<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended JANUARY 29, 1994
Commission File No. 0-6319
JACOBSON STORES INC.
MICHIGAN 38-0686330
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
3333 SARGENT ROAD, JACKSON, MICHIGAN 49201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: 517-764-6400
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $1 PAR VALUE
SERIES A PREFERRED STOCK PURCHASE RIGHTS
6-3/4% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2011
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 [ ]
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]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.
$45,813,000 AS OF MARCH 1, 1994
(THE PERSONS CONSIDERED AFFILIATES FOR THE PURPOSE OF THE FOREGOING COMPUTATION
ARE IDENTIFIED ON PAGE 18 OF THIS REPORT.)
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
COMMON STOCK $1 PAR VALUE: 5,779,021-2/3 SHARES OUTSTANDING,
EXCLUDING 187,200 SHARES HELD IN TREASURY, AS OF MARCH 1, 1994
DOCUMENTS INCORPORATED BY REFERENCE
LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE
PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED:
SPECIFIED PORTIONS OF PROXY STATEMENT FOR 1994 ANNUAL MEETING OF
SHAREHOLDERS, TO BE HELD MAY 26, 1994: PART III
<PAGE> 2
JACOBSON STORES INC.
FORM 10-K
FISCAL YEAR ENDED JANUARY 29, 1994
INDEX
<TABLE>
<CAPTION>
Page
----
PART I.
<S> <C>
Item 1. Business. 1
Item 2. Properties. 7
Item 3. Legal Proceedings. 9
Item 4. Submission of Matters to a Vote of
Security Holders. 9
Executive Officers of the Registrant. 9
PART II.
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters. 11
Item 6. Selected Financial Data. 12
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 12
Item 8. Financial Statements and Supplementary
Data. 17
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. 17
PART III.
Item 10. Directors and Executive Officers of
the Registrant. 18
Item 11. Executive Compensation. 18
Item 12. Security Ownership of Certain Beneficial
Owners and Management. 18
Item 13. Certain Relationships and Related
Transactions. 18
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 19
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SIGNATURES 23
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1/F-17
FINANCIAL STATEMENT SCHEDULES S-1/S-5
INDEX OF EXHIBITS E-1/E-2
</TABLE>
ii
<PAGE> 4
PART I
ITEM 1. BUSINESS.
INTRODUCTION
The registrant, Jacobson Stores Inc., a Michigan corporation, operates
specialty department stores catering to discerning customers with preferences
for fine merchandise. The Company emphasizes quality merchandise, fully
staffed stores, personalized customer service and attractive, comfortable
shopping surroundings. Each store features a full line of fashion apparel and
accessories for women, men and children, and most offer accessories for the
home.
The Company owns a substantial portion of the real property used in its
business, primarily through its consolidated, wholly-owned real estate
subsidiary, Jacobson Stores Realty Company ("Jacobson Realty"). The Company
finances customer receivables through Jacobson Credit Corp. ("Jacobson
Credit"), its consolidated, wholly-owned finance subsidiary. As used in this
report, the terms "registrant", "Company" and "Jacobson's" refer to Jacobson
Stores Inc. and its subsidiaries unless the context indicates otherwise.
Jacobson's operates in two regions, with stores in twenty-five cities in
Michigan, Ohio, Indiana and Florida. The Company maintains separate staffs of
buyers for each region in order to better respond to customers' lifestyles and
merchandise preferences. The principal merchandising and distribution
functions are performed through regional distribution facilities. Functions
common to all stores, such as management coordination, sales promotion, data
processing and accounting, are centralized at the corporate headquarters in
Jackson, Michigan.
MERCHANDISE AND MARKETING
Merchandise. Jacobson's directs its primary merchandising and marketing
efforts to discerning customers with preferences for fine merchandise. Stores
are merchandised with a full line of fashion apparel and accessories for women,
men and children, and most offer accessories for the home.
The percentage contribution to sales by major class of merchandise for the
last three fiscal years was as follows:
1
<PAGE> 5
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------
January, January, January,
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
OWNED DEPARTMENTS:
Women's apparel and accessories 64.6% 64.3% 63.5%
Men's apparel and accessories 12.5 12.6 12.5
Accessories for the home . . . . 9.5 9.3 9.7
Children's apparel and
accessories . . . . . . . . . 9.1 9.3 9.7
Miscellaneous . . . . . . . . . 2.4 2.5 2.5
----- ----- -----
98.1 98.0 97.9
LEASED DEPARTMENTS:
Beauty Salons . . . . . . . . . 1.9 2.0 2.1
----- ----- -----
100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>
The Company's beauty salons are operated under license agreements which
provide for a commission based on sales of the licensee.
PERSONAL SERVICE. Jacobson's stores are fully staffed with knowledgeable
salespeople to ensure that customers receive prompt personal attention.
Jacobson's salespeople are experienced and well-trained through video
presentations, seminars and close working relationships with buyers and
merchandise managers. Salespeople maintain personal trade lists of their
customers' sizes, colors, fashion preferences, and important dates, and contact
customers by telephone or personal note to alert them to the arrival of new
merchandise or to remind them of birthdays or anniversaries. Management
believes that personal relationships between salespeople and their clientele
promote customer loyalty and contribute to the Company's growth. Other special
services include free gift wrapping and free parking. All regularly scheduled
Jacobson's salespeople are compensated on some form of commission program.
SALES PROMOTION. The Company uses newspaper, radio, television and direct
mail advertising, as well as in-store events and billing statement enclosures,
to stimulate sales. Advertising generally is institutional and focuses on
current fashions and merchandise classifications. The Company's policy is to
price merchandise fairly and competitively and to avoid sale events other than
end-of-season clearances. Although advertisements usually mention price,
Jacobson's refrains from comparative pricing (comparing the advertised price to
a higher original price) in its advertising. Management believes that this
practice enhances credibility and customer loyalty. Jacobson's in-store
events include fashion shows and wardrobing seminars to communicate fashion
trends to customers.
STORE DESIGN. Jacobson's stores are designed to project an attractive,
comfortable atmosphere similar to the style customers find in their own homes.
All aspects of the store interiors and fixturing are coordinated by the
Company's store planning personnel, using quality fixtures, carpeting, lighting
and displays.
2
<PAGE> 6
CREDIT POLICY
Jacobson's issues its own credit card as a customer service. The Company
offers two credit plans to its cardholders: an option plan requiring a minimum
monthly payment of 20% of the outstanding balance, and an extended payment plan
available primarily for furs, fine jewelry, and furniture purchases in the
Company's stores which carry furniture (see "General Development of Business"
on page 6).
Sales under Jacobson's credit plans averaged 50.6% of sales for the last
three fiscal years and accounted for 48.4% of the Company's sales in fiscal
1993. In addition, sales under third party credit cards (VISA, MasterCard and
American Express) averaged 29.0% of sales for the last three fiscal years and
accounted for 31.6% of the Company's sales in fiscal 1993. Credit losses
relating to the Company's credit card have averaged 0.52% of credit sales over
the last three years (ranging from 0.40% to 0.61%).
The Company maintains purchasing and payment history on its 306,000 active
account holders, which permits targeting of direct mail advertising and
automatic increases of credit limits.
OPERATIONS
The Company operates in two regions, the Midwest and Florida. The
principal merchandising and distribution functions for the Michigan, Ohio and
Indiana stores are performed at the Company's central distribution facility in
Jackson, Michigan. The principal merchandising and distribution functions for
the Florida stores are performed in Winter Park, Florida. Functions common to
all stores, such as management coordination, sales promotion, data processing
and accounting, are centralized at the corporate headquarters in Jackson,
Michigan.
