovation during the period.
<TABLE>
<CAPTION>
Fiscal 1997
------------------------------------------------
First Second Third Fourth
(In thousands, except per share and store data) Quarter Quarter Quarter Quarter
- ----------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Net sales $92,803 $112,369 $131,033 $142,433
Gross profit 39,002 47,254 53,567 58,999
Earnings before income taxes 8,253 7,877 8,813 9,277
Net earnings $ 5,201 $ 4,805 $ 5,376 $ 6,021
Basic net earnings per common and common equivalent share $ 0.18 $ 0.16 $ 0.18 $ 0.20
Diluted net earnings per common and common equivalent share $ 0.18 $ 0.16 $ 0.18 $ 0.20
Basic weighted average shares outstanding 28,687 29,796 29,984 29,991
Diluted weighted average shares outstanding 29,580 30,881 30,611 30,581
Company superstores at the end of the period 54 61 66 73
Company specialty stores at the end of the period 30 85 87 92
</TABLE>
-20-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Just For Feet's primary sources of working capital have been cash flows from
operations, borrowings under its revolving credit facility and other credit
facilities and proceeds from public offerings of securities. The Company had
working capital of $316.8 million, $155.5 million and $167.8 million at January
30, 1999, January 31, 1998 and January 31, 1997, respectively. The principal use
of cash has been to fund acquisitions and store operations, to remodel the
acquired Sneaker Stadium superstores and to purchase inventory, equipment and
fixtures. During fiscal 1998, the Company spent approximately $79.3 million for
property and equipment, including approximately $53.9 million to open new
stores, approximately $17.6 million for improvements to existing stores, and
approximately $7.8 million for corporate additions and improvements. The
Company's short-term operational cash requirements are not highly seasonal. The
Company had approximately $12.4 million in cash and cash equivalents as of
January 30, 1999.
On July 2, 1998, the Company consummated the private placement of 926,355
shares of common stock and warrants to purchase an additional 923,591 shares of
common stock to an affiliate of Thomas H. Lee Company, one of the former owners
of Sneaker Stadium. The warrants are exercisable at any time prior to July 2,
2003, at a price of $21.59 per share. The Company received $20.0 million from
such private placement.
On December 10, 1998, the Company obtained a $200.0 million senior revolving
credit facility from a syndicate of banks. The revolving credit facility
terminates on December 10, 2001 and bears interest at a floating rate above
either prime or LIBOR. The facility is secured by the stock of the Company's
domestic subsidiaries and 66 2/3% of the Company's foreign subsidiary,
guaranteed by all of the domestic subsidiaries, and is subject to certain
restrictive covenants.
On February 23, 1999, the Company obtained an $80.0 million term loan
generally on the same terms as the revolving facility. The borrowings under the
term loan were applied to repay borrowings under the Company's revolving credit
facility originally incurred to fund expenditures arising from the conversion
and reopening of acquired Sneaker Stadium superstores, expansion of the
superstore and specialty store operations and related working capital needs.
On April 14, 1999, the Company completed a $200.0 million private debt
offering (see Note 13). Proceeds from this debt offering were used to repay the
$80.0 million term loan and approximately $113.0 million of the credit facility
discussed above.
The Company finances certain store fixtures, point-of-sale (POS) equipment and
management information systems through various financing arrangements which may
involve capital leases and/or senior term loans.
Just For Feet's future capital requirements are primarily for the opening of
new superstores and specialty stores and the conversion of the remaining Sneaker
Stadium superstores to the Just For Feet format and operating systems. The
Company estimates that the total cash required to open a new 15,000 to 20,000
square foot prototype superstore, including store fixtures and equipment,
leasehold improvements, net working capital and store opening costs, typically
ranges from $1.5 to $2.5 million, depending on the amount of vendor and landlord
assistance. The Company estimates that the total cash required to open a 4,000
to 6,000 square foot specialty store ranges from $300,000 to $400,000.
The Company anticipates opening a total of approximately 25 new superstores,
13 remodeled former Sneaker Stadium superstores and approximately 60 new
specialty stores in fiscal 1999, and approximately 25 new superstores and
approximately 50-100 new specialty stores in fiscal 2000. The cost to remodel a
Sneaker Stadium superstore is approximately $500,000 to $1,000,000. The Company
generally increases the average inventory at these superstores from
approximately $1.3 million prior to remodeling to approximately $1.8 million at
their reopening.
The Company plans to spend approximately $65.0 to $70.0 million on capital
expenditures in 1999, including up to $5.0 million in connection with the
construction of a second office building on the campus of its existing
Birmingham, Alabama headquarters, approximately $54.0 to $59.0 million primarily
in connection with the opening of new superstores (including two flagship
superstores) and specialty stores and approximately $6.0 million in connection
with other capital improvements to its business. Total capital expenditures for
the construction of its second office building are estimated to be $8.0 million
over the next two years. The company estimates the cost of opening the two
flagship superstores planned for 1999, including capital expenditures with
respect to such superstores, will aggregate approximately $6.0 million.
The Company is not currently planning any material expenditures other than
those mentioned above, and believes that after application of the net proceeds
of the debt offering, internally generated funds, cash on hand and bank
borrowings will be adequate to fund its anticipated needs through at least the
end of fiscal 1999.
NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In April 1998, Statement of Position No. 98-5 Reporting on the Cost of Start-
Up Activities (the "SOP") was issued, which requires that costs of start-up
activities and organization costs be expensed as incurred. The Company currently
expenses start-up costs for new stores in the month that the new store opens.
The Company is required to adopt this SOP in the first quarter of fiscal 1999.
If the SOP had been adopted for the year ended January 30, 1999, the cumulative
effect of the change in accounting principle would have resulted in a net charge
to earnings of approximately $600,000 ($0.02 per basic and diluted share), net
of applicable income taxes of $375,000. The effect on the year ended January 30,
1999 would have been to increase operating expenses by approximately $2.0
million and decrease net income by approximately $1.3 million ($0.04 per basic
and diluted share).
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 is required to be adopted for years beginning after June 15, 1999. The
Company has not yet evaluated the effect which SFAS No. 133 may have on its
financial statements.
-21-
<PAGE>
IMPACT OF INFLATION
The Company does not believe that inflation has had a material, adverse
effect on net sales or results of operations. The Company has generally been
able to pass on increased costs through increases in selling prices.
YEAR 2000 READINESS
As part of the Company's Compliance Validation Project, the Company has
assessed its hardware and software systems for Year 2000 compliance. The
Company also established policies and procedures to coordinate changes to
computer systems and applications necessary to achieve a Year 2000 date
conversion with no effect on customers or disruption to business operations.
These actions are necessary to ensure that the systems and applications will
recognize and process the Year 2000 and beyond. The critical business systems
used by the Company are segregated into five categories for the discussion of
system compliance, findings, certifications, and remediation of software. The
categories include the following:
. Merchandise control applications, related hardware, and operating systems.
. Administration applications, related hardware, and operating systems.
. Network hardware and software.
. System utilities and databases, related hardware, and operating systems.
. Desktop office automation applications, related hardware, and operating
systems.
All known Year 2000 upgrade, replacement or remediation efforts for key systems
are complete with the following two exceptions:
. User files generated through desktop office automation applications
(estimated completion date June 1999).
. Specialty store division's cash register applications on IBM's Retail
Applications for DOS (estimated completion date June 1999).
The Company relies on two applications to manage inventory and monitor sales
activity. The two applications are Island Pacific's I3 Merchandising
Applications for Retail ("I3") and IBM's Retail Applications for DOS ("RADOS").
Another application, Premenos, provides electronic data interchange ("EDI")
interface capabilities between the Company and vendors for I3 processing. I3 is
an inventory and distribution management system that the Company uses to
analyze sales and inventory, and to purchase, price and distribute product. The
Company also uses an integrated financial package from I3. The Company does not
use any other application for inventory item control or for recording financial
information. The I3 version 1.3, is the latest supported software release of
these applications and is certified Year 2000 compliant by the vendor. I3 runs
on the Company's IBM AS400 model 535 computer. The AS400 runs IBM OS400
operating system software, which IBM certifies is Year 2000 compliant. In
addition, as part of the AS400 upgrades, which took place in 1997 as part of a
normal maintenance routine, the Company ensured Year 2000 compliance of that
hardware. The Company also completed a conversion of all point of sale ("POS")
equipment in its superstores to address enhanced operational needs which also
ensured Year 2000 compliance of those terminals. The completion date of the
upgrade to the Year 2000 RADOS release for the specialty stores is estimated to
be June 1999. All superstore POS registers now operate on the latest version
of RADOS, which IBM certifies as being Year 2000 compliant. RADOS runs on IBM
4694 model 144 POS terminals. These terminals are upgraded to the latest
version of hardware BIOS. The oldest terminal in the Company inventory is
approximately two years old.
Premenos is the Company's EDI translation software. The application sends
electronic purchase orders to the Company's vendors and receives invoices from
them electronically. The application version the Company currently has
installed is certified to be Year 2000 compliant. This upgraded version has
been tested and certified and is operating and exchanging information with I3
on a daily basis without significant incident.
The human resource application employed by the Company was internally
developed approximately two years ago. The system was developed using Delphi
development tools and is integrated with an Oracle database
-22-
<PAGE>
that contains employee data. The application and the supporting database are
currently processing century dates. The Company does plan a major revision or
replacement of the system in the next two years.
The Family Plan application, the Company's "13th pair is free" customer
purchase tracking system, tracks customer's shoe purchases and after 12 pairs
are purchased, provides customers with a free pair of shoes (the 13th pair is
free) at a value equal to the average purchase price of the 12 purchased pairs
of shoes. The system was developed approximately three years ago using the
Delphi development tool kit and is Year 2000 compliant. The application has two
components; a corporate application for tracking and reporting and a store
component for inquiry and redemption. The corporate application runs on a
Solaris 3000 operating system, utilizing Solaris 2.6 and Oracle 7.3. The store
component runs on a Compaq, Windows 95B personal computer. All system hardware
and software for both components are Year 2000 compliant.
The Company's payroll system consists of the following three major
components:
. Time clock application.
. The Company's employee information system.
. Ceridian payroll system interface.
The time clock application used by the Company was internally developed. The
application was developed along with the human resource and employee
information system using the Delphi development tool set and integrated with an
Oracle database containing the employee information including time and
attendance information.
The corporate payroll applications run on a Sun 3000 computer, utilizing
Solaris 2.6 and accessing employee data in an Oracle, version 7.3, database.
The remaining component of the payroll system consists of an interface
written by the Company with the Ceridian system that calculates net pay and
produces paychecks for Company employees. The interface was written using the
Delphi development toolkit. Validation of Ceridian Year 2000 compliance is part
of the Company's Compliance Validation Project and is scheduled to be completed
in early 1999.
Novell Intranetware version 4.10 is the system software that provides
directory services and server management functions for all of the corporate and
store local area networks. Version 4.10 is Year 2000 compliant and is
functioning on a daily basis without significant incidents. The Company also
uses many utilities and management tools developed by Novell for network
management. All versions of Novell utilities used by the Company are Year 2000
compliant.
The Company's other applications which are not dependent on computers or
software such as security, fire, phone, audio and visual entertainment systems,
heating and air conditioning and other such systems have been evaluated and are
considered to be Year 2000 compliant. Vendor surveys and requests for
certifications of Year 2000 compliance are being developed. All major vendors
considered critical to the Company's business continuity have been contacted
directly by phone. The process of finalizing communications with the Company
vendors was completed in early 1999.
The Company has not developed a contingency plan but will do so, if deemed
necessary, upon completion of its assessment of vendor readiness with regard to
the Year 2000 issue. The Company has not incurred any significant historical
costs related to the Year 2000 issue as their systems have been upgraded as part
of the Company's normal maintenance routines and also due to their rapid growth.
Management currently estimates that the total remaining costs of achieving Year
2000 compliance and of assessing major vendor compliance will not exceed
$500,000. The most likely worst case scenario would be the interruption of
inventory flow due to our vendors experiencing Year 2000 problems. Any failure
of the Company's computer system or those of certain third parties to achieve
Year 2000 compliance on a timely basis could have a material adverse effect on
the Company's business, financial condition and results of operations.
-23-
<PAGE>
Item 7A. Qualitative and Quantitative Disclosure About Market Risk
- -------- ---------------------------------------------------------
The Company's major "market risk" exposure is the effect of changing interest
rates. The Company manages its interest exposure by using a combination of fixed
and variable rate debt. At January 30, 1999, the Company's debt consisted of
approximately $30.4 million of fixed-rate debt with a weighted average interest
rate of 7.7% and $190.2 million of variable-rate debt with a weighted average
interest rate of 6.8%. If interest rates on such variable debt were to increase
by 68 basis points (one-tenth of the weighted average variable-rate at January
30, 1999), the net impact on the Company's results of operations and cash flows
would not be material.
Item 8. Financial Statements
- ------- --------------------
The following financial statements are filed with this report:
Independent Auditors' Report
Consolidated Balance Sheets as of January 30, 1999 and January 31, 1998.
Consolidated Statements of Earnings for the years ended
January 30, 1999, January 31, 1998 and January 31, 1997.
Consolidated Statements of Shareholders' Equity for the years ended
January 30, 1999, January 31, 1998 and January 31, 1997.
Consolidated Statements of Cash Flows for the years ended
January 30, 1999, January 31, 1998 and January 31, 1997.
Notes to Consolidated Financial Statements
-24-
<PAGE>
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF JUST FOR FEET, INC.:
We have audited the accompanying consolidated balance sheets of Just For Feet,
Inc. and subsidiaries as of January 30, 1999 and January 31, 1998, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended January 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Just For Feet, Inc. and
subsidiaries as of January 30, 1999 and January 31, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended January 30, 1999 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for the store opening costs effective
February 1, 1996.
Deloitte & Touche LLP
Birmingham, Alabama
April 23, 1999
-25-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 30, January 31,
(In thousands except per share amounts) 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,412 $ 82,490
Accounts receivable 18,875 15,840
Merchandise inventories 399,901 206,128
Other 18,302 6,709
- ---------------------------------------------------------------------------------------------------
Total current assets 449,490 311,167
PROPERTY AND EQUIPMENT, NET 160,592 94,529
GOODWILL, NET 71,084 36,106
OTHER ASSETS 8,230 6,550
- ---------------------------------------------------------------------------------------------------
$689,396 $448,352
===================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ -- $ 90,667
Accounts payable 100,322 51,162
Accrued expenses 24,829 9,292
Income taxes 1,363
Deferred income taxes 902
Current maturities of long-term obligations 6,639 3,222
- ---------------------------------------------------------------------------------------------------
Total current liabilities 132,692 155,706
LONG-TERM OBLIGATIONS 216,203 16,646
DEFERRED LEASE RENTALS 13,162 7,212
DEFERRED INCOME TAXES 1,633 704
- ---------------------------------------------------------------------------------------------------
Total liabilities 363,690 180,268
- ---------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 2, 6, 10 AND 12)
SHAREHOLDERS' EQUITY:
Preferred stock -- par value $.0001 per share; 5,000
shares authorized; none issued
Common stock -- par value $.0001 per share; 70,000 shares
authorized; 31,197 (1999) and 29,993 (1998) shares issued and
outstanding 3 3
Paid-in capital 249,590 218,616
Retained earnings 76,113 49,465
- ---------------------------------------------------------------------------------------------------
Total shareholders' equity 325,706 268,084
- ---------------------------------------------------------------------------------------------------
$689,396 $448,352
===================================================================================================
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Fiscal
(In thousands except per share amounts) 1998 1997 1996
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
NET SALES $774,863 $478,638 $256,397
COST OF SALES 452,330 279,816 147,526
-------- -------- --------
GROSS PROFIT 322,533 198,822 108,871
-------- -------- --------
FRANCHISE FEES, ROYALTIES AND OTHER REVENUE 1,299 1,101 581
- ------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Store operating 232,505 139,659 69,329
Store opening costs 13,669 6,728 11,240
Amortization of intangibles 2,072 1,200 180
General and administrative 24,341 18,040 7,878
-------- -------- --------
Total operating expenses 272,587 165,627 88,627
- ------------------------------------------------------------------------------------------------
OPERATING INCOME 51,245 34,296 20,825
INTEREST EXPENSE (8,059) (1,446) (832)
INTEREST INCOME 143 1,370 4,750
- ------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 43,329 34,220 24,743
PROVISION FOR INCOME TAXES 16,681 12,817 8,783
- ------------------------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 26,648 21,403 15,960
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- (2,041)
- ------------------------------------------------------------------------------------------------
Net earnings $ 26,648 $ 21,403 $ 13,919
================================================================================================
BASIC EARNINGS PER SHARE:
Before cumulative effect of change in accounting principle $ 0.87 $ 0.72 $ 0.58
Cumulative effect on prior years of change in accounting
principle -- -- (0.08)
- ------------------------------------------------------------------------------------------------
Net earnings per share $ 0.87 $ 0.72 $ 0.50
================================================================================================
DILUTED EARNINGS PER SHARE:
Before cumulative effect of change in accounting principle $ 0.84 $ 0.70 $ 0.55
Cumulative effect on prior years of change in accounting
principle -- -- (0.07)
- ------------------------------------------------------------------------------------------------
Net earnings per share $ 0.84 $ 0.70 $ 0.48
================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 30,737 29,615 27,627
================================================================================================
Diluted 31,852 30,410 29,096
================================================================================================
</TABLE>
See notes to consolidated financial statements.
-27-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Paid-in Retained
(In thousands) Shares Par Value Capital Earnings
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, FEBRUARY 1, 1996 26,298 $ 3 $135,124 $14,143
Public offering of common stock, net of offering costs 1,639 52,900
Exercise of options 557 1,822
Income tax benefit from exercise of options 620
Other capital transactions 1 25
Net earnings 13,919
- -------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 1997 28,495 3 190,491 28,062
Common stock issued in connection with acquisition 1,336 27,123
Exercise of options 161 804
Income tax benefit from exercise of options 173
Other capital transactions 1 25
Net earnings 21,403
- -------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 31, 1998 29,993 3 218,616 49,465
Common stock issued in connection with acquisition 926 20,000
Warrants issued in connection with acquisition 6,711
Exercise of options 278 3,056
Income tax benefit from exercise of options 1,182
Other capital transactions 25
Net earnings 26,648
- -------------------------------------------------------------------------------------------------------
BALANCE, JANUARY 30, 1999 31,197 $ 3 $249,590 $76,113
=======================================================================================================
</TABLE>
See notes to consolidated financial statements.
-28-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $26,648 $21,403 $13,919
Adjustments to reconcile net earnings to net
cash used by operating activities:
Cumulative effect of change in
accounting principle 2,041
Depreciation and amortization 16,129 8,783 3,971
Deferred income taxes 12,100 2,194 (744)
Deferred lease rentals 2,655 2,111 1,456
Changes in assets and liabilities
providing (using) cash, net of effects
of acquisitions in 1998 and 1997:
Accounts receivable (2,795) (8,918) (3,143)
Merchandise inventories (170,169) (56,616) (76,685)
Other assets (8,228) (5,643) 271
Accounts payable 34,638 7,495 16,628
Accrued expenses 7,133 2,264 2,709
Income taxes (181) 543 (2,506)
------- ------- --------
Net cash used by operating
activities (82,070) (26,384) (42,083)
- ------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment, net of
disposals (78,984) (43,446) (33,206)
Acquisitions, net of cash acquired (199) (25,548)
Purchases of marketable securities (14,726) (44,778)
Maturities and sales of marketable
securities 51,653 63,132
------- ------- --------
Net cash used for investing
activities (79,183) (32,067) (14,852)
- ------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings (repayments) under credit
facilities, net (90,667) (9,333) 45,000
Borrowings of long-term obligations 291,076 12,739 479
Principal payments on long-term
obligations (132,290) (2,054) (1,335)
Proceeds from issuance of common stock,
net 20,000 52,900
Proceeds from exercise of options 3,056 804 1,822
------- ------- --------
Net cash provided by financing
activities 91,175 2,156 98,866
- ------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (70,078) (56,295) 41,931
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 82,490 138,785 96,854
- ------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,412 $ 82,490 $138,785
==============================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for:
Interest, net of amounts capitalized $ 6,156 $ 1,376 $ 832
Income taxes $ 6,300 $ 9,851 $ 7,878
Fair value of assets acquired under
capital leases $ -- $ 507 $ 1,633
</TABLE>
See notes to consolidated financial statements.
-29-
<PAGE>
JUST FOR FEET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business--Just For Feet, Inc. is a national U.S. retailer of
athletic and outdoor footwear and apparel for men, women and children organized
and managed in both a superstore and smaller specialty store concept. Just For
Feet operated 120 company-owned and 12 franchised Just For Feet superstores and
13 Sneaker Stadium superstores (Note 2) and 141 company-owned and 42 franchised
specialty stores at January 30, 1999.
During the year ended January 30, 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 131, Disclosures About Segments of
an Enterprise and Related Information. Under SFAS No. 131, segments are defined
as components of an enterprise about which separate financial information is
available that is evaluated by the chief operating decision maker in deciding
how to allocate operating resources and in assessing performance. Under SFAS
No. 131, the superstore and specialty store concepts represent two operating
segments that have been aggregated for financial reporting purposes.
Approximately 76%, 76% and 78% of the Company's sales were comprised of athletic
and outdoor footwear for fiscal 1998, 1997 and 1996, respectively. The
remaining sales were principally apparel. Sales and assets outside the United
States are not material.
Principles of Consolidation--The accompanying financial statements include the
consolidated accounts of Just For Feet, Inc. and its wholly owned subsidiaries
(collectively, "the Company"). All significant intercompany transactions and
balances have been eliminated.
Fiscal Year--In 1998 the Company adopted the standard fiscal year of the retail
industry which is a 52/53 week period ending on the Saturday closest to January
31. As a result, the most recent fiscal year ended on January 30, 1999 ("fiscal
1998"). Prior to the change, the Company's year ended on January 31, 1998
("fiscal 1997") and January 31, 1997 ("fiscal 1996").
Cash and Cash Equivalents--The Company considers highly liquid investments with
original maturities of three months or less to be cash equivalents.
Merchandise Inventories--Merchandise inventories consist of athletic and outdoor
footwear and apparel and are valued at the lower of cost (first-in, first-out
method) or market. Costs associated with certain purchasing and merchandise
handling activities are included in inventories.
Property and Equipment--Property and equipment are stated at cost. Depreciation
and amortization are computed using the straight-line method over the lesser of
the estimated useful lives of the related assets or the relevant lease term.
Estimated useful lives range from two to ten years for furniture, fixtures and
equipment, up to 20 years for leasehold improvements, and up to 39 years for
buildings. Maintenance and repairs are expensed as incurred. Renewals and
betterments, which extend the useful lives of assets, are capitalized.
At January 31, 1998, the Company's former corporate headquarters in Birmingham,
Alabama and an office and retail center in Michigan with an aggregate net book
value of approximately $3.3 million were held for sale and classified in long-
term other assets in the accompanying consolidated balance sheet. During fiscal
1998, the Company sold the real estate in Michigan and began using the former
corporate headquarters in Birmingham; accordingly, the net book value of the
former headquarters (approximately $2.2 million at January 30, 1999) is now
classified in property and equipment in the accompanying consolidated balance
sheet.
Store Opening Costs--Effective February 1, 1996, the Company changed its method
of accounting for store opening costs, which are costs principally for pre-
opening employee salaries and travel which are incremental and directly
attributable to the opening of a new store. Under the new method, the Company
charges store opening costs to operations in the month the store opens.
Previously, store opening costs were capitalized and amortized over the twelve
months following the store opening. The cumulative effect of this change in
accounting principle resulted in a $2.0 million charge to income, net of income
taxes of $1.1 million, for fiscal 1996 ($0.08 per basic and $0.07 per diluted
share). At January 30, 1999 and January 31, 1998, capitalized store opening
costs of approximately $3.0 million and $1.0 million are included in other
current assets in the accompanying consolidated balance sheets.
Fair Value of Financial Instruments--SFAS No. 107, Disclosures about Fair Value
of Financial Instruments, requires certain disclosures for financial instruments
for which it is practicable to estimate the fair value. The Company's financial
-30-
<PAGE>
instruments consist of cash and cash equivalents, receivables, payables, accrued
expenses and interest bearing debt. The fair value of each of the Company's
financial instruments approximates the carrying values reflected in the
accompanying consolidated balance sheets at January 30, 1999 and January 31,
1998, primarily because of the short-term nature of these instruments. The
Company's debt includes a combination of fixed and variable interest rates,
which approximate market rates at January 30, 1999 and 1998; as such, the
carrying value of the debt approximates fair value.
Accounting for Stock-Based Compensation--The Company accounts for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees. SFAS No. 123, Accounting for Stock-
Based Compensation, requires certain pro forma disclosures which are presented
in Note 10.
Goodwill--Goodwill is being amortized on the straight-line basis over 30 years
(Note 2). Accumulated amortization of goodwill was approximately $2.9 million
at January 30, 1999 and approximately $1.0 million at January 31, 1998.
Impairment of Assets--The Company continually evaluates its investment in long-
lived assets used in operations for impairment based on judgements as to the
undiscounted cash flows of individual stores in accordance with the SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Assets to Be
Disposed Of. Based on these reviews, there were no adjustments to the carrying
value of long-lived assets for fiscal 1998, 1997 or 1996.
Revenue Recognition--Revenues from retail sales are recognized at the time of
sale. The Company maintains an incentive program for frequent buyers of
footwear. Estimated future costs associated with providing incentives under
this program are included in accrued expenses.
Franchise fee income is recognized when the related franchise store begins
operations, which coincides with substantial performance of initial services to
the franchisee. Royalty revenues are recognized as earned. Sales of
merchandise to franchisees (and related cost of sales) are netted in net sales
in the accompanying statements of operations as such amounts, and the resulting
gross profit, are immaterial.
Advertising--The Company expenses the cost of advertising as incurred.
Advertising expense, net of co-op credits, charged to operations was $43.9
million, $27.7 million and $17.7 million for fiscal 1998, 1997 and 1996,
respectively. Included in other current assets at January 30, 1999 is
approximately $738,000 related to a Superbowl advertisement, which will be
expensed by the Company in the first quarter of fiscal 1999.
Income Taxes--The Company accounts for income taxes using the liability method.
Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax basis of assets and liabilities and the
tax rates in effect.
Earnings Per Share--Weighted average common shares outstanding (diluted)
includes the dilutive effect of stock options as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average common shares outstanding (basic) 30,737 29,615 27,627
Dilutive effect of stock options 1,115 795 1,469
- --------------------------------------------------------------------------------
Weighted average common shares outstanding (diluted) 31,852 30,410 29,096
================================================================================
</TABLE>
For fiscal 1998 there were options to purchase 416,000 shares and warrants to
purchase 924,000 shares of common stock and for fiscal 1997 and 1996 there were
options to purchase 1.3 million and 31,000 shares, respectively, of common stock
excluded from the computation of weighted average shares as such options and
warrants would have been anti-dilutive.
Reliance on Key Vendors--The Company's business is dependent to a significant
degree upon its ability to purchase brand-name merchandise at competitive
prices. For fiscal 1998, 1997 and 1996, approximately 62%, 64% and 70%,
respectively, of the Company's merchandise was purchased from five vendors,
including approximately 42%, 48% and 54%, respectively, from Nike and Reebok.
The loss of key vendors could have a material adverse effect on the Company's
business.
-31-
<PAGE>
New Accounting Standards Not Yet Adopted--In April 1998, Statement of Position
No. 98-5, Reporting on the Cost of Start-Up Activities (the "SOP") was issued,
which requires that costs of start-up activities and organization costs be
expensed as incurred. The Company currently expenses start-up costs for new
stores in the month that the new store opens. The Company is required to adopt
this SOP in the first quarter of fiscal 1999. If the SOP had been adopted for
the year ended January 30, 1999, the cumulative effect of the change in
accounting principle would have resulted in a net charge to earnings of
approximately $600,000 ($0.02 per basic and diluted share), net of applicable
income taxes of approximately $375,000. The effect on the year ended January 30,
1999 would have been to increase operating expenses by approximately $2.0
million and decrease net income by approximately $1.3 million ($0.04 per basic
and diluted share).
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 is
required to be adopted for years beginning after June 15, 1999. The Company has
not yet evaluated the effect which SFAS No. 133 may have on its financial
statements.
Accounting Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results may differ from those estimates.
Reclassifications--Certain reclassifications have been made in the fiscal 1997
and 1996 presentations to conform to the fiscal 1998 presentation.
2. ACQUISITIONS
The Company made one acquisition in fiscal 1998 and two acquisitions in fiscal
1997 that have been accounted for as purchases and, accordingly, each purchase
price has been allocated to assets acquired and liabilities assumed based upon
their estimated fair values at the respective acquisition dates. The excess of
the consideration paid over the net tangible and identifiable intangible assets
acquired has been recorded as goodwill and is being amortized over 30 years.
The accompanying consolidated statements of earnings for fiscal 1998 and fiscal
1997 include the results of operations of the acquired entities from their
respective acquisition dates.
In July 1998, the Company acquired all of the outstanding stock of Sneaker
Stadium, Inc. ("Sneaker") for nominal cash consideration (principally for direct
acquisition costs) and the assumption of $43.0 million of existing bank debt.
Such debt was immediately paid off with the proceeds of a term loan by the
Company. The Company may make additional payments of up to $33.0 million after
April 2002 to certain specified former lenders of Sneaker, if the acquired
Sneaker Stadium superstores attain certain financial targets. Such additional
payments, if required, will be accounted for as additional consideration for the
acquisition.
Concurrent with and as a condition of the Company's acquisition of Sneaker, an
affiliate of Thomas H. Lee Company ("THL"), a firm which owned a controlling
interest in Sneaker, purchased from the Company an aggregate of 926,355 units,
each consisting of one share of the Company's common stock and a warrant to
purchase 0.997 of a share of the Company's common stock at a purchase price of
$21.59 per share exercisable at any time through July 2, 2003. The aggregate
purchase price for the units was $20.0 million. The estimated fair market value
of the warrants on July 2, 1998 was $6.7 million, which, for accounting
purposes, was considered a part of the consideration paid by the Company for
Sneaker. The warrants issued in connection with this acquisition represent non-
cash investing and financing activities for the purpose of the consolidated
statement of cash flows for fiscal 1998. In addition, THL appointed a member to
the Company's Board of Directors in accordance with the terms of the acquisition
agreement. Certain fees aggregating approximately $750,000 associated with this
acquisition were paid to affiliates of THL as direct costs of the acquisition.
In March 1997, the Company acquired Athletic Attic for approximately $9.7
million in cash, net of cash acquired, the repayment of approximately $1.3
million of Athletic Attic's debt and approximately $5.6 million of the Company's
common stock (259,000 shares). In May 1997, the Company acquired Imperial
Sports for approximately $5.8 million in cash, net of cash acquired, the
repayment of approximately $8.7 million of Imperial Sport's debt and
approximately $21.5 million of the Company's common stock (approximately 1.1
million shares). The common stock issued in connection with these acquisitions
represents non-cash investing and financing activities for the purpose of the
consolidated statement of cash flows
-32-
<PAGE>
for fiscal 1997. Certain fees aggregating $222,000 associated with these
acquisitions were paid to an entity in which a director of the Company is a
partner.
The estimated fair values of assets acquired and liabilities assumed in fiscal
1998 for the Sneaker Stadium acquisition and in fiscal 1997 for the combined
acquisitions of Athletic Attic and Imperial Sports are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal
1998 1997
- ----------------------------------------------------------------
<S> <C> <C>
Cash $ 2,476 $ 907
Merchandise inventories 37,153 16,188
Property and equipment 700 5,318
Other assets 2,745 1,336
Goodwill 36,403 37,044
Deferred income taxes 15,600 1,759
Accounts payable and accrued liabilities (36,499) (6,312)
Interest bearing debt (43,000)
Deferred lease rentals (3,294) (2,064)
Other liabilities (2,898) (598)
- ----------------------------------------------------------------
$ 9,386 $53,578
================================================================
Consideration consisted of:
Cash $ 2,675 $26,455
Stock issued 27,123
Warrants issued 6,711
- ----------------------------------------------------------------
$ 9,386 $53,578
================================================================
</TABLE>
Included in the above accrued liabilities amount for the Sneaker Stadium
acquisition in fiscal 1998 is (i) approximately $2.1 million for severance costs
relating to substantially all of its approximately 1,900 employees, of which
approximately $2.0 million was paid during fiscal 1998 and charged against the
liability account, and (ii) approximately $1.4 million for future rental costs
associated with acquired Sneaker Stadium superstores closed or expected to be
closed within one year of the acquisition date.
The following unaudited pro forma consolidated results of operations for fiscal
1998 and 1997 assume the Sneaker Stadium acquisition occurred as of the
beginning of fiscal 1997 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Fiscal
1998 1997
- ----------------------------------------------------------------
<S> <C> <C>
Net sales $839,986 $611,481
Net earnings 22,728 10,888
Earnings per share:
Basic $ 0.72 $ 0.36
Diluted $ 0.69 $ 0.35
</TABLE>
The pro forma results are not necessarily indicative of the results the Company
would have achieved had the Sneaker acquisition occurred at the beginning of
fiscal 1997, nor necessarily indicative of the results of future operations.
The acquisitions of the Athletic Attic and Imperial Sports would not have a
material effect on fiscal 1997 and 1996 pro forma results.
3. PROPERTY AND EQUIPMENT
-33-
<PAGE>
Property and equipment is summarized as follows (in thousands):
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Owned:
Land $ 3,807 $ 3,807
Store facilities and corporate office 18,157 15,212
Furniture, fixtures and equipment 61,140 37,847
Leasehold improvements 91,733 42,765
Construction-in-progress 9,537 4,753
- -------------------------------------------------------------------------
184,374 104,384
Accumulated depreciation and amortization (26,645) (12,910)
-------- --------
157,729 91,474
- -------------------------------------------------------------------------
Under capital leases:
Furniture, fixtures and equipment 4,232 4,103
Accumulated amortization (1,369) (1,048)
------- -------
2,863 3,055
- -------------------------------------------------------------------------
$160,592 $ 94,529
=========================================================================
</TABLE>
4. SHORT-TERM BORROWINGS
At January 31, 1998, the Company had $15.7 million outstanding under a $40.0
million unsecured line of credit bank agreement. (The president of one of the
bank's subsidiaries is also a director of the Company.) This line was cancelled
and all amounts outstanding were repaid in December 1998 with proceeds from a
$200.0 million revolving senior credit facility (Note 5). Borrowings under
this line of credit bore interest at a floating rate above the LIBOR rate (5.6%
plus 1.5% at January 31, 1998). The agreement contained certain covenants,
which included the maintenance of minimum net worth and certain financial
ratios.
At January 31, 1998, the Company had $75.0 million of short-term borrowings that
were used to purchase U.S. Treasury securities for Alabama share tax planning
purposes. These securities, which were pledged as collateral on this debt, were
sold in early February 1998 with the sale proceeds being utilized to repay such
borrowings.
5. LONG-TERM OBLIGATIONS
Senior Credit Facility--In December 1998, the Company obtained a $200.0 million
revolving senior credit facility (the "Senior Facility") from a syndicate of
banks, including a bank for which a director of the Company is president of one
of the bank's subsidiaries. The Senior Facility terminates in December 2001,
bears interest at a floating rate above either prime or LIBOR, is guaranteed and
secured by the stock of the Company's domestic subsidiaries and is secured by 66
2/3% of the stock of the Company's foreign subsidiary (Note 13), and is subject
to certain restrictive covenants which include the maintenance of minimum net
worth and certain financial ratios. The Company used borrowings under this
facility to repay amounts outstanding under its other revolving bank lines (Note
4). At January 30, 1999, $189.2 million was outstanding under this facility, of
which $165.0 million bore interest at rates ranging from 6.49% to 6.79% (LIBOR
plus 1.50%) and $24.2 million bore interest at 7.75% (prime). Commitment fees
are computed at rates ranging from .25% to .375% per annum on the unused portion
of the facility.
-34-
<PAGE>
Other Long-Term Debt--Other long-term debt consists of various notes payable due
in monthly installments through 2010, which bear interest at variable and fixed
rates ranging primarily from 6.9% to 10.4% at January 30, 1999. Such debt is
collateralized principally by land, buildings and equipment with an aggregate
carrying value of approximately $35.4 million at January 30, 1999. Scheduled
maturities of other long-term debt at January 30, 1999 were as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal
- ----------------------------------------------
<S> <C>
1999 $ 5,455
2000 5,607
2001 5,555
2002 5,627
2003 3,840
Thereafter 5,365
- ----------------------------------------------
Total $31,449
==============================================
</TABLE>
The Company also leases certain furniture, fixtures and equipment under long-
term agreements that are accounted for as capital leases. Scheduled maturities
under these capital leases at January 30, 1999 were as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
- -----------------------------------------------
<S> <C>
1999 $ 1,430
2000 774
2001 170
2002 61
- -----------------------------------------------
2,435
Less amounts representing interest (242)
- -----------------------------------------------
Total capital lease obligations 2,193
Less current portion (1,184)
- -----------------------------------------------
Long-term capital lease obligations $1,009
===============================================
</TABLE>
6. OPERATING LEASE COMMITMENTS
The Company leases certain store facilities, land, fixtures and equipment under
agreements that are accounted for as operating leases. Lease terms range from
approximately three years to twenty years. Certain leases contain renewal
options and provide for future rent increases based upon increases in the
Consumer Price Index. At January 30, 1999, future annual minimum lease payments
under operating leases with remaining terms in excess of one year (including
lease payments for 31 store facilities not yet opened at January 30, 1999) are
as follows (in thousands):
<TABLE>
<CAPTION>
Real Fixtures and
Fiscal Estate Equipment Total
- ----------------------------------------------------------------------
<S> <C> <C> <C>
1999 $ 64,062 $ 2,308 $ 66,370
2000 68,189 2,205 70,394
2001 68,548 1,233 69,781
2002 69,812 161 69,973
2003 68,675 108 68,783
Thereafter 510,065 - 510,065
- ----------------------------------------------------------------------
Total $849,351 $ 6,015 $855,366
======================================================================
</TABLE>
Total rent expense under all operating leases was as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
1998 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rentals $46,710 $23,891 $10,190
Additional rentals based on sales volume 319 272 710
- ----------------------------------------------------------------------
$47,029 $24,163 $10,900
======================================================================
</TABLE>
-35-
<PAGE>
Rent expense for operating leases that contain scheduled rent increases is
recognized for financial reporting purposes on the straight-line method.
Consequently, amounts that have been expensed for financial reporting purposes,
but not yet paid, are reflected as deferred lease rentals in the accompanying
consolidated balance sheets. In addition, subsequent to January 30, 1999, the
Company entered into lease agreements for four stores which require aggregate
rental payment of $24.2 million through 2019. The Company has subleased a
portion of a facility to a third party. Future sublease rentals are not
material.
7. INCOME TAXES
The consolidated provision for income taxes is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
Fiscal
1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 2,391 $9,763 $7,397
State 572 860 1,245
------- ------ ------
2,963 10,623 8,642
- --------------------------------------------------------------------------
Deferred:
Federal 12,404 1,991 130
State 1,459 203 11
Foreign (145) - -
------- ------ ------
13,718 2,194 141
- --------------------------------------------------------------------------
$16,681 $12,817 $8,783
==========================================================================
</TABLE>
Following is a reconciliation of the applicable U.S. federal income tax,
computed at the statutory rate, to the provision reflected in the consolidated
statements of earnings, excluding the cumulative effect of the fiscal 1996
accounting change (in thousands):
<TABLE>
<CAPTION>
Fiscal
1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income tax at statutory rate $15,165 $11,977 $8,660
State income taxes, net of federal tax effect 1,320 691 820
Tax exempt interest income (270) (856)
Amortization of goodwill 462 398
Other (266) 21 159
- ----------------------------------------------------------------------------
$16,681 $12,817 $8,783
============================================================================
</TABLE>
Deferred tax assets and liabilities that arise as a result of temporary
differences are summarized as follows (in thousands):
<TABLE>
<CAPTION>
January 30, January 31,
1999 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses $ 1,356 $ 865
Deferred lease rentals and lease valuations 3,980 2,509
State net operating loss carryforward 1,345
Other 58 437
------- -------
Total deferred tax assets 6,739 3,811
- ----------------------------------------------------------------------------
Deferred tax liabilities:
Store opening costs (633) (358)
Other prepaid expenses (1,317) (430)
Franchise rights (812) (880)
Depreciation and fixed asset valuation (2,331) (2,375)
Other (465) (524)
------- -------
Total deferred tax liabilities (5,558) (4,567)
- ----------------------------------------------------------------------------
$ 1,181 $ (756)
============================================================================
</TABLE>
-36-
<PAGE>
As a result of the Sneaker Stadium acquisition (see Note 2), the Company has
available net operating loss carryforwards for state income tax purposes of
approximately $20.0 million at January 30, 1999 which expire at various times
over the next 20 years.
8. FRANCHISE AND OTHER ACTIVITIES
Franchise operations consist of one franchisee that operates 12 franchised
superstores in three states and 17 franchisees that operate 42 franchised
specialty stores in six states and Puerto Rico. The Company generally receives
initial franchise fees for the superstore franchises on a per store basis for
providing certain services and other advice related to opening a franchise
store. In addition, the Company receives royalties from superstore and
specialty store franchisees based on a percentage of sales.
Revenues from franchisees included in the accompanying consolidated statements
of earnings are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal
1998 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Initial franchisee fees $ - $ 45 $ 15
Royalties 995 841 566
- ---------------------------------------------------------------------------
$ 995 $ 886 $ 581
===== ===== =====
Merchandise sales to franchisees $ 896 $ 796 $ 399
===========================================================================
</TABLE>
Included in accounts receivable at January 30, 1999 and January 31, 1998 is
$612,000 and $847,000, respectively, due from franchisees and $342,000 and
$348,000, respectively, due from officers of the Company.
9. COMMON STOCK
In June 1996, the Company completed a fourth public offering of 1.6 million
shares of its common stock at $34.25 per share. Net proceeds (after offering
costs) from the sale of this stock approximated $52.9 million. Certain shares
of the Company's common stock are subject to registration rights.
10. STOCK OPTION PLANS
In August 1993, the Company adopted the Employee Incentive Stock Option Plan.
This plan provides for the issuance of incentive stock options to Company
employees of up to 4.5 million shares. Options may be granted at prices that
are equal to or greater than the fair market value of the shares at the date of
the grant. Options become exercisable over periods of generally one to five
years and expire ten years from the date of the grant. At January 30, 1999, the
Company had approximately 1.0 million options available for future grants under
this plan.
In June 1995, the Company adopted the Non-Employee Director Stock Option Plan.
This plan provides for the issuance of stock options to non-employee directors
of up to 281,000 shares of the Company's common stock. Options may be granted at
prices that are equal to or greater than the fair market value of the shares at
the date of grant and become exercisable ratably over the three years commencing
on the first anniversary date of the grant. At January 30, 1999, the Company
had 29,000 options available for future grants under this plan.
-37-
<PAGE>
In June 1997, the Company adopted its 1997 Employee Incentive Plan which
provides for the grant of incentive and non-qualified stock options, stock
appreciation rights, restricted stock or performance awards covering an
aggregate of 2.9 million shares of the Company's common stock to eligible (as
defined by the Plan) directors, officers, employees, consultants and advisors of
the Company and its subsidiaries. Options may be granted at prices which are
equal to or greater than the fair market value (as defined by the Plan) of the
shares at the date of grant. Options become exercisable over periods of
generally one to five years and expire ten years from the date of the grant.
During the year ended January 31, 1998, 100,000 options were granted under this
plan to a director of the Company under a personal services contract;
compensation expense related to this grant was not significant. At January 30,
1999, the Company had 1.1 million options available for future grants under this
plan.