Jacobson's stores in Michigan are located in Birmingham, Dearborn, Grosse
Pointe, Livonia and Rochester (all suburbs of Detroit), Ann Arbor, East Grand
Rapids, East Lansing, Jackson, Kalamazoo and Saginaw; in Ohio, in Columbus and
Toledo; in Indiana, in Indianapolis; and in Florida, in Clearwater, Fort Myers,
Jacksonville, Longwood, Naples, North Palm Beach, Osprey, Sarasota, Tampa and
Winter Park. In addition, the Company has a clearance center in Troy,
Michigan, a suburb of Detroit. Stores in Michigan, Ohio and Indiana range from
101,000 to 210,000 square feet, except for the clearance center, which is
34,000 square feet. The Florida stores range from 23,000 to 90,000 square
feet.
In most of its stores, Jacobson's maintains a policy of limited evening
hours, except during the holiday season. Stores are generally open a maximum
of 59 hours each week, except during the holiday season.
3
<PAGE> 7
Annual sales, percentage increase in sales, average gross square footage
of stores in operation during the fiscal year, and approximate sales per
average gross square foot were as follows:
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------
January, January, January,
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net sales, including leased
departments (in thousands) . . . . . . . . . . . . . . $403,816 $411,631 $395,677
Percentage increase (decrease)
in sales:
All stores . . . . . . . . . . . . . . . . . . . . . (1.9)% 4.0% 0.4%
Same stores . . . . . . . . . . . . . . . . . . . . . (4.1)% 2.9% 0.4%
Average gross square footage
(in thousands) . . . . . . . . . . . . . . . . . . . . 2,454 2,433 2,425
Approximate sales per average
gross square foot . . . . . . . . . . . . . . . . . . . 165 169 163
</TABLE>
PURCHASING, CONTROL AND DISTRIBUTION OF INVENTORY
Jacobson's purchases merchandise from several thousand suppliers, no one
of which accounted for as much as 3% of the Company's net purchases during
fiscal 1993. The Company maintains separate staffs of buyers for its Midwest
and Florida stores to better respond to customer lifestyles and merchandise
preferences. Merchandising decisions are directed by 3 general merchandise
managers, 11 divisional merchandise managers, 76 buyers and 13 assistant
buyers. In addition, the Company is a member of Frederick Atkins, Inc., a
domestic and foreign buying office serving approximately 30 retailers, which
provides merchandising counsel, product information, direct store import
capability, and other services.
An on-line computerized merchandise information system provides the
Company's buyers with detailed reports of current sales and inventory levels
for each store, by department, vendor, class, style, color and size. This
system permits the Company's merchandising staff to analyze trends on a daily
basis, to identify fast-selling and slow-selling merchandise and to respond to
customer buying preferences when making reorder and markdown decisions.
Merchandise is generally shipped directly from vendors to the Company's
regional distribution centers in Jackson, Michigan and in Winter Park, Florida,
where it is inspected for quality by the Company's buyers, priced and shipped
to the stores by Jacobson's fleet of trucks.
Jacobson's adopted the LIFO method of inventory valuation in 1968. At the
end of fiscal 1993, LIFO reserves totalled $19,839,000, or approximately 19.7%
of pre-LIFO inventory values. Physical inventories are taken at least once
each year. Inventory shrinkage at retail over the past three fiscal years has
averaged 2.2% to owned retail sales.
4
<PAGE> 8
EXPANSION
Jacobson's current strategy is to open one new store each year, to the
extent feasible, and to renovate one store each year.
In September 1993, the Company relocated its Ann Arbor, Michigan store to
a 101,000 square foot building and related parking area in Briarwood Mall. The
Company owns its building and related parking area.
The Company has signed a lease for a 161,000 square foot store and related
parking area in Oxmoor Center, Louisville, Kentucky, for a November 1994
opening.
The Company intends to continue expanding its operations in its Midwest
and Florida regions as desirable opportunities arise and resources permit.
REAL ESTATE POLICY
Jacobson's strategy is to own or obtain long-term leases of the real
estate used in the operation of its business. Through Jacobson Realty, the
Company owns approximately 72% of the total square footage used in its
business. The Company uses cash flow equal to depreciation to maintain a
continuing program of property improvements and renewal of existing stores and
support facilities. New stores and major expansion projects generally are
financed by mortgage loans or comparable financing, or through long-term
leases. At January 29, 1994, mortgage loans and related secured financings
comprised approximately 47% of consolidated debt.
COMPETITION
The specialty department store business is highly competitive. The
Company's stores are in active competition with other department and specialty
stores and with regional and national department store chains, some of which
are considerably larger than the Company and have substantially greater
financial and other resources. Jacobson's competes principally on the basis of
availability of fashion merchandise, quality, personalized service and
attractive store surroundings, as well as fair pricing and advertising. The
Company believes it is a respected retail merchandiser in the communities it
serves, and that its merchandising policies and reputation enable it to
maintain its competitive position.
EMPLOYEES
Jacobson's believes that its employees are among its key resources.
Management stresses development programs for employees and promotion from
within. The Company employs approximately 5,200 employees, 4,000 full-time and
1,200 part-time. During the holiday season, the number of employees increases
to approximately 5,900.
5
<PAGE> 9
From February to June 1992, the Company sustained a strike of 225
employees at its Central Distribution Center in Jackson, Michigan. The Company
hired 75 permanent replacements. During fiscal 1993, the Company experienced
picketing at some of its stores, and has responded to unfair labor practice
charges filed by the Teamsters with the National Labor Relations Board.
At the date of filing this report, the terms of a new contract have been
agreed on and ratified by the local union members.
- - - - -
(a) GENERAL DEVELOPMENT OF BUSINESS.
Some of the principal developments in Jacobson's business during
fiscal 1993 and the current year to date are summarized on page 5 of this
report under the caption "Expansion." To finance this expansion, the Company
has a 10-year term loan agreement which provides for borrowings of up to $40
million on an unsecured basis. At January 29, 1994, the Company had borrowed
$20 million under this facility. In addition, the Company's wholly-owned
finance subsidiary has an unsecured line of credit of $35 million under a
3-year revolving credit agreement.
In August 1993, the Company announced its decision to phase out
furniture departments in six stores, in order to provide increased space for
fashion apparel, accessories and home decorative departments. Furniture had
comprised less than 2% of Company-wide annual sales. The six stores affected
were Birmingham, Dearborn, East Lansing, Jackson, Kalamazoo and Livonia,
Michigan. The phase-out of furniture operations in these six stores was
completed in November 1993.
At fiscal year-end, furniture inventories had been reduced to 25%
of July 1993 furniture inventory levels, and were 1.0% of total Company
inventory levels. Furniture departments will remain in the Company's Saginaw,
Michigan and Sarasota, Florida stores.
(b) INDUSTRY SEGMENTS AND LINES OF BUSINESS.
Jacobson's operates in a single industry, the specialty
department store industry.
The percentage contribution to sales by major classes of
merchandise for each of the last three fiscal years is set forth on page 2 of
this report.
6
<PAGE> 10
(c) NARRATIVE DESCRIPTION OF BUSINESS.
The nature of Jacobson's business, the categories of merchandise
it sells, and the percentage contribution to sales by merchandise categories
during the past three fiscal years, are set forth on pages 1-2 of this report.
The specialty department store business is seasonal. The holiday
season (from the day after Thanksgiving to January 1) generally accounts for
15-20% of Jacobson's net sales.
By reason of the seasonal nature of the business, Jacobson's and
others in the industry experience significant build-up of inventory and
accounts receivable at certain times of the year. To support the seasonal
requirements, Jacobson Credit has an unsecured line of credit of $35,000,000
under a revolving credit agreement. Further information on this line of credit
is set forth in the Notes to the Company's Consolidated Financial Statements
for the three fiscal years ended January 1994, filed as part of this report
(see "Financing" on page F-9).
Competitive conditions in the specialty department store business
are discussed on page 5 of this report.
Information with respect to the Company's employees is provided
on pages 5-6 of this report.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES.
The registrant has no foreign operations and no material export
sales.
ITEM 2. PROPERTIES.
(a) The following table shows the location and approximate size of
Jacobson's stores and its offices and principal warehouse and distribution
facilities; whether owned by the registrant or leased; and the expiration dates
(including renewal options) of principal real estate leases. Most such owned
properties are subject to mortgage. In several cities, the store consists of
two or more buildings.
Jacobson's management considers that these properties, as well as its
furniture, fixtures, machinery and equipment, are well maintained, suitable and
adequate for their intended purposes, and in general fully utilized.
7
<PAGE> 11
<TABLE>
<CAPTION>
Approximate Expiration
Total Square Dates of
Feet of Principal
Locations Building(s) Ownership Leases
--------- ------------ --------- ----------
<S> <C> <C> <C>
MICHIGAN
- --------
Jackson. . . . . . . . . . . . . . . 105,000 Partly owned (1) 2006, 2016
Ann Arbor. . . . . . . . . . . . . . 101,000 Owned ----
East Lansing. . . . . . . . . . . . 117,000 Partly owned (2) 2028
Saginaw. . . . . . . . . . . . . . . 199,000 Partly owned (3) 1994
Grosse Pointe. . . . . . . . . . . . 151,000 Owned ---
Birmingham. . . . . . . . . . . . . 210,000 Partly owned (4) 2008, 2011
Kalamazoo. . . . . . . . . . . . . . 131,000 Leased (5) 1994, 2010
Dearborn. . . . . . . . . . . . . . 145,000 Owned ----
East Grand Rapids. . . . . . . . . . 148,000 Owned ----
Rochester. . . . . . . . . . . . . . 106,000 Partly owned (6) 2046
Livonia. . . . . . . . . . . . . . . 150,000 Owned ----
Troy Clearance Center 34,000 Leased 2002
Central Office and
Distribution Center
(Jackson). . . . . . . . . . . . . 238,000 Owned ----
INDIANA
- -------
Indianapolis . . . . . . . . . . . . 120,000 Leased 2048
OHIO
- ----
Toledo . . . . . . . . . . . . . . . 120,000 Owned ----
Columbus . . . . . . . . . . . . . . 119,000 Partly owned (7) 2079
FLORIDA
- -------
Sarasota . . . . . . . . . . . . . . 25,000 Partly owned (7) 2014
Winter Park. . . . . . . . . . . . . 23,000 Leased 2013
Longwood . . . . . . . . . . . . . . 49,000 Leased 2020
North Palm Beach . . . . . . . . . . 90,000 Leased 2022
Osprey . . . . . . . . . . . . . . . 32,000 Leased 2025
Clearwater . . . . . . . . . . . . . 52,000 Leased 2039
Fort Myers . . . . . . . . . . . . . 51,000 Partly owned (8) 2085
Jacksonville . . . . . . . . . . . . 57,000 Leased 2043
Tampa. . . . . . . . . . . . . . . . 48,000 Leased 2030
Naples . . . . . . . . . . . . . . . 46,000 Leased 2042
Regional Distribution
Center (Winter Park) 84,000 Owned ----
</TABLE>
(1) Approximately 28,000 square feet owned; balance leased.
(2) Building is owned; approximately half of land is owned and half leased.
(3) Approximately 29,000 square feet leased from month to month; balance
owned.
(4) Birmingham Fashion Apparel Store (98,000 square feet) is owned. The
Men's Store and Store for the Home (81,000 square feet) include
approximately 64,000 square feet owned; the balance is leased.
The Children's Store (31,000 square feet) is leased from an 80%-owned
subsidiary of Jacobson Stores Realty Company; see Exhibit 21.
8
<PAGE> 12
(5) Kalamazoo Apparel Store (83,000 square feet) is leased pursuant to
lease purchase contract with The Economic Development
Corporation of the City of Kalamazoo. The Store for the Home (48,000
square feet) is leased.
(6) Approximately 71,000 square feet and related parking area are owned.
The balance of the shopping center is leased, of which
35,000 square feet are operated as part of Jacobson's store.
(7) Building is owned on leased land.
(8) Building is owned; land and parking area are leased.
(b) Not applicable.
ITEM 3. LEGAL PROCEEDINGS.
No material legal proceedings are pending to which Jacobson Stores Inc. or
any of its subsidiaries is a party or to which any of their property is
subject, other than ordinary routine litigation incidental to the registrant's
business, and no such proceeding is known by the registrant to be contemplated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The table below sets forth the name and age of each executive officer of
the registrant, all positions and offices with Jacobson Stores Inc. and its
wholly-owned subsidiaries held by each such person, and the period during which
the officer has served in such positions. Each has been elected to hold office
until the 1994 Annual Meeting or until a successor is elected and qualified.
<TABLE>
<CAPTION>
Held
Name Age Positions and Offices Office Since
---- --- --------------------- ------------
<S> <C> <C> <C>
Mark K. Rosenfeld 48 Chairman of the Board and 1993
Chief Executive Officer,
and Director, Jacobson
Stores Inc. and wholly-
owned subsidiaries
Paul W. Gilbert 49 Vice Chairman of the Board, 1993
and Director, Jacobson
Stores Inc. and wholly-owned
subsidiaries
James B. Fowler 46 President and Director, 1993
Jacobson Stores Inc. and
wholly-owned subsidiaries
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
Held
Name Age Positions and Offices Office Since
---- --- --------------------- ------------
<S> <C> <C> <C>
Joseph H. Fisher 58 Senior Vice President- 1991
General Merchandise Manager,
Jacobson Stores Inc.
Nathan Forman* 67 Senior Vice President - 1984
General Merchandise Manager,
Jacobson Stores Inc.
George P. Kelly 57 Senior Vice President- 1994
General Merchandise Manager,
Jacobson Stores Inc.
Theodore R. Kolman 53 Senior Vice President- 1991
General Merchandise Manager,
Jacobson Stores Inc.
Robert L. Moles 52 Senior Vice President-Stores 1986
Jacobson Stores Inc.
Timothy J. Spalding 38 Vice President and Controller, 1991
Jacobson Stores Inc. and
wholly-owned subsidiaries
</TABLE>
*Mr. Forman retired as Senior Vice President-
General Merchandise Manager in February 1994.
There is no arrangement or understanding between any of the officers and
any other person pursuant to which the officer was selected as an officer.
Each executive officer except Mr. Kelly and Mr. Kolman has held managerial
or executive positions with Jacobson's for more than five years.
Before joining Jacobson's as Senior Vice President - General Merchandise
Manager in February 1994, Mr. Kelly was Chairman and Chief Executive Officer,
Marshall Field & Co., 1978-83, President, Mallard's Enterprises, Inc.,
1984-1992, and Chief Operating Officer, Brands of Indiana, 1993-1994.
Before joining Jacobson's in 1990, Mr. Kolman was Senior Vice President
and General Merchandise Manager, Robinson's of Florida, Inc., 1982-1987, and
Assistant to the Chief Executive Officer, Cohoes Specialty Stores, 1987-1990.
He was General Merchandise Manager-Home Furnishings Division, Jacobson Stores
Inc., from 1990 to 1991, and has been Senior Vice President-General Merchandise
Manager since May 1991.
10
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the NASDAQ National Market, under
the symbol "JCBS."
The quarterly range of high and low price quotations of Jacobson's Common
Stock and dividends paid per share are shown in the following schedule:
<TABLE>
<CAPTION>
Dividends
Per
Year Quarter High Low Share
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 4th $14 $11-3/4 $.12-1/2
---- 3rd 13 11 .12-1/2
2nd 14 11-3/4 .12-1/2
1st 16-1/2 11-3/4 .12-1/2
1992 4th $17-1/4 $13-3/4 $.12-1/2
---- 3rd 17-3/4 14-1/2 .12-1/2
2nd 18 14-1/2 .12-1/2
1st 19 15-1/4 .12-1/2
1991 4th $19 $15-1/2 $.12-1/2
---- 3rd 19 16 .12-1/2
2nd 21-1/8 15-3/4 .12-1/2
1st 17-1/4 13-1/2 .12-1/2
</TABLE>
The approximate number of shareholders of Jacobson common stock of record
as of March 1, 1994 was 1,485.