Information regarding these option plans is as follows (in thousands, except for
weighted average exercise price):
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
- --------------------------------------------------------------------------------
<S> <C> <C>
At February 1, 1996 2,502 $ 8.43
Granted at fair market value 1,381 25.78
Exercised (557) 3.38
Forfeited (280) 21.21
- --------------------------------------------------------
At January 31, 1997 (519 options exercisable) 3,046 16.08
Granted at fair market value 3,019 14.72
Exercised (160) 4.99
Forfeited (752) 13.71
Cancelled (930) 25.69
- --------------------------------------------------------
At January 31, 1998 (976 options exercisable) 4,223 13.93
Granted at fair market value 1,015 14.66
Exercised (279) 10.90
Forfeited (902) 15.38
- --------------------------------------------------------
At January 30, 1999 (1,431 options exercisable) 4,057 14.01
=====
- --------------------------------------------------------
</TABLE>
The following table summarizes information about stock options outstanding and
exercisable at January 30, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------------------------------
Range of Number Weighted Average Weighted Average Number Weighted Average
Exercise Outstanding Exercise Remaining Exercisable Exercise
Price (in thousands) Price Life (Years) (in thousands) Price
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 1.48-$ 5.13 211 $ 2.89 4.9 211 $ 2.89
$ 8.69-$13.84 1,540 11.12 7.6 546 9.86
$14.09-$14.75 1,009 14.62 8.6 166 14.64
$15.06-$19.42 990 16.72 8.2 321 16.88
$20.00-$37.08 307 25.39 7.7 187 25.85
- ------------------------ -----
4,057 14.01 7.9 1,431 13.05
===== =====
</TABLE>
The Company has adopted the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Accordingly, no compensation cost has
been recognized in the Company's financial statements for the stock option
plans. The weighted average fair value of options granted during fiscal 1998,
1997 and 1996 was $4.92, $5.10 and $9.86, respectively. Had compensation cost
for the Company's option plans been determined based on the fair market value at
the grant date for awards during fiscal 1998, 1997 and 1996 consistent with the
provisions of that statement, the Company's net earnings (and basic and diluted
earnings per share) prior to the cumulative effect of the change in accounting
principle would have been reduced to $23.2 million ($0.75 basic and $0.73
diluted earnings per share), $17.0 million ($0.58 basic and $0.56 diluted
earnings per share) and $12.7 million ($0.46 basic and $0.44 diluted earnings
per share), respectively. The fair market
-38-
<PAGE>
value of each option grant is estimated on the date of grant using the Black-
Scholes option-pricing model with the following weighted average assumptions for
fiscal 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Fiscal
1998 1997 1996
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Expected volatility 42.0% 30.0% 34.0%
Risk free interest rate 4.9% 6.2% 6.5%
Expected lives (years) 3 4.5 4.6
Dividends paid during the life of the options - - -
</TABLE>
11. RETIREMENT SAVINGS PLAN
In June 1998, the Company adopted a defined contribution retirement savings
plan, (the Just For Feet Savings Plan - the "Plan") under Section 401(k) of the
Internal Revenue Code. The 401(k) plans of Imperial Sports and Sneaker Stadium
were also merged into this plan. All Company employees at least 18 years of age
who have completed one year of service with 1,000 hours or more are eligible to
participate in the Plan. Employees elect contribution percentages of up to 20%
of annual compensation, as well as the investment options for their
contributions. The Company makes matching contributions on behalf of each
participant of up to 25% of the first 6% of each participant's contribution to
the Plan. The Plan also allows for a supplemental matching contribution of up
to 25% of the first 6% of each participant's contribution to the Plan. Matching
contributions to the Plan were $142,000 and $38,000 for fiscal 1998 and 1997,
respectively. Employee contributions are 100% vested while Company
contributions are vested according to a specified scale based on years of
service.
12. LITIGATION
In July 1997, a lawsuit was filed by a shareholder (individually and on behalf
of others) against the Company and certain of its current and former officers, a
former director and two of the four managing underwriters in the Company's June
1996 public offering of common stock. The suit alleges that the Company's
registration statement and prospectus used in such offering contained certain
misleading financial information. The Company and its named officers and
directors deny liability on the claims (the dollar amount of which is currently
unspecified) and are vigorously defending the suit.
On April 20, 1999, the sole superstore franchisee of the Company, as Plaintiff,
filed a complaint seeking declaratory judgement, an accounting and monetary
damages against the Company. The complaint alleges that the Company has
breached its obligations under certain franchise agreements between it and the
Plaintiff and seeks actual damages in excess of $82.5 million, punitive damages
in excess of $25 million and the right to terminate the franchise agreements.
The Company denies all allegations contained in the complaint and will
vigorously defend these allegations.
The Company is a defendant in various lawsuits incident to the ordinary course
of business. It is not possible to determine with precision the probable
outcome or the amount of liability, if any, with respect to these lawsuits;
however, in the opinion of the Company, the disposition of these lawsuits will
not adversely affect the consolidated financial statements of the Company to a
material extent.
13. SUBSEQUENT EVENT
On April 14, 1999, the Company completed the private placement of $200.0
million, 11.0% senior subordinated notes (the "Notes"). Proceeds from this debt
offering were used to repay a $80.0 million term loan (which was initially
borrowed in February 1999) and approximately $113.0 million of the Senior
Facility. The Notes mature in May 2009 and require interest payments semi-
annually. The Notes are redeemable after April 2004 without a make-whole
premium. At any time prior to May 2004, the Company may redeem all of the notes
at a redemption price equal to 100% of their principal amount plus a make-whole
premium, together with accrued interest through the redemption date. Before May
2002, the Company may redeem up to 35% of the notes with the net proceeds of
certain sales of equity. The notes are general unsecured obligations,
subordinate to all of the Company's senior debt.
All of the Company's wholly owned U.S. subsidiaries (the Company's non-guarantor
foreign subsidiary was formed in fiscal 1998) have guaranteed the Notes.
Accordingly, condensed consolidating financial statements are presented below.
On February 1, 1998, the Company effected a corporate reorganization whereby
certain of its operations were transferred into separate wholly owned
subsidiaries. The condensed consolidating financial statements retroactively
reflect this reorganization as if it occurred on February 1, 1996, and thus, the
financial information related to these operations is included in the guarantor
subsidiaries column for all periods presented. The guarantees of the guarantor
subsidiaries of the Notes are full, unconditional, and joint and several.
Separate financial statements of the guarantor subsidiaries are not presented
because management has determined that they would not be material to investors.
There are no significant restrictions on the ability of Just For Feet, Inc. (the
"Parent") to obtain funds from the guarantor subsidiaries. The Parent and the
guarantors have accounted for their respective subsidiaries on the equity basis.
-39-
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEETS
<TABLE>
<CAPTION>
(Amounts in thousands) January 30, 1999
- --------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor Guarantor
Parent Subsidiaries Subsidiary Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,856 $ 10,309 $ 247 $ - $ 12,412
Accounts receivable - trade 18,875 - 18,875
Accounts receivable - intercompany 279,375 - - (279,375) -
Merchandise inventory 97,030 297,247 5,624 399,901
Other 7,057 11,030 215 18,302
- --------------------------------------------------------------------------------------------------------------
Total current assets 404,193 318,586 6,086 (279,375) 449,490
PROPERTY AND EQUIPMENT, NET 45,097 112,693 2,802 160,592
INVESTMENTS IN SUBSIDIARIES 191,507 - - (191,507) -
GOODWILL, NET 71,084 71,084
OTHER ASSETS 1,287 6,932 11 8,230
- --------------------------------------------------------------------------------------------------------------
$642,084 $509,295 $ 8,899 $(470,882) $ 689,396
==============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings
Accounts payable $ 81,341 $ 18,540 $ 441 $ - $100,322
Accounts payable - intercompany - 270,767 8,608 (279,375) -
Accrued expenses 11,563 13,161 105 24,829
Income taxes 902 - 902
Current maturities of
long-term obligations 6,108 531 - 6,639
- --------------------------------------------------------------------------------------------------------------
Total current liabilities 99,914 302,999 9,154 (279,375) 132,692
LONG-TERM OBLIGATIONS 215,186 1,017 216,203
DEFERRED LEASE RENTALS 457 12,705 - 13,162
DEFERRED INCOME TAXES 821 812 - 1,633
- --------------------------------------------------------------------------------------------------------------
Total liabilities 316,378 317,533 9,154 (279,375) 363,690
- --------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock 3 11 - (11) 3
Additional paid-in capital 249,590 115,376 - (115,376) 249,590
Retained earnings 76,113 76,375 (255) (76,120) 76,113
- --------------------------------------------------------------------------------------------------------------
Total shareholders' equity 325,706 191,762 (255) (191,507) 325,706
- --------------------------------------------------------------------------------------------------------------
$642,084 $509,295 $ 8,899 $(470,882) $ 689,396
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Amounts in thousands) January 31, 1998
- --------------------------------------------------------------------------------------------------
Guarantor
Parent Subsidiaries Eliminations Consolidated
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 77,228 $ 5,262 $ - $ 82,490
Accounts receivable - trade 14,664 1,176 - 15,840
Accounts receivable - intercompany 72,848 - (72,848) -
Merchandise inventory 63,246 142,882 - 206,128
Other 5,054 1,655 - 6,709
- ------------------------------------------------------------------------------------------------
Total current assets 233,040 150,975 (72,848) 311,167
PROPERTY AND EQUIPMENT, NET 41,680 52,849 - 94,529
INVESTMENTS IN SUBSIDIARIES 164,508 - (164,508) -
GOODWILL, NET - 36,106 - 36,106
OTHER ASSETS 253 6,297 - 6,550
- ------------------------------------------------------------------------------------------------
$439,481 $246,227 $(237,356) $448,352
================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 90,667 $ - $ - $ 90,667
Accounts payable 51,162 - - 51,162
Accounts payable - intercompany - 72,848 (72,848) -
Accrued expenses 7,724 1,568 - 9,292
Income taxes 478 885 - 1,363
Current maturities of
long-term obligations 3,222 - - 3,222
- ------------------------------------------------------------------------------------------------
Total current liabilities 153,253 75,301 (72,848) 155,706
LONG-TERM OBLIGATIONS 16,646 - - 16,646
DEFERRED LEASE RENTALS 794 6,418 - 7,212
DEFERRED INCOME TAXES 704 - - 704
- ------------------------------------------------------------------------------------------------
Total liabilities 171,397 81,719 (72,848) 180,268
- ------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock 3 11 (11) 3
Additional paid-in capital 218,616 115,376 (115,376) 218,616
Retained earnings 49,465 49,121 (49,121) 49,465
- ------------------------------------------------------------------------------------------------
Total shareholders' equity 268,084 164,508 (164,508) 268,084
- ------------------------------------------------------------------------------------------------
$439,481 $246,227 $(237,356) $448,352
================================================================================================
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING
STATEMENTS OF EARNINGS
(Amounts in thousands) Fiscal 1998
- --------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiary Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ 135,819 $624,251 $ 14,793 $ - $774,863
COST OF SALES 80,950 361,345 10,035 452,330
--------- -------- -------- --------
GROSS PROFIT 54,869 262,906 4,758 322,533
--------- -------- -------- --------
FRANCHISE FEES, ROYALTIES AND OTHER REVENUE (6,708) 8,007 1,299
- --------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Store operating 32,422 195,514 4,569 232,505
Store opening costs 2,067 10,999 603 13,669
Amortization of intangibles 181 1,891 - 2,072
General and administrative 6,282 18,059 - 24,341
--------- -------- -------- --------
Total operating expenses 40,952 226,463 5,172 272,587
- --------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 7,209 44,450 (414) 51,245
INTEREST INCOME (EXPENSE), NET (7,780) (136) (7,916)
- --------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (571) 44,314 (414) 43,329
PROVISION FOR INCOME TAXES (220) 17,060 (159) 16,681
- --------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE EQUITY IN EARNINGS
OF SUBSIDIARIES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (351) 27,254 (255) - 26,648
EQUITY IN EARNINGS OF SUBSIDIARIES 26,999 - - (26,999) -
CUMULATIVE EFFECT ON PRIOR YEARS
OF CHANGE IN ACCOUNTING PRINCIPLE - - - -
- --------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 26,648 $ 27,254 $ (255) $(26,999) $ 26,648
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(Amounts in thousands) Fiscal 1997
- ----------------------------------------------------------------------------------------------------
Guarantor
Parent Subsidiaries Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $86,789 $391,849 $ - $478,638
COST OF SALES 50,732 229,084 - 279,816
------- -------- --------
GROSS PROFIT 36,057 162,765 - 198,822
------- -------- --------
FRANCHISE FEES, ROYALTIES AND OTHER REVENUE 36 1,065 - 1,101
- ----------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Store operating 31,379 108,280 - 139,659
Store opening costs 2,584 4,144 - 6,728
Amortization of intangibles 1,200 - 1,200
General and administrative 5,835 12,205 - 18,040
------- -------- --------
Total operating expenses 39,798 125,829 - 165,627
- ----------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (3,705) 38,001 - 34,296
INTEREST INCOME (EXPENSE), NET (76) - - (76)
- ----------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (3,781) 38,001 - 34,220
PROVISION FOR INCOME TAXES (1,416) 14,233 - 12,817
- ----------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE EQUITY IN EARNINGS
OF SUBSIDIARIES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (2,365) 23,768 - 21,403
EQUITY IN EARNINGS OF SUBSIDIARIES 23,768 - (23,768) -
CUMULATIVE EFFECT ON PRIOR YEARS
OF CHANGE IN ACCOUNTING PRINCIPLE - - - -
- ----------------------------------------------------------------------------------------------------
Net earnings (loss) $21,403 $ 23,768 $(23,768) $21,403
====================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Amounts in thousands) Fiscal 1996
- -----------------------------------------------------------------------------------------------------
Guarantor
Parent Subsidiaries Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $39,952 $216,445 $ - $256,397
COST OF SALES 23,050 124,476 - 147,526
------- -------- --------
GROSS PROFIT 16,902 91,969 - 108,871
------- -------- --------
FRANCHISE FEES, ROYALTIES AND OTHER REVENUE - 581 - 581
- ----------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Store operating 10,835 58,494 - 69,329
Store opening costs 2,668 8,572 - 11,240
Amortization of intangibles - 180 - 180
General and administrative 3,217 4,661 - 7,878
------- -------- --------
Total operating expenses 16,720 71,907 - 88,627
- ----------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 182 20,643 - 20,825
INTEREST INCOME (EXPENSE), NET 3,918 - - 3,918
- ----------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 4,100 20,643 - 24,743
PROVISION FOR INCOME TAXES 1,456 7,327 - 8,783
- ----------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE EQUITY IN EARNINGS
OF SUBSIDIARIES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 2,644 13,316 - 15,960
EQUITY IN EARNINGS OF SUBSIDIARIES 11,275 - (11,275) -
CUMULATIVE EFFECT ON PRIOR YEARS
OF CHANGE IN ACCOUNTING PRINCIPLE - (2,041) - (2,041)
- ----------------------------------------------------------------------------------------------------
Net earnings (loss) $13,919 $ 11,275 $(11,275) $ 13,919
====================================================================================================
</TABLE>
-41-
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING
STATEMENTS OF CASH FLOWS
(Amounts in thousands) Fiscal 1998
- --------------------------------------------------------------------------------------------------------------------
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiary Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) $ 26,648 $ 27,254 $ (255) $(26,999) $ 26,648
Adjustments to reconcile net earnings
to net cash (used in) provided by
operating activities:
Cumulative effect of change in
accounting principle - - -
Depreciation and amortization 4,108 11,828 193 16,129
Deferred income taxes 117 11,983 - 12,100
Deferred lease rentals (337) 2,992 - 2,655
Undistributed earnings of subsidiaries (26,999) - - 26,999 -
Changes in assets and liabilities
providing (using) cash, net of effects
of acquisitions in 1998 and 1997:
Accounts receivable (4,211) 1,416 - - (2,795)
Merchandise inventories (33,784) (130,761) (5,624) - (170,169)
Other assets (2,751) (5,257) (220) - (8,228)
Accounts payable 30,179 4,018 441 - 34,638
Accrued expenses 3,839 3,189 105 - 7,133
Income taxes 424 (605) - - (181)
Advances to/from subsidiaries (157,176) 148,568 8,608 - -
-------- -------- ------ ------- --------
Net cash provided by (used in)
operating activities (159,943) 74,625 3,248 - (82,070)
- --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (6,604) (69,379) (3,001) - (78,984)
Acquisitions, net of cash acquired - (199) - (199)
Purchases of marketable securities - - - -
Maturities and sales of
marketable securities - - - -
-------- -------- ------ ------- --------
Net cash provided by (used for)
investing activities (6,604) (69,578) (3,001) - (79,183)
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings (repayments) under financing
agreements, net (90,667) - - - (90,667)
Borrowings (repayments) of
long-term obligations, net 158,786 - - - 158,786
Proceeds from issuance of
common stock, net 20,000 - - - 20,000
Proceeds from exercise of options 3,056 - - - 3,056
-------- -------- ------ ------- --------
Net cash provided by
financing activities 91,175 - - - 91,175
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (75,372) 5,047 247 (70,078)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 77,228 5,262 - - 82,490
- --------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD $ 1,856 $ 10,309 $ 247 $ - $ 12,412
====================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Amounts in thousands) Fiscal 1997
- --------------------------------------------------------------------------------------------------------
Guarantor
Parent Subsidiaries Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) $ 21,403 $ 23,768 $(23,768) $ 21,403
Adjustments to reconcile net earnings
to net cash (used in) provided by
operating activities:
Cumulative effect of change in
accounting principle - - - -
Depreciation and amortization 3,432 5,351 - 8,783
Deferred income taxes 902 1,292 - 2,194
Deferred lease rentals 375 1,736 - 2,111
Undistributed earnings of subsidiaries (23,768) - 23,768 -
Changes in assets and liabilities
providing (using) cash, net of effects
of acquisitions in 1998 and 1997:
Accounts receivable (8,111) (807) - (8,918)
Merchandise inventories (22,472) (34,144) - (56,616)
Other assets (3,998) (1,645) - (5,643)
Accounts payable 12,265 (4,770) - 7,495
Accrued expenses 2,238 26 - 2,264
Income taxes 478 65 - 543
Advances to/from subsidiaries (63,137) 63,137 - -
------- ------- ------ -------
Net cash provided by (used in)
operating activities (80,393) 54,009 - (26,384)
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (20,247) (23,199) - (43,446)
Acquisitions, net of cash acquired - (25,548) (25,548)
Purchases of marketable securities (14,726) - - (14,726)
Maturities and sales of
marketable securities 51,653 - - 51,653
------- ------- ------ -------
Net cash provided by (used for)
investing activities 16,680 (48,747) - (32,067)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings (repayments) under financing
agreements, net (9,333) - - (9,333)
Borrowings (repayments) of
long-term obligations, net 10,685 - - 10,685
Proceeds from issuance of
common stock, net - - - -
Proceeds from exercise of options 804 - - 804
------- ------- ------ -------
Net cash provided by
financing activities 2,156 - - 2,156
- ------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (61,557) 5,262 - (56,295)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 138,785 - - 138,785
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD $ 77,228 $ 5,262 $ - $ 82,490
======================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(Amounts in thousands) Fiscal 1996
- --------------------------------------------------------------------------------------------------------
Guarantor
Parent Subsidiaries Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings (loss) $ 13,919 $ 11,275 $(11,275) $ 13,919
Adjustments to reconcile net earnings
to net cash (used in) provided by
operating activities:
Cumulative effect of change in
accounting principle - 2,041 - 2,041
Depreciation and amortization 1,669 2,302 - 3,971
Deferred income taxes - (744) - (744)
Deferred lease rentals 235 1,221 - 1,456
Undistributed earnings of subsidiaries (11,275) - 11,275 -
Changes in assets and liabilities
providing (using) cash, net of effects
of acquisitions in 1998 and 1997:
Accounts receivable (3,143) - - (3,143)
Merchandise inventories (19,037) (57,648) - (76,685)
Other assets 233 38 - 271
Accounts payable 16,628 - - 16,628
Accrued expenses 2,709 - - 2,709
Income taxes - (2,506) - (2,506)
Advances to/from subsidiaries (60,734) 60,734 - -
------- ------- ------ -------
Net cash provided by (used in)
operating activities (58,796) 16,713 - (42,083)
- ------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (16,493) (16,713) - (33,206)
Acquisitions, net of cash acquired - - -
Purchases of marketable securities (44,778) - - (44,778)
Maturities and sales of
marketable securities 63,132 - - 63,132
------- ------- ------ -------
Net cash provided by (used for)
investing activities 1,861 (16,713) - (14,852)
- ------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Borrowings (repayments) under financing
agreements, net 45,000 - - 45,000
Borrowings (repayments) of
long-term obligations, net (856) - - (856)
Proceeds from issuance of
common stock, net 52,900 - - 52,900
Proceeds from exercise of options 1,822 - - 1,822
------- ------- ------ -------
Net cash provided by
financing activities 98,866 - - 98,866
- ------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 41,931 - - 41,931
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 96,854 - - 96,854
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD $138,785 $ - $ - $ 138,785
======================================================================================================
</TABLE>
-42-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure.
---------------------
There has been no occurrence requiring a response to this Item.
PART III
Except as to information with respect to executive officers which is
contained in a separate heading under Item 1 to this Form 10-K, the information
required by Part III of Form 10-K is, pursuant to General Instruction G(3) of
Form 10-K, incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's 1999 Annual
Meeting of Stockholders (the "Proxy Statement"). The Company will, within 120
days of the end of its fiscal year, file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A.
Item 10. Directors and Executive Officers of the Registrant.
- -------- --------------------------------------------------
The information concerning directors and executive officers of the
Registrant is set forth in the Proxy Statement under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance," which
information is incorporated herein by reference. The name, age and position of
each executive officer of the Company is set forth under the heading "Executive
Officers" in Item 1 of this Report.
Item 11. Executive Compensation.
- -------- ----------------------
The information concerning executive compensation is set forth in the Proxy
Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------- --------------------------------------------------------------
The information concerning security ownership of certain beneficial owners
and management is set forth in the Proxy Statement under the heading "Security
Ownership of Certain Beneficial Owners and Management," which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
- -------- ----------------------------------------------
The information concerning certain relationships and related transactions
is set forth in the Proxy Statement under the headings "Certain Transactions"
and "Compensation Committee Interlocks and Insider Participation," which
information is incorporated herein by reference.
-43-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- -------- ----------------------------------------------------------------
(a)(1) Financial Statements.
---------------------
The following financial statements and auditors' report have been filed
with Item 8 in Part II of this report:
Independent Auditors' Report
Consolidated Balance Sheets as of January 30, 1999 and January 31, 1998
Consolidated Statements of Earnings for the years ended
January 30, 1999, January 31, 1998 and January 31, 1997
Consolidated Statements of Shareholders' Equity for the years ended
January 30, 1999, January 31, 1998 and January 31, 1997
Consolidated Statements of Cash Flows for the years ended
January 30, 1999, January 31, 1998 and January 31, 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
------------------------------
All financial statement schedules are omitted as the required
information is inapplicable.
(3) Exhibits.
---------
The exhibits listed below are filed with or incorporated by reference
into this Report. The exhibits which are denominated with an asterisk (*) were
previously filed as part of, and are hereby incorporated by reference from
either (i) the Company's Registration Statement on Form S-1 under the Securities
Act of 1933, Registration No. 33-74404 ("1994 S-1"), (ii) the Company's
Registration Statement on Form S-1 under the Securities Act of 1933,
Registration No. 33-87414 (the "1995 S-1"), (iii) the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1997 (the "1997 10-K") and (iv)
the Company's Annual Report on Form 10-K for the fiscal year ended January 31,
1998 (the "1998 10-K"). Unless otherwise indicated, the exhibit number
corresponds to the exhibit number in the referenced document.
Exhibit Number Description
- -------------- -----------
*2.1 Asset Purchase Agreement dated March 17, 1997 by and between
Owensboro Investment Company, Inc. and Just For Feet, Inc.
(1997 10-K)
*2.2 Stock Purchase Agreement dated March 17, 1997 by and among Just For
Feet, Inc., Premium Sports, Inc. and John Gasser (1997 10-K)
*2.3 Agreement and Plan of Merger dated March 17, 1997, by and among Just
For Feet, Inc., an Alabama corporation, IAC Acquisition Corporation,
a Michigan corporation and wholly owned subsidiary of Just For Feet,
Imperial Acquisition Corporation, a
-44-
<PAGE>
Exhibit Number Description
- -------------- -----------
Michigan corporation, and certain of the shareholders of Imperial
Acquisition Corporation (1997 10-K)
*3(i) Amended and Restated Certificate of Incorporation of Just For
Feet, Inc. (1994 S-1, Exhibit 3(a))
*3(ii) Amended and Restated Bylaws of Just For Feet, Inc. (1994 S-1,
Exhibit 3(b))
*4 Specimen of Common Stock Certificate of the Company. (1994 S-1)
*9 Voting Trust Agreement dated August 10, 1993, by and among the
Company, Pamela Beryl Ruttenberg and Harold Ruttenberg. (1994 S-1)
10.1 Amended and Restated Just For Feet, Inc. 1997 Employee Incentive
Plan
10.1.1 Amendment No. 1 to Amended and Restated 1997 Employee Incentive
Plan
*10.2 Employment Agreement dated November 6, 1996, between the Company
and Alex Bond (1997 10-K)
*10.3 Employment Agreement dated May 1, 1997, between the Company
and Eric L. Tyra (1998 10-K)
*10.4.1 Employment Agreement dated January 8, 1998 between the Company and
Adam J. Gilburne (1998 10-K)
10.5 Credit Agreement dated December 10, 1998 among the Company,
certain subsidiaries of the Company as Guarantors, various lenders
named therein and NationsBank, N.A., as Administrative Agent
10.5.1 Amendment No. 1 dated as of January 29, 1999 to Credit Agreement
dated December 10, 1998 among the Company, certain subsidiaries of
the Company as Guarantors, the various lenders named therein and
NationsBank, N.A., as Administrative Agent.
10.5.2 Amendment No. 2 dated as of February 23, 1999 to Credit Agreement
dated December 10, 1998 among the Company, certain subsidiaries of
the Company as Guarantors, the various lenders named therein and
NationsBank, N.A., as Administrative Agent.
10.5.3 Amendment No. 3 dated as of March 24, 1999 to Credit Agreement
dated December 10, 1998 among the Company, certain subsidiaries of
the Company as Guarantors, the various lenders named therein and
NationsBank, N.A., as Administrative Agent.
*10.6 Just For Feet, Inc. Employee Incentive Stock Option Plan, as
amended. (1994 S-1, Exhibit 10(g))
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<PAGE>
Exhibit Number Description
- -------------- -----------
*10.6.1 Amendment No. 2 to the Just For Feet, Inc. Employee Incentive
Stock Option Plan. (1994 S-1)
*10.6.2 Amendment No. 3 to the Just For Feet, Inc. Employee Incentive
Stock Option Plan (1997 10-K)
*10.7 Franchise Agreement dated November 20, 1989, between Casual Wear
II, Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(h))
*10.8 Franchise Agreement dated May 19, 1992, between Casual Wear II,
Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(i))
*10.9 Franchise Agreement dated April 1, 1993, between Casual Wear II,
Inc. and MBA Marketing Corporation. (1994 S-1, Exhibit 10(k))
10.10 Employment Agreement dated March 1, 1999 between the Company and
Helen Rockey.
10.11 Employment Agreement dated December 7, 1998 between the Company
and Nicholas C. Kartalis
*10.15 Personal Service Agreement dated August 22, 1997 between the
Company and Bart Starr, Sr. (1998 10-K)
*21 Subsidiaries (1998 10-K)
23.1 Consent of Deloitte & Touche LLP
24.1 Power of Attorney of Randall L. Haines
24.2 Power of Attorney of Michael P. Lazarus
24.3 Power of Attorney of Bart Starr, Sr.
24.4 Power of Attorney of Edward S. Croft, III
24.5 Power of Attorney of David F. Bellet
24.6 Power of Attorney of Warren C. Smith, Jr.
(b) Reports on Form 8-K. One Report on Form 8-K was filed during the quarter
-------------------
ended January 30, 1999. On January 22, 1999, the Company filed a Current Report
on Form 8-K to disclose that it had changed its fiscal year-end from January 30
to the Saturday closest to January 31.
-46-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
JUST FOR FEET, INC.
Date: April 26, 1999 By: /s/ Harold Ruttenberg
---------------------------------------
Harold Ruttenberg
Chairman of the Board
and Chief Executive Officer
Date: April 26, 1999 By: /s/ Eric L. Tyra
---------------------------------------
Eric L. Tyra
Executive Vice President - Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Harold Ruttenberg
- ---------------------- Chairman of the Board April 26, 1999
Harold Ruttenberg and Chief Executive Officer
/s/ Eric L. Tyra
- ---------------------- Executive Vice President - April 26, 1999
Eric L. Tyra Finance and Chief
Financial Officer
* Director April 26, 1999
- ----------------------
Michael P. Lazarus
* Director April 26, 1999
- ----------------------
Bart Starr, Sr.
* Director April 26, 1999
- ----------------------
Randall L. Haines
* Director April 26, 1999
- ----------------------
David F. Bellet
* Director April 26, 1999
- ----------------------
Edward S. Croft, III
* Director April 26, 1999
- ----------------------
Warren C. Smith, Jr.
*By: /s/ Eric L. Tyra
--------------------------------------------------
Eric L. Tyra, as Attorney-in-Fact pursuant to
Powers of Attorney filed as exhibits to this Report
-47-
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -------------------------------
10.1 Amended and Restated Just For Feet, Inc. 1997 Employee
Incentive Plan
10.1.1 Amendment No. 1 to Amended and Restated 1997 Employee
Incentive Plan
10.5 Credit Agreement dated December 10, 1998 among the Company,
certain subsidiaries of the Company as Guarantors, various
lenders named therein and NationsBank, N.A., as Administrative
Agent
10.5.1 Amendment No. 1 dated as of January 29, 1999 to Credit
Agreement dated December 10, 1998 among the Company, certain
subsidiaries of the Company as Guarantors, the various lenders
named therein and NationsBank, N.A., as Administrative Agent.
10.5.2 Amendment No. 2 dated as of February 23, 1999 to Credit
Agreement dated December 10, 1998 among the Company, certain
subsidiaries of the Company as Guarantors, the various lenders
named therein and NationsBank, N.A., as Administrative Agent.
10.5.3 Amendment No. 3 dated as of March 24, 1999 to Credit Agreement
dated December 10, 1998 among the Company, certain
subsidiaries of the Company as Guarantors, the various lenders
named therein and NationsBank, N.A., as Administrative Agent.
10.10 Employment Agreement dated March 1, 1999 between the Company
and Helen Rockey.
10.11 Employment Agreement dated December 7, 1998 between the
Company and Nicholas C. Kartalis
23.1 Consent of Deloitte & Touche LLP
24.1 Power of Attorney of Randall L. Haines
24.2 Power of Attorney of Michael P. Lazarus
24.3 Power of Attorney of Bart Starr, Sr.
24.4 Power of Attorney of Edward S. Croft, III
24.5 Power of Attorney of David F. Bellet
24.6 Power of Attorney of Warren C. Smith, Jr.
-48-
<PAGE>
EXHIBIT 10.1
JUST FOR FEET, INC.
1997 EMPLOYEE INCENTIVE PLAN
AS AMENDED
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 (i) the commission of a felony or any act of fraud,
theft, embezzlement, dishonesty, misappropriation or moral turpitude (as
hereafter defined) on the part of a participant, (ii) a willful failure by a
participant to comply with any laws or regulations relating to his employment
with the Company (as hereinafter defined in Section 8(a)), (iii) a material
breach by a participant of, or a material failure by a participant to perform,
his duties and obligations to the Company, (iv) substantial dependance or
addiction to alcohol or any drug, (v) wilful dereliction of duties or disregard
of lawful instructions or directions of the officers or directors of the Company
relating to a material matter, (vi) conduct disloyal to the Company, or (vii) a
failure by Participant to cease and desist conducting activities prohibited by
the rules and regulations of the Company after an oral or written request by the
Company to so cease and desist. For purposes of this Agreement, "moral
turpitude" shall mean an act of baseness, vileness, or depravity in the private
and social duties which a person owes to another, or to society in general,
contrary to the accepted and customary rule of right and duty between people.
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.
<PAGE>
g. "Company" means Just For Feet, Inc., a corporation organized under the
laws of the State of Delaware (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.
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, as amended.
r. "Restricted Stock" means an award of shares of Stock that are subject
to restrictions under Section 8.
-2-
<PAGE>
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 product of (A) 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, and (B) 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.
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, any vesting schedules 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;
-3-
<PAGE>
(v) to determine whether, to what extent and under what circumstances the
receipt of 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.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 2,900,000. 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.
-4-
<PAGE>
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 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 under the provisions of Code (S) 424(d) 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,
-5-
<PAGE>
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. To the extent consistent with any applicable
vesting requirements, 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.
(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.
-6-
<PAGE>
(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 prior to August 30, 1998 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
Participants options under the Plan which are not Incentive Stock Options under
the provisions of Section 422 of the Code. Such Non-Qualified Stock Options
shall be evidenced by agreements in such form and 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
-7-
<PAGE>
by the exercise or termination of the related Stock Option exceeds the number of
shares not covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance
with paragraph (d) of this Section 7, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (d) of this Section 7. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Grant and Exercise When Granted in Tandem With Stock Option. Stock
Appreciation Rights may be granted in tandem either at the time of grant of a
Non-Qualified Stock Option or at any time during the term of such Stock Option.
A Stock Appreciation Right may be exercised at any time to the extent that
the Stock Option to which it relates is then exercisable, and shall be subject
to the conditions applicable to such Stock Option. When a Stock Appreciation
Right is exercised in accordance with Section 7(d), the Stock Option to which it
relates shall cease to be exercisable to the extent of the number of shares with
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 if
and to the extent that such optionee does not exercise such Stock Option.
(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. A 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; provided, that in the event the holder of such a Stock Appreciation Right
ceases to be an Employee of the Company or any Subsidiary or Affiliate of the
Company or Eligible Participant for any reason, such Stock Appreciation Right
shall thereafter be exercisable only as and to the extent it would have been
exercisable if granted under Section 7(a) hereof in conjunction with a Stock
Option. 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
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<PAGE>
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.
(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" (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" (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,
-9-
<PAGE>
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.
-10-
<PAGE>
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.
(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:
-11-
<PAGE>
(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.
(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.
-12-
<PAGE>
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.
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
-13-
<PAGE>
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:
(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 purposes 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 is 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
-14-
<PAGE>
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.
(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
-15-
<PAGE>
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.
(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. EMPLOYEE STATUS.
For purposes of determining questions of termination and exercise of a
Stock Option or Stock Appreciation Right after termination of employment, a
leave of absence for military or government service, illness, temporary
disability or other reasons approved by a duly authorized officer of the Company
shall not be treated as termination or interruption of employment; provided,
however, that, with respect to an Incentive Stock Option, if such leave of
absence exceeds 90 days, such Option shall
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<PAGE>
be deemed a Non-Qualified Stock Option unless the Eligible Employee's right to
reemployment with the Company or a Subsidiary following such leave of absence is
guaranteed by statute or by contract.
SECTION 16. 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 17. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock or Performance
Award shall be granted pursuant to the Plan on or after the tenth anniversary of
the date of stockholder approval, but awards theretofore granted may extend
beyond that date.
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<PAGE>
EXHIBIT 10.1.1
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 stockholders 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 stockholders. In the
event stockholder 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.
<PAGE>
EXHIBIT 10.5
CREDIT AGREEMENT
Dated as of December 10, 1998
among
JUST FOR FEET, INC.,
as Borrower,
Certain Subsidiaries and Affiliates,
as Guarantors,
THE LENDERS NAMED HEREIN,
COMPASS BANK,
as Documentation Agent,
FIRST UNION NATIONAL BANK,
MARINE MIDLAND BANK,
SOUTHTRUST BANK, N.A.
and
SUNTRUST BANK, ATLANTA,
as Co-Agents,
AND
NATIONSBANK, N.A.,
as Administrative Agent
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS.....................................................
-----------
1.1 Definitions.....................................................
-----------
1.2 Computation of Time Periods.....................................
---------------------------
1.3 Accounting Terms................................................
----------------
SECTION 2 CREDIT FACILITIES...............................................
-----------------
2.1 Revolving Loans.................................................
---------------
2.2 Letter of Credit Subfacility....................................
----------------------------
2.3 Swingline Loan Subfacility......................................
--------------------------
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES..................
----------------------------------------------
3.1 Default Rate....................................................
------------
3.2 Extension and Conversion........................................
------------------------
3.3 Prepayments.....................................................
-----------
3.4 Termination and Reduction of Commitments........................
----------------------------------------
3.5 Fees............................................................
----
3.6 Capital Adequacy................................................
----------------
3.7 Inability To Determine Interest Rate............................
------------------------------------
3.8 Illegality......................................................
----------
3.9 Requirements of Law.............................................
-------------------
3.10 Taxes...........................................................
-----
3.11 Indemnity.......................................................
---------
3.12 Pro Rata Treatment..............................................
------------------
3.13 Sharing of Payments.............................................
-------------------
3.14 Payments, Computations, Etc.....................................
----------------------------
3.15 Evidence of Debt................................................
----------------
3.16 Replacement of Lenders..........................................
----------------------
SECTION 4 GUARANTY........................................................
--------
4.1 The Guarantee...................................................
-------------
4.2 Obligations Unconditional.......................................
-------------------------
4.3 Reinstatement...................................................
-------------
4.4 Certain Additional Waivers......................................
--------------------------
4.5 Remedies........................................................
--------
4.6 Rights of Contribution..........................................
----------------------
4.7 Continuing Guarantee............................................
--------------------
SECTION 5 CONDITIONS......................................................
----------
5.1 Conditions to Closing...........................................
---------------------
5.2 Conditions to All Extensions of Credit..........................
--------------------------------------
SECTION 6 REPRESENTATIONS AND WARRANTIES..................................
------------------------------
6.1 Financial Condition.............................................
-------------------
3
<PAGE>
6.2 No Changes or Restricted Payments...............................
---------------------------------
6.3 Organization; Existence; Compliance with Law....................
--------------------------------------------
6.4 Power; Authorization; Enforceable Obligations...................
---------------------------------------------
6.5 No Legal Bar....................................................
------------
6.6 No Material Litigation..........................................
----------------------
6.7 No Default......................................................
----------
6.8 Ownership of Property; Liens....................................
----------------------------
6.9 Intellectual Property...........................................
---------------------
6.10 Taxes...........................................................
-----
6.11 ERISA...........................................................
-----
6.12 Governmental Regulations, Etc...................................
-----------------------------
6.13 Subsidiaries....................................................
------------
6.14 Purpose of Extensions of Credit.................................
-------------------------------
6.15 Environmental Matters...........................................
---------------------
6.16 Year 2000 Compliance............................................
--------------------
SECTION 7 AFFIRMATIVE COVENANTS...........................................
---------------------
7.1 Financial Statements............................................
--------------------
7.2 Certificates; Other Information.................................
-------------------------------
7.3 Notices.........................................................
-------
7.4 Payment of Obligations..........................................
----------------------
7.5 Conduct of Business and Maintenance of Existence................
------------------------------------------------
7.6 Maintenance of Property; Insurance..............................
----------------------------------
7.7 Inspection of Property; Books and Records; Discussions..........
------------------------------------------------------
7.8 Environmental Laws..............................................
------------------
7.9 Financial Covenants.............................................
-------------------
7.10 Administrative Fees.............................................
-------------------
7.11 Additional Guaranties and Stock Pledges.........................
---------------------------------------
7.12 Ownership of Subsidiaries.......................................
-------------------------
7.13 Use of Proceeds.................................................
---------------
7.14 Year 2000 Compatibility.........................................
-----------------------
SECTION 8 NEGATIVE COVENANTS..............................................
------------------
8.1 Indebtedness....................................................
------------
8.2 Liens...........................................................
-----
8.3 Consolidation, Merger, Sale or Purchase of Assets, etc..........
------------------------------------------------------
8.4 Advances, Investments and Loans.................................
-------------------------------
8.5 Transactions with Affiliates....................................
----------------------------
8.6 Ownership of Equity Interests...................................
-----------------------------
8.7 Fiscal Year.....................................................
-----------
8.8 Prepayments of Indebtedness, etc................................
---------------------------------
8.9 Restricted Payments.............................................
-------------------
4
<PAGE>
8.10 Sale Leasebacks.................................................
---------------
8.11 Limitations on Restricted Actions...............................
---------------------------------
8.12 No Further Negative Pledges.....................................
---------------------------
SECTION 9 EVENTS OF DEFAULT...............................................
-----------------
9.1 Events of Default...............................................
-----------------
9.2 Acceleration; Remedies..........................................
----------------------
SECTION 10 AGENCY PROVISIONS..............................................
-----------------
10.1 Appointment....................................................
-----------
10.2 Delegation of Duties...........................................
--------------------
10.3 Exculpatory Provisions.........................................
----------------------
10.4 Reliance on Communications.....................................
--------------------------
10.5 Notice of Default..............................................
-----------------
10.6 Non-Reliance on Administrative Agent and Other Lenders.........
------------------------------------------------------
10.7 Indemnification................................................
---------------
10.8 Administrative Agent in its Individual Capacity................
-----------------------------------------------
10.9 Successor Administrative Agent.................................
------------------------------
SECTION 11 MISCELLANEOUS..................................................
-------------
11.1 Notices........................................................
-------
11.2 Right of Set-Off...............................................
----------------
11.3 Benefit of Agreement...........................................
--------------------
11.4 No Waiver; Remedies Cumulative.................................
------------------------------
11.5 Payment of Expenses, etc.......................................
------------------------
11.6 Amendments, Waivers and Consents...............................
--------------------------------
11.7 Counterparts...................................................
------------
11.8 Headings.......................................................
--------
11.9 Survival.......................................................
--------
11.10 Governing Law; Submission to Jurisdiction; Venue...............
------------------------------------------------
11.11 Severability...................................................
------------
11.12 Entirety.......................................................
--------
11.13 Binding Effect; Termination....................................
---------------------------
11.14 Confidentiality................................................
---------------
11.15 Source of Funds................................................
---------------
11.16 Conflict.......................................................
--------
<PAGE>
SCHEDULES
Schedule 2.1(a) Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of Revolving Note
Schedule 2.2(b)-1 Existing Letters of Credit
Schedule 2.2(b)-2 Form of Notice of Request for Standby Letter of Credit
Schedule 2.2(b)-3 Form of Notice of Request for Trade Letter of Credit
Schedule 3.2 Form of Notice of Extension/Conversion
Schedule 5.1(e)(v) Form of Officer's Certificate
Schedule 6.6 Description of Legal Proceedings
Schedule 6.8 Existing Liens
Schedule 6.13 Subsidiaries
Schedule 7.2 Form of Officer's Compliance Certificate
Schedule 7.11 Form of Joinder Agreement
Schedule 8.1 Indebtedness
Schedule 8.4 Existing Investments
Schedule 8.5 Existing Agreements with Affiliates
Schedule 11.1 Lenders and Addresses
Schedule 11.3(b) Form of Assignment and Acceptance
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of December 10, 1998 (the "Credit
------
Agreement"), is by and among JUST FOR FEET, INC., a Delaware corporation (the
- ---------
"Borrower"), the subsidiaries and affiliates of the Borrower identified on the
- ---------
signature pages hereto and such other subsidiaries and affiliates of the
Borrower as may from time to time become Guarantors hereunder in accordance with
the provisions hereof (the "Guarantors"), the lenders named herein and such
----------
other lenders as may become a party hereto (the "Lenders"), COMPASS BANK, as
-------
Documentation Agent, FIRST UNION NATIONAL BANK, MARINE MIDLAND BANK, SOUTHTRUST
BANK, N.A. and SUNTRUST BANK, ATLANTA, as Co-Agents, and NATIONSBANK, N.A., as
Administrative Agent (in such capacity, the "Administrative Agent").
--------------------
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a $200 million
credit facility for the purposes hereinafter set forth;
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
-----------
1.1 Definitions.
-----------
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Additional Credit Party" means each Person that becomes a Guarantor
-----------------------
after the Closing Date by execution of a Joinder Agreement.
"Administrative Agent" shall have the meaning assigned to such term in
--------------------
the heading hereof, together with any successors or assigns.
"Administrative Agent's Fee Letter" means that certain letter
---------------------------------
agreement, dated as of October 6, 1998, between the Administrative Agent
and the Borrower, as
7
<PAGE>
amended, modified, supplemented or replaced from time to time.
"Administrative Agent's Fees" shall have the meaning assigned to such
---------------------------
term in Section 3.5(c).
"Affiliate" means, with respect to any Person, any other Person (i)
---------
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person or (ii) directly or indirectly
owning or holding five percent (5%) or more of the equity interest in such
Person. For purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding
the foregoing, Harold Ruttenburg (and members of his immediate family,
including any trust for the benefit of any member of his immediate family)
shall not be deemed an Affiliate of the Borrower.