11
<PAGE> 15
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for fiscal 1989 through 1993 is as follows:
<TABLE>
<CAPTION>
(in thousands except
per share data) 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales, including
leased departments . . . . . . . . . . $403,816 $411,631 $395,677 $394,009 $394,181
Earnings before income taxes 4,610 5,894 6,494 2,862 17,477
Net earnings . . . . . . . . . . . . . . 3,014 3,910 4,218 2,365 11,801
Total assets . . . . . . . . . . . . . . 248,818 250,395 239,460 240,764 250,066
Long-term debt, less current
portion . . . . . . . . . . . . . . . . 108,203 105,270 97,514 103,597 110,158
Per common share:
Net earnings -
. Primary . . . . . . . . . . . . . . . $ 0.52 $ 0.68 $ 0.73 $ 0.41 $ 2.04
. Fully diluted . . . . . . . . . . . . 0.52 0.68 0.73 0.41 1.95
Cash dividends . . . . . . . . . . . . 0.50 0.50 0.50 0.50 0.48-1/2
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table shows the percentage relationship to sales of the
items presented for the periods indicated.
<TABLE>
<CAPTION>
1993 1992 1991
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales, including leased departments 100.0% 100.0% 100.0%
Gross profit . . . . . . . . . . . . . 33.9 33.7 34.0
Selling, general and administrative
expenses . . . . . . . . . . . . . . 31.1 30.4 30.3
Interest expense, net . . . . . . . . . 1.9 1.9 2.1
Gain on sale of property . . . . . . . 0.2 - -
Earnings before income taxes . . . . . 1.1 1.4 1.6
Net earnings . . . . . . . . . . . . . 0.7 0.9 1.1
</TABLE>
12
<PAGE> 16
1993 versus 1992
Sales in 1993 totalled $403,816,000, a decrease of 1.9% from 1992. The
1992 fiscal year included 53 weeks. On an equivalent 52 week basis, 1993 sales
increased 0.1% and comparable store sales decreased 2.0%.
Women's apparel and accessories represented 64.6% of the Company's total
business in 1993. Other major components were men's 12.5%, home accessories
9.5%, children's 9.1% and miscellaneous 2.4%. Leased department sales amounted
to 1.9% of net sales in 1993.
The Company's gross profit percentage increased to 33.9% in 1993 from
33.7% in 1992, reflecting a higher markup percentage and lower markdowns.
These improvements were partially offset by occupancy costs associated with a
new store opened in November 1992 and higher inventory shortage. The 1993 LIFO
benefit (including liquidation of most furniture LIFO reserves, as discussed
below) reduced cost of merchandise sold by $181,000. The 1992 LIFO benefit
totalled $201,000.
Selling, general and administrative expenses, as a percentage of sales,
were 31.1% compared to 30.4% in 1992. This increase is due primarily to the
decrease in sales and resulting lack of expense leverage. Selling, general and
administrative expense dollars were essentially unchanged from 1992,
principally reflecting the impact of one less week in 1993 and a reduction in
health care expenses.
Interest expense in 1993 was substantially unchanged from 1992. The
first full year impact of interest on $20,000,000 borrowed in November 1992
under the Company's term loan facility was offset by lower interest on real
estate debt and interest capitalized on construction projects.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", as of the beginning of the
1993 fiscal year. Adoption had an immaterial impact on net earnings.
1993 net earnings totalled $3,014,000 or 52 cents per common share,
compared to 1992 net earnings of $3,910,000 or 68 cents per share. As a
percentage of sales, net earnings were 0.7% in 1993 as compared to 0.9% in
1992.
Net earnings in 1993 include an after-tax gain on sale of property of
$636,000 or 11 cents per share.
In the Fall 1993, the Company phased out furniture departments in six
stores to provide increased space for fashion apparel, accessories and home
decorative departments. Furniture comprised less than 2 percent of
Company-wide annual sales. Operating results for 1993 include a $1,400,000
reduction in the LIFO provision to reflect liquidation of most furniture LIFO
reserves, largely offset by a charge to write down furniture inventories to net
realizable value. The impact on net earnings was immaterial.
13
<PAGE> 17
1992 versus 1991
Sales in 1992 totalled $411,631,000, an increase of 4.0% over 1991.
Comparable store sales increased 2.9%. The 1992 fiscal year included 53 weeks.
On an equivalent 52 week basis, the total sales gain was 2.4% and comparable
store sales increased 1.4%. The 1992 comparable store sales increase reflects
a sluggish economy, particularly in Michigan, with moderate price inflation
primarily responsible for the reported sales gain.
Women's apparel and accessories represented 64.3% of the Company's total
business in 1992. Other major components were men's 12.6%, home accessories
9.3%, children's 9.3%, and miscellaneous 2.5%. Leased department sales
amounted to 2.0% of net sales in 1992.
The Company's gross profit percentage was 33.7% in 1992, down from 34.0%
in 1991. This change reflects higher markdown levels and inventory shortage,
the result of a sluggish economy and the general business activity level in
Michigan stores, and of a four-month strike by distribution center employees
and truck drivers in the Company's Jackson, Michigan, central distribution
facility from February through May. This work stoppage delayed receipt of
seasonal merchandise in the Company's Midwestern stores, resulting in
significantly higher markdowns throughout the Spring/Summer season and into the
early Fall. These additional costs were substantially offset by a LIFO benefit
which reduced cost of merchandise sold by $201,000 in 1992 compared to a LIFO
charge of $2,076,000 in 1991.
Selling, general and administrative expenses, as a percentage of sales,
were 30.4% in 1992 compared to 30.3% in 1991. This change was primarily
associated with increased health care expense offset by lower operating
payrolls.
Interest expense decreased in 1992 from 1991, resulting from the March
1992 redemption of the Company's $10,000,000 10% Subordinated Debentures,
partially offset by interest on $20,000,000 borrowed by the Company in November
1992 under its term loan facility and by lower short-term investment income.
1992 net earnings totalled $3,910,000 or 68 cents per common share,
compared to 1991 net earnings of $4,218,000 or 73 cents per common share. As a
percentage of sales, net earnings were 0.9% in 1992 as compared to 1.1% in
1991.
14
<PAGE> 18
INFLATION
The Company cannot determine the precise effects of inflation on its
business. Because of inflation, the Company experienced increases in the cost
of merchandise and in certain operating expenses. The Company generally has
been able to offset the effects of these increased expenses by adjusting
prices, by using the LIFO method for valuing all merchandise inventories and by
controlling expenses. The Company's ability to adjust prices is limited by
competitive pressures in its market areas. The Department Store Inventory
Price Indexes, published by the Bureau of Labor Statistics, are used to measure
inflation's impact on inventories in the LIFO valuation. The BLS Index
increased 1.3% overall in 1993, 0.6% in 1992, and 2.3% in 1991.
LIQUIDITY AND CAPITAL RESOURCES
At January 29, 1994, the Company's current ratio was 3.13 to 1 and
working capital totalled $93,348,000, including $5,899,000 of cash and cash
equivalents. At January 30, 1993, the current ratio was 3.07 to 1 and working
capital totalled $100,779,000, including $8,301,000 of cash and cash
equivalents. At January 25, 1992, the current ratio was 2.96 to 1 and working
capital approximated $92,215,000, including $5,111,000 of cash and cash
equivalents.
The Company utilizes cash flows from operations and short-term
borrowings to fund its seasonal working capital needs. To support its seasonal
requirements, the Company maintains a $35,000,000 unsecured revolving credit
line through its consolidated, wholly-owned finance subsidiary, Jacobson Credit
Corp. This facility provides for either or both of two interest rate
alternatives. At January 29, 1994, no borrowings were outstanding under this
facility. The Company also maintains a 10-year term loan facility which
provides for borrowings of up to $40,000,000 on an unsecured basis at market
rates in effect at the time of such borrowings. At January 29, 1994, the
Company had borrowed $20,000,000 under this facility. These facilities provide
sufficient capacity to fund present and anticipated working capital
requirements.
A part of the Company's financial strategy is to own, or obtain
long-term leases of its properties. Capital expenditures to modernize and
refixture existing stores and support facilities generally are financed with
internally-generated funds. New stores and major expansion projects generally
are financed by first mortgages or comparable financing through the Company's
consolidated, wholly-owned real estate subsidiary, Jacobson Stores Realty
Company, or through long-term leases. Future expansion is expected to be
financed in a similar manner.
15
<PAGE> 19
CASH FLOWS
Cash and cash equivalents decreased $2,402,000 in 1993, increased
$3,190,000 in 1992 and decreased $1,415,000 in 1991. Cash flows are impacted
by operating, investing and financing activities. In 1993, operating
activities provided $16,303,000 of cash, up from $7,684,000 in 1992 and
$14,623,000 in 1991. The increase in 1993 versus 1992 reflects principally
reductions in inventory levels, including discontinuance of most furniture
departments. The reduction in 1992 versus 1991 reflects primarily start-up
working capital requirements for a new store opened in late 1992.
Investing activities used cash of $18,263,000, $8,381,000 and $5,092,000
in 1993, 1992 and 1991, respectively. Investing activities included capital
expenditures for the acquisition and fixturing of new stores, and expansion,
modernization and refixturing of existing stores and support facilities
totalling $17,519,000, $6,034,000 and $3,619,000 in 1993, 1992, and 1991,
respectively. In addition, the Company incurred capital lease obligations (not
included in cash investing activities above) primarily for computer hardware
and related software totalling $1,085,000, $1,257,000 and $2,143,000 in 1993,
1992 and 1991, respectively.
Financing activities used cash of $442,000 in 1993, provided cash of
$3,887,000 in 1992 and used cash of $10,946,000 in 1991. In 1993, the Company
obtained $8,000,000 first mortgage financing, and used $5,552,000 of cash to
service current maturities of long-term debt and to retire the mortgage debt on
its former downtown store facility in Ann Arbor. The Company borrowed
$20,000,000 in 1992 at a fixed rate of 7.73% under its term loan facility, and
used $13,224,000 of cash to redeem its $10,000,000 10% Subordinated Debentures
due April 1993 and to service current maturities of long-term debt. In 1991,
the Company retired a $5,000,000 unsecured Term Loan at maturity and used
$3,056,000 of cash to service current maturities of long-term debt. The
Company paid common stock dividends of $2,890,000 in each of 1993, 1992 and
1991.
The Company believes its cash flows from operations, along with its
borrowing capacity and access to financial markets are adequate to fund its
operations, debt maturities and strategies for future growth.
CORPORATE DEVELOPMENT
The Company's strategy is to achieve consistent, long-term growth both
by maintaining and improving market share in its existing communities and by
entering new markets.
In 1992, the Company completed a 37,000 square foot expansion of its
Florida regional distribution center using internally generated funds and
opened a 46,000 square foot leased store in a new shopping center, Waterside
Shops at Pelican Bay, Naples, Florida.
16
<PAGE> 20
In January 1993, the Company purchased a 101,000 square foot building
and related parking in Briarwood Mall, Ann Arbor, Michigan, and relocated its
store operations to that location in September 1993. The Company obtained
mortgage financing to fund the purchase and renovation of the Briarwood store.
The Company sold its interest in its former downtown store facility.
In March 1994, the Company signed a lease for a 161,000 square foot
building and related parking in the Oxmoor Center, Louisville, Kentucky. The
Company is currently renovating the building and plans to open the store in
November 1994.
An Equal Employment Opportunity Commissioner's Charge was filed against
the Company in June 1984, alleging discriminatory recruiting and hiring
practices in three of the Company's stores. In September 1992, the Commission
issued its determination that there was reasonable cause to believe that the
Company had engaged in certain unlawful employment practices at those three
locations in violation of Title VII of the Civil Rights Act of 1964. In June
1993, the Company and the Commission executed a Conciliation Agreement to
settle the Charge. The settlement did not have a material effect on the
Company's operating results and financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements and supplementary financial
information are filed as part of this report on pages F-1 through F-17 and S-1
through S-5:
Consolidated Statements of Earnings, Three Fiscal Years Ended
January 29, 1994.
Consolidated Statements of Cash Flows, Three Fiscal Years
Ended January 29, 1994.
Consolidated Balance Sheets, January 29, 1994, January 30,
1993, and January 25, 1992.
Consolidated Statements of Shareholders' Equity, Three Fiscal
Years Ended January 29, 1994.
Notes to Consolidated Financial Statements.
Summary of Significant Accounting Policies.
Report of Independent Public Accountants.
Quarterly Information (Unaudited).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
17
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Part III is incorporated by reference from
those portions of the registrant's definitive proxy statement for its 1994
Annual Meeting of Shareholders to be held May 26, 1994, filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days
after the end of the fiscal year covered by this Form 10-K, appearing under the
following captions:
"Voting Securities and Principal Holders Thereof"
(pages 1-3, inclusive, of the proxy statement).
"Election of Directors" (pages 3-7, inclusive, thereof).
"Executive Compensation" (pages 8-11, inclusive, thereof);
but excluding from this incorporation by reference everything
appearing under the captions "Organization and Compensation Committee
Report on Executive Compensation" and "Performance Graph"
(pages 11-13, inclusive, thereof).
For the purpose of stating the aggregate market value of voting stock
held by non-affiliates, on the cover of this report, the registrant considers
that the directors of the registrant, the executive officers listed on pages
9-10 of this report, Marjorie L. Rosenfeld, David A. Rosenfeld, the Jacobson's
Retirement Savings and Profit Sharing Plan, the Jacobson Pension Plan, and The
Jacobson Stores Foundation are affiliates, and that all other shareholders are
non-affiliates. This statement is without prejudice to the classification of
any shareholder at other times or for other purposes.
18
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) The following financial statements, financial statement
schedules, and exhibits are filed as part of this report:
<TABLE>
<CAPTION>
(1) FINANCIAL STATEMENTS: Page
-------------------- No.
----
<S> <C> <C>
Consolidated Statements of Earnings, Three
Fiscal Years Ended January 29, 1994 F-1
Consolidated Statements of Cash Flows, Three
Fiscal Years Ended January 29, 1994 F-2
Consolidated Balance Sheets, January 29, 1994,
January 30, 1993, and January 25, 1992 F-3
Consolidated Statements of Shareholders' Equity,
Three Fiscal Years Ended January 29, 1994 F-4
Notes to Consolidated Financial Statements F-5/
F-13
Summary of Significant Accounting Policies F-14
Report of Independent Public Accountants F-15
Quarterly Information (Unaudited) F-16/
F-17
(2) FINANCIAL STATEMENT SCHEDULES:
-----------------------------
Report of Independent Public Accountants S-1
Schedule V - Property and Equipment, Three
Fiscal Years Ended January 29, 1994 S-2
Schedule VI - Accumulated Depreciation and
Amortization of Property and Equipment, Three
Fiscal Years Ended January 29, 1994 S-3
Schedule VIII - Valuation and Qualifying
Accounts and Reserves, Three Fiscal Years
Ended January 29, 1994 S-4
Schedule X - Supplemental Income Statement
Information, Three Fiscal Years Ended
January 29, 1994 S-5
</TABLE>
19
<PAGE> 23
All schedules, except those set forth above, have been omitted since the
information required to be submitted has been included in the consolidated
financial statements or notes thereto or has been omitted as not applicable or
not required.
<TABLE>
<CAPTION>
(3) EXHIBITS:
--------
<S> <C>
3(a) By-laws, Jacobson Stores Inc., as amended
March 17, 1994
10(a) Employment Agreement dated March 23, 1994
between Jacobson Stores Inc. and Mark K. Rosenfeld
10(b) Employment Agreement dated March 23, 1994
between Jacobson Stores Inc. and Paul W. Gilbert
10(c) Employment Agreement dated March 23, 1994
between Jacobson Stores Inc. and James B. Fowler
10(d) Executive Employment Agreement dated March 26,
1994 between Jacobson Stores Inc. and Robert L.