"Agency Services Address" means NationsBank, N.A., NC1-001-15-04, 101
-----------------------
North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency
Services, or such other address as may be identified by written notice from
the Administrative Agent to the Borrower.
"Aggregate Revolving Committed Amount" means the aggregate amount of
------------------------------------
Revolving Commitments in effect from time to time, being initially TWO
HUNDRED MILLION DOLLARS ($200,000,000).
"Anniversary Date" shall have the meaning assigned to such term in
----------------
Section 2.1(g).
"Applicable Percentage" means for any day, the rate per annum set
---------------------
forth below opposite the applicable Consolidated Fixed Charge Coverage
Ratio then in effect, it being understood that the Applicable Percentage
for (i) Base Rate Loans shall be the percentage set forth under the column
"Base Rate Margin", (ii) Eurodollar Loans shall be the percentage set forth
under the column "Eurodollar Margin and Standby Letter of Credit Fee",
(iii) the Standby Letter of Credit Fee shall be the percentage set forth
under the column "Eurodollar Margin and Standby Letter of Credit Fee", (iv)
the Trade Letter of Credit Fee shall be the percentage set forth under the
column "Trade Letter of Credit Fee", and (v) the Commitment Fee shall be
the percentage set forth under the column "Commitment Fee":
8
<PAGE>
<TABLE>
<CAPTION>
Eurodollar
Margin
Consolidated and
Fixed Charge Standby Letter Trade Letter
Pricing Coverage Base Rate of Credit of Credit Commitment
Level Ratio Margin Fee Fee Fee
----- ----- ------ --- --- ---
<S> <C> <C> <C> <C> <C>
I less than or equal to 2.00 0.25% 1.75% 0.75% 0.375%
II greater than 2.00 0.00% 1.50% 0.60% 0.300%
but less than or equal to 2.50
III greater than 2.50 0.00% 1.25% 0.45% 0.250%
but less than or equal to 3.00
IV greater than 3.00 0.00% 1.00% 0.30% 0.250%
</TABLE>
The Applicable Percentage shall be determined and adjusted quarterly on the
date (each a "Rate Determination Date") five (5) Business Days after the
-----------------------
date by which the annual and quarterly compliance certificates and related
financial statements and information are required in accordance with the
provisions of Sections 7.1(a) and (b) and Section 7.2(b), as appropriate;
provided that:
--------
(i) the initial Applicable Percentages shall be based on Pricing
Level II and shall remain in effect at such Pricing Level until the
first Rate Determination Date to occur after the Closing Date, and
(ii) in the event an annual or quarterly compliance certificate
and related financial statements and information are not delivered
timely to the Agency Services Address by the date required by Sections
7.1(a) and (b) and Section 7.2(b), as appropriate, the Applicable
Percentages shall be based on Pricing Level I until such time as an
appropriate compliance certificate and related financial statements
and information are delivered, whereupon the applicable Pricing Level
shall be adjusted based on the information contained in such
compliance certificate and related financial statements and
information.
Each Applicable Percentage shall be effective from a Rate Determination
Date until the next such Rate Determination Date. The Administrative Agent
shall determine the appropriate Applicable Percentages in the pricing
matrix promptly upon receipt of the
9
<PAGE>
quarterly or annual compliance certificate and related financial
information and shall promptly notify the Borrower and the Lenders of any
change thereof. Such determinations by the Administrative Agent shall be
conclusive absent manifest error. Adjustments in the Applicable Percentages
shall be effective as to existing Extensions of Credit as well as new
Extensions of Credit made thereafter.
"Asset Disposition" means (i) the sale, lease or other disposition of
-----------------
any property or asset by any member of the Consolidated Group (including
the disposition of the capital stock of Subsidiaries), other than any such
sale permitted by Sections 8.3(b), and (ii) receipt by any member of the
Consolidated Group of any cash insurance proceeds or condemnation award
payable by reason of theft, loss, physical destruction or damage, taking or
similar event with respect to any of their property or assets.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
---------------
States Code, as amended, modified, succeeded or replaced from time to time.
"Bankruptcy Event" means, with respect to any Person, the occurrence
----------------
of any of the following with respect to such Person: (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or ordering the winding up or
liquidation of its affairs; or (ii) there shall be commenced against such
Person an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or any case, proceeding or
other action for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or for the winding up or
liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded for a period of sixty (60) consecutive days; or (iii) such Person
shall commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such
Person or for any substantial part of its Property or make any general
assignment for the benefit of creditors; or (iv) such Person shall be
unable to, or shall admit in writing its inability to, pay its debts
generally as they become due.
"Base Rate" means, for any day, the rate per annum (rounded upwards,
---------
if
10
<PAGE>
necessary, to the nearest whole multiple of 1/100 of 1%) equal to the
greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1%
----
or (b) the Prime Rate in effect on such day. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable after due inquiry to
ascertain the Federal Funds Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient quotations in
accordance with the terms hereof, the Base Rate shall be determined without
regard to clause (a) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds Rate
shall be effective on the effective date of such change in the Prime Rate
or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate determined
--------------
by reference to the Base Rate.
"Borrower" means Just For Feet, Inc., a Delaware corporation, as
--------
referenced in the opening paragraph, its successors and permitted assigns.
"Business Day" means a day other than a Saturday, Sunday or other day
------------
on which commercial banks in Atlanta, Georgia, Charlotte, North Carolina,
Birmingham, Alabama or New York, New York are authorized or required by law
to close, except that, when used in connection with a Eurodollar Loan, such
------ ----
day shall also be a day on which dealings between banks are carried on in
U.S. dollar deposits in London, England.
"Capital Lease" means, as applied to any Person, any lease of any
-------------
Property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"Capital Lease Obligation" means the capital lease obligations
------------------------
relating to a Capital Lease determined in accordance with GAAP.
"Cash Equivalents" means (a) securities issued or directly and fully
----------------
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition, (b) U.S.
dollar denominated time deposits and certificates of deposit of (i) any
Lender, or (ii) any domestic commercial bank of recognized standing (y)
having capital and surplus in excess of $500,000,000 and (z) whose short-
term commercial paper rating from S&P is at least A-1 or the equivalent
thereof or from Moody's is at
11
<PAGE>
least P-1 or the equivalent thereof (any such bank being an "Approved
--------
Bank"), in each case with maturities of not more than 270 days from the
----
date of acquisition, (c) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by, any domestic corporation
rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the
equivalent thereof) or better by Moody's and maturing within six months of
the date of acquisition, (d) repurchase agreements entered into by a Person
with a bank or trust company (including any of the Lenders) or recognized
securities dealer having capital and surplus in excess of $500,000,000 for
direct obligations issued by or fully guaranteed by the United States of
America in which such Person shall have a perfected first priority security
interest (subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the
repurchase obligations, (e) obligations of any State of the United States
or any political subdivision thereof, the interest with respect to which is
exempt from federal income taxation under Section 103 of the Internal
Revenue Code, having a long term rating of at least AA- or Aa-3 by S&P or
Moody's, respectively, and maturing within three years from the date of
acquisition thereof, (f) Investments in municipal auction preferred stock
(i) rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the
equivalent thereof) or better by Moody's and (ii) with dividends that reset
at least once every 365 days and (g) Investments, classified in accordance
with GAAP as current assets, in money market investment programs registered
under the Investment Company Act of 1940, as amended, which are
administered by reputable financial institutions having capital of at least
$100,000,000 and the portfolios of which are limited to Investments of the
character described in the foregoing subdivisions (a) through (f).
"Change of Control" means the occurrence of any of the following
-----------------
events: (i) other than Harold Ruttenburg (and members of his immediate
family), any Person or two or more Persons acting in concert shall have
acquired beneficial ownership, directly or indirectly, of, or shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their
acquisition of or control over, Voting Stock of the Borrower (or other
securities convertible into such Voting Stock) representing 25% or more of
the combined voting power of all Voting Stock of the Borrower, or (ii)
during any period of up to 24 consecutive months, commencing after the
Closing Date, individuals who at the beginning of such 24 month period were
directors of the Borrower (together with any new director whose election by
the Borrower's Board of Directors or whose nomination for election by the
Borrower's shareholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the directors of the
12
<PAGE>
Borrower then in office. As used herein, "beneficial ownership" shall have
the meaning provided in Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934.
"Closing Date" means the date hereof.
------------
"Commitment" means the Revolving Commitment, the LOC Commitment and
----------
the Swingline Commitment.
"Commitment Fee" shall have the meaning given such term in Section
--------------
3.5(a).
"Commitment Percentage" means the Revolving Commitment Percentage.
---------------------
"Commitment Period" means the period from and including the Closing
-----------------
Date to but not including the earlier of (i) the Termination Date, or (ii)
the date on which the Commitments terminate in accordance with the
provisions of this Credit Agreement.
"Consolidated EBITDAR" means for any period for the Consolidated
--------------------
Group, the sum of Consolidated EBITDA plus lease and rent expense, in each
----
case on a consolidated basis determined in accordance with GAAP applied on
an consistent basis. Except as otherwise expressly provided, the
applicable period shall be for the four consecutive fiscal quarters ending
as of the date of determination.
"Consolidated Capitalization" means as of any date for the
---------------------------
Consolidated Group, the sum of Consolidated Net Worth plus Consolidated
----
Funded Debt.
"Consolidated EBITDA" means for any period for the Consolidated Group,
-------------------
the sum of Consolidated Net Income plus Consolidated Interest Expense plus
---- ----
all provisions for any Federal, state or other domestic and foreign income
taxes plus depreciation and amortization, in each case on a consolidated
----
basis determined in accordance with GAAP applied on a consistent basis, but
excluding for purposes hereof extraordinary gains and losses and related
tax effects thereon. Except as otherwise expressly provided, the
applicable period shall be for the four consecutive fiscal quarters ending
as of the date of determination.
"Consolidated Fixed Charge Coverage Ratio" means for any period, the
----------------------------------------
ratio of Consolidated EBITDAR to Consolidated Fixed Charges.
"Consolidated Fixed Charges" means for any period for the Consolidated
--------------------------
Group, the sum of Consolidated Interest Expense (but only to the extent
paid in cash) plus lease and rental expense, in each case on a consolidated
----
basis determined in
13
<PAGE>
accordance with GAAP applied on an consistent basis. Except as otherwise
expressly provided, the applicable period shall be for the four consecutive
fiscal quarters ending as of the date of determination.
"Consolidated Funded Debt" means Funded Debt of the Consolidated Group
------------------------
determined on a consolidated basis in accordance with GAAP applied on a
consistent basis.
"Consolidated Funded Debt to Capitalization Ratio" means, as of the
------------------------------------------------
last day of any fiscal quarter, the ratio of Consolidated Funded Debt on
such day to Consolidated Capitalization on such day.
"Consolidated Group" means the Borrower and its consolidated
------------------
subsidiaries, as determined in accordance with GAAP.
"Consolidated Interest Expense" means for any period for the
-----------------------------
Consolidated Group, all interest expense, including the amortization of
debt discount and premium and the interest component under Capital Leases,
in each case on a consolidated basis determined in accordance with GAAP
applied on a consolidated basis. Except as expressly provided otherwise,
the applicable period shall be for the four consecutive quarters ending as
of the date of determination.
"Consolidated Leverage Ratio" means, as of the last day of any fiscal
---------------------------
quarter, the ratio of Consolidated Funded Debt on such day to Consolidated
EBITDA for the period of four consecutive fiscal quarters ending as of such
day.
"Consolidated Net Income" means for any period for the Consolidated
-----------------------
Group, net income on a consolidated basis determined in accordance with
GAAP applied on a consistent basis, but excluding for purposes of
determining the Consolidated Leverage Ratio and Consolidated Fixed Charge
Coverage Ratio (i) any extraordinary gains or losses and related tax
effects thereon and (ii) the cumulative effect of the change in accounting
for store pre-opening expense for 1998 up to $2,000,000. Except as
expressly provided otherwise, the applicable period shall be for the four
consecutive quarters ending as of the date of determination.
"Consolidated Net Worth" means, as of any date for the Consolidated
----------------------
Group, shareholders' equity or net worth as determined in accordance with
GAAP.
"Consolidated Tangible Net Worth" means, as of any date for the
-------------------------------
Consolidated Group, Consolidated Net Worth minus intangible assets, in each
-----
case as determined in accordance with GAAP.
14
<PAGE>
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any material agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Credit Documents" means a collective reference to this Credit
----------------
Agreement, the Notes, the LOC Documents, the Pledge Agreement, each Joinder
Agreement, the Administrative Agent's Fee Letter, and all other related
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto.
"Credit Party" means any of the Borrower and the Guarantors.
------------
"Debt Transaction" means, with respect to any member of the
----------------
Consolidated Group, any sale, issuance or placement of Funded Debt, whether
or not evidenced by promissory note or other written evidence of
indebtedness, except for Funded Debt permitted to be incurred pursuant to
Section 8.1 (other than Subordinated Debt permitted to be incurred pursuant
to Section 8.1(i)).
"Default" means any event, act or condition which with notice or lapse
-------
of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at such time,
-----------------
(i) has failed to make an Extension of Credit required pursuant to the
terms of this Credit Agreement, (ii) has failed to pay to the
Administrative Agent or any Lender an amount owed by such Lender pursuant
to the terms of the Credit Agreement or any other of the Credit Documents,
or (iii) has been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or to a receiver, trustee or similar proceeding.
"Dollars" and "$" means dollars in lawful currency of the United
------- -
States of America.
"Domestic Credit Party" means any Credit Party which is incorporated
---------------------
or organized under the laws of any State of the United States or the
District of Columbia.
"Domestic Subsidiary" means any Subsidiary which is incorporated or
-------------------
organized under the laws of any State of the United States or the District
of Columbia.
"Environmental Laws" means any and all lawful and applicable Federal,
------------------
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or other governmental restrictions relating to the
environment or to emissions, discharges,
15
<PAGE>
releases or threatened releases of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes.
"Equity Transaction" means, with respect to any member of the
------------------
Consolidated Group, any issuance of shares of its capital stock or other
equity interest, other than an issuance (i) to a member of the Consolidated
Group, (ii) in connection with a conversion of debt securities to equity or
(iii) in connection with exercise by a present or former employee, officer,
consultant or director under a stock incentive plan, stock option plan or
other equity-based compensation plan or arrangement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.
"ERISA Affiliate" means an entity which is under common control with
---------------
any Credit Party within the meaning of Section 4001(a)(14) of ERISA, or is
a member of a group which includes the Borrower and which is treated as a
single employer under Sections 414(b) or (c) of the Internal Revenue Code.
"ERISA Event" means (i) with respect to any Plan, the occurrence of a
-----------
Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year in which it was a substantial employer (as
such term is defined in Section 4001(a)(2) of ERISA), or the termination of
a Multiple Employer Plan; (iii) the distribution of a notice of intent to
terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to
terminate or the actual termination of a Plan by the PBGC under Section
4042 of ERISA; (v) any event or condition which would reasonably be
expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan;
(vi) the complete or partial withdrawal of the Borrower, any Subsidiary of
the Borrower or any ERISA Affiliate from a Multiemployer Plan; (vii) the
conditions for imposition of a lien under Section 302(f) of ERISA exist
with respect to any Plan; or (vii) the adoption of an amendment to any Plan
requiring the provision of security to such Plan pursuant to Section 307 of
ERISA.
16
<PAGE>
"Eurodollar Loan" means any Loan bearing interest at a rate determined
---------------
by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
---------------
Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to
the following formula:
Eurodollar Rate = Interbank Offered Rate
--------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that percentage
-----------------------------
(expressed as a decimal) which is in effect from time to time under
Regulation D of the Board of Governors of the Federal Reserve System (or
any successor), as such regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as
that term is defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which the interest rate
of Eurodollar Loans is determined), whether or not Lender has any
Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and
as such shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" means such term as defined in Section 9.1.
----------------
"Existing Letters of Credit" means those Letters of Credit outstanding
--------------------------
on the Closing Date and identified on Schedule 2.2(b)-1.
-----------------
"Extension of Credit" means, as to any Lender, the making of, or
-------------------
participation in, a Loan by such Lender or the issuance or extension of, or
participation in, a Letter of Credit.
"Extension Consent" shall have the meaning assigned to such term in
-----------------
Section 2.1(g).
"Extension Consent Date" shall have the meaning assigned to such term
----------------------
in Section 2.1(g).
"Fees" means all fees payable pursuant to Section 3.5.
----
17
<PAGE>
"Federal Funds Rate" means, for any day, the rate of interest per
------------------
annum (rounded upwards, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
provided that (A) if such day is not a Business Day, the Federal Funds Rate
--------
for such day shall be such rate on such transactions on the next preceding
Business Day and (B) if no such rate is so published on such next preceding
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to the Administrative Agent on such day on such transactions as
determined by the Administrative Agent.
"Foreign Credit Party" means a Credit Party which is not a Domestic
--------------------
Credit Party.
"Foreign Subsidiary" means a Subsidiary which is not a Domestic
------------------
Subsidiary.
"Funded Debt" means, with respect to any Person, without duplication,
-----------
(i) all Indebtedness of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (iii)
all purchase money Indebtedness (including for purposes hereof,
indebtedness and obligations described in clauses (iii) and (iv) of the
definition of "Indebtedness") of such Person, including without limitation
the principal portion of all obligations of such Person under Capital
Leases, (iv) all Support Obligations of such Person with respect to Funded
Indebtedness of another Person, (v) the maximum available amount of all
standby letters of credit or acceptances issued or created for the account
of such Person, (vi) all Funded Debt of another Person secured by a Lien on
any Property of such Person, whether or not such Funded Indebtedness has
been assumed, provided that for purposes hereof the amount of such Funded
--------
Debt shall be limited to the greater of (A) the amount of such Funded Debt
as to which there is recourse to such Person and (B) the fair market value
of the property which is subject to the Lien, (vii) the outstanding
attributed principal amount under any securitization transaction, and
(viii) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance
sheet financing product to which such Person is a party, where such
transaction is considered borrowed money indebtedness for tax purposes but
is classified as an operating lease in accordance with GAAP. The Funded
Debt of any Person shall include the Funded Debt of any partnership or
joint venture in which such Person is a general partner or joint venturer,
but only to the extent to which there is recourse to such Person for the
payment of such Funded Debt.
18
<PAGE>
"GAAP" means generally accepted accounting principles in the United
----
States applied on a consistent basis and subject to the terms of Section
1.3 hereof.
"Governmental Authority" means any Federal, state, local or foreign
----------------------
court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantor" means each of those other Persons identified as a
---------
"Guarantor" on the signature pages hereto, and each other Person which may
hereafter become a Guarantor by execution of a Joinder Agreement, together
with their successors and permitted assigns.
"Guaranteed Obligations" means, as to each Guarantor, without
----------------------
duplication, (i) all obligations of the Borrower (including interest
accruing after a Bankruptcy Event, regardless of whether such interest is
allowed as a claim under the Bankruptcy Code) to the Lenders and the
Administrative Agent, whenever arising, under this Credit Agreement, the
Notes or the other Credit Documents, and (ii) all liabilities and
obligations, whenever arising, owing from the Borrower to any Lender, or
any Affiliate of a Lender, arising under any Hedging Agreement relating to
Obligations hereunder.
"Hedging Agreements" means any interest rate protection agreement or
------------------
foreign currency exchange agreement between the Borrower and any Lender, or
any Affiliate of a Lender.
"Indebtedness" of any Person means (i) all obligations of such Person
------------
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest payments
are customarily made, (iii) all obligations of such Person under
conditional sale or other title retention agreements relating to Property
purchased by such Person (other than customary reservations or retentions
of title under agreements with suppliers entered into in the ordinary
course of business), (iv) all obligations of such Person issued or assumed
as the deferred purchase price of Property or services purchased by such
Person (other than trade debt incurred in the ordinary course of business
and due within six months of the incurrence thereof) which would appear as
liabilities on a balance sheet of such Person, (v) all obligations of such
Person under take-or-pay or similar arrangements or under commodities
agreements, (vi) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on, or payable out of the proceeds of production
from, Property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, provided that for purposes
--------
hereof the amount of such
19
<PAGE>
Indebtedness shall be limited to the greater of (A) the amount of such
Indebtedness as to which there is recourse to such Person and (B) the fair
market value of the property which is subject to the Lien, (vii) all
Support Obligations of such Person, (viii) the principal portion of all
obligations of such Person under Capital Leases, (ix) all obligations of
such Person in respect of interest rate protection agreements, foreign
currency exchange agreements, commodity purchase or option agreements or
other interest or exchange rate or commodity price hedging agreements
(including, but not limited to, the Hedging Agreements), (x) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication,
all drafts drawn thereunder (to the extent unreimbursed), (xi) all
preferred stock issued by such Person and required by the terms thereof to
be redeemed, or for which mandatory sinking fund payments are due, by a
fixed date, (xii) the outstanding attributed principal amount under any
securitization transaction and (xiii) the principal balance outstanding
under any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing product to which such Person is
a party, where such transaction is considered borrowed money indebtedness
for tax purposes but is classified as an operating lease in accordance with
GAAP. The Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer, but only to the extent to which there is recourse to such
Person for payment of such Indebtedness.
"Interbank Offered Rate" means, for the Interest Period for each
----------------------
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal
to the rate of interest, determined by the Administrative Agent on the
basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day of
such Interest Period), appearing on Telerate Page 3750 (or, if, for any
reason, Telerate Page 3750 is not available, the Reuters Screen LIBO Page)
as of approximately 11:00 A.M. (London time) two (2) Business Days before
the first day of such Interest Period. As used herein, "Telerate Page
3750" means the display designated as page 3750 by Dow Jones Markets, Inc.
(or such other page as may replace such page on that service for the
purpose of displaying the British Bankers Association London interbank
offered rates) and "Reuters Screen LIBO Page" means the display designated
as page "LIBO" on the Reuters Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks).
"Interest Payment Date" means (i) as to any Base Rate Loan, the last
---------------------
day of each March, June, September and December, the date of repayment of
principal of
20
<PAGE>
such Loan and the Termination Date and (ii) as to any Eurodollar Loan and
Swingline Loan, the last day of each Interest Period for such Loan, the
date of repayment of principal of such Loan and the Termination Date, and
in addition where the applicable Interest Period is more than three months,
then also on the date three months from the beginning of the Interest
Period, and each three months thereafter. If an Interest Payment Date falls
on a date which is not a Business Day, such Interest Payment Date shall be
deemed to be the next succeeding Business Day (except that in the case of
Eurodollar Loans where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day).
"Interest Period" means (i) as to any Eurodollar Loan, a period of
---------------
one, two, three or six months' duration, as the Borrower may elect,
commencing in each case on the date of the borrowing (including
conversions, extensions and renewals) and (ii) as to any Swingline Loan, a
period of such duration, not to exceed 30 days, as the Borrower may request
and the Swingline Lender may agree in accordance with the provisions of
Section 2.3(b)(i), commencing in each case, on the date of borrowing;
provided, however, (A) if any Interest Period would end on a day which is
-------- -------
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day (except that in the case of Eurodollar Loans where
the next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding Business Day), (B) no Interest Period
shall extend beyond the Termination Date, and (C) in the case of Eurodollar
Loans, where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the Interest
Period is to end, such Interest Period shall end on the last day of such
calendar month.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended, and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code shall be construed also
to refer to any successor sections.
"Invested Amount" shall have the meaning given such term in the
---------------
definition of Attributed Principal Amount.
"Investment", in any Person, means any loan or advance to such Person,
----------
any purchase or other acquisition of any capital stock, warrants, rights,
options, obligations or other securities of, or equity interest in, such
Person, any capital contribution to such Person or any other investment in
such Person, including, without limitation, any Support Obligation incurred
for the benefit of such Person.
"Issuing Lender" means (a) in the case of Standby Letters of Credit,
--------------
NationsBank, (b) in the case of Trade Letters of Credit, Marine Midland
Bank, its
21
<PAGE>
affiliates or such other Lender as to which the Borrower may request and
such Lender shall agree, and (c) in the case of Existing Letters of Credit,
the Lender identified as the issuer on Schedule 2.2(b)-1.
-----------------
"Issuing Lender Fees" shall have the meaning assigned to such term in
-------------------
Section 3.5(b)(ii).
"Joinder Agreement" means a Joinder Agreement substantially in the
-----------------
form of Schedule 7.11 hereto, executed and delivered by an Additional
-------------
Credit Party in accordance with the provisions of Section 7.11.
"Lenders" means each of the Persons identified as a "Lender" on the
-------
signature pages hereto, and their successors and assigns.
"Letter of Credit" means an Existing Letter of Credit, a Standby
----------------
Letter of Credit or a Trade Letter of Credit, as appropriate.
"Letter of Credit Fees" means the Standby Letter of Credit Fee and the
---------------------
Trade Letter of Credit Fee.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority or charge of any kind (including any agreement to give
any of the foregoing, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the
Uniform Commercial Code as adopted and in effect in the relevant
jurisdiction or other similar recording or notice statute, and any lease in
the nature thereof).
"Loan" or "Loans" means the Revolving Loans and/or Swingline Loans.
---- -----
"LOC Commitment" means the Standby LOC Commitment and the Trade LOC
--------------
Commitment.
"LOC Committed Amount" means, collectively, the aggregate amount of
--------------------
all of the LOC Commitments of the Lenders to issue and participate in
Letters of Credit as referenced in Section 2.2(a) and, individually, the
amount of each Lender's LOC Commitment as specified in Schedule 2.1(a).
---------------
"LOC Documents" means, with respect to any Letter of Credit, such
-------------
Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents
22
<PAGE>
(whether general in application or applicable only to such Letter of
Credit) governing or providing for (i) the rights and obligations of the
parties concerned or at risk or (ii) any collateral security for such
obligations.
"LOC Obligations" means, at any time, the sum of Standby LOC
---------------
Obligations plus Trade LOC Obligations.
----
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
condition (financial or otherwise), operations, business, assets,
liabilities or prospects of the Consolidated Group taken as a whole, (ii)
the ability of the Credit Parties taken as a whole to perform any material
obligation under the Credit Documents to which it is a party or (iii) the
rights and remedies of the Lenders under the Credit Documents.
"Materials of Environmental Concern" means any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Laws, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Moody's" means Moody's Investors Service, Inc., or any successor or
-------
assignee of the business of such company in the business of rating
securities.
"Multiemployer Plan" means a Plan which is a multiemployer plan as
------------------
defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which the Borrower, any
----------------------
Subsidiary of the Borrower or any ERISA Affiliate and at least one employer
other than the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate are contributing sponsors.
"NationsBank" means NationsBank, N.A. and its successors.
-----------
"Net Proceeds" means gross cash proceeds (including any cash received
------------
by way of deferred payment pursuant to a promissory note, receivable or
otherwise, but only as and when received) received in connection with an
Asset Disposition, Equity Transaction or Debt Transaction, net of (i)
reasonable transaction costs, including in the case of an Equity
Transaction or a Debt Transaction, underwriting discounts and commissions
and in the case of an Asset Disposition occurring in connection with a
claim under an insurance policy, costs incurred in connection with
adjustment and settlement of the claim, (ii) estimated taxes payable in
connection therewith, and (iii) in the case of an Asset Disposition or Debt
Transaction, any amounts payable in
23
<PAGE>
respect of Funded Debt, including without limitation principal, interest,
premiums and penalties, which is secured by, or otherwise related to, any
property or asset which is the subject thereof to the extent that such
Funded Debt and any payments in respect thereof are paid with a portion of
the proceeds therefrom.
"Non-Excluded Taxes" means such term as is defined in Section 3.10.
------------------
"Note" or "Notes" means any Revolving Note.
---- -----
"Notice of Borrowing" means a written notice of borrowing in
-------------------
substantially the form of Schedule 2.1(b)(i), as required by Section
------------------
2.1(b)(i).
"Notice of Extension/Conversion" means a written notice of extension
------------------------------
or conversion in substantially the form of Schedule 3.2, as required by
------------
Section 3.2.
"Obligations" means, collectively, the Revolving Loans, Swingline
-----------
Loans and the LOC Obligations.
"Operating Lease" means, as applied to any Person, any lease
---------------
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed) which
is not a Capital Lease other than any such lease in which that Person is
the lessor.
"Participation Interest" means the purchase by a Lender of a
----------------------
participation in LOC Obligations as provided in Section 2.2(c), in
Swingline Loans as provided in Section 2.3(b)(iii) and in Loans as provided
in Section 3.13.
"PBGC" means the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
"Permitted Investments" means Investments which are either (i) cash
---------------------
and Cash Equivalents; (ii) accounts receivable created, acquired or made in
the ordinary course of business and payable or dischargeable in accordance
with customary trade terms; (iii) Investments consisting of stock,
obligations, securities or other property received in settlement of
accounts receivable (created in the ordinary course of business) from
bankrupt obligors; (iv) Investments existing as of the Closing Date and set
forth in Schedule 8.4, (v) Support Obligations permitted by Section 8.1;
------------
(vi) acquisitions permitted by Section 8.3(c)(ii); (vii) transactions
permitted by Section 8.5, (viii) loans to employees, directors or officers
in connection with the award of convertible bonds or stock under a stock
incentive plan, stock option plan or other equity-based compensation plan
or arrangement in the aggregate not to exceed $1,000,000
24
<PAGE>
(calculated on the exercise price for any such shares) in the aggregate at
any time outstanding; (ix) other advances or loans to employees, directors,
officers or agents not to exceed $1,000,000 in the aggregate at any time
outstanding; (x) advances or loans to customers or suppliers that do not
exceed $1,000,000 in the aggregate at any one time outstanding, (xi)
Investments by one Credit Party in and to another Credit Party and (xii)
other loans, advances and investments of a nature not contemplated in the
foregoing subsections in an amount not to exceed $1,000,000 in the
aggregate at any time outstanding.
"Permitted Liens" means:
---------------
(i) Liens in favor of the Administrative Agent on behalf of the
Lenders; and
(ii) Liens in favor of a Lender or an Affiliate of a Lender pursuant
to a Hedging Agreement permitted hereunder, but only (A) to the extent
such Liens secure obligations under such agreements permitted under
Section 8.1, (B) to the extent such Liens are on the same collateral
as to which the Lenders also have a Lien and (C) if such provider and
the Lender shall share pari passu in the collateral subject to such
---- -----
Liens; and
(iii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or
Liens for taxes being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the Property subject to
any such Lien is not yet subject to foreclosure, sale or loss on
account thereof); and
(iv) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and suppliers and other Liens imposed by law or
pursuant to customary reservations or retentions of title arising in
the ordinary course of business, provided that such Liens secure only
--------
amounts not yet due and payable or, if due and payable, are unfiled
and no other action has been taken to enforce the same or are being
contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and
as to which the Property subject to any such Lien is not yet subject
to foreclosure, sale or loss on account thereof); and
(v) Liens (other than Liens created or imposed under ERISA) incurred
or deposits made by the Borrower and its Subsidiaries in the ordinary
course of business in connection with workers' compensation,
unemployment
25
<PAGE>
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money); and
(vi) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that the judgments secured shall,
--------
within 30 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall have been discharged
within 30 days after the expiration of any such stay; and
(vii) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other
similar charges or encumbrances not, in any material respect,
impairing the use of the encumbered Property for its intended
purposes; and
(viii) Liens securing purchase money and sale/leaseback Indebtedness
(including Capital Leases) to the extent permitted under Sections
8.1(c) or (d), provided that any such Lien attaches only to the
--------
Property financed or leased and such Lien attaches thereto
concurrently with or within 90 days after the acquisition thereof in
connection with the purchase money transactions and within 30 days
after the closing of any sale/leaseback transaction; and
(ix) leases or subleases granted to others not interfering in any
material respect with the business of any member of the Consolidated
Group; and
(x) any interest of title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by
this Credit Agreement; and
(xi) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with
the importation of goods; and
(xii) Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Section 8.4; and
(xiii) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions; and
26
<PAGE>
(xiv) Liens existing as of the Closing Date and set forth on Schedule
--------
6.8; provided that (a) no such Lien shall at any time be extended to
--- --------
or cover any Property other than the Property subject thereto on the
Closing Date and (b) the principal amount of the Indebtedness secured
by such Liens shall not be extended, renewed, refunded or refinanced.
"Person" means any individual, partnership, joint venture, firm,
------
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section 3(3) of
----
ERISA) which is covered by ERISA and with respect to which the Borrower,
any Subsidiary of the Borrower or any ERISA Affiliate is (or, if such plan
were terminated at such time, would under Section 4069 of ERISA be deemed
to be) an "employer" within the meaning of Section 3(5) of ERISA.
"Pledge Agreement" means the Pledge Agreement dated as of the Closing
----------------
Date given by the Borrower and the other pledgors identified therein to
NationsBank, N.A., as Administrative Agent, to secure the obligations
hereunder, as amended and modified.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by NationsBank as its prime rate in effect at its
principal office in Charlotte, North Carolina, with each change in the
Prime Rate being effective on the date such change is publicly announced as
effective (it being understood and agreed that the Prime Rate is a
reference rate used by NationsBank in determining interest rates on certain
loans and is not intended to be the lowest rate of interest charged on any
extension of credit by NationsBank to any debtor).
"Pro Forma Basis" means, with respect to any Transaction, that such
---------------
Transaction shall be deemed to have occurred as of the first day of the
four fiscal-quarter period ending as of the most recent fiscal quarter end
preceding the date of such Transaction with respect to which the
Administrative Agent and the Lenders have received the officer's
certificate in accordance with the provisions of Section 7.2(b). As used
herein, "Transaction" means (i), the incurrence of Subordinated Debt as
referred to in Section 8.1(i), (ii) any sale or other disposition of assets
as referred to in Section 8.3(b), (iii) any acquisition of capital stock or
securities or any purchase, lease or other acquisition of property as
referred to in Section 8.3(c), (iv) the prepayment, redemption, defeasance
or acquisition for value of other Indebtedness as referred to in Section
8.8, or (v) the making of any Restricted Payment as referred to in Section
8.9.
27
<PAGE>
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Receivables" means any right of payment from or on behalf of any
-----------
obligor, whether constituting an account, chattel paper, instrument,
general intangible or otherwise, arising from the sale or financing by a
member of the Consolidated Group or merchandise or services, and monies due
thereunder, security in the merchandise and services financed thereby,
records related thereto, and the right to payment of any interest or
finance charges and other obligations with respect thereto, proceeds from
claims on insurance policies related thereto, any other proceeds related
thereto, and any other related rights.
"Register" shall have the meaning given such term in Section 11.3(c).
--------
"Regulation T, U or X" means Regulation T, U or X, respectively, of
--------------------
the Board of Governors of the Federal Reserve System as from time to time
in effect and any successor to all or a portion thereof.
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, dumping or disposing
into the environment (including the abandonment or discarding of barrels,
containers and other closed receptacles containing any Materials of
Environmental Concern).
"Reportable Event" means any of the events set forth in Section
----------------
4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
"Required Lenders" means, at any time, Lenders having more than fifty
----------------
percent (50%) of the Commitments, or if the Commitments have been
terminated, Lenders having more than fifty percent (50%) of the aggregate
principal amount of the Obligations outstanding (taking into account in
each case Participation Interests or obligation to participate therein);
provided that the Commitments of, and outstanding principal amount of
--------
Obligations (taking into account Participation Interests therein) owing to,
a Defaulting Lender shall be excluded for purposes hereof in making a
determination of Required Lenders.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or
28
<PAGE>
any of its material property is subject.
"Responsible Officer" means the Chief Financial Officer, the
-------------------
Controller and any Vice President.
"Restricted Payment" means (i) any dividend or other distribution,
------------------
direct or indirect, on account of any shares of any class of stock now or
hereafter outstanding, except (A) a dividend payable solely in shares of
that class to the holders of that class and (B) dividends and other
distributions payable to a Credit Party, (ii) any redemption, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock now or hereafter
outstanding and (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock now or hereafter outstanding.
"Revolving Commitment" means, with respect to each Lender, the
--------------------
commitment of such Lender to make Revolving Loans in an aggregate principal
amount at any time outstanding of up to such Lender's Commitment Percentage
of the Aggregate Revolving Committed Amount as specified in Schedule
--------
2.1(a), as such amount may be reduced from time to time in accordance with
------
the provisions hereof.
"Revolving Commitment Percentage" means, for each Lender, a fraction
-------------------------------
(expressed as a decimal) the numerator of which is the Revolving Commitment
of such Lender at such time and the denominator of which is the Aggregate
Revolving Committed Amount at such time. The initial Revolving Commitment
Percentages are set out on Schedule 2.1(a).
---------------
"Revolving Committed Amount" means, collectively, the aggregate amount
--------------------------
of all of the Revolving Commitments and, individually, the amount of each
Lender's Revolving Commitment as specified in Schedule 2.1(a).
---------------
"Revolving Loans" shall have the meaning assigned to such term in
---------------
Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory notes of
-------------- ---------------
the Borrower in favor of each of the Lenders evidencing the Revolving Loans
and the Swingline Loans in substantially the form attached as Schedule
--------
2.1(e), individually or collectively, as appropriate, as such promissory
------
notes may be amended, modified, supplemented, extended, renewed or replaced
from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
---
Hill,
29
<PAGE>
Inc., or any successor or assignee of the business of such division in the
business of rating securities.
"Single Employer Plan" means any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.
"Standby Letter of Credit" means any standby letter of credit issued
------------------------
by the Issuing Lender for the account of the Borrower in accordance with
the terms of Section 2.2 as such letter of credit may be amended, modified,
extended, renewed or replaced from time to time.
"Standby Letter of Credit Fee" shall have the meaning assigned to such
----------------------------
term in Section 3.5(b)(i).
"Standby LOC Commitment" means the commitment of the Issuing Lender to
----------------------
issue, and to honor payment obligations under, Standby Letters of Credit
hereunder and with respect to each Lender, the commitment of each Lender to
purchase participation interests in the Standby Letters of Credit up to
such Lender's LOC Committed Amount as specified in Schedule 2.1(a), as such
---------------
amount may be reduced from time to time in accordance with the provisions
hereof.
"Standby LOC Obligations" means, at any time, the sum of (i) the
-----------------------
maximum amount which is, or at any time thereafter may become, available to
be drawn under Standby Letters of Credit then outstanding, assuming
compliance with all requirements for drawings referred to in such Standby
Letters of Credit plus (ii) the aggregate amount of all drawings under
----
Standby Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed.
"Subject Properties" shall have the meaning assigned to such term in
------------------
Section 6.15(a).
"Subordinated Debt" means any Indebtedness of a member of the
-----------------
Consolidated Group which by its terms is expressly subordinated in right of
payment to the prior payment of the obligations under the Credit Agreement
and the other Credit Documents on terms and conditions and evidenced by
documentation satisfactory to the Required Lenders.
"Subsidiary" means, as to any Person, (a) any corporation more than
----------
50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time, any class or
classes of such corporation shall have or might have voting
30
<PAGE>
power by reason of the happening of any contingency) is at the time owned
by such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than 50% of the
voting interests at any time. Unless otherwise identified, "Subsidiary" or
"Subsidiaries" shall mean Subsidiaries of the Borrower.
"Support Obligations" means, with respect to any Person, without
-------------------
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, and including
without limitation any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any Property constituting security
therefor, (ii) to advance or provide funds or other support for the payment
or purchase of any such Indebtedness or to maintain working capital,
solvency or other balance sheet condition of such other Person (including
without limitation keep well agreements, maintenance agreements, comfort
letters or similar agreements or arrangements) for the benefit of any
holder of Indebtedness of such other Person, (iii) to lease or purchase
Property, securities or services primarily for the purpose of assuring the
holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The
amount of any Support Obligation hereunder shall (subject to any
limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger) of
the Indebtedness in respect of which such Support Obligation is made.
"Swingline Commitment" means the commitment of the Swingline Lender to
--------------------
make Swingline Loans in an aggregate principal amount at any time
outstanding up to the Swingline Committed Amount and the commitment of the
Lenders to purchase participation interests in the Swingline Loans up to
their respective Revolving Commitment Percentage as provided in Section
2.3(b)(iii), as such amounts may be reduced from time to time in accordance
with the provisions hereof.
"Swingline Committed Amount" means the amount of the Swingline
--------------------------
Lender's Commitment as specified in Section 2.3(a).
"Swingline Lender" means NationsBank or its successor.
----------------
"Swingline Loan" means a swingline revolving loan made by the
--------------
Swingline Lender pursuant to the provisions of Section 2.3.
"Termination Date" means December 10, 2001, or if extended with the
----------------
written consent of each of the Lenders, such later date as to which the
Termination Date may
31
<PAGE>
be extended.
"Trade Letter of Credit" means any trade, documentary or merchandise
----------------------
letter of credit issued by the Issuing Lender for the account of the
Borrower in accordance with the terms of Section 2.2 as such letter of
credit may be amended, modified, extended, renewed or replaced from time to
time.
"Trade Letter of Credit Fee" shall have the meaning assigned to such
--------------------------
term in Section 3.5(b)(ii).
"Trade LOC Commitment" means the commitment of the Issuing Lender to
--------------------
issue, and to honor payment obligations under, Trade Letters of Credit
hereunder and with respect to each Lender, the commitment of each Lender to
purchase participation interests in the Trade Letters of Credit up to such
Lender's Trade LOC Committed Amount as specified in Schedule 2.1(a), as
---------------
such amount may be reduced from time to time in accordance with the
provisions hereof.
"Trade LOC Committed Amount" shall have the meaning assigned to such
--------------------------
term in Section 2.2(a).
"Trade LOC Obligations" means, at any time, the sum of (i) the maximum
---------------------
amount which is, or at any time thereafter may become, available to be
drawn under Trade Letters of Credit then outstanding, assuming compliance
with all requirements for drawings referred to in such Trade Letters of
Credit plus (ii) the aggregate amount of all drawings under Trade Letters
----
of Credit honored by the Issuing Lender but not theretofore reimbursed.
"Voting Stock" means, with respect to any Person, capital stock issued
------------
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to
vote has been suspended by the happening of such a contingency.
1.2 Computation of Time Periods.
---------------------------
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
1.3 Accounting Terms.
----------------
Except as otherwise expressly provided herein, all accounting terms used
herein
32
<PAGE>
shall be interpreted, and all financial statements and certificates and reports
as to financial matters required to be delivered to the Lenders hereunder shall
be prepared, in accordance with GAAP applied on a consistent basis. All
calculations made for the purposes of determining compliance with this Credit
Agreement shall (except as otherwise expressly provided herein) be made by
application of GAAP applied on a basis consistent with the most recent annual or
quarterly financial statements delivered pursuant to Section 7.1 hereof (or,
prior to the delivery of the first financial statements pursuant to Section 7.1
hereof, consistent with the annual audited financial statements referenced in
Section 6.1(i) hereof); provided, however, if (a) the Borrower shall object to
-------- -------
determining such compliance on such basis at the time of delivery of such
financial statements due to any change in GAAP or the rules promulgated with
respect thereto or (b) the Administrative Agent or the Required Lenders shall so
object in writing within 30 days after delivery of such financial statements,
then such calculations shall be made on a basis consistent with the most recent
financial statements delivered by the Borrower to the Lenders as to which no
such objection shall have been made.
It is further acknowledged and agreed that, except as expressly provided
otherwise, for purposes of determining the Applicable Percentage and compliance
with the financial covenants in Section 7.9 (and compliance therewith on a Pro
Forma Basis), in the case of acquisitions and dispositions which have occurred
during the applicable period to the extent permitted hereunder, adjustments
shall be made to take into account historical performance relating thereto
during such applicable period prior to the date of such acquisition or
disposition, and the effect of any Indebtedness paid with proceeds from a
disposition.
SECTION 2
CREDIT FACILITIES
-----------------
2.1 Revolving Loans.
---------------
(a) Revolving Commitment. During the Commitment Period, subject to the
--------------------
terms and conditions hereof, each Lender severally agrees to make revolving
credit loans (the "Revolving Loans") to the Borrower from time to time in the
---------------
amount of such Lender's Revolving Commitment Percentage of such Revolving Loans
for the purposes hereinafter set forth; provided that (i) with regard to the
--------
Lenders collectively, the aggregate principal amount of Obligations outstanding
at any time shall not exceed the Aggregate Revolving Committed Amount, and (ii)
with regard to each Lender individually, such Lender's Revolving Commitment
Percentage of Obligations outstanding at any time shall not exceed such Lender's
Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or
Eurodollar Loans, or a combination thereof, as the Borrower may request, and may
be repaid and reborrowed in accordance with the provisions hereof.
33
<PAGE>
(b) Revolving Loan Borrowings.
-------------------------
(i) Notice of Borrowing. The Borrower shall request a Revolving Loan
-------------------
borrowing by written notice (or telephone notice promptly confirmed in
writing) to the Administrative Agent not later than 11:30 A.M. (Charlotte,
North Carolina time) on the Business Day of the requested borrowing in the
case of Base Rate Loans, and not later than 1:00 P.M. (Charlotte, North
Carolina time) on the third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request for borrowing
shall be irrevocable and shall specify (A) that a Revolving Loan is
requested, (B) the date of the requested borrowing (which shall be a
Business Day), (C) the aggregate principal amount to be borrowed, and (D)
whether the borrowing shall be comprised of Base Rate Loans, Eurodollar
Loans or a combination thereof, and if Eurodollar Loans are requested, the
Interest Period(s) therefor. If the Borrower shall fail to specify in any
such Notice of Borrowing (I) an applicable Interest Period in the case of a
Eurodollar Loan, then such notice shall be deemed to be a request for an
Interest Period of one month, or (II) the type of Revolving Loan requested,
then such notice shall be deemed to be a request for a Base Rate Loan
hereunder. The Administrative Agent shall give notice to each Lender
promptly upon receipt of each Notice of Borrowing pursuant to this Section
2.1(b)(i), the contents thereof and each such Lender's share of any
borrowing to be made pursuant thereto.
(ii) Minimum Amounts. Each Revolving Loan shall be in a minimum
---------------
aggregate principal amount of $5,000,000, in the case of Eurodollar Loans,
or $1,000,000 (or the remaining Revolving Committed Amount, if less), in
the case of Base Rate Loans, and integral multiples of $1,000,000 in excess
thereof.
(iii) Advances. Each Lender will make its Revolving
--------
Commitment Percentage of each Revolving Loan borrowing available to the
Administrative Agent for the account of the Borrower, or in such other
manner as the Administrative Agent may specify in writing, by 1:00 P.M.
(Charlotte, North Carolina time) on the date specified in the applicable
Notice of Borrowing in Dollars and in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the
Borrower by the Administrative Agent by crediting the account of the
Borrower with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be due
---------
and payable in full on the Termination Date.
(d) Interest. Subject to the provisions of Section 3.1,
--------
34
<PAGE>
(i) Base Rate Loans. During such periods as Revolving Loans shall be
---------------
comprised in whole or in part of Base Rate Loans, such Base Rate Loans
shall bear interest at a per annum rate equal to the Base Rate plus the
----
Applicable Percentage;
(ii) Eurodollar Loans. During such periods as Revolving Loans shall be
----------------
comprised in whole or in part of Eurodollar Loans, such Eurodollar Loans
shall bear interest at a per annum rate equal to the Eurodollar Rate plus
----
the Applicable Percentage.
Interest on Revolving Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(e) Revolving Notes. The Revolving Loans shall be evidenced by a duly
---------------
executed Revolving Note in favor of each Lender.
(f) Maximum Number of Eurodollar Loans. The Borrower will be limited to a
----------------------------------
maximum number of ten (10) Eurodollar Loans outstanding at any time. For
purposes hereof, Eurodollar Loans with separate or different Interest Periods
will be considered as separate Eurodollar Loans even if their Interest Periods
expire on the same date.
(g) Extension of Termination Date. The Borrower may, within 60 days, but
-----------------------------
not less than 45 days, prior to the first and second anniversary date of the
Closing Date (each such anniversary date being referred to as an "Anniversary
-----------
Date"), by notice to the Administrative Agent, make written request of the
- ----
Lenders to extend the Termination Date for an additional period of one year.
The Administrative Agent will give prompt notice to each of the Lenders of its
receipt of any such request for extension of the Termination Date. Each Lender
shall make a determination not later than 30 days prior to the then applicable
Anniversary Date (the "Extension Consent Date") as to whether or not it will
----------------------
agree to extend the Termination Date as requested (such approval of an extension
shall be an "Extension Consent"); provided, however, that failure by any Lender
----------------- -------- -------
to make a timely response to the Borrower's request for extension of the
Termination Date shall be deemed to constitute a refusal by such Lender to
extension of the Termination Date.
(h) Lender Not Consenting. If by any Extension Consent Date the Borrower
---------------------
and the Administrative Agent have not received an Extension Consent from any
Lender, the Termination Date, as it relates to such Lender, shall not be
extended, the Commitment of such Lender shall terminate on the Termination Date
applicable to it and any Loans made by such Lender and all accrued and unpaid
interest thereon shall be due and payable on such Termination Date. Upon the
termination of the Commitment of any such Lender, unless this Agreement is
amended as provided in Subsections 2.1(j) or 2.1(k), the aggregate amount of the
Commitments shall be reduced by the amount of such terminated Commitment, and
the
35
<PAGE>
Revolving Commitment Percentage of each other Lender shall be adjusted to
that percentage obtained by dividing the Commitment of such Lender by the
aggregate amount of the Commitments after giving effect to such reduction as
provided in the definition of "Revolving Commitment Percentage".
(i) Other Lenders. No refusal by any one Lender to consent to any
-------------
extension of the Termination Date shall affect the extension of the Termination
Date as it may relate to the Commitment and Loans of any Lender which consents
to such extension as provided in Subsection 2.1(g), and one or more Lenders may
consent to the extension of the Termination Date as it relates to them
notwithstanding any refusal by any other Lenders so to consent; provided that
--------
even as to the consenting Lenders the Termination Date will be extended only
upon consent to such an extension by Lenders holding more than 50% of the
aggregate Commitments outstanding at the time of the request for extension.
(j) Increase in Commitment of Other Lender or Lenders. If any Lender does
-------------------------------------------------
not deliver an Extension Consent as provided in Subsection 2.1(g), upon the
expiration of the Commitment of such Lender, the Borrower may offer each Lender
which has delivered an Extension Consent as provided in Subsection 2.1(g) a
reasonable opportunity to increase its Commitment by an amount equal to its pro-
rata share (based on its Commitment before such increase) of the Commitment of
the Lender which does not deliver an Extension Consent as provided in Subsection
2.1(g). After giving such Lenders such an opportunity, the Borrower may with
the approval of the Administrative Agent amend this Agreement to increase the
Commitment of any other Lender or Lenders with the consent of such Lender or
Lenders provided that such increase does not increase the aggregate amount of
the Commitments to an amount greater than the aggregate amount of Commitments in
effect immediately before such expiration or termination.
(k) Additional Lender or Lenders. If any Lender does not deliver an
----------------------------
Extension Consent as provided in Section 2.1(g), upon the expiration of the
Commitment of such Lender, the Borrower may with the approval of the
Administrative Agent amend this Agreement as provided in Subsections 11.3 and
11.6 to add one or more other Lenders as parties, with such Commitment or
Commitments as may be agreed to by the Administrative Agent and such other
Lender or Lenders, provided that such additions do not increase the aggregate
amount of the Commitments to an amount greater than the aggregate amount of
Commitments in effect immediately before such expiration or termination.
(l) Notice. The Administrative Agent shall promptly provide each of the
------
Lenders with a copy of any amendment made pursuant to Subsection 2.1(j) or
Subsection 2.1(k).
2.2 Letter of Credit Subfacility.
----------------------------
36
<PAGE>
(a) Issuance. During the Commitment Period, subject to the terms and
--------
conditions hereof and of the LOC Documents, if any, and such other terms and
conditions which the Issuing Lender may reasonably require, the Issuing Lender
shall issue, and the Lenders shall participate in, such Letters of Credit as the
Borrower may request for its own account or for the account of another Credit
Party as provided herein, in a form acceptable to the Issuing Lender, for the
purposes hereinafter set forth; provided that (i) the aggregate amount of LOC
--------
Obligations shall not exceed TWENTY-FIVE MILLION DOLLARS ($25,000,000) at any
time (the "LOC Committed Amount"), (ii) the aggregate amount of Trade LOC
--------------------
Obligations shall not exceed TWENTY MILLION DOLLARS ($20,000,000) at any time
(the "Trade LOC Committed Amount"), (iii) with regard to the Lenders
--------------------------
collectively, the aggregate principal amount of Obligations outstanding at any
time shall not exceed the Aggregate Revolving Committed Amount, and (iv) with
regard to each Lender individually, such Lender's Revolving Commitment
Percentage of Obligations outstanding at any time shall not exceed such Lender's
Revolving Committed Amount. Standby Letters of Credit issued hereunder shall
not have an original expiry date more than one year from the date of issuance or
extension, and Trade Letters of Credit issued hereunder shall not have an
original expiry date more than 180 days from the date of issuance or extension.
No Letter of Credit issued hereunder shall have an expiry date, whether as
originally issued or by extension, extending beyond the Termination Date. Each
Letter of Credit shall comply with the related LOC Documents, except in the case
of any discrepancies in documents delivered in connection with a Trade Letter of
Credit which are waived by the Borrower. The issuance date of each Letter of
Credit shall be a Business Day except in the case of an issuance of Trade
Letters of Credit by an overseas affiliate of the Issuing Lender.
(b) Notice and Reports. Except for those Letters of Credit described on
------------------
Schedule 2.2(b)-1 which shall be issued on the Closing Date, the request for the
- -----------------
issuance of a Letter of Credit shall be submitted by the Borrower to the Issuing
Lender at least three (3) Business Days prior to the requested date of issuance
(or such shorter period as may be agreed by the Issuing Lender) in the case of
Standby Letters of Credit and at least one (1) Business Day prior to the
requested date of issuance in the case of Trade Letters of Credit. A form of
Notice of Request for Standby Letter of Credit is attached as Schedule 2.2(b)-2
-----------------
and a form of Notice of Request for Trade Letter of Credit is attached as
Schedule 2.2(b)-3. The Issuing Lender will provide to the Administrative Agent
- -----------------
at least monthly, and more frequently upon request, a detailed summary report on
its Letters of Credit and the activity thereon, in form and substance acceptable
to the Administrative Agent. In addition, the Issuing Lender will provide to
the Administrative Agent for dissemination to the Lenders at least quarterly,
and more frequently upon request, a detailed summary report on its Letters of
Credit and the activity thereon, including, among other things, the Credit Party
for whose account the Letter of Credit is issued, the beneficiary, the face
amount, and the expiry date. The Issuing Lender will provide copies of the
Letters of Credit to the Administrative Agent and the Lenders promptly upon
request.
37
<PAGE>
(c) Participation. Each Lender, with respect to the Existing Letters of
-------------
Credit, hereby purchases a participation interest in such Existing Letters of
Credit, and with respect to Letters of Credit issued on or after the Closing
Date, upon issuance of a Letter of Credit, shall be deemed to have purchased
without recourse a risk participation from the applicable Issuing Lender in such
Letter of Credit and the obligations arising thereunder, in each case in an
amount equal to its pro rata share of the obligations under such Letter of
Credit (based on the respective Commitment Percentages of the Lenders) and shall
absolutely, unconditionally and irrevocably assume, as primary obligor and not
as surety, and be obligated to pay to the Issuing Lender therefor and discharge
when due, its pro rata share of the obligations arising under such Letter of
Credit. Without limiting the scope and nature of each Lender's participation in
any Letter of Credit, to the extent that the Issuing Lender has not been
reimbursed as required hereunder or under any such Letter of Credit, each such
Lender shall pay to the Issuing Lender its pro rata share of such unreimbursed
drawing in same day funds on the day of notification by the Issuing Lender of an
unreimbursed drawing pursuant to the provisions of subsection (d) hereof. The
obligation of each Lender to so reimburse the Issuing Lender shall be absolute
and unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower to reimburse the
Issuing Lender under any Letter of Credit, together with interest as hereinafter
provided.
(d) Reimbursement. In the event of any drawing under any Letter of Credit,
-------------
the Issuing Lender will promptly notify the Borrower. Unless the Borrower shall
immediately notify the Issuing Lender that the Borrower intends to otherwise
reimburse the Issuing Lender for such drawing, the Borrower shall be deemed to
have requested that the Lenders make a Revolving Loan in the amount of the
drawing as provided in subsection (e) hereof on the related Letter of Credit,
the proceeds of which will be used to satisfy the related reimbursement
obligations. The Borrower promises to reimburse the Issuing Lender on the day
of drawing under any Letter of Credit (either with the proceeds of a Revolving
Loan obtained hereunder or otherwise) in same day funds. If the Borrower shall
fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed
amount of such drawing shall bear interest at a per annum rate equal to the Base
Rate plus the sum of (i) the Applicable Percentage and (ii) two percent (2%).
The Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of setoff,
counterclaim or defense to payment the Borrower may claim or have against the
Issuing Lender, the Administrative Agent, the Lenders, the beneficiary of the
Letter of Credit drawn upon or any other Person, including without limitation
any defense based on any failure of the Borrower or any other Credit Party to
receive consideration or the legality, validity, regularity or unenforceability
of the Letter of Credit. The Issuing Lender will promptly notify the other
Lenders of the amount of any unreimbursed drawing and each Lender shall promptly
pay to the Administrative Agent for the account of the Issuing Lender in Dollars
and in immediately
38
<PAGE>
available funds, the amount of such Lender's pro rata share of such unreimbursed
drawing. Such payment shall be made on the day such notice is received by such
Lender from the Issuing Lender if such notice is received at or before 2:00 P.M.
(Charlotte, North Carolina time) otherwise such payment shall be made at or
before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next
succeeding the day such notice is received. If such Lender does not pay such
amount to the Issuing Lender in full upon such request, such Lender shall, on
demand, pay to the Administrative Agent for the account of the Issuing Lender
interest on the unpaid amount during the period from the date of such drawing
until such Lender pays such amount to the Issuing Lender in full at a rate per
annum equal to, if paid within two (2) Business Days of the date that such
Lender is required to make payments of such amount pursuant to the preceding
sentence, the Federal Funds Rate and thereafter at a rate equal to the Base
Rate. Each Lender's obligation to make such payment to the Issuing Lender, and
the right of the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and without
regard to the termination of this Credit Agreement or the Commitments hereunder,
the existence of a Default or Event of Default or the acceleration of the
obligations of the Borrower hereunder and shall be made without any offset,
abatement, withholding or reduction whatsoever. Simultaneously with the making
of each such payment by a Lender to the Issuing Lender, such Lender shall,
automatically and without any further action on the part of the Issuing Lender
or such Lender, acquire a participation in an amount equal to such payment
(excluding the portion of such payment constituting interest owing to the
Issuing Lender) in the related unreimbursed drawing portion of the LOC
Obligation and in the interest thereon and in the related LOC Documents, and
shall have a claim against the Borrower with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the Borrower shall
------------------------------
have requested, or been deemed to have requested, a Revolving Loan advance to
reimburse a drawing under a Letter of Credit, the Administrative Agent shall
give notice to the Lenders that a Revolving Loan has been requested or deemed
requested by the Borrower to be made in connection with a drawing under a Letter
of Credit, in which case a Revolving Loan advance comprised of Base Rate Loans
(or Eurodollar Loans to the extent the Borrower has complied with the procedures
of Section 2.1(b)(i) with respect thereto) shall be immediately made to the
Borrower by all Lenders (notwithstanding any termination of the Commitments
pursuant to Section 9.2) pro rata based on the respective Commitment Percentages
--- ----
of the Lenders (determined before giving effect to any termination of the
Commitments pursuant to Section 9.2) and the proceeds thereof shall be paid
directly to the Issuing Lender for application to the respective LOC
Obligations. Each such Lender hereby irrevocably agrees to make its pro rata
share of each such Revolving Loan immediately upon any such request or deemed
request in the amount, in the manner and on the date specified in the preceding
sentence notwithstanding (i) the amount of such borrowing may not comply with
---------------
the minimum amount for advances of Revolving Loans otherwise required hereunder,
(ii) whether any conditions specified in Section 5.2 are then satisfied, (iii)
whether a Default or an Event
39
<PAGE>
of Default then exists, (iv) failure for any such request or deemed request for
Revolving Loan to be made by the time otherwise required hereunder, (v) whether
the date of such borrowing is a date on which Revolving Loans are otherwise
permitted to be made hereunder or (vi) any termination of the Commitments
relating thereto immediately prior to or contemporaneously with such borrowing.
In the event that any Revolving Loan cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code with respect to the
Borrower or any Credit Party), then each such Lender hereby agrees that it shall
forthwith purchase (as of the date such borrowing would otherwise have occurred,
but adjusted for any payments received from the Borrower on or after such date
and prior to such purchase) from the Issuing Lender such participation in the
outstanding LOC Obligations as shall be necessary to cause each such Lender to
share in such LOC Obligations ratably (based upon the respective Commitment
Percentages of the Lenders (determined before giving effect to any termination
of the Commitments pursuant to Section 9.2)), provided that in the event such
--------
payment is not made on the day of drawing, such Lender shall pay in addition to
the Issuing Lender interest on the amount of its unfunded Participation Interest
at a rate equal to, if paid within two (2) Business Days of the date of drawing,
the Federal Funds Rate, and thereafter at the Base Rate.
(f) Designation of other Credit Parties as Account Parties.
------------------------------------------------------
Notwithstanding anything to the contrary set forth in this Credit Agreement,
including without limitation Section 2.2(a) hereof, a Letter of Credit issued
hereunder may contain a statement to the effect that such Letter of Credit is
issued for the account of a Credit Party, provided that notwithstanding such
statement, the Borrower shall be the actual account party for all purposes of
this Credit Agreement for such Letter of Credit and such statement shall not
affect the Borrower's reimbursement obligations hereunder with respect to such
Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any Letter of Credit
------------------
shall, for purposes hereof, be treated in all respects the same as the issuance
of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have the Letters
-----------------------------
of Credit be subject to The Uniform Customs and Practice for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP"), in which case the UCP may be incorporated therein and
---
deemed in all respects to be a part thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
--------------------------------------------------
(i) In addition to its other obligations under this Section 2.2, the
Borrower hereby agrees to protect, indemnify, pay and save the Issuing
Lender harmless from
40
<PAGE>
and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees) that the
Issuing Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or (B) the failure of
the Issuing Lender to honor a drawing under a Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority (all such
acts or omissions, herein called "Government Acts").
----------------
(ii) As between the Borrower and the Issuing Lender, the Borrower
shall assume all risks of the acts, omissions or misuse of any Letter of
Credit by the beneficiary thereof. The Issuing Lender shall not be
responsible: (A) for the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with
the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (D) for
any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under a Letter of Credit or of the proceeds
thereof; and (E) for any consequences arising from causes beyond the
control of the Issuing Lender, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
the Issuing Lender, under or in connection with any Letter of Credit or the
related certificates, if taken or omitted in good faith, shall not put such
Issuing Lender under any resulting liability to the Borrower or any other
Credit Party. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and indemnify the
Issuing Lender against any and all risks involved in the issuance of the
Letters of Credit, all of which risks are hereby assumed by the Borrower
(on behalf of itself and each of the other Credit Parties), including,
without limitation, any and all Government Acts. The Issuing Lender shall
not, in any way, be liable for any failure by the Issuing Lender or anyone
else to pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the Issuing
Lender.
(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (d)
above. The obligations of the
41
<PAGE>
Borrower under this subsection (i) shall survive the termination of this
Credit Agreement. No act or omissions of any current or prior beneficiary
of a Letter of Credit shall in any way affect or impair the rights of the
Issuing Lender to enforce any right, power or benefit under this Credit
Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (i), the Borrower shall have no obligation to indemnify the
Issuing Lender in respect of any liability incurred by the Issuing Lender
(A) arising solely out of the gross negligence or willful misconduct of the
Issuing Lender, as determined by a court of competent jurisdiction, or (B)
caused by the Issuing Lender's failure to pay under any Letter of Credit
after presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit, as determined by a court of competent
jurisdiction, unless such payment is prohibited by any law, regulation,
court order or decree.
(j) Responsibility of Issuing Lender. It is expressly understood and agreed
--------------------------------
that the obligations of the Issuing Lender hereunder to the Lenders are only
those expressly set forth in this Credit Agreement and that the Issuing Lender
shall be entitled to assume that the conditions precedent set forth in Section
5.2 have been satisfied unless it shall have acquired actual knowledge that any
such condition precedent has not been satisfied; provided, however, that nothing
-------- -------
set forth in this Section 2.2 shall be deemed to prejudice the right of any
Lender to recover from the Issuing Lender any amounts made available by such
Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it
is determined by a court of competent jurisdiction that the payment with respect
to a Letter of Credit constituted gross negligence or willful misconduct on the
part of the Issuing Lender.
(k) Conflict with LOC Documents. In the event of any conflict between this
---------------------------
Credit Agreement and any LOC Document (including any letter of credit
application), this Credit Agreement shall control.
2.3 Swingline Loan Subfacility.
--------------------------
(a) Swingline Commitment. Subject to the terms and conditions hereof and in
--------------------
reliance upon the representations and warranties set forth herein, the Swingline
Lender, in its individual capacity, agrees to make certain revolving credit
loans requested by the Borrower in Dollars to the Borrower (each a "Swingline
---------
Loan" and, collectively, the "Swingline Loans") from time to time from the
- ----
Closing Date until the Termination Date for the purposes hereinafter set forth;
provided, however, (i) the aggregate principal amount of Swingline Loans
- -----------------
outstanding at any time shall not exceed TEN MILLION DOLLARS ($10,000,000) (the
"Swingline Committed Amount"), and (ii) with regard to the Lenders collectively,
- ---------------------------
the aggregate principal amount of Obligations outstanding at any time shall not
exceed the
42
<PAGE>
Aggregate Revolving Committed Amount. Swingline Loans hereunder shall be made as
Base Rate Loans, and may be repaid or reborrowed in accordance with the
provisions hereof.
(b) Swingline Loan Advances.
-----------------------
(i) Notices; Disbursement. Whenever the Borrower desires a Swingline
---------------------
Loan advance hereunder it shall give written notice (or telephonic notice
promptly confirmed in writing) to the Swingline Lender not later than 1:00
P.M. (Charlotte, North Carolina time) on the Business Day of the requested
Swingline Loan advance. Each such notice shall be irrevocable and shall
specify (A) that a Swingline Loan advance is requested, (B) the date of the
requested Swingline Loan advance (which shall be a Business Day) and (C)
the principal amount of and Interest Period for the Swingline Loan advance
requested. Each Swingline Loan shall have such maturity date as the
Swingline Lender and the Borrower shall agree upon receipt by the Swingline
Lender of any such notice from the Borrower. The Swingline Lender shall
initiate the transfer of funds representing the Swingline Loan advance to
the Borrower by 3:00 P.M. (Charlotte, North Carolina time) on the Business
Day of the requested borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall be in a
---------------
minimum principal amount of $100,000 and in integral multiples of $50,000
in excess thereof (or the remaining amount of the Swingline Committed
Amount, if less).
(iii) Repayment of Swingline Loans. The principal amount of
----------------------------
all Swingline Loans shall be due and payable on the earlier of (A) the
maturity date agreed to by the Swingline Lender and the Borrower with
respect to such Loan (which maturity date shall not be a date more than
thirty (30) Business Days from the date of advance thereof) or (B) the
Termination Date. The Swingline Lender may, at any time, in its sole
discretion, by written notice to the Borrower and the Lenders, demand
repayment of its Swingline Loans by way of a Revolving Loan advance, in
which case the Borrower shall be deemed to have requested a Revolving Loan
advance comprised solely of Base Rate Loans in the amount of such Swingline
Loans; provided, however, that any such demand shall be deemed to have been
-------- -------
given one Business Day prior to the Termination Date and on the date of the
occurrence of any Event of Default described in Section 9.1 and upon
acceleration of the indebtedness hereunder and the exercise of remedies in
accordance with the provisions of Section 9.2. Each Lender hereby
irrevocably agrees to make its pro rata share of each such Revolving Loan
in the amount, in the manner and on the date specified in the preceding
sentence notwithstanding (I) the amount of such borrowing may not comply
---------------
with the minimum amount for advances of Revolving Loans otherwise required
hereunder, (II) whether any conditions specified in Section 5.2 are then
satisfied, (III) whether a Default or an
43
<PAGE>
Event of Default then exists, (IV) failure of any such request or deemed
request for Revolving Loan to be made by the time otherwise required
hereunder, (V) whether the date of such borrowing is a date on which
Revolving Loans are otherwise permitted to be made hereunder or (VI) any
termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Revolving Loan
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the Borrower or any
other Credit Party), then each Lender hereby agrees that it shall forthwith
purchase (as of the date such borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after such date
and prior to such purchase) from the Swingline Lender such Participation
Interests in the outstanding Swingline Loans as shall be necessary to cause
each such Lender to share in such Swingline Loans ratably based upon its
Commitment Percentage of the Revolving Committed Amount (determined before
giving effect to any termination of the Commitments pursuant to Section
3.4), provided that (A) all interest payable on the Swingline Loans
--------
shall be for the account of the Swingline Lender until the date as of which
the respective Participation Interest is purchased and (B) at the time any
purchase of Participation Interests pursuant to this sentence is actually
made, the purchasing Lender shall be required to pay to the Swingline
Lender, to the extent not paid to the Swingline Lender by the Borrower in
accordance with the terms of subsection (c)(ii) below, interest on the
principal amount of Participation Interests purchased for each day from and
including the day upon which such borrowing would otherwise have occurred
to but excluding the date of payment for such Participation Interests, at
the rate equal to the Federal Funds Rate.
(c) Interest on Swingline Loans.
---------------------------
Subject to the provisions of Section 3.1, each Swingline Loan shall bear
interest at a per annum rate (computed on the basis of the actual number of days
elapsed over a year of 365 days) equal to the Base Rate. Interest on Swingline
Loans shall be payable in arrears on each applicable Interest Payment Date (or
at such other times as may be specified herein), unless accelerated sooner
pursuant to Section 9.2.
(d) Swingline Note. The Swingline Loans shall be evidenced by the Revolving
--------------
Note.
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
----------------------------------------------
44
<PAGE>
3.1 Default Rate.
------------
Upon the occurrence, and during the continuance, of an Event of Default, the
principal of and, to the extent permitted by law, interest on the Loans and any
other amounts owing hereunder or under the other Credit Documents shall bear
interest, payable on demand, at a per annum rate 2% greater than the rate which
would otherwise be applicable (or if no rate is applicable, whether in respect
of interest, fees or other amounts, then 2% greater than the Base Rate).
3.2 Extension and Conversion.
------------------------
Subject to the terms of Section 5.2, the Borrower shall have the option, on
any Business Day, to extend existing Loans into a subsequent permissible
Interest Period or to convert Loans into Loans of another interest rate type;
provided, however, that (i) except as provided in Section 3.8, Eurodollar Loans
- -------- -------
may be converted into Base Rate Loans only on the last day of the Interest
Period applicable thereto, (ii) Eurodollar Loans may be extended, and Base Rate
Loans may be converted into Eurodollar Loans, only if no Default or Event of
Default is in existence on the date of extension or conversion, (iii) Loans
extended as, or converted into, Eurodollar Loans shall be subject to the terms
of the definition of "Interest Period" set forth in Section 1.1 and shall be in
---------------
such minimum amounts as provided in Section 2.1(b)(ii) , and (iv) any request
for extension or conversion of a Eurodollar Loan which shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of one
month. Each such extension or conversion shall be effected by the Borrower by
giving a Notice of Extension/Conversion (or telephone notice promptly confirmed
in writing) to the Administrative Agent prior to 1:00 P.M. (Charlotte, North
Carolina time) on the third Business Day prior to the date of the proposed
extension or conversion, specifying the date of the proposed extension or
conversion, the Loans to be so extended or converted, the types of Loans into
which such Loans are to be converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for extension or conversion
shall be irrevocable and shall constitute a representation and warranty by the
Borrower of the matters specified in subsections (a) through (e) of Section 5.2.
In the event the Borrower fails to request extension or conversion of any
Eurodollar Loan in accordance with this Section, or any such conversion or
extension is not permitted or required by this Section, then such Eurodollar
Loan shall be automatically converted into a Base Rate Loan at the end of the
Interest Period applicable thereto. The Administrative Agent shall give each
Lender notice as promptly as practicable of any such proposed extension or
conversion affecting any Loan.
3.3 Prepayments.
-----------
(a) Voluntary Prepayments. Revolving Loans may be repaid in whole or in part
---------------------
without premium or penalty; provided that (i) the Borrower shall give
--------
written notice
45
<PAGE>
thereof to the Administrative Agent prior to 11:30 A.M. (Charlotte, North
Carolina time) on the Business Day of, in the case of the prepayment of Base
Rate Loans, and prior to 1:00 P.M. (Charlotte, North Carolina time) on the third
Business Day prior to, in the case of the prepayment of Eurodollar Loans, the
date of the prepayment, (ii) prepayments of Eurodollar Loans must be accompanied
by payment of any amounts owing under Section 3.11, and (iii) partial
prepayments shall be minimum principal amounts of $5,000,000, in the case of
Eurodollar Loans, and $1,000,000, in the case of Base Rate Loans, and in
integral multiples of $1,000,000 in excess thereof.
(b) Mandatory Prepayments. If at any time, (A) the aggregate principal amount
---------------------
of Obligations shall exceed the Aggregate Revolving Committed Amount, (B) the
aggregate amount of LOC Obligations shall exceed the LOC Committed Amount, (C)
the aggregate amount of Trade LOC Obligations shall exceed the Trade LOC
Committed Amount or (D) the aggregate amount of Swingline Loans shall exceed the
Swingline Committed Amount, the Borrower shall immediately make payment on the
Revolving Loans and/or to a cash collateral account in respect of the LOC
Obligations, in an amount sufficient to eliminate the deficiency.
(c) Application. Unless otherwise specified by the Borrower, prepayments made
-----------
hereunder shall be applied first to Swingline Loans, then to Revolving Loans
which are Base Rate Loans, then to Revolving Loans which are Eurodollar Loans in
direct order of Interest Period maturities and then to a cash collateral account
to secure LOC Obligations. Amounts prepaid hereunder may be reborrowed in
accordance with the provisions hereof.
3.4 Termination and Reduction of Commitments
----------------------------------------
(a) Voluntary Reductions. The Revolving Commitments may be terminated or
--------------------
permanently reduced in whole or in part upon three (3) Business Days' prior
written notice to the Administrative Agent, provided that (i) after giving
--------
effect to any voluntary reduction the aggregate amount of Obligations shall not
exceed the Aggregate Revolving Committed Amount, as reduced, and (ii) partial
reductions shall be in a minimum principal amount of $5,000,000, and in integral
multiples of $1,000,000 in excess thereof.
(b) Mandatory Reduction.
-------------------
(i) Asset Dispositions. The Revolving Commitments shall be permanently
------------------
reduced in an amount equal to one hundred percent (100%) of the Net
Proceeds received from Asset Dispositions to the extent (A) such Net
Proceeds are not reinvested in similar property or assets within 12 months
of the date of sale, lease, disposition, casualty, theft or loss which gave
rise to the Asset Disposition, and (B) the aggregate amount of such Net
Proceeds not reinvested in accordance with the
46
<PAGE>
foregoing subsection (A) shall exceed $5,000,000 in any fiscal year.
(ii) Debt and Equity Transactions. The Revolving Commitments shall be
----------------------------
permanently reduced in an amount equal to fifty percent (50%) of the Net
Proceeds received from any Debt Transaction or Equity Transaction.
(iii) Maximum Mandatory Reductions. Notwithstanding the foregoing
----------------------------
provisions of this subsection (b), the mandatory commitment reduction under
clauses (i) and (ii) above shall become inapplicable once the Aggregate
Revolving Commitment Amount shall be permanently reduced to $100 million or
less.
(c) Termination. The Commitments hereunder shall terminate on the
-----------
Termination Date.
3.5 Fees.
----
(a) Commitment Fee. In consideration of the Revolving Commitments
--------------
hereunder, the Borrower agrees to pay to the Administrative Agent for the
ratable benefit of the Lenders a commitment fee (the "Commitment Fee") equal to
--------------
the Applicable Percentage per annum on the average daily unused amount of the
Revolving Committed Amount for the applicable period. The Commitment Fee shall
be payable quarterly in arrears on the 15th day following the last day of each
calendar quarter for the immediately preceding quarter (or portion thereof)
beginning with the first such date to occur after the Closing Date. For purposes
of computation of the Commitment Fee, Swingline Loans shall not be counted
toward or considered usage under the Revolving Loan facility.
(b) Letter of Credit Fees.
---------------------
(i) Standby Letter of Credit Fee. In consideration of the Standby LOC
----------------------------
Commitment hereunder, the Borrower agrees to pay to the Administrative
Agent for the ratable benefit of the Lenders a fee (the "Standby Letter of
-----------------
Credit Fee") equal to the Applicable Percentage per annum on the average
----------
daily maximum amount available to be drawn under Standby Letters of Credit
from the date of issuance to the date of expiration. The Standby Letter of
Credit Fee shall be payable quarterly in arrears on the 15th day following
the last day of each calendar quarter for the immediately preceding quarter
(or portion thereof) beginning with the first such date to occur after the
Closing Date.
(ii) Trade Letter of Credit Fee. In consideration of the Trade LOC
--------------------------
Commitment hereunder, the Borrower agrees to pay to the Administrative
Agent for the ratable benefit of the Lenders a fee (the "Trade Letter of
---------------
Credit Fee") equal to the
----------
47
<PAGE>
Applicable Percentage per annum on the average daily maximum amount
available to be drawn under Trade Letters of Credit from the date of
issuance to the date of expiration. The Trade Letter of Credit Fee shall be
payable quarterly in arrears on the 15th day following the last day of each
calendar quarter for the immediately preceding quarter (or portion thereof)
beginning with the first such date to occur after the Closing Date.
(iii) Issuing Lender Fee. In addition to the Standby Letter
------------------
of Credit Fee and the Trade Letter of Credit Fee, the Borrower agrees to
pay to the Issuing Lender for its own account without sharing by the other
Lenders (A) a fronting and negotiation fee of 0.125% per annum on the
average daily maximum amount available to be drawn under Standby Letters of
Credit issued by it from the date of issuance to the date of expiration
payable quarterly in arrears, (B) a fronting and negotiation fee of 0.10%
on the maximum amount available to be drawn under Trade Letters of Credit
issued by it payable in advance on the date of issuance, and (C) customary
charges of the Issuing Lender with respect to the issuance, amendment,
transfer, administration, cancellation and conversion of, and drawings
under, such Letters of Credit (collectively, the "Issuing Lender Fees").
-------------------
(c) Administrative Agent's Fees. The Borrower agrees to pay to the
---------------------------
Administrative Agent, for its own account, an annual administrative fee and
such other fees, if any, referred to in the Administrative Agent's Fee
Letter (collectively, the "Administrative Agent's Fees").
---------------------------
3.6 Capital Adequacy.
----------------
If any Lender has determined, after the date hereof, that the adoption or
the becoming effective of, or any change in, or any change by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof in the interpretation or administration of, any
applicable law, rule or regulation regarding capital adequacy, or compliance by
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital or assets as a consequence of its commitments or obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, effectiveness, change or compliance (taking into consideration
such Lender's policies with respect to capital adequacy), then, upon notice from
such Lender to the Borrower, the Borrower shall be obligated to pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction. Each determination by any such Lender of amounts owing under this
Section shall, absent manifest error, be conclusive and binding on the parties
hereto.
48
<PAGE>
3.7 Inability To Determine Interest Rate.
------------------------------------
If prior to the first day of any Interest Period, the Administrative Agent
shall have determined (which determination shall be conclusive and binding upon
the Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Administrative Agent shall give telecopy or
telephonic notice thereof to the Borrower and the Lenders as soon as practicable
thereafter (which notice shall be withdrawn the Administrative Agent whenever
such circumstances no longer exist). If such notice is given (a) any Eurodollar
Loans requested to be made on the first day of such Interest Period shall be
made as Base Rate Loans and (b) any Loans that were to have been converted on
the first day of such Interest Period to or continued as Eurodollar Loans shall
be converted to or continued as Base Rate Loans. Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made
or continued as such, nor shall the Borrower have the right to convert Base Rate
Loans to Eurodollar Loans.
3.8 Illegality.
----------
Notwithstanding any other provision herein, if the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Lender to make
or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such
Lender shall promptly give written notice of such circumstances to the Borrower
and the Administrative Agent (which notice shall be withdrawn by such Lender
whenever such circumstances no longer exist), (b) the commitment of such Lender
hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and,
until such time as it shall no longer be unlawful for such Lender to make or
maintain Eurodollar Loans, such Lender shall then have a commitment only to make
a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans
then outstanding as Eurodollar Loans, if any, shall be converted automatically
to Base Rate Loans on the respective last days of the then current Interest
Periods with respect to such Loans or within such earlier period as required by
law. If any such conversion of a Eurodollar Loan occurs on a day which is not
the last day of the then current Interest Period with respect thereto, the
Borrower shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 3.11.
3.9 Requirements of Law.
-------------------
If, after the date hereof, the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof applicable to any Lender, or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority, in each
case made subsequent to the Closing
49
<PAGE>
Date (or, if later, the date on which such Lender becomes a Lender):
(a) shall subject such Lender to any tax of any kind whatsoever with
respect to any Letter of Credit, any Eurodollar Loans made by it or its
obligation to make Eurodollar Loans, or change the basis of taxation of
payments to such Lender in respect thereof (except for (i) Non-Excluded
Taxes covered by Section 3.10 (including Non-Excluded Taxes imposed solely
by reason of any failure of such Lender to comply with its obligations
under Section 3.10(b)) and (ii) changes in taxes measured by or imposed
upon the overall net income, or franchise tax (imposed in lieu of such net
income tax), of such Lender or its applicable lending office, branch, or
any affiliate thereof));
(b) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(c) shall impose on such Lender any other condition (excluding any tax
of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Administrative Agent, in accordance herewith, the Borrower shall be
obligated to promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such increased cost or reduced amount
receivable, provided that, in any such case, the Borrower may elect to convert
--------
the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving
the Administrative Agent at least one Business Day's notice of such election, in
which case the Borrower shall promptly pay to such Lender, upon demand, without
duplication, such amounts, if any, as may be required pursuant to Section 3.11.
If any Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall provide prompt notice thereof to the Borrower, through the
Administrative Agent, certifying (x) that one of the events described in this
paragraph (a) has occurred and describing in reasonable detail the nature of
such event, (y) as to the increased cost or reduced amount resulting from such
event and (z) as to the additional amount demanded by such Lender and a
reasonably detailed explanation of the calculation thereof. Such a certificate
as to any additional amounts payable pursuant to this subsection submitted by
such Lender, through the Administrative Agent, to the Borrower shall be
conclusive and binding on the parties hereto in the absence of manifest error.
This
50
<PAGE>
covenant shall survive the termination of this Credit Agreement and the
payment of the Loans and all other amounts payable hereunder.
3.10 Taxes.
-----
(a) Except as provided below in this subsection, all payments made by
the Borrower under this Credit Agreement and any Notes shall be made free
and clear of, and without deduction or withholding for or on account of,
any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any court, or
governmental body, agency or other official, excluding taxes measured by or
imposed upon the overall net income of any Lender or its applicable lending
office, or any branch or affiliate thereof, and all franchise taxes, branch
taxes, taxes on doing business or taxes on the overall capital or net worth
of any Lender or its applicable lending office, or any branch or affiliate
thereof, in each case imposed in lieu of net income taxes, imposed: (i) by
the jurisdiction under the laws of which such Lender, applicable lending
office, branch or affiliate is organized or is located, or in which its
principal executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii) by
reason of any connection between the jurisdiction imposing such tax and
such Lender, applicable lending office, branch or affiliate other than a
connection arising solely from such Lender having executed, delivered or
performed its obligations, or received payment under or enforced, this
Credit Agreement or any Notes. If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded
------------
Taxes") are required to be withheld from any amounts payable to the
-----
Administrative Agent or any Lender hereunder or under any Notes, (A) the
amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or
such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in
this Credit Agreement and any Notes, provided, however, that the Borrower
-------- -------
shall be entitled to deduct and withhold any Non-Excluded Taxes and shall
not be required to increase any such amounts payable to any Lender that is
not organized under the laws of the United States of America or a state
thereof if such Lender fails to comply with the requirements of paragraph
(b) of this subsection whenever any Non-Excluded Taxes are payable by the
Borrower, and (B) as promptly as possible thereafter the Borrower shall
send to the Administrative Agent for its own account or for the account of
such Lender, as the case may be, a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the Borrower
fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental
taxes, interest or penalties that may become payable by the Administrative
Agent or any Lender as a result of any such failure. The agreements in
this subsection shall survive the termination of this Credit Agreement and
the
51
<PAGE>
payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(X)(i) on or before the date of any payment by the Borrower under this
Credit Agreement or Notes to such Lender, deliver to the Borrower and the
Administrative Agent (A) two (2) duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, or successor applicable form,
as the case may be, certifying that it is entitled to receive payments
under this Credit Agreement and any Notes without deduction or withholding
of any United States federal income taxes and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may be,
certifying that it is entitled to an exemption from United States backup
withholding tax;
(ii) deliver to the Borrower and the Administrative Agent two (2)
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the Borrower
or the Administrative Agent; or
(Y) in the case of any such Lender that is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Internal Revenue Code, (i) represent
to the Borrower (for the benefit of the Borrower and the Administrative
Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of
the Internal Revenue Code, (ii) agree to furnish to the Borrower on or
before the date of any payment by the Borrower, with a copy to the
Administrative Agent two (2) accurate and complete original signed copies
of Internal Revenue Service Form W-8, or successor applicable form
certifying to such Lender's legal entitlement at the date of such
certificate to an exemption from U.S. withholding tax under the provisions
of Section 881(c) of the Internal Revenue Code with respect to payments to
be made under this Credit Agreement and any Notes (and to deliver to the
Borrower and the Administrative Agent two (2) further copies of such form
on or before the date it expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recently provided
form and, if necessary, obtain any extensions of time reasonably requested
by the Borrower or the Administrative Agent for filing and completing such
forms), and (iii) agree, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to
52
<PAGE>
the Borrower (for the benefit of the Borrower and the Administrative Agent)
such other forms as may be reasonably required in order to establish the
legal entitlement of such Lender to an exemption from withholding with
respect to payments under this Credit Agreement and any Notes;
unless in any such case any change in treaty, law or regulation has occurred
after the date such Person becomes a Lender hereunder which renders all such
forms inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Administrative Agent. Each Person that shall become a Lender
or a participant of a Lender pursuant to subsection 11.3 shall, upon the
effectiveness of the related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this subsection, provided
--------
that in the case of a participant of a Lender the obligations of such
participant of a Lender pursuant to this subsection (b) shall be determined as
if the participant of a Lender were a Lender except that such participant of a
Lender shall furnish all such required forms, certifications and statements to
the Lender from which the related participation shall have been purchased.
3.11 Indemnity.
---------
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement or (c) the making of a prepayment of Eurodollar Loans on a
day which is not the last day of an Interest Period with respect thereto. With
respect to Eurodollar Loans, such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of the applicable Interest Period (or, in the case of a
failure to borrow, convert or continue, the Interest Period that would have
commenced on the date of such failure) in each case at the applicable rate of
interest for such Loans provided for herein (excluding, however, the Applicable
Percentage included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market. The covenants of the Borrower
set forth in this Section 3.11 shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable hereunder.
53
<PAGE>
3.12 Pro Rata Treatment.
------------------
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or prepayment of principal of any Loan
-----
(other than Swingline Loans) or reimbursement obligations arising from drawings
under Letters of Credit, each payment of interest on the Loans or reimbursement
obligations arising from drawings under Letters of Credit, each payment of
Commitment Fees, each payment of the Letter of Credit Fee, each reduction of the
Revolving Committed Amount and each conversion or extension of any Loan (other
than Swingline Loans), shall be allocated pro rata among the Lenders in
accordance with the respective principal amounts of their outstanding Loans and
Participation Interests.