Moles
10(e) 1994 Management Incentive Plan
11 Computation of Earnings per Share
21 Schedule of subsidiaries
23 Consent of Arthur Andersen & Co.
</TABLE>
In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)
<TABLE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
3(b) Restated Articles of Incorporation, Exhibit 19(a) to Form
Jacobson Stores Inc., as amended 10-Q, Quarter Ended
and restated May 25, 1989 April 29, 1989
3(c) Certificate of Designation, Exhibit 3(a) to Form
Preferences and Rights of 10-Q, Quarter Ended
Preferred Stock of Jacobson October 29, 1988
Stores Inc.
4(a) Election under Section 780, Exhibit 28 to Form
Michigan Business Corporation Act 10-Q, Quarter Ended
October 27, 1984
</TABLE>
20
<PAGE> 24
<TABLE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
4(b) Indenture dated as of December 15, File #33-10532: Exhibit
1986 between Jacobson Stores Inc. 4(a) to Form S-2 (Amend-
and National Bank of Detroit, as ment No. 1), filed
Trustee December 12, 1986
4(c) Rights Agreement dated as of Exhibit I to Form 8-A
October 4, 1988 between Jacobson and Exhibit 4 to Form
Stores Inc. and Manufacturers 8-K, October 7, 1988;
National Bank of Detroit, as Exhibit 1 to Amendment
Rights Agent; Change of Rights No. 1 to Form 8-A,
Agent, Effective June 1, 1989 May 16, 1989
4(d) Jacobson Credit Corp. $35,000,000 Exhibit 4(a) to Form
Amended and Restated Revolving 10-Q, Quarter Ended
Credit Agreement, dated as of October 24, 1992
November 20, 1992
4(e) Jacobson Stores Inc. $40,000,000 Exhibit 4(b) to Form
Term Loan Agreement, dated as of 10-Q, Quarter Ended
November 20, 1992 October 24, 1992
9 Voting and Transfer Restriction Exhibit 9 to Form 10-K,
Agreement, effective December 31, Year Ended January 26,
1990 1991
10(f) Restated Executive Employment Exhibit 10(a) to Form
Agreement dated March 23, 1993 10-K, Year Ended
between Jacobson Stores Inc. January 30, 1993
and Nathan Forman
10(g) Employment Agreement dated Exhibit 10(a) to Form
August 25, 1992 between 10-Q, Quarter Ended
Jacobson Stores Inc. and July 25, 1992
John R. Fowler
10(h) Jacobson Stores Inc. Deferred Exhibit 10(c) to Form
Compensation Plan 10-K, Year Ended
January 26, 1991
</TABLE>
With the exception of Exhibits 4(b), 4(d) and 4(e), instruments
defining the rights of holders of long-term debt of the registrant and its
subsidiaries have been omitted. The amount of debt authorized under each such
instrument is less than 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis. The registrant agrees to furnish a copy
of any such instrument to the Securities and Exchange Commission upon request.
21
<PAGE> 25
In addition to Exhibits 10(a) to 10(d), inclusive, and 10(f), the
registrant has employment agreements with four other executive officers, which
are not considered material in amount or significance.
(b) The registrant did not file any report on Form 8-K during the
last quarter of the period covered by this report.
(c) See Item 14(a) (3).
(d) See Item 14(a) (2).
22
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DATE: April 14, 1994 JACOBSON STORES INC.
By: /s/ Mark K. Rosenfeld
--------------------------
Mark K. Rosenfeld, Chairman
of the Board and Chief
Executive Officer
By: /s/ Paul W. Gilbert
--------------------------
Paul W. Gilbert, Vice Chairman
of the Board (Principal
Financial Officer)
By: /s/ Timothy J. Spalding
--------------------------
Timothy J. Spalding, Vice
President and Controller
(Principal Accounting 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 and in the capacities and on the dates indicated.
JACOBSON STORES INC. Date
By: /s/ Mark K. Rosenfeld April 14, 1994
---------------------------
Mark K. Rosenfeld, Chairman
of the Board and Chief
Executive Officer, and
Director
By: /s/ Paul W. Gilbert April 14, 1994
-----------------------------
Paul W. Gilbert, Vice Chairman
of the Board, and Director
By: /s/ James B. Fowler April 14, 1994
------------------------------
James B. Fowler, President and
Director
23
<PAGE> 27
JACOBSON STORES INC. Date
By: /s/ Herbert S. Amster April 14, 1994
-----------------------------
Herbert S. Amster, Director
By: /s/ Frank Couzens, Jr. April 14, 1994
-----------------------------
Frank Couzens, Jr., Director
By: /s/ J. R. Fowler April 14, 1994
-----------------------------
J. R. Fowler, Director
By: /s/ Herman S. Kohlmeyer, Jr. April 14, 1994
-----------------------------
Herman S. Kohlmeyer, Jr., Director
By: /s/ Kathleen McCree Lewis April 14, 1994
-----------------------------
Kathleen McCree Lewis, Director
By: April 14, 1994
-----------------------------
Patricia Shontz Longe, Director
By: /s/ Michael T. Monahan April 14, 1994
-----------------------------
Michael T. Monahan, Director
By: /s/ Philip H. Power April 14, 1994
-----------------------------
Philip H. Power, Director
By: /s/ Richard Z. Rosenfeld April 14, 1994
-----------------------------
Richard Z. Rosenfeld, Director
By: /s/ Robert L. Rosenfeld April 14, 1994
-----------------------------
Robert L. Rosenfeld, Director
By: /s/ James L. Wolohan April 14, 1994
-----------------------------
James L. Wolohan, Director
24
<PAGE> 28
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------
January 29, January 30, January 25,
(in thousands except per share data) 1994 1993 (1) 1992
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES, including leased departments . . . . . . . . . . . . . . $403,816 $411,631 $395,677
-------- -------- --------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses . . . . . . . . . . . . . . . . . . . . . . 266,882 272,962 260,867
Selling, general and administrative expenses . . . . . . . . . . 125,759 125,218 119,934
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . 7,544 7,557 8,382
Gain on sale of property . . . . . . . . . . . . . . . . . . . . (979) -- --
-------- -------- --------
Total costs and expenses . . . . . . . . . . . . . . . . . . 399,206 405,737 389,183
-------- -------- --------
EARNINGS BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . 4,610 5,894 6,494
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . . 1,596 1,984 2,276
-------- -------- --------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,014 $ 3,910 $ 4,218
-------- -------- --------
-------- -------- --------
EARNINGS PER COMMON SHARE:
Primary and Fully Diluted . . . . . . . . . . . . . . . . . . . . $0.52 $0.68 $0.73
----- ----- -----
----- ----- -----
(1) 53 week year.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
F-1
<PAGE> 29
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------
January 29, January 30, January 25,
(in thousands) 1994 1993 (1) 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,014 $ 3,910 $ 4,218
Gain on sale of property, net of income tax . . . . . . . . . . . . (636) -- --
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 9,404 8,865 8,877
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . 164 1,047 589
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . (14) 53 121
Change in:
Receivables from customers, net . . . . . . . . . . . . . . . 3,791 2,325 1,331
Merchandise inventories . . . . . . . . . . . . . . . . . . . 4,854 (8,537) (3,485)
Prepaid expenses and other assets . . . . . . . . . . . . . . 1,052 (1,300) 405
Accounts payable and accrued expenses . . . . . . . . . . . . (6,021) 2,038 3,137
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . 695 (717) (570)
-------- -------- --------
Net cash provided by operating activities . . . . . . . . 16,303 7,684 14,623
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, net of income tax . . . . . . . . . 2,096 -- --
Additions to property and equipment . . . . . . . . . . . . . . . . (17,519) (6,034) (3,619)
Other non-current assets . . . . . . . . . . . . . . . . . . . . . (2,840) (2,347) (1,473)
-------- -------- --------
Net cash used in investing activities . . . . . . . . . . (18,263) (8,381) (5,092)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt . . . . . . . . . . . . . . . . . . . . 8,000 20,000 --
Reduction of long-term debt . . . . . . . . . . . . . . . . . . . . (5,552) (13,224) (8,056)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . (2,890) (2,890) (2,890)
Proceeds from exercise of stock options . . . . . . . . . . . . . . -- 1 --
-------- -------- --------
Net cash provided by (used in) financing activities . . . (442) 3,887 (10,946)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . (2,402) 3,190 (1,415)
Cash and cash equivalents, beginning of year . . . . . . . . . . . 8,301 5,111 6,526
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR . . . . . . . . . . . . . . . $ 5,899 $ 8,301 $ 5,111
-------- -------- --------
-------- -------- --------
(1) 53 week year.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
SUPPLEMENTARY CASH FLOW INFORMATION
The Company considers all short-term investments with a maturity at date of
purchase of three months or less to be cash equivalents.