(b) Advances. No Lender shall be responsible for the failure or delay by any
--------
other Lender in its obligation to make its ratable share of a borrowing
hereunder; provided, however, that the failure of any Lender to fulfill its
-------- -------
obligations hereunder shall not relieve any other Lender of its obligations
hereunder. Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its ratable share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by such Lender within the time period specified therefor hereunder, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the Federal Funds Rate for a period of two
(2) Business Days, and thereafter at the Base Rate, for the period until such
Lender makes such amount immediately available to the Administrative Agent. If
such Lender does not pay such amounts to the Administrative Agent forthwith upon
demand, the Administrative Agent may notify the Borrower and request the
Borrower to immediately pay such amount to the Administrative Agent with
interest at the Base Rate. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
3.13 Sharing of Payments.
-------------------
The Lenders agree among themselves that, in the event that any Lender shall
obtain payment in respect of any Loan, LOC Obligations or any other obligation
owing to such Lender under this Credit Agreement through the exercise of a right
of setoff, banker's lien or counterclaim, or pursuant to a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or
54
<PAGE>
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a participation in such Loans, LOC Obligations
and other obligations in such amounts, and make such other adjustments from time
to time, as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by repurchase of a participation theretofore sold, return
its share of that benefit (together with its share of any accrued interest
payable with respect thereto) to each Lender whose payment shall have been
rescinded or otherwise restored. The Borrower agrees that any Lender so
purchasing such a participation may, to the fullest extent permitted by law,
exercise all rights of payment, including setoff, banker's lien or counterclaim,
with respect to such participation as fully as if such Lender were a holder of
such Loan, LOC Obligations or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Administrative Agent shall fail to remit to the
Administrative Agent or any other Lender an amount payable by such Lender or the
Administrative Agent to the Administrative Agent or such other Lender pursuant
to this Credit Agreement on the date when such amount is due, such payments
shall be made together with interest thereon for each date from the date such
amount is due until the date such amount is paid to the Administrative Agent or
such other Lender at a rate per annum equal to the Federal Funds Rate. If under
any applicable bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a setoff to which this Section 3.13 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.13 to share in the benefits of any recovery on such secured claim.
3.14 Payments, Computations, Etc.
----------------------------
(a) Except as otherwise specifically provided herein, all payments hereunder
shall be made to the Administrative Agent in Dollars in immediately available
funds, without setoff, deduction, counterclaim or withholding of any kind, at
the Administrative Agent's office specified in Section 11.1 not later than 2:00
P.M. (Charlotte, North Carolina time) on the date when due. Payments received
after such time shall be deemed to have been received on the next succeeding
Business Day. The Administrative Agent may (but shall not be obligated to) debit
the amount of any such payment which is not made by such time to any ordinary
deposit account of the Borrower maintained with the Administrative Agent (with
notice to the Borrower). The Borrower shall, at the time it makes any payment
under this Credit Agreement, specify to the Administrative Agent the Loans, LOC
Obligations, Fees, interest or other amounts payable by the Borrower hereunder
to which such payment is to be
55
<PAGE>
applied (and in the event that it fails so to specify, or if such application
would be inconsistent with the terms hereof, the Administrative Agent shall
distribute such payment to the Lenders in such manner as the Administrative
Agent may determine to be appropriate in respect of obligations owing by the
Borrower hereunder, subject to the terms of Section 3.12(a)). The Administrative
Agent will distribute such payments to such Lenders, if any such payment is
received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day
in like funds as received prior to the end of such Business Day and otherwise
the Administrative Agent will distribute such payment to such Lenders on the
next succeeding Business Day. Whenever any payment hereunder shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of interest and
Fees for the period of such extension), except that in the case of Eurodollar
Loans, if the extension would cause the payment to be made in the next following
calendar month, then such payment shall instead be made on the next preceding
Business Day. Except as expressly provided otherwise herein, all computations of
interest and fees shall be made on the basis of the actual number of days
elapsed over a year of 360 days, except with respect to computation of interest
on Base Rate Loans which (unless the Base Rate is determined by reference to the
Federal Funds Rate) shall be calculated based on a year of 365 or 366 days, as
appropriate. Interest shall accrue from and include the date of borrowing, but
exclude the date of payment.
(b) Allocation of Payments After Event of Default. Notwithstanding any other
---------------------------------------------
provisions of this Credit Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Administrative Agent or any Lender on account of the Guaranteed
Obligations or any other amounts outstanding under any of the Credit Documents
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation reasonable attorneys' fees) of the
Administrative Agent in connection with enforcing the rights of the Lenders
under the Credit Documents;
SECOND, to payment of any fees owed to the Administrative Agent;
THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys' fees) of each of the
Lenders in connection with enforcing its rights under the Credit Documents
or otherwise with respect to the Obligations owing to such Lender;
FOURTH, to the payment of all accrued interest and fees on or in respect
of the Obligations;
FIFTH, to the payment of the outstanding principal amount of the
Guaranteed
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<PAGE>
Obligations (including the payment or cash collateralization of the
outstanding LOC Obligations);
SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Credit Documents or otherwise and not
repaid pursuant to clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (ii) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding
Obligations held by such Lender bears to the aggregate then outstanding
Obligations) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts
available for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of outstanding Letters of Credit, such amounts
shall be held by the Administrative Agent in a cash collateral account and
applied (A) first, to reimburse the Issuing Lender for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 3.14(b).
3.15 Evidence of Debt.
----------------
(a) Each Lender shall maintain an account or accounts evidencing each
Loan made by such Lender to the Borrower from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Credit Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update its
account or accounts from time to time, as necessary.
(b) The Administrative Agent shall maintain the Register pursuant to
Section 11.3(c) hereof, and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount, type and Interest
Period of each such Loan hereunder, (ii) the amount of any principal or interest
due and payable or to become due and payable to each Lender hereunder and (iii)
the amount of any sum received by the Administrative Agent hereunder from or for
the account of the Borrower and each Lender's share thereof. The Administrative
Agent will make reasonable efforts to maintain the accuracy of the subaccounts
referred to in the preceding sentence and to promptly update such subaccounts
from time to time, as necessary.
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<PAGE>
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.15 (and, if consistent
with the entries of the Administrative Agent, subsection (a)) shall be prima
facie evidence of the existence and amounts of the obligations of the Borrower
therein recorded; provided, however, that the failure of any Lender or the
-------- -------
Administrative Agent to maintain any such account, such Register or such
subaccount, as applicable, or any error therein, shall not in any manner affect
the obligation of the Borrower to repay the Loans made by such Lender in
accordance with the terms hereof.
3.16 Replacement of Lenders.
----------------------
If any Lender requests compensation or indemnification from the Borrower under
Sections 3.6, 3.9 or 3.10 hereof, the Borrower may, at its option, within
fifteen (15) days after receipt by the Borrower of written demand from the
affected Lender for payment of such compensation or indemnification, notify the
Administrative Agent and such affected Lender of its intention to replace the
affected Lender. So long as no Event of Default shall have occurred and be
continuing, the Borrower may obtain, at the Borrower's expense, a replacement
Lender for the affected Lender. If the Borrower obtains a replacement Lender
within ninety (90) days following notice of its intention to do so, the affected
Lender must sell and assign its Loans and any Revolving Commitment to such
replacement Lender pursuant to Section 11.3(b) hereof (without giving effect to
any requirement therein that the Administrative Agent consent thereto), for an
amount equal to the principal balance of all Revolving Loans held by the
affected Lender and all accrued interest and Fees with respect thereto through
the date of such sale, provided that the Borrower shall have paid to such
--------
affected Lender the compensation or indemnification that it is entitled to
receive under Sections 3.6, 3.9 or 3.10 hereof, through the date of such sale
and assignment. Notwithstanding the foregoing, the Borrower shall not have the
right to obtain a replacement Lender if the affected Lender rescinds its demand
for such compensation or indemnification within fifteen (15) days following its
receipt of the Borrower's notice of intention to replace such affected Lender.
Additionally, if the Borrower gives a notice to the Administrative Agent and an
affected Lender of its intention to replace such affected Lender and does not so
replace such affected Lender within ninety (90) days thereafter, the Borrower's
rights under this Section 3.16 shall terminate and the Borrower shall promptly
pay all compensation or indemnification demanded by such affected Lender
pursuant to Sections 3.6, 3.9 or 3.10 hereof.
SECTION 4
GUARANTY
--------
4.1 The Guarantee.
-------------
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<PAGE>
Each of the Guarantors hereby jointly and severally guarantees to each Lender,
to each Affiliate of a Lender that enters into a Hedging Agreement and to the
Administrative Agent as hereinafter provided the prompt payment of the
Guaranteed Obligations in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration, a mandatory cash collateralization or
otherwise) strictly in accordance with the terms thereof. The Guarantors hereby
further agree that if any of the Guaranteed Obligations are not paid in full
when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as mandatory cash collateralization or otherwise), the Guarantors
will, jointly and severally, promptly pay the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Guaranteed Obligations, the same will be promptly paid in full
when due (whether at extended maturity, as a mandatory prepayment, by
acceleration or otherwise) in accordance with the terms of such extension or
renewal.
Notwithstanding any provision to the contrary contained herein or in any other
of the Credit Documents or Hedging Agreements, to the extent the obligations of
a Guarantor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers) then the obligations of each
Guarantor hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).
4.2 Obligations Unconditional.
-------------------------
The obligations of the Guarantors under Section 4.1 hereof are joint and
several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements, or any other agreement or instrument referred to therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 4.2 that the obligations of the
Guarantors hereunder shall be absolute and unconditional under any and all
circumstances. Each Guarantor agrees that such Guarantor shall have no right of
subrogation, indemnity, reimbursement or contribution against the Borrower or
any other Guarantor of the Guaranteed Obligations for amounts paid under this
Guaranty until such time as the Lenders (and any Affiliates of Lenders entering
into Hedging Agreements) have been paid in full, all Commitments under the
Credit Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under the Credit Documents or Hedging
Agreements. Without limiting the generality of the foregoing, it is agreed
that, to the fullest extent permitted by law, the
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<PAGE>
occurrence of any one or more of the following shall not alter or impair the
liability of any Guarantor hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to any Guarantor,
the time for any performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall be
waived;
(ii) any of the acts mentioned in any of the provisions of any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be waived or any other guarantee of any of the Guaranteed Obligations or
any security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;
(iv) any Lien granted to, or in favor of, the Administrative Agent or
any Lender or Lenders as security for any of the Guaranteed Obligations
shall fail to attach or be perfected; or
(v) any of the Guaranteed Obligations shall be determined to be void or
voidable (including, without limitation, for the benefit of any creditor of
any Guarantor) or shall be subordinated to the claims of any Person
(including, without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Administrative Agent or any Lender
exhaust any right, power or remedy or proceed against any Person under any of
the Credit Documents, any Hedging Agreement or any other agreement or instrument
referred to in the Credit Documents or Hedging Agreements, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
4.3 Reinstatement.
-------------
The obligations of the Guarantors under this Section 4 shall be automatically
reinstated if and to the extent that for any reason any payment by or on behalf
of any Person in respect of the Guaranteed Obligations is rescinded or must be
otherwise restored by any holder of any
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of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and each Guarantor agrees that it
will indemnify the Administrative Agent and each Lender on demand for all
reasonable costs and expenses (including, without limitation, reasonable fees
and expenses of counsel) incurred by the Administrative Agent or such Lender in
connection with such rescission or restoration, including any such reasonable
costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under
any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
--------------------------
Without limiting the generality of the provisions of this Section 4, each
Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. (S)(S) 26-7
through 26-9, inclusive. Each Guarantor further agrees that such Guarantor
shall have no right of recourse to security for the Guaranteed Obligations,
except through the exercise of the rights of subrogation pursuant to Section
4.2.
4.5 Remedies.
--------
The Guarantors agree that, to the fullest extent permitted by law, as between
the Guarantors, on the one hand, and the Administrative Agent and the Lenders,
on the other hand, the Guaranteed Obligations may be declared to be forthwith
due and payable as provided in Section 9.2 hereof (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 9.2) for purposes of Section 4.1 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing the
Guaranteed Obligations from becoming automatically due and payable) as against
any other Person and that, in the event of such declaration (or the Guaranteed
Obligations being deemed to have become automatically due and payable), the
Guaranteed Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of said
Section 4.1.
4.6 Rights of Contribution.
----------------------
The Guarantors hereby agree, as among themselves, that if any Guarantor shall
become an Excess Funding Guarantor (as defined below), each other Guarantor
shall, on demand of such Excess Funding Guarantor (but subject to the succeeding
provisions of this Section 4.6), pay to such Excess Funding Guarantor an amount
equal to such Guarantor's Pro Rata Share (as defined below and determined, for
this purpose, without reference to the properties, assets, liabilities and debts
of such Excess Funding Guarantor) of such Excess Payment (as defined below).
The payment obligation of any Guarantor to any Excess Funding Guarantor under
this Section 4.6 shall be subordinate and subject in right of payment to the
prior payment in
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full of the obligations of such Guarantor under the other provisions of this
Section 4, and such Excess Funding Guarantor shall not exercise any right or
remedy with respect to such excess until payment and satisfaction in full of all
of such obligations. For purposes hereof, (i) "Excess Funding Guarantor" shall
------------------------
mean, in respect of any obligations arising under the other provisions of this
Section 4 (hereafter, the "Guarantied Obligations"), a Guarantor that has paid
----------------------
an amount in excess of its Pro Rata Share of the Guarantied Obligations; (ii)
"Excess Payment" shall mean, in respect of any Guarantied Obligations, the
--------------
amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of
such Guarantied Obligations; and (iii) "Pro Rata Share", for the purposes of
--------------
this Section 4.6, shall mean, for any Guarantor, the ratio (expressed as a
percentage) of (a) the amount by which the aggregate present fair saleable value
of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder) to (b) the amount by which the aggregate present fair saleable value
of all assets and other properties of the Borrower and all of the Guarantors
exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of the Borrower and the Guarantors hereunder) of the Borrower and
all of the Guarantors, all as of the Closing Date (if any Guarantor becomes a
party hereto subsequent to the Closing Date, then for the purposes of this
Section 4.6 such subsequent Guarantor shall be deemed to have been a Guarantor
as of the Closing Date and the information pertaining to, and only pertaining
to, such Guarantor as of the date such Guarantor became a Guarantor shall be
deemed true as of the Closing Date).
4.7 Continuing Guarantee.
--------------------
The guarantee in this Section 4 is a continuing guarantee, and shall apply to
all Guaranteed Obligations whenever arising.
SECTION 5
CONDITIONS
----------
5.1 Conditions to Closing.
---------------------
This Credit Agreement shall become effective, and the initial Extensions of
Credit may be made, upon the satisfaction of the following conditions precedent:
(a) Execution of Credit Agreement and Credit Documents. Receipt by the
--------------------------------------------------
Administrative Agent of (i) multiple counterparts of this Credit Agreement, (ii)
a Revolving Note for each Lender, and (iii) multiple counterparts of the Pledge
Agreement, in each case executed by a duly authorized officer of each party
thereto and in each case conforming to the
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requirements of this Credit Agreement.
(b) Legal Opinions. Receipt of multiple counterparts of opinions of
--------------
counsel for the Credit Parties relating to the Credit Documents and the
transactions contemplated herein, in form and substance satisfactory to the
Administrative Agent and the Required Lenders.
(c) Financial Information. Receipt of financial information regarding the
---------------------
Borrower and its subsidiaries, as may be requested by, and in each case in form
and substance satisfactory to the Administrative Agent and the Lenders.
(d) Absence of Legal Proceedings. The absence of any action, suit,
----------------------------
investigation or proceeding pending in any court or before any arbitrator or
governmental instrumentality which could reasonably be expected to have a
Material Adverse Effect.
(e) Corporate Documents. Receipt of the following (or their equivalent)
-------------------
for each of the Credit Parties:
(i) Articles of Incorporation. Copies of the articles of
-------------------------
incorporation or charter documents certified to be true and complete as of
a recent date by the appropriate governmental authority of the state of its
incorporation.
(ii) Resolutions. Copies of resolutions of the Board of Directors
-----------
approving and adopting the respective Credit Documents, the transactions
contemplated therein and authorizing execution and delivery thereof,
certified by a secretary or assistant secretary as of the Closing Date to
be true and correct and in force and effect as of such date.
(iii) Bylaws. Copies of the bylaws certified by a secretary
------
or assistant secretary as of the Closing Date to be true and correct and in
force and effect as of such date.
(iv) Good Standing. Copies, where applicable, of certificates of good
-------------
standing, existence or its equivalent certified as of a recent date by the
appropriate governmental authorities of the state of incorporation and each
other state in which the failure to so qualify and be in good standing
would have a Material Adverse Effect.
(v) Officer's Certificate. An officer's certificate for each of the
---------------------
Credit Parties dated as of the Closing Date substantially in the form of
Schedule 5.1(e)(v) with appropriate insertions and attachments.
------------------
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(f) Fees. Receipt of all fees, if any, owing pursuant to the Agents' Fee
----
Letter, Section 3.5 or otherwise.
(g) Subsection 5.2 Conditions. The conditions specified in Section 5.2
-------------------------
shall be satisfied.
(h) Additional Matters. All other documents and legal matters in connection
------------------
with the transactions contemplated by this Credit Agreement shall be reasonably
satisfactory in form and substance to the Agents and the Required Lenders.
5.2 Conditions to All Extensions of Credit.
--------------------------------------
The obligation of each Lender to make any Extension of Credit hereunder
(including the initial Extension of Credit to be made hereunder) is subject to
the satisfaction of the following conditions precedent on the date of making
such Extension of Credit:
(a) Representations and Warranties. The representations and warranties made
------------------------------
by the Credit Parties herein or in any other Credit Documents or which are
contained in any certificate furnished at any time under or in connection
herewith shall be true and correct in all material respects on and as of the
date of such Extension of Credit as if made on and as of such date (except for
those which expressly relate to an earlier date).
(b) No Default or Event of Default. No Default or Event of Default shall
------------------------------
have occurred and be continuing on such date or after giving effect to the
Extension of Credit to be made on such date unless such Default or Event of
Default shall have been waived in accordance with this Credit Agreement.
(c) Involuntary Bankruptcy or Insolvency. There shall not have been
------------------------------------
commenced against any of the Credit Parties an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or for the
winding up or liquidation of its affairs, and shall remain undismissed,
undischarged or unbonded.
(d) No Material Adverse Effect. No circumstances, events or conditions
--------------------------
shall have occurred since the date of the audited financial statements
referenced in Section 6.1 which would have a Material Adverse Effect.
(e) Additional Conditions to Revolving Loans. If a Revolving Loan is made
----------------------------------------
pursuant to Section 2.1, all conditions set forth therein shall have been
satisfied.
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(f) Additional Conditions to Letters of Credit. If such Extension of Credit
------------------------------------------
is made pursuant to Section 2.2, all conditions set forth therein shall have
been satisfied.
(g) Additional Conditions to Swingline Loans. If a Swingline Loan is made
----------------------------------------
pursuant to Section 2.3, all conditions set forth therein shall have been
satisfied.
Each request for Extension of Credit (including extensions and conversions)
and each acceptance by the Borrower of an Extension of Credit (including
extensions and conversions) shall be deemed to constitute a representation and
warranty by the Borrower as of the date of such Extension of Credit that the
applicable conditions in paragraphs (a), (b), (c) and (d), and in (e), (f) or
(g) of this subsection have been satisfied.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce the Lenders to enter into this Credit Agreement and to make
Extensions of Credit herein provided for, each of the Credit Parties hereby
represents and warrants to the Administrative Agent and to each Lender that:
6.1 Financial Condition.
-------------------
Each of the financial statements described below (copies of which have
heretofore been provided to the Administrative Agent for distribution to the
Lenders), have been prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, are complete and correct in all material
respects and present fairly the financial condition and results from operations
of the entities and for the periods specified, subject in the case of interim
company-prepared statements to normal year-end adjustments and the absence of
footnotes:
(i) audited consolidated balance sheets of the Borrower and its
consolidated subsidiaries dated as of January 31, 1996, January 31, 1997
and January 31, 1998, together with related consolidated statements of
income and cash flows certified by Deloitte & Touche LLP, certified public
accountants; and
(ii) company-prepared consolidated balance sheets of the Borrower and
its consolidated subsidiaries dated as of April 30, 1998 and July 31, 1998,
together with related consolidated statements of income and cash flows.
6.2 No Changes or Restricted Payments.
---------------------------------
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Since the date of the audited financial statements referenced in Section
6.1(i), (a) there has been no circumstance, development or event relating to or
affecting the members of the Consolidated Group which has had or would be
reasonably expected to have a Material Adverse Effect, and (b) except as
permitted herein, no Restricted Payments have been made or declared or are
contemplated by any members of the Consolidated Group.
6.3 Organization; Existence; Compliance with Law.
--------------------------------------------
Each of the members of the Consolidated Group (a) is duly organized, validly
existing in good standing under the laws of the jurisdiction of its
incorporation or organization, (b) has the corporate or other necessary power
and authority, and the legal right to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing would not, in the aggregate, have a Material
Adverse Effect, and (d) is in compliance with all Requirements of Law, except to
the extent that the failure to comply therewith would not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations.
---------------------------------------------
Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate or other
action to authorize the execution, delivery and performance by it of the Credit
Documents to which it is a party. No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with acceptance of Extensions of Credit
or the making of the guaranties hereunder or with the execution, delivery or
performance of any Credit Documents by the Credit Parties (other than those
which have been obtained, such filings as are required by the SEC and to fulfill
other reporting requirements with Governmental Authorities) or with the validity
or enforceability of any Credit Document against the Credit Parties (except such
filings as are necessary in connection with the perfection of the Liens created
by such Credit Documents). Each Credit Document to which it is a party
constitutes a legal, valid and binding obligation of such Credit Party
enforceable against such Credit Party in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
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6.5 No Legal Bar.
------------
The execution, delivery and performance of the Credit Documents, the
borrowings hereunder and the use of the Extensions of Credit will not violate
any Requirement of Law or any Contractual Obligation of any member of the
Consolidated Group (except those as to which waivers or consents have been
obtained), and will not result in, or require, the creation or imposition of any
Lien on any of its respective properties or revenues pursuant to any Requirement
of Law or Contractual Obligation other than the Liens arising under or
contemplated in connection with the Credit Documents. No member of the
Consolidated Group is in default under or with respect to any of its Contractual
Obligations in any respect which would reasonably be expected to have a Material
Adverse Effect.
6.6 No Material Litigation.
----------------------
Except as set forth on Schedule 6.6, no claim, litigation, investigation or
------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge of the Credit Parties, threatened by or against, any
members of the Consolidated Group or against any of their respective properties
or revenues which (a) relate to the Credit Documents or any of the transactions
contemplated hereby or thereby, or (b) if adversely determined, would reasonably
be expected to have a Material Adverse Effect.
6.7 No Default.
----------
No Default or Event of Default has occurred and is continuing.
6.8 Ownership of Property; Liens.
----------------------------
Each of members of the Consolidated Group has good record and marketable title
in fee simple to, or a valid leasehold interest in, all its material real
property, and good title to, or a valid leasehold interest in, all its other
material property, and none of such property is subject to any Lien, except for
Permitted Liens.
6.9 Intellectual Property.
---------------------
Each of the members of the Consolidated Group owns, or has the legal right to
use, all United States trademarks, tradenames, copyrights, technology, know-how
and processes, if any, necessary for each of them to conduct its business as
currently conducted (the "Intellectual Property") except for those the failure
---------------------
to own or have such legal right to use would not be reasonably expected to have
a Material Adverse Effect. No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, nor does
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any Credit Party know of any such claim, and the use of such Intellectual
Property by the members of the Consolidated Group does not infringe on the
rights of any Person, except for such claims and infringements that, in the
aggregate, would not be reasonably expected to have a Material Adverse Effect.
6.10 Taxes.
-----
Each of the members of the Consolidated Group has filed or caused to be filed
all United States federal income tax returns and all other material tax returns
which, to the best knowledge of the Credit Parties, are required to be filed and
has paid (a) all taxes shown to be due and payable on said returns or (b) all
taxes shown to be due and payable on any assessments of which it has received
notice made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any (i) taxes, fees or other charges with respect to which the
failure to pay, in the aggregate, would not have a Material Adverse Effect or
(ii) taxes, fees or other charges the amount or validity of which are currently
being contested and with respect to which reserves in conformity with GAAP have
been provided on the books of such Person), and no tax Lien has been filed, and,
to the best knowledge of the Credit Parties, no claim is being asserted, with
respect to any such tax, fee or other charge.
6.11 ERISA
-----
Except as would not reasonably be expected to have a Material Adverse Effect:
(a) During the five-year period prior to the date on which this representation
is made or deemed made: (i) no ERISA Event has occurred, and, to the best
knowledge of the Credit Parties, no event or condition has occurred or exists as
a result of which any ERISA Event could reasonably be expected to occur, with
respect to any Plan; (ii) no "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Internal Revenue Code,
whether or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own terms and
in material compliance with the provisions of ERISA, the Internal Revenue Code,
and any other applicable federal or state laws; and (iv) no lien in favor of the
PBGC or a Plan has arisen or is reasonably likely to arise on account of any
Plan.
(b) The actuarial present value of all "benefit liabilities" (as defined in
Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer
Plan, as of the last annual valuation date prior to the date on which this
representation is made or deemed made (determined, in each case, in accordance
with Financial Accounting Standards Board Statement 87, utilizing the actuarial
assumptions used in such Plan's most recent actuarial valuation report), did not
exceed as of such valuation date the fair market value of the assets
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of such plan.
(c) No member of the Consolidated Group nor any ERISA Affiliate has incurred,
or, to the best knowledge of the Credit Parties, could be reasonably expected to
incur, any withdrawal liability under ERISA to any Multiemployer Plan or
Multiple Employer Plan. No member of the Consolidated Group nor any ERISA
Affiliate would become subject to any withdrawal liability under ERISA if any
member of the Consolidated Group or any ERISA Affiliate were to withdraw
completely from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this representation is
made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in reorganization
(within the meaning of Section 4241 of ERISA), is insolvent (within the meaning
of Section 4245 of ERISA), or has been terminated (within the meaning of Title
IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code) or breach of fiduciary responsibility
has occurred with respect to a Plan which has subjected or may subject any
member of the Consolidated Group or any ERISA Affiliate to any liability under
Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Internal
Revenue Code, or under any agreement or other instrument pursuant to which any
member of the Consolidated Group or any ERISA Affiliate has agreed or is
required to indemnify any person against any such liability.
(e) No member of the Consolidated Group nor any ERISA Affiliates has any
material liability with respect to "expected post-retirement benefit
obligations" within the meaning of the Financial Accounting Standards Board
Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Internal
Revenue Code apply has been administered in compliance in all material respects
of such sections.
6.12 Governmental Regulations, Etc.
-----------------------------
(a) No part of the proceeds of the Extensions of Credit hereunder will be
used, directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" within the meaning of Regulation U, or for the purpose of
purchasing or carrying or trading in any securities. If requested by any Lender
or the Administrative Agent, the Borrower will furnish to the Administrative
Agent and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U. No indebtedness
being reduced or retired out of the proceeds of the Extensions of Credit
hereunder was or will be incurred for the purpose of purchasing or carrying any
margin stock within the meaning of
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Regulation U or any "margin security" within the meaning of Regulation T.
"Margin stock" within the meanings of Regulation U does not constitute more than
25% of the value of the consolidated assets of the Borrower and its
Subsidiaries. None of the transactions contemplated by this Credit Agreement
(including, without limitation, the direct or indirect use of the proceeds of
the Loans) will violate or result in a violation of the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, or regulations
issued pursuant thereto, or Regulation T, U or X.
(b) None of the members of the Consolidated Group is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940, each as amended. In addition, none of the
members of the Consolidated Group is (i) an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as amended,
and is not controlled by such a company, or (ii) a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
(c) Each of the members of the Consolidated Group has obtained all material
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its respective Property and to the conduct of its business.
(d) None of the members of the Consolidated Group is in violation of any
applicable statute, regulation or ordinance of the United States of America, or
of any state, city, town, municipality, county or any other jurisdiction, or of
any agency thereof (including without limitation, environmental laws and
regulations), which violation could reasonably be expected to have a Material
Adverse Effect.
(e) Each of the members of the Consolidated Group is current with all material
reports and documents, if any, required to be filed with any state or federal
securities commission or similar agency and is in full compliance in all
material respects with all applicable rules and regulations of such commissions.
6.13 Subsidiaries.
------------
Set forth on Schedule 6.13 are all the Subsidiaries of the Borrower at the
-------------
Closing Date, the jurisdiction of their incorporation and the direct or indirect
ownership interest of the Borrower therein.
6.14 Purpose of Extensions of Credit.
-------------------------------
The Extensions of Credit will be used to refinance existing Indebtedness and
to finance
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working capital, capital expenditures and other lawful corporate purposes.
6.15 Environmental Matters.
---------------------
Except as would not reasonably be expected to have a Material Adverse Effect:
(a) Each of the facilities and properties owned, leased or operated by the
members of the Consolidated Group (the "Subject Properties") and all
------------------
operations at the Subject Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any Environmental Law with
respect to the Subject Properties or the businesses operated by the members of
the Consolidated Group (the "Businesses"), and, to the best knowledge of
----------
any Credit Party, there are no conditions relating to the Businesses or Subject
Properties that could give rise to liability under any applicable Environmental
Laws.
(b) To the best knowledge of any Credit Party, none of the Subject Properties
contains, or has previously contained, any Materials of Environmental Concern
at, on or under the Subject Properties in amounts or concentrations that
constitute or constituted a violation of, or could give rise to liability under,
Environmental Laws.
(c) None of the members of the Consolidated Group has received any written or
verbal notice of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or potential liability
regarding environmental matters or compliance with Environmental Laws with
regard to any of the Subject Properties or the Businesses, nor does any member
of the Consolidated Group have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or disposed
of from the Subject Properties, or generated, treated, stored or disposed of at,
on or under any of the Subject Properties or any other location, in each case by
or on behalf any members of the Consolidated Group in violation of, or in a
manner that would be reasonably likely to give rise to liability under, any
applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is pending
or, to the best knowledge of any Credit Party, threatened, under any
Environmental Law to which any member of the Consolidated Group is or will be
named as a party, nor are there any consent decrees or other decrees, consent
orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to
any member of the Consolidated Group, the Subject Properties or the Businesses.
(f) There has been no release or, threat of release of Materials of
Environmental Concern at or from the Subject Properties, or arising from or
related to the operations
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(including, without limitation, disposal) of any member of the Consolidated
Group in connection with the Subject Properties or otherwise in connection with
the Businesses, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws.
6.16 Year 2000 Compliance.
--------------------
The Borrower has (i) initiated a review and assessment of all areas within its
and each of its Subsidiaries' business and operations (including those affected
by suppliers, vendors and customers) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by the
-----------------
Borrower or any of its Subsidiaries (or suppliers, vendors and customers) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) developed a
plan and timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable. Based
on the foregoing, the Borrower believes that all computer applications
(including those of its suppliers, vendors and customers) that are material to
its or any of its Subsidiaries' business and operations are reasonably expected
on a timely basis to be able to perform properly date-sensitive functions for
all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"),
-------------------
except to the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect.
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each of the Credit Parties covenants and agrees that on the Closing Date, and
so long as this Credit Agreement is in effect and until the Commitments have
been terminated, no Obligations remain outstanding and all amounts owing
hereunder or in connection herewith have been paid in full, each of the members
of the Consolidated Group party hereto shall:
7.1 Financial Statements.
--------------------
Furnish, or cause to be furnished, to the Administrative Agent and the
Lenders:
(a) Audited Financial Statements. As soon as available, but in any event
----------------------------
within 90 days after the end of each fiscal year, an audited consolidated
balance sheet of the Borrower and its subsidiaries as of the end of the
fiscal year and the related consolidated statements of income, retained
earnings, shareholders' equity and cash flows for the year, audited by
independent certified public accountants of nationally recognized standing,
setting forth in each case in comparative form the figures for the
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<PAGE>
previous year, reported without a "going concern" or like qualification or
exception, or qualification indicating that the scope of the audit was
inadequate to permit such independent certified public accountants to certify
such financial statements without such qualification.
(b) Company-Prepared Financial Statements. As soon as available, but in any
-------------------------------------
event within 45 days after the end of each of the first three fiscal
quarters, a company-prepared consolidated balance sheet of the Borrower and
its subsidiaries as of the end of the quarter and related company-prepared
consolidated statements of income, retained earnings, shareholders' equity and
cash flows for such quarterly period and for the fiscal year to date;
in each case setting forth in comparative form the consolidated figures for the
corresponding period or periods of the preceding fiscal year or the portion of
the fiscal year ending with such period, as applicable, in each case subject to
normal recurring year-end audit adjustments.
All such financial statements shall be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring year-
end audit adjustments and the absence of footnotes) and shall be prepared in
reasonable detail and, in the case of the annual and quarterly financial
statements provided in accordance with subsections (a) and (b) above, in
accordance with GAAP applied consistently throughout the periods reflected
therein and further accompanied by a description of, and an estimation of the
effect on the financial statements on account of, a change in the application of
accounting principles as provided in Section 1.3.
7.2 Certificates; Other Information.
-------------------------------
Furnish, or cause to be furnished, to the Administrative Agent and the
Lenders:
(a) Accountant's Certificate and Reports. Concurrently with the delivery of
------------------------------------
the financial statements referred to in subsection 7.1(a) above, a certificate
of the independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default, except as specified
in such certificate.
(b) Officer's Compliance Certificate. Concurrently with the delivery of the
--------------------------------
financial statements referred to in Sections 7.1(a) and 7.1(b) above, a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge and belief, (i) the financial statements fairly
present in all material respects the financial condition of the parties covered
by such financial statements, (ii) during such
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period the members of the Consolidated Group have observed or performed in all
material respects the covenants and other agreements hereunder and under the
other Credit Documents relating to them, and satisfied in all material respects
the conditions, contained in this Credit Agreement to be observed, performed or
satisfied by them, and (iii) such Responsible Officer has obtained no knowledge
of any Default or Event of Default except as specified in such certificate. Such
certificate shall include the calculations required to indicate compliance with
Section 7.9. A form of Officer's Certificate is attached as Schedule 7.2(b).
---------------
(c) Accountants' Reports. Promptly upon receipt, a copy of any final (as
--------------------
distinguished from a preliminary or discussion draft) "management letter" or
other similar report submitted by independent accountants or financial
consultants to the members of the Consolidated Group in connection with any
annual, interim or special audit.
(d) Public Information. Within thirty days after the same are sent, copies of
------------------
all reports (other than those otherwise provided pursuant to subsection 7.1) and
other financial information which any member of the Consolidated Group sends to
its public stockholders, and within thirty days after the same are filed, copies
of all financial statements and non-confidential reports which any member of the
Consolidated Group may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority.
(e) Other Information. Promptly, such additional financial and other
-----------------
information as the Administrative Agent, at the request of any Lender, may
from time to time reasonably request.
7.3 Notices.
-------
Give notice to the Administrative Agent (which shall promptly transmit such
notice to each Lender) of:
(a) Defaults. Immediately (and in any event within two (2) Business Days)
--------
after any Credit Party knows or has reason to know thereof, the occurrence
of any Default or Event of Default.
(b) Contractual Obligations. Promptly, the occurrence of any default or
-----------------------
event of default under any Contractual Obligation of any member of the
Consolidated Group which would reasonably be expected to have a Material Adverse
Effect.
(c) Legal Proceedings. Promptly, any litigation, or any investigation or
-----------------
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<PAGE>
proceeding (including without limitation, any environmental proceeding) known to
any member of the Consolidated Group, or any material development in respect
thereof, affecting any member of the Consolidated Group which, if adversely
determined, would reasonably be expected to have a Material Adverse Effect.
(d) ERISA. Promptly, after any Responsible Officer of the Borrower knows or
-----
has reason to know of (i) any event or condition, including, but not limited to,
any Reportable Event, that constitutes, or might reasonably lead to, an ERISA
Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed against
any of their ERISA Affiliates, or of a determination that any Multiemployer Plan
is in reorganization or insolvent (both within the meaning of Title IV of
ERISA); (iii) the failure to make full payment on or before the due date
(including extensions) thereof of all amounts which the members of the
Consolidated Group or any ERISA Affiliate are required to contribute to each
Plan pursuant to its terms and as required to meet the minimum funding standard
set forth in ERISA and the Internal Revenue Code with respect; or (iv) any
change in the funding status of any Plan that reasonably could be expected to
have a Material Adverse Effect; together with a description of any such event or
condition or a copy of any such notice and a statement by the chief financial
officer of the Borrower briefly setting forth the details regarding such event,
condition, or notice, and the action, if any, which has been or is being taken
or is proposed to be taken by the Credit Parties with respect thereto. Promptly
upon request, the members of the Consolidated Group shall furnish the
Administrative Agent and the Lenders with such additional information concerning
any Plan as may be reasonably requested, including, but not limited to, copies
of each annual report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA and the Internal Revenue Code,
respectively, for each "plan year" (within the meaning of Section 3(39) of
ERISA).
(e) Other. Promptly, any other development or event which a Responsible
-----
Officer of the Borrower determines could reasonably be expected to have a
Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the relevant Credit Parties propose
to take with respect thereto.
7.4 Payment of Obligations.
----------------------
Pay, discharge or otherwise satisfy at or before maturity or before they
become
75
<PAGE>
delinquent, as the case may be, in accordance with prudent business practice
(subject, where applicable, to specified grace periods) all material obligations
of each member of the Consolidated Group of whatever nature and any additional
costs that are imposed as a result of any failure to so pay, discharge or
otherwise satisfy such obligations, except when the amount or validity of such
obligations and costs is currently being contested in good faith by appropriate
proceedings and reserves, if applicable, in conformity with GAAP with respect
thereto have been provided on the books of the Consolidated Group, as the case
may be.
7.5 Conduct of Business and Maintenance of Existence.
------------------------------------------------
Continue to engage in business of the same general type as now conducted by it
on the date hereof and similar or related businesses with, and preserve, renew
and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges, licenses and franchises
necessary or desirable in the normal conduct of its business; comply with all
Contractual Obligations and Requirements of Law applicable to it except to the
extent that failure to comply therewith would not, in the aggregate, have a
Material Adverse Effect.
7.6 Maintenance of Property; Insurance.
----------------------------------
Keep all material property useful and necessary in its business in reasonably
good working order and condition (ordinary wear and tear excepted); maintain
with financially sound and reputable insurance companies casualty, liability and
such other insurance (which may include plans of self-insurance) with such
coverage and deductibles, and in such amounts as may be consistent with prudent
business practice and in any event consistent with normal industry practice
(except to any greater extent as may be required by the terms of any of the
other Credit Documents); and furnish to the Administrative Agent, upon written
request, full information as to the insurance carried.
7.7 Inspection of Property; Books and Records; Discussions.
------------------------------------------------------
Keep proper books of records and account in which full, true and correct
entries in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its businesses and activities; and
permit, during regular business hours and upon reasonable notice by the
Administrative Agent, the Administrative Agent to visit and inspect any of its
properties and examine and make abstracts (including photocopies) from any of
its books and records (other than materials protected by the attorney-client
privilege and materials which the Credit Parties may not disclose without
violation of a confidentiality obligation binding upon them) at any reasonable
time, and to discuss the business, operations, properties and financial and
other condition of the members of the Consolidated Group with officers and
employees of the members of the Consolidated Group
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and with their independent certified public accountants. The cost of the
inspection referred to in the preceding sentence shall be for the account of the
Lenders unless an Event of Default has occurred and is continuing, in which case
the cost of such inspection shall be for the account of the Credit Parties.
7.8 Environmental Laws.
------------------
(a) Comply in all material respects with, and take reasonable actions to
ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws and obtain and comply in all
material respects with and maintain, and take reasonable actions to ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so would not reasonably be expected to have a Material Adverse
Effect;
(b) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental Laws
and promptly comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws except
to the extent that the same are being contested in good faith by appropriate
proceedings and the failure to do or the pendency of such proceedings would not
reasonably be expected to have a Material Adverse Effect; and
(c) Defend, indemnify and hold harmless the Administrative Agent and the
Lenders, and their respective employees, agents, officers and directors, from
and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any Environmental Law
applicable to the operations of the members of the Consolidated Group or the
Subject Properties, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, reasonable
attorney's and consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the party
seeking indemnification therefor. The agreements in this paragraph shall survive
repayment of the Loans and all other amounts payable hereunder, and termination
of the Commitments.
7.9 Financial Covenants.
-------------------
Comply with the following financial covenants:
(a) Consolidated Leverage Ratio. As of the end of each fiscal quarter, the
---------------------------
Consolidated Leverage Ratio shall not be greater than 3.0:1.0.
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(b) Consolidated Fixed Charge Coverage Ratio. As of the end of each fiscal
----------------------------------------
quarter, the Consolidated Fixed Charge Coverage Ratio shall not be less
than 1.75:1.0.
(c) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth shall at
-------------------------------
no time be less than the sum of $230,000,000 plus on the last day of each
----
fiscal quarter to occur after the Closing Date, 50% of Consolidated Net
Income for the fiscal quarter then ended, such increases to be cumulative,
plus 100% of the net proceeds from Equity Transactions occurring after the
- ----
Closing Date.
(d) Consolidated Funded Debt to Capitalization Ratio. Consolidated Funded Debt
------------------------------------------------
to Capitalization Ratio shall at no time be greater than 0.50:1.0.
(e) Capital Expenditures. The aggregate amount of Capital Expenditures for the
--------------------
Consolidated Group will not exceed in any fiscal year an amount equal to the
amount shown below:
(i) In the event the Borrower shall have completed by October 31, 1999,
an issuance of convertible Subordinated Debt of at least $100 million in
principal amount or an issuance of equity of at least $50 million in gross
proceeds:
Fiscal Year Ending
------------------
January 31, 2000 $65,000,000
January 31, 2001 and $72,000,000
each fiscal year thereafter
(ii) Otherwise, for the fiscal year ending January 31, 2000 and each
fiscal year thereafter, $25,000,000 or such greater amount as may be agreed
in writing by the Required Lenders.
7.10 Administrative Fees.
-------------------
Pay to the Administrative Agent the Administrative Agent's Fees and comply
with the other agreements provided for in the Administrative Agent's Fee Letter.
7.11 Additional Guaranties and Stock Pledges.
---------------------------------------
(a) Domestic Subsidiaries. Where Domestic Subsidiaries of the Borrower which
---------------------
are not Credit Parties hereunder (the "Non-Guarantor Subsidiaries") shall
--------------------------
at any time constitute more than (the "Threshold Requirement"):
---------------------
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(i) in any instance for any such Non-Guarantor Subsidiary, five percent
(5%) of consolidated assets for the Consolidated Group or five percent (5%)
of consolidated revenues for the Consolidated Group, or
(ii) in the aggregate for all such Non-Guarantor Subsidiaries, ten
percent (10%) of consolidated assets for the Consolidated Group or ten
percent (10%) of consolidated revenues for the Consolidated Group,
then the Borrower shall promptly (but in any event within thirty (30) days) (i)
notify the Administrative Agent thereof, (ii) cause such Domestic Subsidiary or
Subsidiaries to become a Guarantor by execution of a Joinder Agreement, such
that immediately after joinder as a Guarantor, the remaining Non-Guarantor
Subsidiaries shall not in any instance, or collectively, exceed the Threshold
Requirement, (iii) deliver with the Joinder Agreement, supporting resolutions,
incumbency certificates, corporate formation and organizational documentation
and opinions of counsel as the Administrative Agent may reasonably request, and
(iv) deliver stock certificates and related pledge agreements or pledge joinder
agreements evidencing the pledge of 100% of the Voting Stock of all Domestic
Subsidiaries (whether or not they are Guarantors), together in each case with
undated stock transfer powers executed in blank.
(b) Foreign Subsidiaries. At any time any Person becomes a Foreign Subsidiary,
--------------------
the Company will promptly (but in any event within thirty (30) days) (i) notify
the Administrative Agent thereof, (ii) cause delivery of supporting resolutions,
incumbency certificates, corporation formation and organizational documentation
and opinions of counsel as the Administrative Agent may reasonably request, and
(iii) cause delivery of stock certificates (where required for perfection under
local law) and a related pledge agreement or pledge joinder agreement evidencing
the pledge of 66% of the Voting Stock and 100% of the non-Voting Stock of such
Foreign Subsidiary, together in each case with undated stock transfer powers
executed in blank.
7.12 Ownership of Subsidiaries.
-------------------------
Except to the extent otherwise permitted in Section 8.6, the Borrower shall,
directly or indirectly, own at all times 100% of the Voting Stock of each of its
Subsidiaries.
7.13 Use of Proceeds.
---------------
Extensions of Credit will be used solely for the purposes provided in Section
6.14.
7.14 Year 2000 Compatibility.
-----------------------
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Take all action necessary to assure that its computer based systems are
able to operate and effectively process data including dates on and after
January 1, 2000, and, at the reasonable request of the Administrative Agent or
the Required Lenders, provide evidence to the Lenders of such year 2000
compatibility.
SECTION 8
NEGATIVE COVENANTS
Each of the Credit Parties covenants and agrees that on the Closing Date,
and so long as this Credit Agreement is in effect and until the Commitments have
been terminated, no Obligations remain outstanding and all amounts owing
hereunder or in connection herewith, have been paid in full, no member of the
Consolidated Group shall:
8.1 Indebtedness.
------------
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit Agreement and
the other Credit Documents;
(b) Indebtedness set forth in Schedule 8.1, and renewals, refinancings
------------
and extensions thereof on terms and conditions no less favorable than for
such existing Indebtedness;
(c) purchase money Indebtedness (including Capital Lease Obligations
and term debt obligations) extended by General Electric Capital Corporation
or any of its Affiliates in an aggregate outstanding principal amount not
to exceed $30,000,000 at any time;
(d) purchase money Indebtedness (including Capital Lease Obligations
and mortgage obligations) incurred to provide all or a portion of the
purchase price or costs of construction of an asset or, in the case of a
sale/leaseback transaction as described in Section 8.10, to finance the
value of an asset owned by a member of the Consolidated Group, provided
--------
that (i) such Indebtedness when incurred shall not exceed the purchase
price or cost of construction of such asset or, in the case of a
sale/leaseback transaction, the fair market value of such asset, (ii) no
such Indebtedness shall be refinanced for a principal amount in excess of
the principal balance outstanding thereon at the time of such refinancing,
and (iii) the total amount of all such Indebtedness shall not exceed
$20,000,000 at any time outstanding;
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(e) Indebtedness and obligations owing under interest rate protection
agreements relating to the Obligations hereunder and under interest rate,
commodities and foreign currency exchange protection agreements entered
into in the ordinary course of business to manage existing or anticipated
risks and not for speculative purposes;
(f) unsecured intercompany Indebtedness owing by a member of the
Consolidated Group to another member of the Consolidated Group (subject,
however, to the limitations of Section 8.4 in the case of the member of the
Consolidated Group extending the intercompany loan, advance or credit);
(g) other senior unsecured Indebtedness of the Borrower of up to
$5,000,000 in the aggregate at any time outstanding;
(h) Support Obligations of Indebtedness permitted under this Section
8.1; and
(i) Subordinated Debt of the Borrower, provided that, on a Pro Forma
Basis, the incurrence of such Subordinated Debt shall not result in a
Default or Event of Default.
8.2 Liens.
-----
Contract, create, incur, assume or permit to exist any Lien with respect to
any of their respective property or assets of any kind (whether real or
personal, tangible or intangible), whether now owned or hereafter acquired,
except for Permitted Liens.
8.3 Consolidation, Merger, Sale or Purchase of Assets, etc.
------------------------------------------------------
(a) Enter into a transaction of merger or consolidation, unless (A) if
------
the Borrower is a party thereto, the Borrower shall be the surviving
corporation, (B) in any other case, the surviving corporation shall be a
Guarantor or the surviving corporation shall be Domestic Subsidiary and such
Domestic Subsidiary shall become a Guarantor hereunder as an Additional Credit
Party pursuant to Section 7.11 concurrently therewith, (C) no Default or Event
of Default shall exist either immediately prior to or immediately after giving
effect thereto and (D) in the case of a transaction of merger or consolidation
with any Person which is not a Consolidated Party, the provisions of subsection
(c) of this Section 8.3 shall be complied with
(b) Sell, lease, transfer or otherwise dispose of assets, property
and/or operations (including any sale-leaseback transaction, but excluding the
sale of inventory in the
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ordinary course of business), other than to another Credit Party, which
(i) in any instance (including any series of related
transactions) shall constitute more than five percent (5%) of Consolidated
Assets at the end of the immediately preceding fiscal year or five percent
(5%) of Consolidated EBITDA for the immediately preceding fiscal year, or
(ii) in the aggregate in any fiscal year shall constitute more
than ten percent (10%) of Consolidated Assets at the end of the immediately
preceding fiscal year or ten percent (10%) Consolidated EBITDA for the
immediately preceding fiscal year, and
(iii) no Default or Event of Default would exist after giving
effect thereto on a Pro Forma Basis.
(c) Acquire all or any portion of the capital stock or other ownership
interest in any Person which is not a Subsidiary or all or any substantial
portion of the assets, property and/or operations of a Person which is not a
Subsidiary, unless
------
(i) in the case of an acquisition of capital stock or other
ownership interest and after giving effect thereto such Person will not be
a Subsidiary, then such acquisition will not cause a violation of Section
8.4;
(ii) in the case of an acquisition of capital stock or other
ownership interest and after giving effect thereto such Person will be a
Subsidiary, or in the case of an acquisition of assets, property and/or
operations, then
(A) the total cash consideration paid in connection with any
such acquisition (or series of related transactions) shall not exceed
in any instance $25 million (including Indebtedness assumed and the
fair value of assets transferred by the Borrower in connection
therewith);
(B) the total cash consideration paid in connection with all
such acquisitions shall not exceed in any fiscal year $50 million
(including Indebtedness assumed and the fair value of assets
transferred by the Borrower in connection therewith) plus, for fiscal
----
years occurring after the current fiscal year, the unused portions
from the immediately preceding fiscal year (without giving effect to
any carry-over amounts from prior years);
(C) the Board of Directors of the Person which is the
subject of the acquisition shall have approved the acquisition; and
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(D) no Default or Event of Default would exist after giving
effect thereto on a Pro Forma Basis.
(d) In the case of the Borrower and any Subsidiary which is not
wholly-owned, liquidate, wind-up or dissolve, whether voluntarily or
involuntarily (or suffer to permit any such liquidation or dissolution).
(e) Alter the character of their business in any material respect from
that conducted as of the Closing Date and similar or related businesses.
8.4 Advances, Investments and Loans.
-------------------------------
Lend money or extend credit or make advances to any Person, or purchase or
acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, or otherwise make an Investment in, any Person
except for Permitted Investments.
8.5 Transactions with Affiliates.
----------------------------
Enter into or permit to exist any transaction or series of transactions,
whether or not in the ordinary course of business, with any officer, director,
shareholder or Affiliate other than (i) transactions permitted by Section 8.1,
Section 8.3(b), Section 8.4 or Section 8.9, (ii) customary fees and expenses
paid to directors, (iii) transactions pursuant to agreements existing as of the
Closing Date and set forth on Schedule 8.5 hereto and (iv) where such
------------
transactions are on terms and conditions substantially as favorable as would be
obtainable in a comparable arm's-length transaction with a Person other than an
officer, director, shareholder or Affiliate.
8.6 Ownership of Equity Interests.
-----------------------------
Issue, sell, transfer, pledge or otherwise dispose of any partnership
interests, shares of capital stock or other equity or ownership interests
("Equity Interests") in any member of the Consolidated Group other than the
----------------
Borrower, except (i) issuance, sale or transfer of Equity Interests to a Credit
Party by a Subsidiary of such Credit Party, (ii) in connection with a
transaction permitted by Section 8.3, and (iii) as needed to qualify directors
under applicable law.
8.7 Fiscal Year.
-----------
Change its fiscal year from a January 31 fiscal year end.
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8.8 Prepayments of Indebtedness, etc.
---------------------------------
(a) After the issuance thereof, amend or modify (or permit the amendment or
modification of), the terms of any other Indebtedness in a manner adverse to the
interests of the Lenders (including specifically shortening any maturity or
average life to maturity or requiring any payment sooner than previously
scheduled or increasing the interest rate or fees applicable thereto);
(b) Make any prepayment, redemption, defeasance or acquisition for value of
(including without limitation, by way of depositing money or securities with the
trustee with respect thereto before due for the purpose of paying when due), or
refund, refinance or exchange, any Funded Debt (other than intercompany
Indebtedness permitted hereunder), other than (i) regularly scheduled payments
of principal and interest on such Funded Debt and (ii) so long as no Default or
Event of Default would exist after giving effect thereto on a Pro Forma Basis,
prepayments, redemptions, defeasances and acquisitions for value which shall not
exceed $5 million in the aggregate during the term of this Credit Agreement.
8.9 Restricted Payments.
-------------------
Make or permit any Restricted Payments, unless and to the extent that no
Default or Event of Default shall exist immediately prior or after giving effect
thereto on a Pro Forma Basis.
8.10 Sale Leasebacks.
---------------
Except as permitted pursuant to Sections 8.1(c) and 8.1(d) hereof, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property (whether real or personal or mixed), whether now owned or hereafter
acquired, (i) which such Person has sold or transferred or is to sell or
transfer to any other Person other than a Credit Party or (ii) which such Person
intends to use for substantially the same purpose as any other Property which
has been sold or is to be sold or transferred by such Person to any other Person
in connection with such lease.
8.11 Limitations on Restricted Actions.
---------------------------------
Directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any such
Person to (a) pay dividends or make any other distributions to any Credit Party
on its capital stock or with respect to any other interest or participation in,
or measured by, its profits, (b) pay any Indebtedness or other
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obligation owed to any Credit Party, (c) make loans or advances to any Credit
Party, (d) sell, lease or transfer any of its properties or assets to any Credit
Party, (e) grant a lien on its properties or assets whether now owned or
hereafter acquired or (f) act as a Guarantor and pledge its assets pursuant to
the Credit Documents or any renewals, refinancings, exchanges, refundings or
extension thereof, except (in respect of any of the matters referred to in
clauses (a)-(d) above) for such encumbrances or restrictions existing under or
by reason of (i) this Credit Agreement and the other Credit Documents or (ii)
applicable law.
8.12 No Further Negative Pledges.
---------------------------
Except with respect to prohibitions against other encumbrances on specific
Property encumbered to secure payment of particular Indebtedness (which
Indebtedness relates solely to such specific Property, and improvements and
accretions thereto, and is otherwise permitted hereby), no member of the
Consolidated Group will enter into, assume or become subject to any agreement
prohibiting or otherwise restricting the creation or assumption of any Lien upon
its properties or assets, whether now owned or hereafter acquired, or requiring
the grant of any security for such obligation if security is given for some
other obligation.
SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 Events of Default.
-----------------
An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default"):
----------------
(a) Payment. Any Credit Party shall
-------
(i) default in the payment when due of any principal of any of the
Loans or of any reimbursement obligations arising from drawings under
Letters of Credit, or
(ii) default, and such defaults shall continue for three (3) or more
Business Days, in the payment when due of any interest on the Loans or any
interest on any reimbursement obligations arising from drawings under
Letters of Credit, or of any Fees or other amounts owing hereunder, under
any of the other Credit Documents or in connection herewith or therewith; or
(b) Representations. Any representation, warranty or statement made or
---------------
deemed to be made herein, in any of the other Credit Documents, or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove
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untrue in any material respect on the date as of which it was made or deemed to
have been made; or
(c) Covenants.
---------
(i) Default in the due performance or observance of any term,
covenant or agreement contained in Section 7.3(a), 7.9, 7.11, 7.13, 8.1,
8.2, 8.3 or 8.6 through 8.12, inclusive, or
(ii) Default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in subsections
(a), (b) or (c)(i) of this Section 9.1) contained in this Credit Agreement
and such default shall continue unremedied for a period of at least 30 days
after the earlier of a responsible officer of a Credit Party becoming aware
of such default or notice thereof by the Administrative Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default in the due
----------------------
performance or observance of any material term, covenant or agreement in any of
the other Credit Documents (subject to applicable grace or cure periods, if
any), or (ii) except as to the Credit Party which is dissolved, released or
merged or consolidated out of existence as the result of or in connection with a
dissolution, merger or disposition permitted by Section 8.3(a), Section 8.3(b)
or Section 8.3(c), any Credit Document shall fail to be in full force and effect
or to give the Administrative Agent and/or the Lenders any material part of the
Liens, rights, powers and privileges purported to be created thereby; or
(e) Guaranties. Except as to the Credit Party which is dissolved, released
----------
or merged or consolidated out of existence as the result of or in connection
with a dissolution, merger or disposition permitted by Section 8.3(a), Section
8.3(b) or Section 8.3(c), the guaranty given by any Guarantor hereunder or any
material provision thereof shall cease to be in full force and effect, or any
Guarantor hereunder or any Person acting by or on behalf of such Guarantor shall
deny or disaffirm such Guarantor's obligations under such guaranty, or any
Guarantor shall default in the due performance or observance of any term,
covenant or agreement on its part to be performed or observed pursuant to any
guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to any
---------------
member of the Consolidated Group; or
(g) Defaults under Other Agreements.
-------------------------------
(i) Any member of the Consolidated Group shall default in the
performance or observance (beyond the applicable grace period with respect
thereto, if any) of any
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material obligation or condition of any contract or lease material to the
Consolidated Group, taken as a whole; or
(ii) With respect to any Indebtedness (other than Indebtedness
outstanding under this Credit Agreement) in excess of $2,500,000 in the
aggregate for the Consolidated Group taken as a whole, (A) (1) any member of
the Consolidated Group shall default in any payment (beyond the applicable
grace period with respect thereto, if any) with respect to any such
Indebtedness, or (2) the occurrence and continuance of a default in the
observance or performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event or condition shall occur or condition exist, the effect of which
default or other event or condition is to cause, or permit, the holder or
holders of such Indebtedness (or trustee or agent on behalf of such holders)
to cause (determined without regard to whether any notice or lapse of time
is required), any such Indebtedness to become due prior to its stated
maturity; or (B) any such Indebtedness shall be declared due and payable, or
required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
(h) Judgments. Any member of the Consolidated Group shall fail within 30
---------
days of the date due and payable to pay, bond or otherwise discharge any
judgment, settlement or order for the payment of money which judgment,
settlement or order, when aggregated with all other such judgments, settlements
or orders due and unpaid at such time, exceeds $2,500,000, and which is not
stayed on appeal (or for which no motion for stay is pending) or is not
otherwise being executed; or
(i) ERISA. Any of the following events or conditions, if such event or
-----
condition could reasonably be expected to have a Material Adverse Effect: (1)
any "accumulated funding deficiency," as such term is defined in Section 302 of
ERISA and Section 412 of the Internal Revenue Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets of a
member of the Consolidated Group or any ERISA Affiliate in favor of the PBGC or
a Plan; (2) an ERISA Event shall occur with respect to a Single Employer Plan,
which is, in the reasonable opinion of the Administrative Agent, likely to
result in the termination of such Plan for purposes of Title IV of ERISA; (3) an
ERISA Event shall occur with respect to a Multiemployer Plan or Multiple
Employer Plan, which is, in the reasonable opinion of the Administrative Agent,
likely to result in (i) the termination of such Plan for purposes of Title IV of
ERISA, or (ii) a member of the Consolidated Group or any ERISA Affiliate
incurring any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency of (within the
meaning of Section 4245 of ERISA) such Plan; or (4) any prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Internal
Revenue Code) or breach of fiduciary responsibility shall occur which may
subject a member of the Consolidated Group or any ERISA Affiliate to
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any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section
4975 of the Internal Revenue Code, or under any agreement or other instrument
pursuant to which a member of the Consolidated Group or any ERISA Affiliate has
agreed or is required to indemnify any person against any such liability; or
(j) Ownership. There shall occur a Change of Control.
---------
9.2 Acceleration; Remedies.
----------------------
Upon the occurrence of an Event of Default, and at any time thereafter, the
Administrative Agent shall, upon the request and direction of the Required
Lenders, by written notice to the Credit Parties take any of the following
actions:
(i) Termination of Commitments. Declare the Commitments
--------------------------
terminated whereupon the Commitments shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of and any
------------
accrued interest in respect of all Loans, any reimbursement obligations
arising from drawings under Letters of Credit and any and all other
indebtedness or obligations of any and every kind owing by the Credit
Parties to the Administrative Agent and/or any of the Lenders hereunder to
be due whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each of the Credit Parties.
(iii) Cash Collateral. Direct the Borrower to pay (and the
---------------
Borrower agrees that upon receipt of such notice, or upon the occurrence of
an Event of Default under Section 9.1(f), it will immediately pay) to the
Administrative Agent additional cash, to be held by the Administrative
Agent, for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount equal to
the maximum aggregate amount which may be drawn under all Letters of Credits
then outstanding.
(iv) Enforcement of Rights. Enforce any and all rights and
---------------------
interests created and existing under the Credit Documents and all rights of
set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations arising from drawings under Letters of
Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and
other indebtedness or obligations owing to the Administrative Agent and/or any
of the Lenders hereunder automatically shall immediately
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become due and payable without presentment, demand, protest or the giving of any
notice or other action by the Administrative Agent or the Lenders, all of which
are hereby waived by the Credit Parties.
SECTION 10
AGENCY PROVISIONS
-----------------
10.1 Appointment.
-----------
Each Lender hereby designates and appoints NationsBank, N.A. as
administrative agent (in such capacity, the "Administrative Agent") of such
--------------------
Lender to act as specified herein and the other Credit Documents, and each such
Lender hereby authorizes the Administrative Agent as the Administrative Agent
for such Lender, to take such action on its behalf under the provisions of this
Credit Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated by the terms hereof and of the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. Each Lenders further directs and authorizes the
Administrative Agent to execute releases (or similar agreements) to give effect
to the provisions of this Credit Agreement and the other Credit Documents,
including specifically, without limitation, the provisions of Section 8.3
hereof. Notwithstanding any provision to the contrary elsewhere herein and in
the other Credit Documents, the Administrative Agent shall not have any duties
or responsibilities, except those expressly set forth herein and therein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Administrative Agent. The provisions of this Section are solely for
the benefit of the Administrative Agent and the Lenders and none of the Credit
Parties shall have any rights as a third party beneficiary of the provisions
hereof. In performing its functions and duties under this Credit Agreement and
the other Credit Documents, the Administrative Agent shall act solely as
Administrative Agent of the Lenders and does not assume and shall not be deemed
to have assumed any obligation or relationship of agency or trust with or for
any Credit Party or any of their respective Affiliates.
10.2 Delegation of Duties.
--------------------
The Administrative Agent may execute any of its duties hereunder or under
the other Credit Documents by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care.
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10.3 Exculpatory Provisions.
----------------------
The Administrative Agent and its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall not be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any of the Credit Parties contained herein
or in any of the other Credit Documents or in any certificate, report, document,
financial statement or other written or oral statement referred to or provided
for in, or received by the Administrative Agent under or in connection herewith
or in connection with the other Credit Documents, or enforceability or
sufficiency therefor of any of the other Credit Documents, or for any failure of
any Credit Party to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Credit Agreement, or any of the other Credit Documents or
for any representations, warranties, recitals or statements made herein or
therein or made by the Borrower or any Credit Party in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Lenders or by or on behalf
of the Credit Parties to the Administrative Agent or any Lender or be required
to ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or the use of the Letters of Credit
or of the existence or possible existence of any Default or Event of Default or
to inspect the properties, books or records of the Credit Parties or any of
their respective Affiliates.
10.4 Reliance on Communications.
--------------------------
The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Administrative Agent with reasonable care). The
Administrative Agent may deem and treat the Lenders as the owners of their
respective interests hereunder for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent in accordance with Section 11.3(b) hereof. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Credit Agreement or under any of the other Credit Documents
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unless it shall first receive such advice or concurrence of the Required Lenders
as it deems appropriate or it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or under any of the other Credit Documents in
accordance with a request of the Required Lenders (or to the extent specifically
provided in Section 11.6, all the Lenders) and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders
(including their successors and assigns).
10.5 Notice of Default.
-----------------
The Administrative Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or a Credit Party
referring to the Credit Document, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders.
10.6 Non-Reliance on Administrative Agent and Other Lenders.
------------------------------------------------------
Each Lender expressly acknowledges that each of the Administrative Agent
and its officers, directors, employees, Administrative Agents, attorneys-in-fact
or affiliates has not made any representations or warranties to it and that no
act by the Administrative Agent or any affiliate thereof hereinafter taken,
including any review of the affairs of any Credit Party or any of their
respective Affiliates, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower, the other
Credit Parties or their respective Affiliates and made its own decision to make
its Loans hereunder and enter into this Credit Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement, and to make such investigation as it deems necessary to
inform itself as to the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower, the other
Credit Parties and their respective Affiliates. Except for notices, reports and
other documents expressly required to be furnished to the
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Lenders by the Administrative Agent hereunder, the Administrative Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, assets, property,
financial or other conditions, prospects or creditworthiness of the Borrower,
the other Credit Parties or any of their respective Affiliates which may come
into the possession of the Administrative Agent or any of its officers,
directors, employees, Administrative Agents, attorneys-in-fact or affiliates.
10.7 Indemnification.
---------------
The Lenders agree to indemnify the Administrative Agent in its capacity as
such (to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to their respective
Commitments (or if the Commitments have expired or been terminated, in
accordance with the respective principal amounts of outstanding Loans and
Participation Interests of the Lenders), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following the final payment of all of
the obligations of the Borrower hereunder and under the other Credit Documents)
be imposed on, incurred by or asserted against the Administrative Agent in its
capacity as such in any way relating to or arising out of this Credit Agreement
or the other Credit Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
--------
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
gross negligence or willful misconduct of the Administrative Agent. If any
indemnity furnished to the Administrative Agent for any purpose shall, in the
opinion of the Administrative Agent, be insufficient or become impaired, the
Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section shall survive the repayment of the
Loans, LOC Obligations and other obligations under the Credit Documents and the
termination of the Commitments hereunder.
10.8 Administrative Agent in its Individual Capacity.
-----------------------------------------------
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower,
its Subsidiaries or their respective Affiliates as though the Administrative
Agent were not the Administrative Agent hereunder. With respect to the Loans
made by and all obligations of the Borrower hereunder and under the other Credit
Documents, the Administrative Agent shall have the same rights and powers under
this Credit Agreement as any Lender and may exercise the same as though it were
not the Administrative Agent, and the terms "Lender" and "Lenders" shall include
the
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Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent.
------------------------------
The Administrative Agent may, at any time, resign upon 30 days' written
notice to the Lenders, and may be removed, upon show of cause, by the Required
Lenders upon 30 days' written notice to the Administrative Agent. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the notice of resignation or notice of
removal, as appropriate, then the retiring Administrative Agent shall select a
successor Administrative Agent provided such successor is a Lender hereunder or
a commercial bank organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$400,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations as Administrative Agent, as
appropriate, under this Credit Agreement and the other Credit Documents and the
provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Credit Agreement.
SECTION 11
MISCELLANEOUS
-------------
11.1 Notices.
-------
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
the third Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case to the respective parties at
the address, in the case of the Borrower, Guarantors and the Administrative
Agent, set forth below, and, in the case of the Lenders, set forth on Schedule
--------
11.1, or at such other address as such party may specify by written notice to
- ----
the other parties hereto:
if to the Borrower or the Guarantors:
Just For Feet, Inc.
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7400 Cahaba Valley Road
Birmingham, Alabama 35242
Attn: Eric Tyra
Telephone: (205) 408-3351
Telecopy: (205) 408-3170
with a copy to:
Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
Attn: Arthur Jay Schwartz
Telephone: 404-815-3632
Telecopy: 404-685-6932
if to the Administrative Agent:
NationsBank, N.A.
101 N. Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attn: Angela Berry
Agency Services
Telephone: (704) 386-8958
Telecopy: (704) 388-9436
with a copy to:
NationsBank, N.A.
Suite 100 N
One Perimeter Park South
Birmingham, Alabama 35243
Attn: Alan Schweer
Telephone: (205) 970-6015
Telecopy: (205) 970-6176
11.2 Right of Set-Off.
----------------
In addition to any rights now or hereafter granted under applicable law or
otherwise,
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and not by way of limitation of any such rights, upon the occurrence of an Event
of Default, each Lender is authorized at any time and from time to time, without
presentment, demand, protest or other notice of any kind (all of which rights
being hereby expressly waived), to set-off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at any time held or
owing by such Lender (including, without limitation branches, agencies or
Affiliates of such Lender wherever located) to or for the credit or the account
of any Credit Party against obligations and liabilities of such Person to such
Lender hereunder, under the Notes, the other Credit Documents or otherwise,
irrespective of whether such Lender shall have made any demand hereunder and
although such obligations, liabilities or claims, or any of them, may be
contingent or unmatured, and any such set-off shall be deemed to have been made
immediately upon the occurrence of an Event of Default even though such charge
is made or entered on the books of such Lender subsequent thereto. Any Person
purchasing a participation in the Loans and Commitments hereunder pursuant to
Section 3.13 or Section 11.3(d) may exercise all rights of set-off with respect
to its participation interest as fully as if such Person were a Lender
hereunder.
11.3 Benefit of Agreement.
--------------------
(a) Generally. This Credit Agreement shall be binding upon and inure to
---------
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto; provided that none of the Credit Parties may assign or
--------
transfer any of its interests without prior written consent of the Lenders;
provided further that the rights of each Lender to transfer, assign or grant
- -------- -------
participations in its rights and/or obligations hereunder shall be limited as
set forth in this Section 11.3, provided however that nothing herein shall
--------
prevent or prohibit any Lender from (i) pledging its Loans hereunder to a
Federal Reserve Bank in support of borrowings made by such Lender from such
Federal Reserve Bank, or (ii) granting assignments or selling participations in
such Lender's Loans and/or Commitments hereunder to its parent company and/or to
any Affiliate or Subsidiary of such Lender.
(b) Assignments. Each Lender may assign all or a portion of its rights and
-----------
obligations hereunder (including, without limitation, all or a portion of its
Commitments or its Loans), pursuant to an assignment agreement substantially in
the form of Schedule 11.3(b), to (i) a Lender, (ii) an affiliate of a Lender or
----------------
(iii) any other Person (other than the Borrower or an Affiliate of the Borrower)
reasonably acceptable to the Administrative Agent and, so long as no Default or
Event of Default has occurred and is continuing, the Borrower (the consent of
the Borrower shall not be unreasonably withheld or delayed and such consent
shall be deemed given if the Borrower does not notify the assigning Lender and
the Administrative Agent of any objection within two Business Days after the
Borrower has been provided notice of the proposed assignment by the assigning
Lender or the Administrative Agent); provided that (i) any such assignment
--------
(other than any assignment to an existing Lender) shall be in a
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minimum aggregate amount of $5,000,000 (or, if less, the remaining amount of the
Commitment being assigned by such Lender) of the Commitments and in integral
multiples of $1,000,000 above such amount and (ii) each such assignment shall be
of a constant, not varying, percentage of all such Lender's rights and
obligations under this Credit Agreement. Any assignment hereunder shall be
effective upon delivery to the Administrative Agent of written notice of the
assignment, together with (except in the case of an assignment to an affiliate
of the assigning Lender) a transfer fee of $3,500 payable to the Administrative
Agent for its own account, from and after the later of (i) the effective date
specified in the applicable assignment agreement and (ii) the date of recording
of such assignment in the Register pursuant to the terms of subsection (c)
below. The assigning Lender will give prompt notice to the Administrative Agent
and the Borrower of any such assignment. Upon the effectiveness of any such
assignment (and after notice to, and (to the extent required pursuant to the
terms hereof), with the consent of, the Borrower as provided herein), the
assignee shall become a "Lender" for all purposes of this Credit Agreement and
the other Credit Documents and, to the extent of such assignment, the assigning
Lender shall be relieved of its obligations hereunder to the extent of the Loans
and Commitment components being assigned. Along such lines the Borrower agrees
that upon notice of any such assignment and surrender of the appropriate Note or
Notes, it will promptly provide to the assigning Lender and to the assignee
separate promissory notes in the amount of their respective interests
substantially in the form of the original Note (but with notation thereon that
it is given in substitution for and replacement of the original Note or any
replacement notes thereof). By executing and delivering an assignment agreement
in accordance with this Section 11.3(b), the assigning Lender thereunder and the
assignee thereunder shall be deemed to confirm to and agree with each other and
the other parties hereto as follows: (i) such assigning Lender warrants that it
is the legal and beneficial owner of the interest being assigned thereby free
and clear of any adverse claim; (ii) except as set forth in clause (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant hereto or
thereto, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Credit Agreement, any of the other Credit Documents
or any other instrument or document furnished pursuant hereto or thereto or the
financial condition of any Credit Party or any of their respective Affiliates or
the performance or observance by any Credit Party of any of its obligations
under this Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
assignment agreement; (iv) such assignee confirms that it has received a copy of
this Credit Agreement, the other Credit Documents and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such assignment agreement; (v) such assignee will
independently and without reliance upon the Administrative Agent, such assigning
Lender or any other Lender,
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and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Credit Agreement and the other Credit Documents; (vi) such assignee
appoints and authorizes the Administrative Agent to take such action on its
behalf and to exercise such powers under this Credit Agreement or any other
Credit Document as are delegated to the Administrative Agent by the terms hereof
or thereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all the obligations which by the terms of this Credit Agreement and the other
Credit Documents are required to be performed by it as a Lender.
(c) Maintenance of Register. The Administrative Agent shall maintain at
-----------------------
one of its offices in Charlotte, North Carolina a copy of each Lender assignment
agreement delivered to it in accordance with the terms of subsection (b) above
and a register for the recordation of the identity of the principal amount, type
and Interest Period of each Loan outstanding hereunder, the names, addresses and
the Commitments of the Lenders pursuant to the terms hereof from time to time
(the "Register"). The Administrative Agent will make reasonable efforts to
--------
maintain the accuracy of the Register and to promptly update the Register from
time to time, as necessary. The entries in the Register shall be conclusive in
the absence of manifest error and the Borrower, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Borrower and
each Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(d) Participations. Each Lender may sell, transfer, grant or assign
--------------
participations in all or a portion of such Lender's rights, obligations or
rights and obligations hereunder (including all or a portion of its Commitments
or its Loans); provided that (i) such selling Lender shall remain a "Lender" for
--------
all purposes under this Credit Agreement (such selling Lender's obligations
under the Credit Documents remaining unchanged) and the participant shall not
constitute a Lender hereunder, (ii) no such participant shall have, or be
granted, rights to approve any amendment or waiver relating to this Credit
Agreement or the other Credit Documents except to the extent any such amendment
or waiver would (A) reduce the principal of or rate of interest on or Fees in
respect of any Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal (including extension of the Termination
Date or the date of any mandatory prepayment), interest or Fees in which the
participant is participating, (C) except as the result of or in connection with
a dissolution, merger or disposition of a Subsidiary permitted under Section
8.3, release the Borrower or substantially all of the Guarantors from its or
their obligations under the Credit Documents, or (D) except as the result of or
in connection with a disposition permitted under Section 8.3(b), release all or
substantially all of the
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collateral, and (iii) sub-participations by the participant (except to an
affiliate, parent company or affiliate of a parent company of the participant)
shall be prohibited. In the case of any such participation, the participant
shall not have any rights under this Credit Agreement or the other Credit
Documents (the participant's rights against the selling Lender in respect of
such participation to be those set forth in the participation agreement with
such Lender creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such participation,
provided, however, that such participant shall be entitled to receive
- --------
additional amounts under Sections 3.6, 3.9, 3.10, 3.11 and 11.2 on the same
basis as if it were a Lender.
11.4 No Waiver; Remedies Cumulative.
------------------------------
No failure or delay on the part of the Administrative Agent or any Lender
in exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Administrative Agent or any Lender
and any of the Credit Parties shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Administrative Agent or any Lender would otherwise
have. No notice to or demand on any Credit Party in any case shall entitle the
Borrower or any other Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
11.5 Payment of Expenses, etc.
------------------------
The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and
expenses (A) of the Administrative Agent in connection with the negotiation,
preparation, execution and delivery and administration of this Credit Agreement
and the other Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
Moore & Van Allen, PLLC, special counsel to the Administrative Agent) and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and (B) of the Administrative Agent
and the Lenders in connection with enforcement of the Credit Documents and the
documents and instruments referred to therein (including, without limitation, in
connection with any such enforcement, the reasonable fees and disbursements of
counsel for the Administrative Agent and each of the Lenders); (ii) pay and hold
each of the Lenders harmless from and against any and all present
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and future stamp and other similar taxes with respect to the foregoing matters
and save each of the Lenders harmless from and against any and all liabilities
with respect to or resulting from any delay or omission (other than to the
extent attributable to such Lender) to pay such taxes; and (iii) indemnify each
Lender, its officers, directors, employees, representatives and agents from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of (A) any investigation, litigation or
other proceeding (whether or not any Lender is a party thereto) related to the
entering into and/or performance of any Credit Document or the use of proceeds
of any Loans (including other extensions of credit) hereunder or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding or (B) the presence or Release of any Materials of Environmental
Concern at, under or from any Property owned, operated or leased by the Borrower
or any of its Subsidiaries, or the failure by the Borrower or any of its
Subsidiaries to comply with any Environmental Law (but excluding, in the case of
either of clause (A) or (B) above, any such losses, liabilities, claims, damages
or expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).
11.6 Amendments, Waivers and Consents.
--------------------------------
Neither this Credit Agreement nor any other Credit Document nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
-------- -------
(a) without the consent of each Lender affected thereby, neither this
Credit Agreement nor any of the other Credit Documents may be amended to
(i) extend the final maturity of any Loan or the time of payment
of any reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
(ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any increase
in interest rates after the occurrence of an Event of Default or on
account of a failure to deliver financial statements on a timely
basis) thereon or Fees hereunder,
(iii) reduce or waive the principal amount of any Loan or of any
reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
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(iv) increase the Commitment of a Lender over the amount thereof
in effect (it being understood and agreed that a waiver of any Default
or Event of Default or mandatory reduction in the Commitments shall
not constitute a change in the terms of any Commitment of any Lender),
(v) except as the result of or in connection with a dissolution,
merger or disposition of a Subsidiary permitted under Section 8.3,
release the Borrower or substantially all of the Guarantors from its
or their obligations under the Credit Documents,
(vi) except as the result of or in connection with a disposition
permitted under Section 8.3(b), release all or substantially all of
the collateral,
(vii) amend, modify or waive any provision of this Section 11.6
or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 9.1(a),
11.2, 11.3, 11.5 or 11.9,
(viii) modify any percentage specified in, or otherwise amend,
the definition of Required Lenders, or
(ix) consent to the assignment or transfer by the Borrower (or
another Credit Party) of any of its rights and obligations under (or
in respect of) the Credit Documents except as permitted thereby;
(b) without the consent of the Administrative Agent, no provision of
Section 10 may be amended;
(c) without the consent of the Issuing Lender, no provision of Section 2.2
may be amended.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans, and each Lender acknowledges that the provisions of Section 1126(c) of
the Bankruptcy Code supersedes the unanimous consent provisions set forth herein
and (y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.
11.7 Counterparts.
------------
This Credit Agreement may be executed in any number of counterparts, each
of which
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when so executed and delivered shall be an original, but all of which shall
constitute one and the same instrument. It shall not be necessary in making
proof of this Credit Agreement to produce or account for more than one such
counterpart.
11.8 Headings.
--------
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Survival.
--------
All indemnities set forth herein, including, without limitation, in Section
2.2(i), 3.9, 3.11, 10.7 or 11.5 shall survive the execution and delivery of this
Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder, and all
representations and warranties made by the Credit Parties herein shall survive
delivery of the Notes and the making of the Loans hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
------------------------------------------------
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA. Any legal action or proceeding with respect to this Credit Agreement
or any other Credit Document may be brought in the courts of the State of North
Carolina in Mecklenburg County, or of the United States for the Western District
of North Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the nonexclusive jurisdiction of
such courts. Each of the Credit Parties further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to it at the address set out for notices pursuant to Section
11.1, such service to become effective three (3) days after such mailing.
Nothing herein shall affect the right of the Administrative Agent to serve
process in any other manner permitted by law or to commence legal proceedings or
to otherwise proceed against any Credit Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any objection
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which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Credit Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE ADMINISTRATIVE AGENT, THE
LENDERS, THE BORROWER AND THE OTHER CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.11 Severability.
------------
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
--------
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.13 Binding Effect; Termination.
---------------------------
(a) This Credit Agreement shall become effective at such time on or after
the Closing Date when it shall have been executed by the Borrower, the
Guarantors and the Administrative Agent, and the Administrative Agent shall have
received copies hereof (telefaxed or otherwise) which, when taken together, bear
the signatures of each Lender, and thereafter this Credit Agreement shall be
binding upon and inure to the benefit of the Borrower, the Guarantors, the
Administrative Agent and each Lender and their respective successors and
assigns.
(b) The term of this Credit Agreement shall commence on the effective date
pursuant to subsection (a) above and shall continue until no Loans, LOC
Obligations or any
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other amounts payable hereunder or under any of the other Credit Documents shall
remain outstanding and until all of the Commitments hereunder shall have expired
or been terminated.
11.14 Confidentiality.
---------------
The Administrative Agent and the Lenders agree to keep confidential (and to
cause their respective affiliates, officers, directors, employees, agents and
representatives to keep confidential) all information, materials and documents
furnished to the Administrative Agent or any such Lender by or on behalf of any
Credit Party (whether before or after the Closing Date) which relates to the
Borrower or any of its Subsidiaries (the "Information"). Notwithstanding the
-----------
foregoing, the Administrative Agent and each Lender shall be permitted to
disclose Information (i) to its affiliates, officers, directors, employees,
Administrative Agents and representatives in connection with its participation
in any of the transactions evidenced by this Credit Agreement or any other
Credit Documents or the administration of this Credit Agreement or any other
Credit Documents; (ii) to the extent required by applicable laws and regulations
or by any subpoena or similar legal process, or requested by any Governmental
Authority; (iii) to the extent such Information (A) becomes publicly available
other than as a result of a breach of this Credit Agreement or any agreement
entered into pursuant to clause (iv) below, (B) becomes available to the
Administrative Agent or such Lender on a non-confidential basis from a source
other than a Credit Party or (C) was available to the Administrative Agent or
such Lender on a non-confidential basis prior to its disclosure to the
Administrative Agent or such Lender by a Credit Party; (iv) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first specifically agrees
in a writing furnished to and for the benefit of the Credit Parties to be bound
by the terms of this Section 11.14; or (v) to the extent that the Borrower shall
have consented in writing to such disclosure. Nothing set forth in this Section
11.14 shall obligate the Administrative Agent or any Lender to return any
materials furnished by the Credit Parties.
11.15 Source of Funds.
---------------
Each of the Lenders hereby represents and warrants to the Borrower that at
least one of the following statements is an accurate representation as to the
source of funds to be used by such Lender in connection with the financing
hereunder:
(a) no part of such funds constitutes assets allocated to any separate
account maintained by such Lender in which any employee benefit plan (or its
related trust) has any interest;
(b) to the extent that any part of such funds constitutes assets allocated
to
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any separate account maintained by such Lender, such Lender has disclosed to the
Borrower the name of each employee benefit plan whose assets in such account
exceed 10% of the total assets of such account as of the date of such purchase
(and, for purposes of this subsection (b), all employee benefit plans maintained
by the same employer or employee organization are deemed to be a single plan);
(c) to the extent that any part of such funds constitutes assets of an
insurance company's general account, such insurance company has complied with
all of the requirements of the regulations issued under Section 401(c)(1)(A) of
ERISA; or
(d) such funds constitute assets of one or more specific benefit plans
which such Lender has identified in writing to the Borrower.
As used in this Section 11.15, the terms "employee benefit plan" and "separate
account" shall have the respective meanings assigned to such terms in Section 3
of ERISA.
11.16 Conflict.
--------
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Page to Follow]
104
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: JUST FOR FEET, INC.,
- --------
a Delaware corporation
By:
Name: Eric L. Tyra
Title: Chief Financial Officer
GUARANTORS: SNEAKER STADIUM, INC.,
- ----------
a Delaware corporation
By:
Name: Eric L. Tyra
Title: Vice President
SNKR HOLDING CORP.,
a Delaware corporation
By:
Name: Eric L. Tyra
Title: Vice President
PREMIUM SPORTS, INC.,
a Florida corporation
By:
Name: Eric L. Tyra
Title: Vice President
ATHLETIC ATTIC PROPERTIES, INC.,
a Florida corporation
By:
Name: Eric L. Tyra
Title: Vice President
ATHLETIC ATTIC MARKETING, INC.,
<PAGE>
a Florida corporation
By:
Name: Eric L. Tyra
Title: Vice President
106
<PAGE>
ATHLETIC ATTIC RETAIL COMPANY,
a Florida corporation
By:
Name: Eric L. Tyra
Title: Vice President
JUST FOR FEET OF TEXAS, INC.
an Alabama corporation
By:
Name: Eric L. Tyra
Title: Vice President
JUST FOR FEET OF NEVADA, INC.
a Nevada corporation
By:
Name: Eric L. Tyra
Title: Vice President
IMPERIAL ACQUISITION CORPORATION,
a Michigan corporation
By:
Name: Eric L. Tyra
Title: Vice President
JUST FOR FEET SPECIALTY STORES, INC.
a Michigan corporation
By:
Name: Eric L. Tyra
Title: Vice President
<PAGE>
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Administrative Agent
By:
Name:
Title:
SUNTRUST BANK, ATLANTA
By:
Name:
Title:
COMPASS BANK
By:
Name:
Title:
AMSOUTH BANK
By:
Name:
Title:
BANCO POPULAR DE PUERTO RICO
By:
Name:
Title:
MICHIGAN NATIONAL BANK
By:
Name:
Title:
108
<PAGE>
FIRST AMERICAN NATIONAL BANK
By:
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By:
Name:
Title:
MARINE MIDLAND BANK
By:
Name:
Title:
SOUTHTRUST BANK, N.A.
By:
Name:
Title:
110
<PAGE>
EXHIBIT 10.5.1
AMENDMENT NO. 1
THIS AMENDMENT NO. 1 (this "Amendment") dated as of January 29, 1999, to
---------
the Credit Agreement referenced below, is by and among JUST FOR FEET, INC., a
Delaware corporation (the "Borrower"), the subsidiaries and affiliates of the
--------
Borrower identified on the signature pages hereto (the "Guarantors"), the
----------
lenders identified on the signature pages hereto (the "Lenders"), COMPASS BANK,
-------
as Documentation Agent, FIRST UNION NATIONAL BANK, MARINE MIDLAND BANK,
SOUTHTRUST BANK, N.A. and SUNTRUST BANK, ATLANTA, as Co-Agents, and NATIONSBANK,
N.A., as Administrative Agent (in such capacity, the "Administrative Agent").
--------------------
Terms used but not otherwise defined shall have the meanings provided in the
Credit Agreement.
W I T N E S S E T H
WHEREAS, a $200 million credit facility has been extended to the Borrower
pursuant to the terms of that Credit Agreement dated as of December 10, 1998 (as
amended and modified, the "Credit Agreement") among the Borrower, the
----------------
Guarantors, the Lenders, Compass Bank, as Documentation Agent, First Union
National Bank, Marine Midland Bank, SouthTrust Bank, N.A. and SunTrust Bank,
Atlanta, as Co-Agents, and NationsBank, N.A., as Administrative Agent;
WHEREAS, the Borrower has requested certain modifications to the Credit
Agreement which require the consent of the Required Lenders;
WHEREAS, the Required Lenders have agreed to the requested modifications on
the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The Credit Agreement is amended in the following respects:
1.1 Section 8.7 is amended to read as follows:
8.7 Fiscal Year.
-----------
Change its fiscal year from a fiscal year ending the Saturday
closest to January 31.
2. In Section 7.9(e), each reference to a fiscal year ending "January 31"
is amended to read "on or about January 31".
3. This Amendment shall be effective upon its execution by the Credit
Parties and the Required Lenders.
4. The Credit Parties hereby affirm (i) the representations and warranties
set out in Section 6 of the Credit Agreement are true and correct as of the
date hereof (except those
<PAGE>
which expressly relate to an earlier period) and (ii) no Default or Event
of Default presently exists.
5. Except as modified hereby, all of the terms and provisions of the Credit
Agreement (including Schedules and Exhibits) shall remain in full force and
effect.
6. The Borrower agrees to pay all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and
delivery of this Amendment, including without limitation the reasonable
fees and expenses of Moore & Van Allen, PLLC.
7. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and it
shall not be necessary in making proof of this Amendment to produce or
account for more than one such counterpart.