Investing and financing activities not reported in the Consolidated Statements
of Cash Flows, because they do not involve cash, include equipment acquired
through capital lease obligations of $1,085,000 in 1993, $1,257,000 in 1992 and
$2,143,000 in 1991.
Interest paid (net of interest capitalized) was $7,165,000 in 1993, $7,218,000
in 1992 and $7,995,000 in 1991. Income tax payments were $753,000 in 1993,
$1,670,000 in 1992 and $2,235,000 in 1991.
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
F-2
<PAGE> 30
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------
January 29, January 30, January 25,
(in thousands) 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 5,899 $ 8,301 $ 5,111
Receivables from customers, net . . . . . . . . . . . . . . . . . 45,668 49,459 51,784
Merchandise inventories . . . . . . . . . . . . . . . . . . . . . 80,768 85,622 77,085
Prepaid expenses and other assets . . . . . . . . . . . . . . . . 1,920 2,972 1,672
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . 2,969 3,027 3,567
--------- --------- ---------
Total current assets . . . . . . . . . . . . . . . . . . . 137,224 149,381 139,219
--------- --------- ---------
PROPERTY AND EQUIPMENT, NET . . . . . . . . . . . . . . . . . . . . 96,526 88,786 90,360
--------- --------- ---------
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,068 12,228 9,881
--------- --------- ---------
$248,818 $250,395 $239,460
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . . . . . . . . . $ 3,971 $ 3,371 $ 3,094
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 25,247 30,255 28,372
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 13,734 14,747 14,592
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . 924 229 946
--------- --------- ---------
Total current liabilities . . . . . . . . . . . . . . . . . 43,876 48,602 47,004
--------- --------- ---------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 108,203 105,270 97,514
--------- --------- ---------
DEFERRED TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 7,722 7,616 7,109
--------- --------- ---------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 1,503 1,517 1,464
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . 5,966 5,966 5,966
Paid-in surplus . . . . . . . . . . . . . . . . . . . . . . . . . 7,109 7,109 7,108
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 74,838 74,714 73,694
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . (399) (399) (399)
--------- --------- ---------
87,514 87,390 86,369
--------- --------- ---------
$248,818 $250,395 $239,460
--------- --------- ---------
--------- --------- ---------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
F-3
<PAGE> 31
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Paid-in Retained Treasury
(in thousands except number of shares) Stock Surplus Earnings Stock
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, January 26, 1991 . . . . . . . . . . . . $5,966 $7,108 $72,366 $(399)
FIFTY-TWO WEEKS ENDED January 25, 1992:
Net earnings . . . . . . . . . . . . . . . . . 4,218
Dividends paid, 50 cents per share . . . . . . (2,890)
------ ------ ------- -----
BALANCE, January 25, 1992 . . . . . . . . . . . . 5,966 7,108 73,694 (399)
FIFTY-THREE WEEKS ENDED January 30, 1993:
Net earnings . . . . . . . . . . . . . . . . . 3,910
Dividends paid, 50 cents per share . . . . . . (2,890)
Exercise of stock options . . . . . . . . . . . 1
------ ------ ------- -----
BALANCE, January 30, 1993 . . . . . . . . . . . . 5,966 7,109 74,714 (399)
FIFTY-TWO WEEKS ENDED January 29, 1994:
Net earnings . . . . . . . . . . . . . . . . . 3,014
Dividends paid, 50 cents per share . . . . . . (2,890)
------ ------ ------- -----
BALANCE, January 29, 1994 . . . . . . . . . . . . $5,966 $7,109 $74,838 $(399)
------ ------ ------- -----
------ ------ ------- -----
- -----------------------------------------------------------------------------------------------------------
</TABLE>
PREFERRED STOCK
Authorized 1,000,000 shares, $1 par value; no shares outstanding at January 25,
1992, January 30, 1993 and January 29, 1994.
COMMON STOCK
Authorized 15,000,000 shares, $1 par value; 5,966,141 shares issued at January
25, 1992, and 5,966,221 shares issued at January 30, 1993 and January 29, 1994.
Shares issued include 187,200 shares in treasury at January 25, 1992, January
30, 1993 and January 29, 1994.
The accompanying notes (pages F-5 through F-13) and summary of significant
accounting policies (page F-14) are an integral part of these statements.
F-4
<PAGE> 32
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
TAXES The provisions for income taxes consisted of:
---------------------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable . . . . . . . . . . . . . . . . . . . . . . . $1,432 $ 937 $1,687
Current deferred:
Alternative minimum tax . . . . . . . . . . . . . . . . . . . 314 120 (107)
Expenses deductible for tax purposes
only at time of payment . . . . . . . . . . . . . . . . . . (256) 420 103
Non-current deferred:
Accelerated depreciation . . . . . . . . . . . . . . . . . . (574) (247) (212)
Additional pension cost deductible for tax purposes . . . . . 692 835 846
Other timing differences, net . . . . . . . . . . . . . . . . (12) (81) (41)
-------- ------- -------
$1,596 $1,984 $2,276
-------- ------- -------
-------- ------- -------
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Income taxes as a percent of earnings before income taxes
differed from the statutory Federal income tax rate as follows:
---------------------------------------------------------------------------------------------------------
(percent of earnings before income taxes) 1993 1992 1991
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal income tax rate . . . . . . . . . . . . . . . . 34.0% 34.0% 34.0%
State income tax . . . . . . . . . . . . . . . . . . . . . . . . 0.1 (0.6) 1.0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5 0.3 --
------- ------- -------
34.6% 33.7% 35.0%
------- ------- -------
------- ------- -------
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Deferred income taxes represent temporary differences in the
recognition of certain items for income tax and financial
reporting purposes. The components of the net deferred income
tax liability at January 29, 1994 and January 31, 1993 (the
first day of the 1993 fiscal year) were as follows: January January
---------------------------------------------------------------------------------------------------------
(in thousands) 1994 1993
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Liabilities:
Accelerated depreciation . . . . . . . . . . . . . . . . . . $4,475 $4,472
Additional pension cost deductible for tax purposes . . . . . 3,930 3,248
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 923
------ ------
8,860 8,643
------ ------
Deferred Tax Assets:
Accrued vacation pay . . . . . . . . . . . . . . . . . . . . 1,144 1,106
Additional inventory capitalized for tax purposes . . . . . . 1,044 930
Alternative minimum tax credit carry forward . . . . . . . . 277 590
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,642 1,449
------ ------
4,107 4,075
------ ------
$4,753 $4,568
------ ------
------ ------
---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Taxes, other than income taxes, were as follows:
---------------------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,167 $ 7,454 $ 7,481
Real estate and personal property taxes . . . . . . . . . . . . 4,134 4,389 4,442
Other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 1,116 1,349 1,433
------- ------- -------
$12,417 $13,192 $13,356
------- ------- -------
------- ------- -------
---------------------------------------------------------------------------------------------------------
</TABLE>
F-5
<PAGE> 33
INTEREST
EXPENSE
<TABLE>
<CAPTION>
Components of net interest expense are summarized below:
-----------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-term borrowings . . . . . . . . . . . . . . . . . . $ 167 $ 291 $ 209
Real estate obligations . . . . . . . . . . . . . . . . . 3,380 3,986 4,303
Long-term debt . . . . . . . . . . . . . . . . . . . . . 3,908 2,751 3,570
Capital lease obligations . . . . . . . . . . . . . . . . 487 587 583
------- ------- -------
7,942 7,615 8,665
Less interest earned on short-term investments . . . . . 66 58 283
Less interest capitalized on properties under development 332 -- --
------- ------- -------
$7,544 $7,557 $8,382
------- ------- -------
------- ------- -------
-----------------------------------------------------------------------------------------------
</TABLE>
CUSTOMER Credit sales under Jacobson credit plans were 48.4% of
CREDIT AND total sales in 1993, 50.7% in 1992 and 52.8% 1991.