8. This Amendment shall be deemed to be a contract made under, and for
all purposes shall be construed in accordance with the laws of the State of
North Carolina.
[Remainder of Page Intentionally Left Blank]
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment No. 1 to be duly executed and delivered as of the date first
above written.
BORROWER: JUST FOR FEET, INC.,
- --------
a Delaware corporation
By: /s/ Eric L. Tyra
----------------
Name: Eric L. Tyra
Title: Executive Vice President
and Chief Financial Officer
GUARANTORS: SNEAKER STADIUM, INC.,
- ---------- a Delaware corporation
SNKR HOLDING CORP.,
a Delaware corporation
PREMIUM SPORTS, INC.,
a Florida corporation
ATHLETIC ATTIC PROPERTIES, INC.,
a Florida corporation
ATHLETIC ATTIC MARKETING, INC.,
a Florida corporation
ATHLETIC ATTIC RETAIL COMPANY,
a Florida corporation
JUST FOR FEET OF TEXAS, INC.
an Alabama corporation
JUST FOR FEET OF NEVADA, INC.
a Nevada corporation
IMPERIAL ACQUISITION CORPORATION,
a Michigan corporation
JUST FOR FEET SPECIALTY STORES, INC.
a Michigan corporation
By: /s/ Eric L. Tyra
----------------
Name: Eric L. Tyra
Title: Vice President
<PAGE>
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Administrative Agent
By: Nan C. Hillis
-------------
Name: Nan C. Hillis
Title: Senior Vice President
SUNTRUST BANK, ATLANTA
By:
Name:
Title:
COMPASS BANK
By: Janet Brock
-----------
Name: Janet Brock
Title: Senior Vice President
AMSOUTH BANK
By: John M. Kettle
--------------
Name: John M. Kettle
Title: Senior Vice President
BANCO POPULAR NORTH AMERICA
By: /s/ Andrew H. Melville
----------------------
Name: Andrew H. Melville
Title: Assistant Vice President
MICHIGAN NATIONAL BANK
By: /s/ John M. Bebb
----------------
Name: John M. Bebb
Title: Relationship Manager
FIRST AMERICAN NATIONAL BANK
By: /s/ H. Hope Stewart
-------------------
Name: H. Hope Stewart
Title: Assistant Vice President
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ C. Wes Burton, Jr.
----------------------
Name: C. Wes Burton, Jr.
Title: Vice President
MARINE MIDLAND BANK
By:/s/ Adriana D. Collins
----------------------
Name: Adriana D. Collins
Title: Vice President
SOUTHTRUST BANK, N.A.
By: /s/ William Douglass
--------------------
Name: William Douglass
Title: Assistant Vice President
<PAGE>
EXHIBIT 10.5.2
AMENDMENT NO. 2
THIS AMENDMENT NO. 2 (this "Amendment") dated as of February 23, 1999, to
---------
the Credit Agreement referenced below, is by and among JUST FOR FEET, INC., a
Delaware corporation (the "Borrower"), the subsidiaries and affiliates of the
--------
Borrower identified on the signature pages hereto (the "Guarantors"), the
----------
lenders identified on the signature pages hereto (the "Lenders") and
-------
NATIONSBANK, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent"). Terms used but not otherwise defined shall have the
- ---------------------
meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $200 million credit facility has been extended to the Borrower
pursuant to the terms of that Credit Agreement dated as of December 10, 1998 (as
amended and modified, the "Credit Agreement") among the Borrower, the
----------------
Guarantors, the Lenders, Compass Bank, as Documentation Agent, First Union
National Bank, Marine Midland Bank, SouthTrust Bank, N.A. and SunTrust Bank,
Atlanta, as Co-Agents, and NationsBank, N.A., as Administrative Agent;
WHEREAS, the Borrower has requested certain modifications to the Credit
Agreement which require the consent of the Required Lenders;
WHEREAS, the Required Lenders have agreed to the requested modifications on
the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The Credit Agreement is amended in the following respects:
1.1 In Section 1.1, the following definitions are amended and/or
added, as appropriate, to read as follows:
"Bridge Credit Agreement" means the credit agreement(s), as amended and
-----------------------
modified, entered into to evidence the Bridge Credit Facility.
"Bridge Credit Facility" means the credit facility or facilities
----------------------
extended pursuant to Section 8.1(g).
"Debt Transaction" means, with respect to any member of the
----------------
Consolidated Group, any sale, issuance or placement of Funded Debt, whether
or not evidenced by promissory note or other written evidence of
indebtedness, except for Funded Debt permitted to be incurred pursuant to
Section 8.1 (other than Subordinated Debt permitted to be incurred pursuant
to Section 8.1(j)).
<PAGE>
1.2 Clauses (g), (h) and (i) of Section 8.1 are renumbered as clauses
(h), (i) and (j), and a new clause (g) is added and clause (i) is amended
to read as follows:
(g) other senior unsecured Indebtedness of the Credit Parties in an
aggregate principal amount of up to $80 million with a term of not more
than six (6) months from the date of issuance (the "Bridge Credit
-------------
Facility");
--------
(i) Subordinated Debt of the Borrower, provided that (i) such
Subordinated Debt is issued in replacement and refinancing of the
Bridge Credit Facility, or (ii) on a Pro Forma Basis, the incurrence of
such Subordinated Debt shall not result in a Default or Event of
Default.
1.3 Clause (b) of Section 8.8 is amended to read as follows:
(b) Except in connection with a refinancing or refunding permitted
hereunder, make any prepayment, redemption, defeasance or acquisition
for value of (including, without limitation, by way of depositing
money or securities with the trustee with respect thereto before due
for the purpose of paying when due), or refund, refinance or exchange
of, any Funded Debt (other than (i) intercompany Indebtedness
permitted hereunder and (ii) Indebtedness under the Bridge Credit
Agreement permitted hereunder) other than regularly scheduled payments
of principal and interest on such Funded Debt.
1.4 Section 8.11 is amended to read as follows:
Directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability
of any such Person to (a) pay dividends or make any other distributions
on its capital stock or with respect to any other interest or
participation in, or measured by, its profits, (b) pay any Indebtedness
or other obligation, (c) make loans or advances, (d) sell, lease or
transfer any of its properties or assets, (e) grant a Lien on its
properties or assets whether now owned or hereafter acquired or (f) act
as a guarantor and pledge its assets, except (in respect of any of the
matters referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Credit Agreement
and the other Credit Documents, (ii) applicable law or (iii) the Bridge
Credit Agreement.
1.5 Section 8.12 is amended to read as follows:
8.12 No Further Negative Pledges.
---------------------------
Except with respect to (i) prohibitions against other encumbrances
on specific Property encumbered to secure payment of particular
Indebtedness (which Indebtedness relates solely to such specific
Property, and improvements and accretions thereto, and is otherwise
permitted hereby) and (ii) the Bridge Credit Agreement, no member of
the Consolidated Group will enter into, assume or become subject to any
agreement prohibiting or otherwise restricting the creation or
assumption of any Lien upon its properties or assets, whether now owned
or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation.
1.6 Clause (j) of Section 9.1 is renumbered as clause (k), and a new
clause (j) is added to read as follows:
2
<PAGE>
(j) The occurrence of an Event of Default under the Bridge Credit
Agreement; or
2. This Amendment shall be effective upon satisfaction of the following
conditions:
(a) execution of this Amendment by the Credit Parties and the Required
Lenders;
(b) receipt by the Administrative Agent of legal opinions of counsel to
the Credit Parties relating to this Amendment in form and substance
satisfactory to the Administrative Agent; and
(c) receipt by the Administrative Agent for the ratable benefit of the
Lenders which consent to this Amendment (the "Consenting Lenders") of an
------------------
amendment fee of five (5) basis points on the aggregate of the Commitments
of the Consenting Lenders.
3. The Credit Parties hereby affirm (i) the representations and warranties
set out in Section 6 of the Credit Agreement are true and correct as of the date
hereof (except those which expressly relate to an earlier period) and (ii) no
Default or Event of Default presently exists.
4. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (including Schedules and Exhibits) shall remain in full force
and effect.
5. The Borrower agrees to pay all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment, including without limitation the reasonable fees and expenses
of Moore & Van Allen, PLLC.
6. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
7. This Amendment shall be deemed to be a contract made under, and for all
purposes shall be construed in accordance with the laws of the State of North
Carolina.
[Remainder of Page Intentionally Left Blank]
3
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment No. 2 to be duly executed and delivered as of the date first
above written.
BORROWER: JUST FOR FEET, INC.,
- --------
a Delaware corporation
By: /s/ Eric L. Tyra
------------------------------
Name: Eric L. Tyra
Title: Executive Vice President
and Chief Financial Officer
GUARANTORS: SNEAKER STADIUM, INC.,
- ---------- a Delaware corporation
SNKR HOLDING CORP.,
a Delaware corporation
ATHLETIC ATTIC MARKETING, INC.,
a Florida corporation
JUST FOR FEET OF TEXAS, INC.,
an Alabama corporation
JUST FOR FEET OF NEVADA, INC.,
a Nevada corporation
JUST FOR FEET SPECIALTY STORES, INC.,
a Michigan corporation
By: /s/ Eric L. Tyra
---------------------------
Name: Eric L. Tyra
Title: Vice President of each
of the foregoing Guarantors
<PAGE>
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Administrative Agent
By: /s/ Nan C. Hillis
-----------------------------------
Name: Nan C. Hillis
---------------------------------
Title: Sr. Vice President
--------------------------------
SUNTRUST BANK, ATLANTA
By: /s/ John Frazer
-----------------------------------
Name: John Frazer
---------------------------------
Title: Vice President
--------------------------------
By: /s/ Brian K. Peters
-----------------------------------
Name: Brian K. Peters
---------------------------------
Title: Director
--------------------------------
COMPASS BANK
By: /s/ Janet Brock
-----------------------------------
Name: Janet Brock
---------------------------------
Title: Senior Vice President
--------------------------------
AMSOUTH BANK
By: /s/ John M. Kettig
-----------------------------------
Name: John M. Kettig
---------------------------------
Title: Senior Vice President
--------------------------------
BANCO POPULAR NORTH AMERICA
By: /s/ Karen Hamilton
-----------------------------------
Name: Karen Hamilton
---------------------------------
Title: Vice President
--------------------------------
MICHIGAN NATIONAL BANK
By: /s/ John M. Bebb
-----------------------------------
Name: John M. Bebb
---------------------------------
Title: Relationship Manager
--------------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/ H. Hope Stewart
-----------------------------------
Name: H. Hope Stewart
---------------------------------
Title: Assistant Vice President
--------------------------------
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ Daniel L. Evans
-----------------------------
Name: Daniel L. Evans
---------------------------
Title: Senior Vice President
--------------------------
MARINE MIDLAND BANK
By: /s/ Adriana D. Collins
-----------------------------
Name: Adriana D. Collins
---------------------------
Title: Vice President
--------------------------
SOUTHTRUST BANK, N.A.
By: /s/ William Douglas
-----------------------------
Name: William Douglas
---------------------------
Title: Assistant Vice President
--------------------------
<PAGE>
EXHIBIT 10.5.3
AMENDMENT NO. 3
THIS AMENDMENT NO. 3 (this "Amendment"), dated as of March 24, 1999, to the
---------
Credit Agreement referenced below, is by and among JUST FOR FEET, INC., a
Delaware corporation (the "Borrower"), the subsidiaries and affiliates of the
--------
Borrower identified on the signature pages hereto (the "Guarantors"), the
----------
lenders identified on the signature pages hereto (the "Lenders") and
-------
NATIONSBANK, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent"). Terms used but not otherwise defined shall have the
--------------------
meanings provided in the Credit Agreement.
W I T N E S S E T H
WHEREAS, a $200 million credit facility has been extended to the Borrower
pursuant to the terms of that Credit Agreement dated as of December 10, 1998 (as
amended and modified, the "Credit Agreement") among the Borrower, the
----------------
Guarantors, the Lenders, Compass Bank, as Documentation Agent, First Union
National Bank, Marine Midland Bank, SouthTrust Bank, N.A. and SunTrust Bank,
Atlanta, as Co-Agents, and NationsBank, N.A., as Administrative Agent;
WHEREAS, the Borrower has made arrangements to issue up to $250 million in
Senior Subordinated Notes;
WHEREAS, the Borrower has requested certain modifications to the Credit
Agreement in connection with the issuance of the Senior Subordinated Notes and
such modifications require the consent of the Required Lenders;
WHEREAS, the Required Lenders have agreed to the requested modifications on
the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The Credit Agreement is amended in the following respects:
1.1 In Section 1.1 of the Credit Agreement, the following definitions are
amended or added to read as follows:
"Consolidated Senior Funded Debt" means Consolidated Funded Debt
-------------------------------
less Subordinated Debt.
"Consolidated Senior Leverage Ratio" means, as of the last day of
----------------------------------
any fiscal quarter, the ratio of Consolidated Senior Funded Debt on
such day to Consolidated EBITDA for the period of four consecutive
fiscal quarters ending as of such day.
<PAGE>
"Senior Subordinated Notes" means those [ __%] Senior Subordinated
-------------------------
Notes of the Borrower due 2009, as amended, modified and extended.
"Subordinated Debt" means (i) the Indebtedness evidenced by the
-----------------
Senior Subordinated Notes, and (ii) any other Indebtedness of a member
of the Consolidated Group which by its terms is expressly subordinated
in right of payment to the prior payment of the obligations under the
Credit Agreement and the other Credit Documents on terms and
conditions satisfactory to the Required Lenders.
1.2 The pricing grid in the definition of "Applicable Percentage" in
Section 1.1 of the Credit Agreement is amended to read as follows:
<TABLE>
<CAPTION>
Eurodollar
Margin and
Pricing Standby Letter Trade Letter
Level Consolidated Fixed Charge Base Rate of Credit of Credit Commitment
- ------- Coverage Ratio Margin Fee Fee Fee
----------------------------------------------- -------------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
I less than or equal to 1.75 0.50% 2.00% 0.90% 0.450%
II greater than 1.75 but less than or equal to 2.00 0.25% 1.75% 0.75% 0.375%
III greater than 2.00 but less than or equal to 2.50 0.00% 1.50% 0.60% 0.300%
IV greater than 2.50 but less than or equal to 3.00 0.00% 1.25% 0.45% 0.250%
V greater than 3.00 0.00% 1.00% 0.30% 0.250%
</TABLE>
1.3 In Section 1.1 of the Credit Agreement, the definitions of "Bridge
Credit Agreement" and "Bridge Credit Facility" are deleted in their
entirety.
1.4 Clause (a) of Section 7.9 of the Credit Agreement is amended to read
as follows:
(a) Consolidated Leverage Ratio. As of the end of each fiscal
---------------------------
quarter set forth below, the Consolidated Leverage Ratio shall not be
greater than the ratio set forth opposite such period:
The Borrower's first and second fiscal quarter of 1999 4.0:1.0
The Borrower's third fiscal quarter of 1999 and 3.5:1.0
each of the Borrower's fiscal quarters thereafter
1.5 Clause (b) of Section 7.9 of the Credit Agreement is amended to read
as follows:
(b) Consolidated Fixed Charge Coverage Ratio. As of the end of
----------------------------------------
each fiscal quarter, the Consolidated Fixed Charge Coverage Ratio
shall not be less than 1.50:1.0.
1.6 Clause (e) of Section 7.9 of the Credit Agreement is amended to read
as follows:
(e) Capital Expenditures. The aggregate amount of Capital
--------------------
Expenditures for the Consolidated Group will not exceed $75,000,000
in any fiscal year.
1.7 A new clause (f) is added to Section 7.9 to read as follows:
2
<PAGE>
(f) Consolidated Senior Leverage Ratio. As of the end of
----------------------------------
each fiscal quarter, the Consolidated Senior Leverage Ratio shall not
be greater than 2.5:1.0.
1.8 A new clause (c) is added to Section 7.11 to read as follows:
(c) Guaranties Given in respect of Other Indebtedness.
-------------------------------------------------
Notwithstanding anything to the contrary contained herein, the
Borrower will promptly provide, or cause to be provided, to the
Administrative Agent, a guaranty joinder or guaranty in respect of the
Loans and obligations hereunder from any Subsidiary or Affiliate of
the Borrower which shall give a guaranty in respect of the Senior
Subordinated Notes, together with the other items referenced in
subsections (a) or (b) hereof, as appropriate.
1.9 Section 8.1 is amended and restated to read as follows:
8.1 Indebtedness.
------------
Contract, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness arising or existing under this Credit
Agreement and the other Credit Documents;
(b) Indebtedness set forth in Schedule 8.1, and
------------
renewals, refinancings and extensions thereof on terms and conditions
no less favorable than for such existing Indebtedness;
(c) purchase money Indebtedness (including Capital Lease
Obligations and term debt obligations) extended by General Electric
Capital Corporation or any of its Affiliates in an aggregate
outstanding principal amount not to exceed $30,000,000 at any time;
(d) purchase money Indebtedness (including Capital Lease
Obligations and mortgage obligations) incurred to provide all or a
portion of the purchase price or costs of construction of an asset or,
in the case of a sale/leaseback transaction as described in Section
8.10, to finance the value of an asset owned by a member of the
Consolidated Group, provided that (i) such Indebtedness when incurred
--------
shall not exceed the purchase price or cost of construction of such
asset or, in the case of a sale/leaseback transaction, the fair market
value of such asset, (ii) no such Indebtedness shall be refinanced for
a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing, and (iii) the total amount of
all such Indebtedness shall not exceed $20,000,000 at any time
outstanding;
(e) Indebtedness and obligations owing under interest
rate protection agreements relating to the Obligations hereunder and
under interest rate, commodities and foreign currency exchange
protection agreements entered into in the ordinary course of business
to manage existing or anticipated risks and not for speculative
purposes;
(f) unsecured intercompany Indebtedness owing by a
member of the Consolidated Group to another member of the Consolidated
Group (subject, however, to the limitations of Section 8.4 in the case
of the member of the Consolidated Group extending the intercompany
loan, advance or credit);
3
<PAGE>
(g) other senior unsecured Indebtedness of the Borrower
of up to $5,000,000 in the aggregate at any time outstanding;
(h) Support Obligations of Indebtedness permitted under
this Section 8.1; and
(i) Subordinated Debt of the Borrower consisting of
(i) the Senior Subordinated Notes in an aggregate
principal amount of up to $250 million; and
(ii) other Subordinated Debt, provided that (A) the
Borrower shall demonstrate it will be in compliance with the
financial covenants in Section 7.9 after giving effect thereto on
a Pro Forma Basis, and (B) no Default or Event of Default shall
exist after giving effect thereto.
1.10 Clause (b) of Section 8.8 is amended to read as follows:
(b) Make any prepayment, redemption, defeasance or acquisition
for value of (including without limitation, by way of depositing money
or securities with the trustee with respect thereto before the due
date therefor for the purpose of paying when due), or refund,
refinance or exchange, any Funded Debt (other than intercompany
Indebtedness permitted hereunder), other than (i) regularly scheduled
payments of principal and interest on such Funded Debt and (ii) so
long as no Default or Event of Default would exist after giving effect
thereto on a Pro Forma Basis, prepayments, redemptions, defeasances
and acquisitions for value which shall not exceed $5 million in the
aggregate during the term of this Credit Agreement.
1.11 In Section 8.11, the reference in clause (iii) of the exception
to "the Bridge Credit Agreement" is amended to read as "the Senior
Subordinated Notes" instead.
1.12 In Section 8.12, the reference in clause (ii) of the exception
to "the Bridge Credit Agreement" is amended to read as "the Senior
Subordinated Notes" instead.
1.13 Clause (j) of Section 9.1(c) is deleted, and clause (k) thereof
is renumbered as clause (j) thereof.
2. As required in the definition of "Subordinated Debt," consent is given
hereby to the terms of subordination, and the other terms and conditions, of the
Senior Subordinated Notes as described in Exhibit A attached hereto.
---------
3. The Required Lenders hereby waive the requirement under Section
3.4(b)(ii) of the Credit Agreement that the Revolving Commitments be reduced by
an amount equal to fifty percent (50%) of the Net Proceeds received from the
issuance of the Senior Subordinated Notes; provided that, if the Net Proceeds
--------
received from the issuance of the Senior Subordinated Notes exceed $225,000,000,
the Revolving Commitments shall be reduced by an amount equal to fifty percent
(50%) of the amount by which the Net Proceeds received from the issuance of the
Senior Subordinated Notes exceed $200,000,000.
4
<PAGE>
4. The Required Lenders hereby waive any Default or Event of Default
which existed or may have existed prior to the effective date of this Amendment
solely on account of noncompliance with the Consolidated Leverage Ratio under
Section 7.9(a) of the Credit Agreement.
5. This Amendment shall be effective upon satisfaction of the
following conditions:
(a) execution of this Amendment by the Credit Parties and the Required
Lenders;
(b) evidence of the issuance of the Senior Subordinated Notes and
repayment in full of all amounts outstanding under the Bridge Credit
Facility (and termination of the commitments thereunder);
(c) receipt by the Administrative Agent of an opinion of counsel to
the Credit Parties relating to this Amendment, which opinion shall be in
form and substance satisfactory to the Required Lenders;
(d) receipt by the Administrative Agent of an officer's certificate
demonstrating compliance with the financial covenants in Section 7.9 of the
Credit Agreement after giving effect to the Indebtedness evidenced by the
Senior Subordinated Notes on a Pro Forma Basis and certifying that no
Default or Event of Default exists after giving effect thereto; and
(e) receipt by the Administrative Agent, for the ratable benefit of
the Lenders which consent to this Amendment (the "Consenting Lenders"), of
------------------
an amendment fee equal to 7.5 basis points (0.075%) on the aggregate
Commitments of the Consenting Lenders.
6. The Credit Parties hereby affirm (i) the representations and warranties
set out in Section 6 of the Credit Agreement are true and correct as of the date
hereof (except those which expressly relate to an earlier period) and (ii) no
Default or Event of Default presently exists (after giving effect to this
Amendment).
7. Except as modified hereby, all of the terms and provisions of the Credit
Agreement (including Schedules and Exhibits) shall remain in full force and
effect.
8. The Borrower agrees to pay all reasonable costs and expenses of the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment, including without limitation the reasonable fees and expenses
of Moore & Van Allen, PLLC.
9. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and it shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
5
<PAGE>
10. This Amendment shall be deemed to be a contract made under, and for all
purposes shall be construed in accordance with the laws of the State of North
Carolina.
[Remainder of Page Intentionally Left Blank]
6
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment No. 3 to be duly executed and delivered as of the date first
above written.
BORROWER: JUST FOR FEET, INC.,
- --------
a Delaware corporation
By: /s/ Eric L. Tyra
---------------------------
Name: Eric L. Tyra
Title: Executive Vice President
and Chief Financial Officer
GUARANTORS: SNEAKER STADIUM, INC.,
- ---------- a Delaware corporation
SNKR HOLDING CORP.,
a Delaware corporation
ATHLETIC ATTIC MARKETING, INC.,
a Florida corporation
JUST FOR FEET OF TEXAS, INC.,
an Alabama corporation
JUST FOR FEET OF NEVADA, INC.,
a Nevada corporation
JUST FOR FEET SPECIALTY STORES, INC.,
a Michigan corporation
By: /s/ Eric L. Tyra
---------------------------
Name: Eric L. Tyra
Title: Vice President of each
of the foregoing Guarantors
<PAGE>
LENDERS: NATIONSBANK, N.A.,
- ------- individually in its capacity as a
Lender and in its capacity as Administrative Agent
By: /s/ Nan C. Hillis
-----------------------------------
Name: Nan C. Hillis
---------------------------------
Title: Sr. Vice President
--------------------------------
SUNTRUST BANK, ATLANTA
By: /s/ John Frazer
-----------------------------------
Name: John Frazer
---------------------------------
Title: Vice President
--------------------------------
By: /s/ Brian K. Peters
-----------------------------------
Name: Brian K. Peters
---------------------------------
Title: Vice President
--------------------------------
COMPASS BANK
By: /s/ Janet Brock
-----------------------------------
Name: Janet Brock
---------------------------------
Title: Senior Vice President
--------------------------------
AMSOUTH BANK
By: /s/ John M. Kettig
-----------------------------------
Name: John M. Kettig
---------------------------------
Title: Senior Vice President
--------------------------------
BANCO POPULAR NORTH AMERICA
By: /s/ Karen Hamilton
-----------------------------------
Name: Karen Hamilton
---------------------------------
Title: Vice President
--------------------------------
MICHIGAN NATIONAL BANK
By: /s/ John M. Bebb
-----------------------------------
Name: John M. Bebb
---------------------------------
Title: Relationship Manager
--------------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/ H. Hope Stewart
-----------------------------------
Name: H. Hope Stewart
---------------------------------
Title: Assistant Vice President
--------------------------------
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/ Daniel L. Evans
-----------------------------
Name: Daniel L. Evans
---------------------------
Title: Senior Vice President
--------------------------
MARINE MIDLAND BANK
By: /s/ Adriana D. Collins
-----------------------------
Name: Adriana D. Collins
---------------------------
Title: Vice President
--------------------------
SOUTHTRUST BANK, N.A.
By: /s/ William Douglas
-----------------------------
Name: William Douglas
---------------------------
Title: Assistant Vice President
--------------------------
<PAGE>
Exhibit A
---------
Description of Senior Subordinated Notes
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 1st day of
March, 1999 by and between JUST FOR FEET, INC., an Delaware corporation (the
"Company"), and HELEN ROCKEY (the "Executive"), an individual.
For and in consideration of the mutual covenants described below, the
parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ Executive, and Executive
agrees to accept such employment, upon the following terms and conditions.
2. DUTIES. Executive shall assume the responsibilities and perform the
duties of President and Chief Operating Officer of the Company with the
following duties: (i) oversee Company's day-to-day operations and all
employees, (ii) support Chairman and Chief Executive Officer in representing the
Company to the investment community, (iii) prepare and update strategic and
operations plans for approval by the Chief Executive Officer and the Board of
Directors, (iv) execute approved strategic and operations plans, and (v) manage
marketing process including assisting in the development of the Company's
marketing strategy as part of the preparation of the strategic plan. Such
duties may be revised from time to time at the sole discretion of the Board of
Directors of the Company, and Executive shall perform such duties as the Company
may direct from time to time subject to Executive's right of termination for
Good Reason (as that term is defined in Section 12.5 (iii)). Executive agrees to
devote her full time and energy to the furtherance of the business of the
Company and shall be loyal to the Company and use her best efforts to further
its interests, and shall not during the term hereof, without the prior written
consent of the Company, work or perform services in any advisory or other
capacity for any individual, firm, company, or corporation other than for the
Company. Notwithstanding the foregoing, the Executive shall not be precluded
from devoting such time to her personal or financial affairs or to community,
charitable, trade and professional activities as shall not interfere with her
duties to the Company in the reasonable judgment of the Board of Directors,
subject to the rights described in Section 14 hereof.
3. COMPENSATION.
3.1 Base Salary. The Company shall pay Executive as compensation for all
-----------
the services to be rendered by Executive hereunder a base salary equal to a rate
of $600,000 per year ("Base Salary") for each of the years during the Initial
Term hereof (as hereinafter defined). Thereafter, if this Agreement is extended
pursuant to Section 4(a) below, Executive's base salary shall be subject to
review and increase (but not decrease) in the discretion of the Board of
Directors. Executive's salary shall be payable beginning with the period
starting March 1, 1999 in equal monthly installments and shall be prorated on a
daily basis for the years in which Executive commences and terminates her
employment pursuant to this Agreement. The Company's obligation to pay
Executive any compensation shall cease upon termination of Executive's
employment with the Company; provided, however, if Executive's employment is
terminated due to her death, Company shall pay as a lump sum payment to the
estate of Executive her Base Salary for one year.
<PAGE>
3.2 Living Allowance. During the Initial Term (as hereinafter defined)
----------------
Company shall pay to Executive as an annual living allowance a sum equal to the
product obtained by multiplying $750,000 times Executive's mortgage interest
rate on the home she purchases in the Birmingham, Alabama area. Said amount
shall be payable in equal monthly installments beginning with the first month
after Executive purchases her home as set forth in the preceding sentence; and
shall be prorated on a daily basis for the years in which Executive commences
and terminates her employment relationship with the Company.
3.3 Bonus.
-----
(a) Executive shall be eligible to receive a performance and merit-based
bonus during the fiscal year of her employment hereunder beginning with the
Company's fiscal year starting January 1, 1999 in the bonus program attached
hereto as Exhibit A.
(b) On February 29, 2004, if Executive is employed hereunder or if
Executive is not employed hereunder, if Executive's employment hereunder has
been terminated other than "for cause" (as defined in Section 4.2 below), or
voluntarily by Executive (other than with Good Reason), Company shall pay
Executive a bonus of $750,000.
3.4 Stock Options. Subject to Executive's execution of and compliance with
-------------
the terms of that certain Just For Feet, Inc. Incentive Stock Option Agreement
substantially in the form attached hereto as Exhibit B, Company grants to
Executive options to acquire 600,000 shares of the common stock of the Company
at the Fair Market Value per share on the date of the grant.
3.5 Other Benefits. Executive shall be entitled to receive health and
--------------
dental insurance benefits, vacation benefits and other benefits substantially
similar to those provided to other executives of the Company. Company shall
have the right to change said benefit program at any time or times.
3.6 Reimbursement of Expenses. In addition to the compensation described
-------------------------
in this Agreement, Executive shall be entitled to reimbursement by Company for
all actual, reasonable and direct expenses incurred by her in the performance of
her duties hereunder, provided such expenses are properly characterized as being
business expenses that are properly tax deductible for Company, and further
provided that such expenses were incurred only in accordance with the policies
and procedures established by the Board of Directors from time to time. The
Company agrees that Executive may use "Business Class" or the Company's private
plane for all air travel. Executive shall provide Company with written
documentation of such expenses in form complying with the records required of
Company by the Internal Revenue Service and appropriate state authorities for
tax deductibility purposes in such cases, and reimbursement for each item of
approved expense shall be made within a reasonable time after receipt by Company
of the written documentation thereof.
3.7 Vacation. The Executive shall be entitled to four (4) weeks annual
--------
paid vacation and such holidays as the Board of Directors may approve. In the
event of any termination of employment, Executive shall not be entitled to
receive payment for any unused vacation time.
-2-
<PAGE>
3.8 Other. The Company agrees to reimburse Executive for legal fees
-----
incurred by her in connection with a law suit from BrookSports, Inc. for breach
of her employment agreement in an amount not to exceed $250,000.00
3.9 Withholdings. All amounts payable to Executive pursuant to this
------------
Agreement shall be subject to all applicable withholdings as required by all
laws.
4. TERM AND TERMINATION.
4.1 Term. This Agreement shall be effective upon the date first set forth
----
above and, unless earlier terminated as provided herein, shall remain in full
force and effect for an initial period which ends on February 29, 2004 (the
"Initial Term"). This Agreement shall be deemed to be renewed on the same terms
and conditions for additional successive periods of one (1) year absent notice
from the Company or the Executive at least twelve (12) months prior to the end
of the Initial Term, or any extension thereof, that either party wishes to
terminate the Agreement at the end of the term then in effect. The purpose of
the preceding sentence shall be to provide, beginning on the anniversary date of
this Agreement in 2003, with a continuing term of this Agreement of greater than
one (1) year but no more than two (2) years at all times thereafter until notice
is given by either party to this Agreement to the contrary.
4.2 Termination. Notwithstanding anything contained herein to the
-----------
contrary, the Company may terminate Executive's employment immediately for
cause. For purposes of this Agreement, "for cause" shall mean the occurrence of
the following: (i) the commission of any act of fraud, dishonesty materially
harmful to the Company, misappropriation or moral turpitude on the part of the
Executive, (ii) a material breach by the Executive of her duties and obligations
hereunder, (iii) continued neglect by Executive in fulfilling her duties as an
executive officer of the Company as a result of alcoholism, addiction to illegal
substances, or excessive unauthorized absenteeism, after written notification
from the Board of Directors of such neglect, setting forth in detail the matters
involved and Executive's failure to cure the problem resulting in such neglect
within a reasonable time thereafter, (iv) the Executive becomes Completely
Disabled (as hereinafter defined), or (v) the death of Executive. For purposes
of this Agreement, "Completely Disabled" shall mean Executive's inability, due
to illness, accident or any other physical or mental incapacity, to perform the
duties provided for herein for an aggregate of 91 days during any period of 180
consecutive days during the term hereof.
(a) Upon a termination "for cause" the Executive shall be entitled to her
prorated Base Salary and prorated living allowance described in Section 3.2
through the date of termination and reimbursement for any expenses incurred and
properly documented pursuant to Section 3.6. Termination of Executive's
employment upon the occurrence of any act specified in (i) through (iii) of the
preceding paragraph shall result, to the extent not otherwise prohibited by law,
in Executive's loss of any benefits provided by the Company. Upon termination
of Executive's employment as a result of her Complete Disability or death, the
Company shall pay to the Executive or her estate, respectively, a lump sum
payment of her Base Salary for one (1) year.
(b) Upon termination as a result of Complete Disability or death the
Executive shall also be entitled to receive her prorated Base Salary and
prorated living allowance described in Section 3.2
-3-
<PAGE>
through the date of termination and reimbursement for any expenses incurred and
properly documented pursuant to Section 3.6.
(c) Notwithstanding anything contained herein to the contrary, Executive
shall have the right to voluntarily terminate this Agreement and her employment
with the Company at any time. Such voluntary termination shall not be
considered a breach of this Agreement. Upon such voluntary termination by the
Executive (i) the Company shall pay the Executive six months' Base Salary,
payable to the Executive in accordance with the Company's normal payroll
schedule for other executives, but in no case in less than monthly installments;
and (ii) the Company shall pay to Executive fifty percent (50%) of any bonus
that would have otherwise been payable to her for the year of termination,
payable at or after the end of such year as is customary, and with regard to any
subjective element of such bonus, as determined by the Board of Directors of the
Company acting in good faith. The Executive shall also be entitled to receive
her prorated Base Salary and prorated living allowance described in Section 3.2
through the date of termination and reimbursement for any expenses incurred and
properly documented pursuant to Section 3.6.
(d) In all cases of termination of the Executive not described in (a)
through (c) of this Section 4.2 above or in Section 12 below, including the
Executive's voluntary termination with Good Reason (as that term is defined in
Section 12.5 (iii)), and the Company's termination of the Executive's employment
other than "for cause" (even if such termination occurs after the term of this
Agreement has otherwise expired,) the Executive shall continue to be entitled to
(i) all Base Salary, fringe benefits and other rights under this Agreement for
the lesser of (A) the period from the date of such termination until the end of
the Initial Term, as the same may have been extended, but in no event not less
than six (6) months, or (B) fifteen (15) months from the date of such
termination; (ii) the Company shall pay to Executive any bonus that would have
otherwise been payable to her for the year of termination, payable at or after
the end of such year as is customary, and with regard to any subjective element
of such bonus, as determined by the Board of Directors of the Company acting in
good faith; and (iii) any unvested stock options then held by Executive,
pursuant to any incentive stock option agreement or other stock option agreement
with the Company or any subsidiary of the Company which would have otherwise
become vested and become exercisable within the fifteen (15) month period
immediately following such termination shall be deemed immediately exercisable,
provided, however, Executive agrees that the amounts payable to her pursuant to
4.2(d)(i) and 4.2(d)(ii) above shall be reduced dollar for dollar as to all
amounts Executive receives if she obtains employment during the fifteen (15)
months from the date of termination; provided further that Company acknowledges
that Executive is not obligated to obtain employment. The Executive shall also
be entitled to receive her prorated Base Salary through the date of termination
and reimbursement for any expenses incurred and properly documented pursuant to
Section 3.6.
4.3 Return of Property. Upon termination of employment for any reason,
------------------
Executive shall return immediately to the Company all documents, property, and
other records of the Company, and all copies thereof, within Executive's
possession, custody or control, including but not limited to any materials
containing any Trade Secrets or Confidential Information (each as defined below)
or any portion thereof.
-4-
<PAGE>
5 RELOCATION EXPENSES.
The Company agrees to reimburse Executive for the following expenses
incurred with respect to Executive's relocation from Seattle, Washington to
Birmingham, Alabama: (i) reasonable expenses incurred for the movement of normal
household goods provided Executive obtains bids from three (3) moving companies
and takes the lowest bid, (ii) actual closing costs and real estate commissions
paid with respect to the sale by Executive of her home in Seattle, Washington up
to a maximum of seven (7%) percent of the sales price, (iii) the costs of
temporary living quarters for Executive in Birmingham, Alabama, not to exceed
$1,500.00 per month until the earlier of: (i) the date Executive sells her home
in Seattle, Washington or (ii) six (6) months from the date hereof; (iii) the
reasonable costs of two (2) trips for Executive and her spouse to Birmingham,
Alabama to search for a new residence; and (vi) the cost of round-trip airfare
for one trip per month for up to six (6) months between Birmingham, Alabama and
Seattle, Washington.
To the extent that the amounts payable to Executive pursuant to this Section
5 are taxable to Executive, Company shall pay to Executive an amount equal to
the federal and state income tax payable by Executive on said amounts (grossed
up for taxes).
6. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
6.1 Confidentiality. The Company may disclose to Executive certain Trade
---------------
Secrets and Confidential Information (each as defined below). Executive
acknowledges and agrees that the Trade Secrets and Confidential Information are
the sole and exclusive property of the Company (or a third party providing such
information to the Company) and that the Company or such third party owns all
worldwide rights therein under patent, copyright, trade secret, confidential
information, or other property rights laws. Executive acknowledges and agrees
that the disclosure of the Trade Secrets and Confidential Information to
Executive does not confer upon Executive any license, interest or rights of any
kind in or to the Trade Secrets or Confidential Information. Executive may use
the Trade Secrets and Confidential Information solely for the benefit of the
Company while Executive is employed or retained by the Company. Except in the
performance of services for the Company, Executive will hold in confidence and
not reproduce, distribute, transmit, reverse engineer, decompile, disassemble,
or transfer, directly or indirectly, in any form, by any means, or for any
purpose, the Trade Secrets or the Confidential Information or any portion
thereof. Executive agrees to return to the Company, upon request by the
Company, the Trade Secrets and Confidential Information and all materials
relating thereto. Notwithstanding the above, Executive may disclose any Trade
Secrets or Confidential Information compelled by summons or service of process,
or as otherwise required by law. Executive agrees, to the extent reasonably
possible, to provide advance notice to the Company of any such request for
information.
6.2 Duration. Executive's obligations under this Agreement with regard to
--------
the Trade Secrets shall remain in effect for as long as such information shall
remain a trade secret under applicable law. Executive acknowledges that its
obligations with regard to the Confidential Information shall remain in effect
while Executive is employed or retained by the Company and for five (5) years
thereafter. As used herein, "Trade Secrets" means information of the Company,
its licensors, suppliers, customers, or prospective licensors or customers,
including, but not limited to, technical or
-5-
<PAGE>
nontechnical data, formulas, patterns, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, financial plans, product plans,
or a list of actual or potential customers or suppliers, which (i) derives
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use; and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy. As used
herein, "Confidential Information" means information, other than Trade Secrets,
that is of value to its owner and is treated as confidential, including, but not
limited to, future business plans, financial information, marketing strategies
and advertising campaigns, information regarding Company's executives and
employees, and the terms and conditions of this Agreement. For purposes of this
Agreement, "Confidential Information" and "Trade Secrets" shall not include the
following: (i) anything or any information that was or becomes generally
available to the public other than as a result of a disclosure by the Executive,
(ii) was available to the Executive on a nonconfidential basis prior to its
disclosure to the Executive by the Company, (iii) becomes available to the
Executive on a nonconfidential basis from a source other than the Company,
provided that such source is not prohibited from disclosing such information by
a contractual or legal obligation to the Company of such information, or (iv)
that the Executive can conclusively show by documentary evidence was
independently developed by the Executive without use of any information
disclosed to Executive by the Company. Executive and the Company acknowledge
that the intent of this Section 5 is not to restrict Executive's employment
following her tenure with the Company, but rather it is to protect the rights
that the Company has in its Trade Secrets and Confidential Information.
7. COVENANT NOT TO COMPETE. In consideration of her employment hereunder,
Executive agrees as follows.
7.1 Term. Executive will not, during the term of her employment with the
----
Company and for a period of two (2) years after termination for any reason of
her employment with the Company, directly or indirectly, engage in or carry on
(i) within a fifty (50) mile radius of any of the Company's retail outlets
existing upon the date of termination of such employment (the "Territory"), any
business, like or similar to that engaged in by Company (including, without
limitation, any business engaged in the retail sale of athletic shoes, sporting
goods or athletic wear whether through retail outlets or by means of the
Internet or other similar medium of electronic commerce), either individually or
as a stockholder, director, officer, consultant, independent contractor,
Executive, agent, member or otherwise of or through any corporation,
partnership, association, joint venture, firm, individual or otherwise, or in
any other capacity: The above two (2) year period shall be extended by any
period of time during which Executive is in default of the covenants contained
in this Agreement. The above notwithstanding, a manufacturer of athletic shoes,
sporting goods or athletic wear (even if such manufacturer may sell such goods
directly to the public as an incidental portion of their business), shall not be
deemed a business "like or similar to that engaged in by the Company." Nothing
in this Section 7.1 shall prohibit Executive from owning up to 5% of any class
of securities of a company that are publicly traded on a regularly recognized
stock exchange or over the counter market.
7.2 Remedies. In the event of a breach or threatened breach by Executive
--------
of all or any part of the provisions of Section 7.1, the Company shall be
entitled to an injunction restraining Executive from such breach without
limiting any other rights or remedies available to the Company for such breach
or threatened breach.
-6-
<PAGE>
7.3 Exclusions. Notwithstanding any provision to the contrary herein
----------
contained, Section 7.1 shall not apply upon the termination of the Executive's
employment by the Company other than for cause within one (1) year following a
Sale of the Company.
7.4 Sale of Company.
---------------
(a) In the event of a Sale of the Company following the execution of this
Agreement, Executive expressly agrees that the terms and conditions set forth in
this Section 7 shall be binding upon Executive and shall be fully enforceable by
the successor to the Company.
(b) For purposes of this Agreement, "Sale of the Company" shall mean (i)
the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (a "Person"), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either the
then outstanding shares of common stock of the Company (the "Outstanding Common
Stock") or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"), or (ii) consummation by the Company of a
reorganization, merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company; unless, following such
acquisition of beneficial ownership or transaction (A) more than 60% of the then
outstanding shares of common stock of the Person resulting from such
reorganization, merger or consolidation, or (B) more than 60% of the then
outstanding shares of common stock of the Person acquiring such beneficial
ownership or assets, and the combined voting power of the then outstanding
voting securities of such Person entitled to vote generally in the election of
directors of such Person, is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such acquisition or transaction, in
substantially the same proportion as their ownership of Outstanding Common Stock
and Outstanding Voting Securities prior to such event.
8. CUSTOMER NON-SOLICITATION. Executive agrees that for a period of
eighteen (18) months immediately following termination of Executive's employment
with the Company for any reason, including, without limitation, voluntary
resignation from employment by Executive (the "Non-Solicitation Period"),
Executive shall not, on Executive's own behalf or on behalf of any person, firm,
partnership, association, corporation or business organization, entity or
enterprise, solicit, contact, call upon, communicate with or attempt to
communicate with any customer or prospect of the Company, or any representative
of any customer or prospect of the Company, with a view to selling or providing
any product or service competitive or potentially competitive with any product
or service sold or provided or under development by the Company during the time
of two (2) years immediately preceding cessation of Executive's employment with
the Company, provided that the restrictions set forth in this paragraph shall
apply only to customers or prospects of the Company, or representatives of
customers or prospects of the Company, with which Executive had contact during
such two (2) year period. Executive acknowledges that the Company provides
products and services to customers throughout the Territory.
-7-
<PAGE>
9. EMPLOYEE NON-SOLICITATION. Executive agrees that Executive shall not
call upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting any person who is or was an Employee of the Company within the Non-
Solicitation Period, for the purpose of having such person work in any other
corporation, association, entity, or business engaged in providing products or
services of the same or similar kind as offered by the Company.
10. EQUITABLE RELIEF. The parties to this Agreement acknowledge that a
breach by Executive of any of the terms or conditions of this Agreement will
result in irrevocable harm to the Company and that the remedies at law for such
breach may not adequately compensate the Company for damages suffered.
Accordingly, Executive agrees that in the event of such breach, the Company
shall be entitled to injunctive relief or such other equitable remedy as a court
of competent jurisdiction may provide. Nothing contained herein will be
construed to limit the Company's right to any remedies at law, including the
recovery of damages for breach of this Agreement.
11. ARBITRATION. Any difference, claim or matter in dispute arising
between the parties out of this Agreement or connected therewith (other than
requests by the Company for injunctive relief to enforce the provisions of
Sections 7 through 10 hereof) shall be submitted by them to arbitration by a
panel of three arbitrators appointed by and in accordance with the rules of the
American Arbitration Association. The determination or decision rendered by the
arbitrators shall be final and absolute. The arbitrators shall apply Alabama
law and the arbitration shall take place in Birmingham, Alabama. The decision
of the arbitrators may be entered as a judgment in any court of the State of
Alabama or elsewhere.
12. CHANGE IN CONTROL OF THE COMPANY.
12.1 Subject to Section 12.2 hereof, the Company shall pay the Executive the
payments described in this Section 12.1 (the "Change of Control Payments") upon
the termination of the Executive's employment following a Change in Control and
during the term of this Agreement, including voluntary termination by the
Executive for Good Reason (as defined in Section 12.5 (iii)), in addition to any
of the then unpaid compensation and benefits previously required to be paid to
Executive through the date of termination, unless such termination is (i) by the
Company for cause, or (ii) by reason of death, becoming Completely Disabled (as
defined in Section 4.2) or voluntary resignation without Good Reason or
retirement of Executive. The Change of Control Payments shall be as follows:
(a) In lieu of any further salary payments to the Executive for periods
subsequent to the date of termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the Executive a
lump sum severance payment, in cash, equal to two (2) times the Executive's
annual Base Salary in effect immediately prior to the occurrence of the event or
circumstance upon which the notice of termination is based;
(b) The Company shall pay to the Executive a lump sum amount, in cash,
equal to the sum of (i) any annual and quarterly performance or discretionary
bonuses which have been allocated or awarded to the Executive for a completed
calendar year preceding the date of termination but has not
-8-
<PAGE>
yet been paid (pursuant to Section 3.3 hereof or otherwise), (ii) a pro rata
portion of any annual and quarterly performance or discretionary bonuses for the
calendar year in which the date of termination occurs, determined by multiplying
the Executive's bonuses awarded or paid for the most recently completed calendar
year by a fraction, the numerator of which shall be the number of full days the
Executive was employed by the Company during the fiscal year in which the
Executive's date of termination occurred and the denominator of which shall be
three hundred and sixty-five (365) days; and (iii) the bonus required by Section
3.3 (b) payable on termination; and
(c) For a twelve (12) month period after the date of termination, the
Company shall arrange to provide the Executive with life, disability, accident
and health insurance benefits substantially similar to those which the Executive
is receiving immediately prior to the notice of termination. Benefits otherwise
receivable by the Executive pursuant to this Section 12.1(c) shall be reduced to
the extent comparable benefits are actually received by or made available to the
Executive without cost during the twelve (12) month period following the
Executive's termination of employment (and any such benefits actually received
by the Executive shall be reported to the Company by the Executive). If the
benefits provided to the Executive under this Section 12.1.(c) shall result in a
decrease, pursuant to Section 12.2, in the Change of Control Payments and these
Section 12.1(c) benefits are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt of comparable benefits, the Company
shall, at the time of such reduction, pay to the Executive the lesser of (a) the
amount of the decrease made in the Change of Control Payments pursuant to
Section 12.2, or (b) the maximum amount which can be paid to the Executive
without being, or causing any other payment to be, nondeductible by the Company
by reason of section 280G of the Code.
12.2 Notwithstanding any other provisions of this Agreement, in the event
that any payment or benefit received or to be received by the Executive in
connection with and contingent on a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (all such payments and benefits, including the Change of Control
Payments, being hereinafter called "Total Payments") would not be deductible (in
whole or part), by the Company, an affiliate or person making such payment or
providing such benefit, as a result of section 280G of the Code, then, to the
extent necessary to make the remaining portion of the Total Payments deductible
(and after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan, arrangement or
agreement), (A) the cash Change of Control Payments and/or other cash payments
provided for hereunder, in each case, to the extent still unpaid, shall first be
reduced (if necessary, to zero), and (B) all other noncash Change of Control
Payments and/or other noncash benefits provided for hereunder, in each case, to
the extent still unfurnished, shall next be reduced (if necessary, to zero), and
(C) the Executive shall have no right to receive hereunder, and neither the
Company, any person whose actions result in a Change in Control or any person
affiliated with the Company or such person shall be obligated to make, pay or
furnish to the Executive hereunder any payment or benefit in excess of those
payments or benefits provided hereunder as reduced, if applicable, pursuant to
clause (A) or clause (B) above. For purposes of this limitation (i) no portion
of the Total Payments the receipt or enjoyment of which the Executive shall have
effectively waived in writing prior to the date of termination shall be taken
into account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the Company's
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<PAGE>
independent auditors and reasonably acceptable to the Executive does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of the
Code, including by reason of section 280G(b)(4)(A) of the Code, (iii) the Change
of Control Payments shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any noncash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by the Company's independent auditors in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Section 12.2, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate provided in section
1274(b)(2)(B) of the Code from the date of the Executive's receipt of such
excess until the date of such payment.
12.3 The payments and other items provided for in Section 12.1 (other than
Section 12.1(c)) hereof shall be made not later than the fifteenth (15th) day
following the date of termination or the date of exercise by Executive of any of
Executive's rights hereunder; provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in Section 12.2 hereof,
cannot be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the date of termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 12.3, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from outside
counsel, auditors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
12.4 The Company also shall pay to the Executive all legal and accounting
fees and expenses incurred by the Executive as a result of a termination which
entitles the Executive to the Change of Control Payments (including all such
fees and expenses, if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the
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<PAGE>
application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within fifteen (15) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
12.5 For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(i) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act, other than Harold Ruttenberg or any affiliate of
Harold Ruttenberg, the Company, a subsidiary of the Company or any Company
Executive 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) during any period of two consecutive years (not including
any period prior to the execution of this Agreement) 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 of the Company through purchase of assets, or by
merger, or otherwise.
(ii) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(iii) "Good Reason" for termination, by the Executive, of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, of any one of the
following acts by the Company, or failures by the Company to act:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as an executive officer of the Company or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those in effect pursuant to this Agreement;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time;
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<PAGE>
(III) the relocation of the Company's principal executive offices
to a location outside a forty (40) mile radius from the city limits of
Birmingham, Alabama or the Company's requiring the Executive to be based
anywhere other than the Birmingham, Alabama metropolitan area except for
required travel on the Company's business to an extent substantially
consistent with the Executive's present business travel obligations;
(IV) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the Executive's current
compensation or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates which is material to
the Executive's total compensation, including but not limited to the
Company's stock option, incentive compensation, bonus and other plans or any
substitute plans adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue
the Executive's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount
of benefits provided and the level of the Executive's participation relative
to other participants, as existed on the date of this Agreement; or
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
dental, health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any action
by the Company which would directly or indirectly materially reduce any of
such benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the number of paid
vacation days to which the Executive is entitled pursuant to this Agreement.
(VII) the Executive not reporting directly to Harold Ruttenberg
for so long as he is Chairman of the Company, or not reporting to the
Chairman or Vice Chairman of the Company thereafter;
provided, that, the Executive's right to terminate Executive's employment for
- --------------
Good Reason shall not be affected by the Executive's incapacity due to physical
or mental illness and the Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(iv) "person" shall mean legal person, whether an individual or an
entity, as the context may require.
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<PAGE>
13. SEVERABILITY. If any provision or part of any provision of this
Agreement is held invalid or unenforceable by a court of competent jurisdiction,
such holding shall not affect the enforceability of any other provisions or
parts thereof, and all other provisions and parts thereof shall continue in full
force and effect.
14. BOARD POSITIONS. Executive may maintain her position as a member of
the board of directors or other committees of the following entities: The
Federal Reserve Board of the 12/th/ District, Seattle Branch; Gargoyles, Inc.;
The University of Washington; and BrooksSports, Inc. Executive agrees not to
join any additional boards of directors without the prior written consent of the
Company.
15. MISCELLANEOUS. This Agreement shall not be amended or modified except
by a writing executed by both parties. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns. Due to the
personal nature of this Agreement, neither Executive or the Company shall not
have the right to assign Executive's rights or obligations under this Agreement
without the prior written consent of the other, except subject to the provisions
of this Agreement that the Company may assign all of its rights and obligations
hereunder to any entity that succeeds to the business of Company. This
Agreement shall be governed by the laws of the State of Alabama without regard
to its rules governing conflicts of law. This Agreement and any attached
exhibits represent the entire understanding of the parties concerning the
subject matter hereof and supersede all prior communications, agreements and
understandings, whether oral or written, relating to the subject matter hereof.
All communications required or otherwise provided under this Agreement shall be
in writing and shall be deemed given when delivered to the address provided
below such party's signature (as may be amended by notice from time to time), by
hand, by courier or express mail, or by registered or certified United States
mail, return receipt requested, postage prepaid. Exhibit A attached hereto is
incorporated herein by this reference.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal effective as of the date first above written.
JUST FOR FEET, INC.
By: /s/ Harold Ruttenberg
------------------------------------------
Title: Chairman & Chief Executive Officer
[CORPORATE SEAL]
Address:
7400 Cahaba Valley Road
Birmingham, Alabama 35242
EXECUTIVE:
/s/ Helen Rockey (SEAL)
--------------------------------------
HELEN ROCKEY
Address:
13764 Riviera Place, N.E.
Seattle, Washington 98125
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<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the 7th day of
December, 1998 by and between JUST FOR FEET, INC., an Alabama corporation (the
"Company"), and NICHOLAS C. KARTALIS (the "Executive"), an individual.
For and in consideration of the mutual covenants described below, the
parties hereto agree as follows:
1. EMPLOYMENT. The Company agrees to employ Executive, and Executive
agrees to accept such employment, upon the following terms and conditions.
2. DUTIES. Executive shall assume the responsibilities and perform the
duties of Executive Vice President of the Company. Such duties may be revised
from time to time at the sole discretion of the Board of Directors of the
Company, and Executive shall perform such duties as the Company may direct from
time to time. Executive agrees to devote his full time and energy to the
furtherance of the business of the Company and shall be loyal to the Company and
use his best efforts to further its interests, and shall not during the term
hereof, without the prior written consent of the Company, work or perform
services in any advisory or other capacity for any individual, firm, company, or
corporation other than for the Company.
3. COMPENSATION.
3.1 Base Salary. The Company shall pay Executive as compensation for all
-----------
the services to be rendered by Executive hereunder a base salary equal to a rate
of $200,000 per year ("Base Salary") for each of the years during the Initial
Term hereof (as hereinafter defined). Thereafter, if this Agreement is extended
pursuant to Section 4(a) below, Executive's base salary shall be subject to
review and increase in the discretion of the Board of Directors. Executive's
salary shall be payable beginning with the period starting December 7, 1998 in
equal monthly installments and shall be prorated on a daily basis for the years
in which Executive commences and terminates his employment pursuant to this
Agreement. The Company's obligation to pay Executive any compensation shall
cease upon termination of Executive's employment with the Company; provided,
however, if Executive's employment is terminated due to his death, Company shall
pay as a lump sum payment to the estate of Executive his Base Salary for one
year.
3.2 Living Allowance. During the Initial Term (as hereinafter defined)
----------------
Company shall pay to Executive as an annual living allowance a sum equal to the
product obtained by multiplying $500,000 times Executive's mortgage interest
rate on the home he purchases in the Birmingham, Alabama area. Said amount
shall be payable in equal monthly installments beginning with the first month
after Executive purchases his home as set forth in the preceding sentence; and
shall be prorated on a daily basis for the years in which Executive commences
and terminates his employment relationship with the Company.
<PAGE>
3.3 Bonus.
-----
Executive shall be eligible to receive a performance-based bonus during each
calendar year of his employment hereunder beginning January 1, 1999 in such
amounts and subject to meeting certain specified goals as may be agreed upon
between Company and Executive in writing from time to time.
3.4 Stock Options. Subject to Executive's execution of and compliance with
-------------
the terms of that certain Just For Feet, Inc. Incentive Stock Option Agreement
substantially in the form attached hereto as Exhibit A, which executed agreement
shall in all respects be in form and substance satisfactory to the Company,
Company will grant to Executive on or before April 1, 1999, options to acquire
300,000 shares of the common stock of the Company at the Fair Market Value per
share on the date of the grant.
3.5 Other Benefits. Executive shall be entitled to receive health and
--------------
dental insurance benefits, vacation benefits and other benefits substantially
similar to those provided to other executives of the Company. Company shall
have the right to change said benefit program at any time or times.
3.6 Reimbursement of Expenses. In addition to the compensation described
-------------------------
in this Agreement, Employee shall be entitled to reimbursement by Company for
all actual, reasonable and direct expenses incurred by him in the performance of
his duties hereunder, provided such expenses are properly characterized as being
business expenses that are properly tax deductible for Company, and further
provided that such expenses were incurred only in accordance with the policies
and procedures established by the Board of Directors from time to time.
Employee shall provide Company with written documentation of such expenses in
form complying with the records required of Company by the Internal Revenue
Service and appropriate state authorities for tax deductibility purposes in such
cases, and reimbursement for each item of approved expense shall be made within
a reasonable time after receipt by Company of the written documentation thereof.
3.7 Vacation. The Employee shall be entitled to two (2) weeks annual paid
--------
vacation and such holidays as the Board of Directors may approve. In the event
of any termination of employment, Executive shall not be entitled to receive
payment for any unused vacation time.
3.8 Withholdings. All amounts payable to Executive pursuant to this
------------
Agreement shall be subject to all applicable withholdings as required by all
laws.
4. TERM AND TERMINATION.
4.1 Term. This Agreement shall be effective upon the date first set forth
----
above and, unless earlier terminated as provided herein, shall remain in full
force and effect for an initial period which ends on December 6, 2003 (the
"Initial Term"). This Agreement may be renewed on the same terms and conditions
for additional successive periods of one (1) year upon the execution of a
written agreement by the parties hereto.
4.2 Termination. Notwithstanding anything contained herein to the
-----------
contrary, the Company may terminate Executive's employment immediately for
cause. For purposes of this Agreement, "for
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<PAGE>
cause" shall mean the occurrence of the following: (i) the commission of any act
of fraud, dishonesty, misappropriation or moral turpitude on the part of the
Executive, (ii) a material breach by the Executive of, or a material failure by
the Executive to perform, his duties and obligations hereunder, (iii) continued
neglect by Executive in fulfilling his duties as an executive officer of the
Company as a result of alcoholism, addiction to illegal substances, or excessive
unauthorized absenteeism, after written notification from the Board of Directors
of such neglect, setting forth in detail the matters involved and Employee's
failure to cure the problem resulting in such neglect within a reasonable time
thereafter, (iv) the Executive becomes Completely Disabled (as hereinafter
defined), or (v) the death of Executive. For purposes of this Agreement,
"Completely Disabled" shall mean Executive's inability, due to illness, accident
or any other physical or mental incapacity, to perform the duties provided for
herein for an aggregate of 91 days during any period of 180 consecutive days
during the term hereof. In addition, termination of Executive's employment upon
the occurrence of any act specified in (i) through (iii) above shall result, to
the extent not otherwise prohibited by law, in Executive's loss of any benefits
provided by the Company.
4.3 Return of Property. Upon termination of employment for any reason,
------------------
Executive shall return immediately to the Company all documents, property, and
other records of the Company, and all copies thereof, within Executive's
possession, custody or control, including but not limited to any materials
containing any Trade Secrets or Confidential Information (each as defined below)
or any portion thereof.
5. RELOCATION EXPENSES.
The Company agrees to reimburse Employee for the following expenses incurred
with respect to Employee's relocation from Redding, Connecticut to Birmingham,
Alabama: (i) reasonable expenses incurred for the movement of normal household
goods provided Executive obtains bids from three (3) moving companies and takes
the lowest bid, (ii) actual closing costs and real estate commissions paid with
respect to the sale of Employee's existing home up to a maximum of six (6%)
percent of the sales price, (iii) the costs of temporary living quarters for
Executive in Birmingham, Alabama, not to exceed $_____ per month until the
earlier of: (i) the date Executive sells his home in Redding, Connecticut or
(ii) six (6) months from the date hereof; and (v) the reasonable costs of two
(2) trips for Executive and his spouse to Birmingham, Alabama to search for a
new residence.
To the extent that the amounts payable to Executive pursuant to this Section
5 are taxable to Executive, Company shall pay to Executive an amount equal to
the federal and state income tax payable by Executive on said amounts (grossed
up for taxes).
6. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
6.1 Confidentiality. The Company may disclose to Executive certain Trade
---------------
Secrets and Confidential Information (each as defined below). Executive
acknowledges and agrees that the Trade Secrets and Confidential Information are
the sole and exclusive property of the Company (or a third party providing such
information to the Company) and that the Company or such third party owns all
worldwide rights therein under patent, copyright, trade secret, confidential
information, or other property rights laws. Executive acknowledges and agrees
that the disclosure of the Trade Secrets and
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<PAGE>
Confidential Information to Executive does not confer upon Executive any
license, interest or rights of any kind in or to the Trade Secrets or
Confidential Information. Executive may use the Trade Secrets and Confidential
Information solely for the benefit of the Company while Executive is employed or
retained by the Company. Except in the performance of services for the Company,
Executive will hold in confidence and not reproduce, distribute, transmit,
reverse engineer, decompile, disassemble, or transfer, directly or indirectly,
in any form, by any means, or for any purpose, the Trade Secrets or the
Confidential Information or any portion thereof. Executive agrees to return to
the Company, upon request by the Company, the Trade Secrets and Confidential
Information and all materials relating thereto.
6.2 Duration. Executive's obligations under this Agreement with regard to
--------
the Trade Secrets shall remain in effect for as long as such information shall
remain a trade secret under applicable law. Executive acknowledges that its
obligations with regard to the Confidential Information shall remain in effect
while Executive is employed or retained by the Company and for five (5) years
thereafter. As used herein, "Trade Secrets" means information of the Company,
its licensors, suppliers, customers, or prospective licensors or customers,
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, or a list of actual
or potential customers or suppliers, which (i) derives economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use; and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. As used herein,
"Confidential Information" means information, other than Trade Secrets, that is
of value to its owner and is treated as confidential, including, but not limited
to, future business plans, financial information, marketing strategies and
advertising campaigns, information regarding Company's executives and employees,
and the terms and conditions of this Agreement. For purposes of this Agreement,
"Confidential Information" and "Trade Secrets" shall not include the following:
(i) anything or any information that was or becomes generally available to the
public other than as a result of a disclosure by the Executive, (ii) was
available to the Executive on a nonconfidential basis prior to its disclosure to
the Executive by the Company, (iii) becomes available to the Executive on a
nonconfidential basis from a source other than the Company, provided that such
source is not prohibited from disclosing such information by a contractual or
legal obligation to the Company of such information, or (iv) that the Executive
can conclusively show by documentary evidence was independently developed by the
Executive without use of any information disclosed to Executive by the Company.
Executive and the Company acknowledge that the intent of this Section 5 is not
to restrict Executive's employment following his tenure with the Company, but
rather it is to protect the rights that the Company has in its Trade Secrets and
Confidential Information.
7. COVENANT NOT TO COMPETE. Executive acknowledges to Company that prior
to becoming an employee of Company that Executive was not engaged in any
business like or similar to that carried on by the Company and that all of
Executive's knowledge concerning the business of the Company has been learned
and obtained while an employee of the Company. In consideration of his
employment hereunder, Executive agrees as follows.
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<PAGE>
7.1 Term. Executive will not, during the term of his employment with the
----
Company and for a period of two (2) years after termination for any reason of
his employment with the Company, directly or indirectly, engage in or carry on
within a fifty (50) mile radius of any of the Company's retail outlets existing
upon the date of termination of such employment (the "Territory"), any business,
like or similar to that engaged in by Company, either individually or as a
stockholder, director, officer, consultant, independent contractor, Executive,
agent, member or otherwise of or through any corporation, partnership,
association, joint venture, firm, individual or otherwise, or in any other
capacity: The above two (2) year period shall be extended by any period of time
during which Executive is in default of the covenants contained in this
Agreement.
7.2 Remedies. In the event of a breach or threatened breach by Executive
--------
of all or any part of the provisions of Section 7.1, the Company shall be
entitled to an injunction restraining Executive from such breach without
limiting any other rights or remedies available to the Company for such breach
or threatened breach.
7.3 Exclusions. Notwithstanding any provision to the contrary herein
----------
contained, Section 7.1 shall not apply:
Upon the termination of the Executive's employment by the Company other
than for cause within one (1) year following a Sale of the Company; and
7.4 Sale of Company.
---------------
(a) In the event of a Sale of the Company following the execution of this
Agreement, Executive expressly agrees that the terms and conditions set forth in
this Section 7 shall be binding upon Executive and shall be fully enforceable by
the successor to the Company.
(b) For purposes of this Agreement, "Sale of the Company" shall mean (i)
the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (a "Person"), of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either the
then outstanding shares of common stock of the Company (the "Outstanding Common
Stock") or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"), or (ii) consummation by the Company of a
reorganization, merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company; unless, following such
acquisition of beneficial ownership or transaction (A) more than 60% of the then
outstanding shares of common stock of the Person resulting from such
reorganization, merger or consolidation, or (B) more than 60% of the then
outstanding shares of common stock of the Person acquiring such beneficial
ownership or assets, and the combined voting power of the then outstanding
voting securities of such Person entitled to vote generally in the election of
directors of such Person, is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of Outstanding Common Stock and Outstanding Voting
Securities immediately prior to such acquisition or transaction, in
substantially the same proportion as their ownership of Outstanding Common Stock
and Outstanding Voting Securities prior to such event.
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<PAGE>
8. CUSTOMER NON-SOLICITATION. Executive agrees that for a period of
eighteen (18) months immediately following termination of Executive's employment
with the Company for any reason, including, without limitation, voluntary
resignation from employment by Executive (the "Non-Solicitation Period"),
Executive shall not, on Executive's own behalf or on behalf of any person, firm,
partnership, association, corporation or business organization, entity or
enterprise, solicit, contact, call upon, communicate with or attempt to
communicate with any customer or prospect of the Company, or any representative
of any customer or prospect of the Company, with a view to selling or providing
any product or service competitive or potentially competitive with any product
or service sold or provided or under development by the Company during the time
of two (2) years immediately preceding cessation of Executive's employment with
the Company, provided that the restrictions set forth in this paragraph shall
apply only to customers or prospects of the Company, or representatives of
customers or prospects of the Company, with which Executive had contact during
such two (2) year period. Executive acknowledges that the Company provides
products and services to customers throughout the Territory.
9. EMPLOYEE NON-SOLICITATION. Executive agrees that Executive shall not
call upon, solicit, recruit, or assist others in calling upon, recruiting or
soliciting any person who is or was an employee of the Company within the Non-
Solicitation Period, for the purpose of having such person work in any other
corporation, association, entity, or business engaged in providing products or
services of the same or similar kind as offered by the Company.
10. EQUITABLE RELIEF. The parties to this Agreement acknowledge that a
breach by Executive of any of the terms or conditions of this Agreement will
result in irrevocable harm to the Company and that the remedies at law for such
breach may not adequately compensate the Company for damages suffered.
Accordingly, Executive agrees that in the event of such breach, the Company
shall be entitled to injunctive relief or such other equitable remedy as a court
of competent jurisdiction may provide. Nothing contained herein will be
construed to limit the Company's right to any remedies at law, including the
recovery of damages for breach of this Agreement.
11. ARBITRATION. Any difference, claim or matter in dispute arising
between the parties out of this Agreement or connected therewith (other than
claims by the Company to enforce the provisions of Paragraphs 7 through 10
hereof) shall be submitted by them to arbitration by a panel of three
arbitrators appointed by and in accordance with the rules of the American
Arbitration association. The determination or decision rendered by the
arbitrators shall be final and absolute. The arbitrators shall apply Alabama
law and the arbitration shall take place in Birmingham, Alabama. The decision
of the arbitrators may be entered as a judgment in any court of the State of
Alabama or elsewhere.
12. CHANGE IN CONTROL OF THE COMPANY.
12.1 Subject to Section 12.2 hereof, the Company shall pay the Executive
the payments described in this Section 12.1 (the "Change of Control Payments")
upon the termination of the Executive's employment following a Change in Control
and during the term of this Agreement, in addition to any of the then unpaid
compensation and benefits previously required to be paid to Executive through
the date of termination, unless such termination is (i) by the Company for
cause,
-6-
<PAGE>
or (ii) by reason of death, disability (as defined in Section 4.2) or voluntary
resignation or retirement of Executive. The Change of Control Payments shall be
as follows:
(a) In lieu of any further salary payments to the Executive for periods
subsequent to the date of termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall pay to the Executive a
lump sum severance payment, in cash, equal to two (2) times the Executive's
annual Base Salary in effect immediately prior to the occurrence of the event or
circumstance upon which the notice of termination is based;
(b) The Company shall pay to the Executive a lump sum amount, in cash,
equal to the sum of (i) any annual and quarterly performance or discretionary
bonuses which have been allocated or awarded to the Executive for a completed
calendar year preceding the date of termination but has not yet been paid
(pursuant to Section 3.3 hereof or otherwise), and (ii) a pro rata portion of
any annual and quarterly performance or discretionary bonuses for the calendar
year in which the date of termination occurs, determined by multiplying the
Executive's bonuses awarded or paid for the most recently completed calendar
year by a fraction, the numerator of which shall be the number of full days the
Executive was employed by the Company during the fiscal year in which the
Executive's date of termination occurred and the denominator of which shall be
three hundred and sixty-five (365) days; and
(c) For a twelve (12) month period after the date of termination, the
Company shall arrange to provide the Executive with life, disability, accident
and health insurance benefits substantially similar to those which the Executive
is receiving immediately prior to the notice of termination (without giving
effect to any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason). Benefits otherwise receivable by the
Executive pursuant to this Section 12.1(c) shall be reduced to the extent
comparable benefits are actually received by or made available to the Executive
without cost during the twelve (12) month period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive). If the benefits
provided to the Executive under this Section 12.1.(c) shall result in a
decrease, pursuant to Section 12.2, in the Change of Control Payments and these
Section 12.1(c) benefits are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt of comparable benefits, the Company
shall, at the time of such reduction, pay to the Executive the lesser of (a) the
amount of the decrease made in the Change of Control Payments pursuant to
Section 12.2, or (b) the maximum amount which can be paid to the Executive
without being, or causing any other payment to be, nondeductible by the Company
by reason of section 280G of the Code.
12.2 Notwithstanding any other provisions of this Agreement, in the event
that any payment or benefit received or to be received by the Executive in
connection with and contingent on a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any person whose actions
result in a Change in Control or any person affiliated with the Company or such
person) (all such payments and benefits, including the Change of Control
Payments, being hereinafter called "Total Payments") would not be deductible (in
whole or part), by the Company, an affiliate or person making such payment or
providing such benefit, as a result of section 280G of the Code, then, to the
extent
-7-
<PAGE>
necessary to make the remaining portion of the Total Payments deductible (and
after taking into account any reduction in the Total Payments provided by reason
of Section 280G of the Code in such other plan, arrangement or agreement), (A)
the cash Change of Control Payments and/or other cash payments provided for
hereunder, in each case, to the extent still unpaid, shall first be reduced (if
necessary, to zero), and (B) all other noncash Change of Control Payments and/or
other noncash benefits provided for hereunder, in each case, to the extent still
unfurnished, shall next be reduced (if necessary, to zero), and (C) the
Executive shall have no right to receive hereunder, and neither the Company, any
person whose actions result in a Change in Control or any person affiliated with
the Company or such person shall be obligated to make, pay or furnish to the
Executive hereunder any payment or benefit in excess of those payments or
benefits provided hereunder as reduced, if applicable, pursuant to clause (A) or
clause (B) above. For purposes of this limitation (i) no portion of the Total
Payments the receipt or enjoyment of which the Executive shall have effectively
waived in writing prior to the date of termination shall be taken into account,
(ii) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (iii) the Change of Control Payments shall be
reduced only to the extent necessary so that the Total Payments (other than
those referred to in clauses (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning of
section 280G(b)(4)(B) of the Code or are otherwise not subject to disallowance
as deductions, in the opinion of the tax counsel referred to in clause (ii); and
(iv) the value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of the
Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Section 12.2, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate provided in section
1274(b)(2)(B) of the Code from the date of the Executive's receipt of such
excess until the date of such payment.
12.3 The payments and other items provided for in Section 12.1 (other than
Section 12.1(c)) hereof shall be made not later than the fifteenth (15th) day
following the date of termination or the date of exercise by Executive of any of
Executive's rights hereunder; provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in Section 12.2 hereof,
cannot be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount
thereof can be determined but in no event later than the thirtieth (30th) day
after the date of
-8-
<PAGE>
termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made under
this Section 12.3, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were calculated and
the basis for such calculations including, without limitation, any opinions or
other advice the Company has received from outside counsel, auditors or
consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
12.4 The Company also shall pay to the Executive all legal and accounting
fees and expenses incurred by the Executive as a result of a termination which
entitles the Executive to the Change of Control Payments (including all such
fees and expenses, if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder). Such payments shall be made within fifteen (15)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
12.5 For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(i) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any persons becomes the beneficial owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such person any securities acquired directly from the
Company or its affiliates, as such term is defined in the rules and
regulations of the Securities and Exchange Commission) representing 50.1% or
more of the combined voting power of the Company's then outstanding
securities; or
(II) during any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (I), (III) or
(IV) of this paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or
(III) the shareholders of the Company approve a merger or
statutory share exchange of the Company with any other corporation, other
than (i) a merger or statutory share exchange which would result in the
voting securities of the Company
-9-
<PAGE>
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
at least 75% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or statutory share exchange, or (ii) a merger or statutory share exchange
effected to implement a recapitalization of the Company (or similar
transaction) in which no person acquires more than 25% of the combined
voting power of the Company's then outstanding securities; or
(IV) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets.
(ii) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(iii) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, of any one of the following acts by the
Company, or failures by the Company to act:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as an executive officer of the Company or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change in
Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time;
(III) the relocation of the Company's principal executive offices to
a location outside a forty (40) mile radius from the city limits of
Birmingham, Alabama or the Company's requiring the Executive to be based
anywhere other than the metropolitan area in which the Executive is based
immediately prior to the Change in Control except for required travel on the
Company's business to an extent substantially consistent with the
Executive's present business travel obligations;
(IV) the failure by the Company, without the Executive's consent, to
pay to the Executive any portion of the Executive's current compensation or
to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately prior to
the Change in Control which is material to the Executive's total
compensation, including but not limited to the
-10-
<PAGE>
Company's stock option, incentive compensation, bonus and other plans or any
substitute plans adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue
the Executive's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount
of benefits provided and the level of the Executive's participation relative
to other participants, as existed at the time of the Change in Control; or
(VI) the failure by the Company to continue to provide the Executive
with benefits substantially similar to those enjoyed by the Executive under
any of the Company's pension, life insurance, medical, dental, health and
accident, or disability plans in which the Executive was participating at
the time of the Change in Control, the taking of any action by the Company
which would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the
Company to provide the Executive with the number of paid vacation days to
which the Executive is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in effect at
the time of the Change in Control;
provided, that, the Executive's right to terminate Executive's employment for
- --------------
Good Reason shall not be affected by the Executive's incapacity due to physical
or mental illness and the Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(iv) "person" shall mean legal person, whether an individual or an
entity, as the context may require.
13. SEVERABILITY. If any provision or part of any provision of this
Agreement is held invalid or unenforceable by a court of competent jurisdiction,
such holding shall not affect the enforceability of any other provisions or
parts thereof, and all other provisions and parts thereof shall continue in full
force and effect.
14. MISCELLANEOUS. This Agreement shall not be amended or modified except
by a writing executed by both parties. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns. Due to the
personal nature of this Agreement, Executive shall not have the right to assign
Executive's rights or obligations under this Agreement without the prior written
consent of Company. This Agreement shall be governed by the laws of the State
of Alabama without regard to its rules governing conflicts of law. This
Agreement and any attached exhibits represent the entire understanding of the
parties concerning the subject matter hereof and supersede all prior
communications, agreements and understandings, whether oral or written, relating
to the subject matter hereof. All communications required or otherwise provided
under this Agreement shall be in writing and shall be deemed given when
delivered to the address provided below such party's signature (as may be
amended by notice from time to time), by hand, by courier or express
-11-
<PAGE>
mail, or by registered or certified United States mail, return receipt
requested, postage prepaid. Exhibit A attached hereto is incorporated herein by
this reference.
[SIGNATURES ON FOLLOWING PAGE]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal effective as of the date first above written.
JUST FOR FEET, INC.
By: /s/ Harold Ruttenberg
-----------------------------------------
Title: Chairman & Chief Executive Officer
[CORPORATE SEAL]
Address:
7400 Cahaba Valley Road
Birmingham, Alabama 35242
EXECUTIVE:
/s/ Nicholas C. Kartalis (SEAL)
---------------------------------------
NICHOLAS C. KARTALIS
Address:
__________________________________________
__________________________________________
-13-
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
333-28041, 333-42313, 333-06531 and 333-96584 of Just For Feet, Inc. and
subsidiaries on Forms S-8 of our report dated April 23, 1999, appearing in the
Annual Report on Form 10-K of Just For Feet, Inc. for the year ended January 30,
1999.
DELOITTE & TOUCHE LLP
Birmingham, Alabama
April 27, 1999
<PAGE>
EXHIBIT 24.1
STATE OF ALABAMA
COUNTY OF ____________
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Randall L. Haines, a Director of
JUST FOR FEET, INC., a Delaware corporation (the "Company"), do constitute and
appoint Harold Ruttenberg and Eric L. Tyra, and each of them, my true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for me in any and all capacities, to sign, on my behalf and in
my stead pursuant to the requirements of the Securities Act of 1933, as amended
and the Securities Exchange Act of 1934, as amended (i) a Registration Statement
on Form S-8 to register additional shares for issuance pursuant to the Just For
Feet, Inc. 1997 Employee Incentive Plan; (ii) post-effective amendments to the
following Registration Statements: 33-80578, 33-96588, 333-06531, 333-28041,
333-96584, 333-26345 and 333-28039; and (iii) the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 1999, and to file the same with
the Securities and Exchange Commission, together with all exhibits thereto and
other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Registration Statements
or Reports, incorporating such changes as the said attorneys-in-fact deem
appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
March, 1999.
/s/ Randall L. Haines
-------------------------------
Randall L. Haines
ACKNOWLEDGEMENT
---------------
BEFORE me this 4th day of March, 1999, came Randall L. Haines, personally
known to me, who in my presence did sign and seal the above and foregoing Power
of Attorney and acknowledged the same as his true act and deed.
/s/ Deborah B. Partridge
-------------------------------
NOTARY PUBLIC
State of Alabama
My Commission Expires:
2/28/2000
-------------------------------
<PAGE>
EXHIBIT 24.2
STATE OF _____________
COUNTY OF ____________
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Michael P. Lazarus, a Director of
JUST FOR FEET, INC., a Delaware corporation (the "Company"), do constitute and
appoint Harold Ruttenberg and Eric L. Tyra, and each of them, my true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for me in any and all capacities, to sign, on my behalf and in
my stead pursuant to the requirements of the Securities Act of 1933, as amended
and the Securities Exchange Act of 1934, as amended (i) a Registration Statement
on Form S-8 to register additional shares for issuance pursuant to the Just For
Feet, Inc. 1997 Employee Incentive Plan; (ii) post-effective amendments to the
following Registration Statements: 33-80578, 33-96588, 333-06531, 333-28041,
333-96584, 333-26345 and 333-28039; and (iii) the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 1999, and to file the same with
the Securities and Exchange Commission, together with all exhibits thereto and
other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Registration Statements
or Reports, incorporating such changes as the said attorneys-in-fact deem
appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this ____ day of
________________, 1999.
/s/ Michael P. Lazarus
-------------------------------
Michael P. Lazarus
ACKNOWLEDGEMENT
---------------
BEFORE me this ____ day of _____________, 1999, came Michael P. Lazarus,
personally known to me, who in my presence did sign and seal the above and
foregoing Power of Attorney and acknowledged the same as his true act and deed.
-------------------------------
NOTARY PUBLIC
State of
----------------------
My Commission Expires:
-------------------------------
<PAGE>
EXHIBIT 24.3
STATE OF ALABAMA
COUNTY OF ____________
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Bart Starr, Sr., a Director of
JUST FOR FEET, INC., a Delaware corporation (the "Company"), do constitute and
appoint Harold Ruttenberg and Eric L. Tyra, and each of them, my true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for me in any and all capacities, to sign, on my behalf and in
my stead pursuant to the requirements of the Securities Act of 1933, as amended
and the Securities Exchange Act of 1934, as amended (i) a Registration Statement
on Form S-8 to register additional shares for issuance pursuant to the Just For
Feet, Inc. 1997 Employee Incentive Plan; (ii) post-effective amendments to the
following Registration Statements: 33-80578, 33-96588, 333-06531, 333-28041,
333-96584, 333-26345 and 333-28039; and (iii) the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 1999, and to file the same with
the Securities and Exchange Commission, together with all exhibits thereto and
other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Registration Statements
or Reports, incorporating such changes as the said attorneys-in-fact deem
appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 5th day of
March, 1999.
/s/ Bart Starr, Sr.
-------------------------------
Bart Starr, Sr.
ACKNOWLEDGEMENT
---------------
BEFORE me this 5th day of March, 1999, came Bart Starr, Sr., personally
known to me, who in my presence did sign and seal the above and foregoing Power
of Attorney and acknowledged the same as his true act and deed.
/s/ Leigh Anne Harrell
-------------------------------
NOTARY PUBLIC
State of Alabama
My Commission Expires:
9/17/2001
-------------------------------
<PAGE>
EXHIBIT 24.4
STATE OF GEORGIA
COUNTY OF PAULDING
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Edward S. Croft, III, a Director of
JUST FOR FEET, INC., a Delaware corporation (the "Company"), do constitute and
appoint Harold Ruttenberg and Eric L. Tyra, and each of them, my true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for me in any and all capacities, to sign, on my behalf and in
my stead pursuant to the requirements of the Securities Act of 1933, as amended
and the Securities Exchange Act of 1934, as amended (i) a Registration Statement
on Form S-8 to register additional shares for issuance pursuant to the Just For
Feet, Inc. 1997 Employee Incentive Plan; (ii) post-effective amendments to the
following Registration Statements: 33-80578, 33-96588, 333-06531, 333-28041,
333-96584, 333-26345 and 333-28039; and (iii) the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 1999, and to file the same with
the Securities and Exchange Commission, together with all exhibits thereto and
other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Registration Statements
or Reports, incorporating such changes as the said attorneys-in-fact deem
appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 5th day of
March, 1999.
/s/ Edward S. Croft, III
-------------------------------
Edward S. Croft, III
ACKNOWLEDGEMENT
---------------
BEFORE me this 5th day of March, 1999, came Edward S. Croft, III,
personally known to me, who in my presence did sign and seal the above and
foregoing Power of Attorney and acknowledged the same as his true act and deed.
/s/ Donna J. Hitchcock
-------------------------------
NOTARY PUBLIC
State of Georgia
My Commission Expires:
January 29, 2000
-------------------------------
<PAGE>
EXHIBIT 24.5
STATE OF NEW YORK
COUNTY OF QUEENS
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, David F. Bellet, a Director of JUST
FOR FEET, INC., a Delaware corporation (the "Company"), do constitute and
appoint Harold Ruttenberg and Eric L. Tyra, and each of them, my true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for me in any and all capacities, to sign, on my behalf and in
my stead pursuant to the requirements of the Securities Act of 1933, as amended
and the Securities Exchange Act of 1934, as amended (i) a Registration Statement
on Form S-8 to register additional shares for issuance pursuant to the Just For
Feet, Inc. 1997 Employee Incentive Plan; (ii) post-effective amendments to the
following Registration Statements: 33-80578, 33-96588, 333-06531, 333-28041,
333-96584, 333-26345 and 333-28039; and (iii) the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 1999, and to file the same with
the Securities and Exchange Commission, together with all exhibits thereto and
other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Registration Statements
or Reports, incorporating such changes as the said attorneys-in-fact deem
appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
March, 1999.
/s/ David F. Bellet
-------------------------------
David F. Bellet
ACKNOWLEDGEMENT
---------------
BEFORE me this 4th day of March, 1999, came David F. Bellet, personally
known to me, who in my presence did sign and seal the above and foregoing Power
of Attorney and acknowledged the same as his true act and deed.
/s/ Mavis Davidson
-------------------------------
NOTARY PUBLIC
State of New York
My Commission Expires:
7/25/2000
-------------------------------
<PAGE>
EXHIBIT 24.6
STATE OF MASSACHUSETTS
COUNTY OF PLYMOUTH
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that I, Warren C. Smith, Jr., a Director of
JUST FOR FEET, INC., a Delaware corporation (the "Company"), do constitute and
appoint Harold Ruttenberg and Eric L. Tyra, and each of them, my true and lawful
attorneys-in-fact and agents, each with full power of substitution and
resubstitution, for me in any and all capacities, to sign, on my behalf and in
my stead pursuant to the requirements of the Securities Act of 1933, as amended
and the Securities Exchange Act of 1934, as amended (i) a Registration Statement
on Form S-8 to register additional shares for issuance pursuant to the Just For
Feet, Inc. 1997 Employee Incentive Plan; (ii) post-effective amendments to the
following Registration Statements: 33-80578, 33-96588, 333-06531, 333-28041,
333-96584, 333-26345 and 333-28039; and (iii) the Company's Annual Report on
Form 10-K for the fiscal year ended January 30, 1999, and to file the same with
the Securities and Exchange Commission, together with all exhibits thereto and
other documents in connection therewith, and to sign on my behalf and in my
stead, in any and all capacities, any amendments to said Registration Statements
or Reports, incorporating such changes as the said attorneys-in-fact deem
appropriate, hereby ratifying and confirming all that said attorneys-in-fact, or
their substitute or substitutes, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 4th day of
March, 1999.
/s/ Warren C. Smith, Jr.
-------------------------------
Warren C. Smith, Jr.
ACKNOWLEDGEMENT
---------------
BEFORE me this 4th day of March, 1999, came Warren C. Smith, Jr.,
personally known to me, who in my presence did sign and seal the above and
foregoing Power of Attorney and acknowledged the same as his true act and deed.
/s/ Eileen M. Messlinger
-------------------------------
NOTARY PUBLIC
State of Massachusetts
My Commission Expires:
1/15/03
-------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> JAN-30-1999 JAN-31-1998
<PERIOD-START> FEB-01-1998 FEB-01-1997
<PERIOD-END> JAN-30-1999 JAN-31-1998
<CASH> 12,412 82,490
<SECURITIES> 0 0
<RECEIVABLES> 18,875 15,840
<ALLOWANCES> 0 0
<INVENTORY> 399,901 206,128
<CURRENT-ASSETS> 449,490 311,167
<PP&E> 188,606 108,487
<DEPRECIATION> 28,014 13,958
<TOTAL-ASSETS> 689,396 448,352
<CURRENT-LIABILITIES> 132,692 155,706
<BONDS> 0 0
0 0
0 0
<COMMON> 3 3
<OTHER-SE> 325,703 268,081
<TOTAL-LIABILITY-AND-EQUITY> 689,396 448,352
<SALES> 774,863 478,638
<TOTAL-REVENUES> 776,305<F1> 481,109<F1>
<CGS> 452,330 279,816
<TOTAL-COSTS> 698,504<F2> 426,203<F2>
<OTHER-EXPENSES> 26,413<F3> 19,240<F3>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,059 1,446
<INCOME-PRETAX> 43,329 34,220
<INCOME-TAX> 16,681 12,817
<INCOME-CONTINUING> 26,648 21,403
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 26,648 21,403
<EPS-PRIMARY> 0.87 0.72
<EPS-DILUTED> 0.84 0.70
<FN>
<F1> Includes sales, franchise fees, royalties and other revenue and interest
income.
<F2> Includes CGS, store operating and store opening costs.
<F3> Includes amortization of intangibles and general and administrative.
</FN>
</TABLE>