RECEIVABLES Credit plans consist of option and extended payment
accounts.
<TABLE>
<CAPTION>
Revenues and direct costs associated with the Company's credit
program are summarized below:
-----------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finance charge revenues. . . . . . . . . . . . . . . . . $5,660 $5,968 $6,290
------ ------ ------
Cost of credit operations:
Credit and collection administration . . . . . . . . . 1,389 1,646 2,108
Allocated interest expense . . . . . . . . . . . . . . 1,813 2,015 3,214
Provision for doubtful accounts, net of recoveries . . 720 1,116 1,064
Provision (credit) for income taxes . . . . . . . . . . 591 405 (33)
------ ------ ------
4,513 5,182 6,353
------ ------ ------
Net income from (cost of) credit program . . . . . . . . $1,147 $ 786 $ (63)
------ ------ -------
------ ------ -------
As a percent of credit sales . . . . . . . . . . . . . 0.6% 0.4% - %
----- ----- -----
----- ----- -----
-----------------------------------------------------------------------------------------------
</TABLE>
The finance charge rate assessed under the Company's credit
plans has remained unchanged for 1993, 1992 and 1991.
Allocated interest expense is computed at the average rate of
interest incurred by Jacobson Credit Corp. (the Company's
consolidated, wholly-owned finance subsidiary) applied to the
average total receivables from customers. The average
rate was 3.8% in 1993, 4.0% in 1992 and 6.3% in 1991.
<TABLE>
<CAPTION>
Receivables from customers at year-end were as follows:
-----------------------------------------------------------------------------------------------
January January January
(in thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Receivables from customers . . . . . . . . . . . . . . . . . . $46,498 $50,360 $52,684
Less reserve for doubtful accounts . . . . . . . . . . . . . . 830 901 900
------- ------- -------
$45,668 $49,459 $51,784
------- ------- -------
------- ------- -------
-----------------------------------------------------------------------------------------------
</TABLE>
Accounts written off, net of recoveries, were $791,000 in 1993,
$1,115,000 in 1992 and $1,272,000 in 1991 (0.40%, 0.53% and
0.61%, respectively, of credit sales).
F-6
<PAGE> 34
MERCHANDISE
INVENTORIES
<TABLE>
<CAPTION>
All merchandise inventories are valued at cost, which is lower
than market, as determined by the retail last-in, first-out
(LIFO) method. At year-end, merchandise inventories were as
follows:
-----------------------------------------------------------------------------------------------------
January January January
(in thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inventories at first-in, first-out (FIFO) cost . . . . . . . $100,607 $105,642 $97,306
Less LIFO reserves . . . . . . . . . . . . . . . . . . . . . 19,839 20,020 20,221
-------- -------- -------
$ 80,768 $ 85,622 $77,085
-------- -------- -------
-------- -------- -------
-----------------------------------------------------------------------------------------------------
</TABLE>
The change in LIFO reserves from January 1993 to January
1994 includes a $1,400,000 liquidation of most furniture LIFO
reserves as a result of the Company's phase-out of furniture
departments in six stores in 1993.
PROPERTY
AND
EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment year-end are set forth below:
-----------------------------------------------------------------------------------------------------
January January January
(in thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land and improvements . . . . . . . . . . . . . . . . . . . . $ 9,329 $ 9,299 $ 9,221
Buildings and improvements . . . . . . . . . . . . . . . . . 89,608 82,398 81,765
Furniture, fixtures and equipment . . . . . . . . . . . . . . 38,870 31,621 30,673
Leasehold improvements . . . . . . . . . . . . . . . . . . . 9,211 9,627 9,377
Construction in progress . . . . . . . . . . . . . . . . . . 1,089 2,405 92
Capital leases . . . . . . . . . . . . . . . . . . . . . . . 10,403 11,321 11,688
------- ------- -------
158,510 146,671 142,816
Less accumulated depreciation and amortization . . . . . . . 61,984 57,885 52,456
------- ------- -------
$96,526 $88,786 $90,360
------- ------- -------
------- ------- -------
-----------------------------------------------------------------------------------------------------
</TABLE>
Depreciation and amortization amounted to $9,404,000 in 1993,
$8,865,000 in 1992 and $8,877,000 in 1991.
CAPITAL AND
MAINTENANCE
EXPENDITURES
<TABLE>
<CAPTION>
Capital expenditures, including amounts under capital leases,
for the past three years are summarized below:
-----------------------------------------------------------------------------------------------------
Stores and Store Support Facilities
(in thousands) Modernization and Equipment Total
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1993 . . . . . . . . . . . . . . . . . . . . . $15,503 $3,101 $18,604
1992 . . . . . . . . . . . . . . . . . . . . . 4,350 2,941 7,291
1991 . . . . . . . . . . . . . . . . . . . . . 3,187 2,575 5,762
-----------------------------------------------------------------------------------------------------
</TABLE>
Stores and store modernization expenditures include those made
for the acquisition of land, buildings and improvements, and
related fixtures and equipment for new stores and expansion and
re-fixturing of existing stores. Support facilities and equipment
expenditures relate to corporate office and distribution centers
and other non-store expenditures.
Repairs and maintenance expense totalled $1,737,000 in 1993,
$1,630,000 in 1992 and $1,621,000 in 1991.
F-7
<PAGE> 35
LONG-TERM At January 29, 1994, the Company was obligated under
LEASES non-cancellable long-term leases for certain stores or
portions of stores, and for certain fixtures and equipment.
Many of the leases contain renewal options. Most require payment
of taxes, insurance, and other costs applicable to the property,
and some require additional rentals based on percentages of sales.
<TABLE>
<CAPTION>
Future minimum rental commitments (net of rental income) as of
January 29, 1994, for all non-cancellable leases which had a
remaining term of more than one year were as follows:
------------------------------------------------------------------------------------------
Operating Capital
(in thousands) Leases Leases
------------------------------------------------------------------------------------------
<S> <C> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,601 $2,159
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,430 1,889
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,270 893
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,305 560
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,176 225
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,047 272
------- -------
Total minimum lease payments $81,829 5,998
-------
-------
Less imputed interest . . . . . . . . . . . . . . . . . . . . . . . 863
-------
Capital lease obligations, including current maturities of $1,779 . $5,135
-------
-------
------------------------------------------------------------------------------------------
</TABLE>
Capital leases provide the Company with the economic benefits and
risks of ownership. These leases are capitalized and treated as
installment purchases of depreciable property. Capital leases are
included in the balance sheets as property and equipment while the
related lease obligations are included in current portion of
long-term debt. Interest based on these obligations and
amortization based on the lease terms are charged to current
operations in lieu of rental expense.
All other leases are considered operating leases. Operating
leases are accounted for by recording rental expense over the
terms of the leases. Additional rentals based on percentages of
sales are recorded as rental for both capital and operating leases.
<TABLE>
<CAPTION>
Rental expense (net of rental income) was as follows:
-------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Buildings and improvements:
Operating leases:
Minimum rent . . . . . . . . . . . . . . . . . . . . . $3,914 $3,496 $2,723
Percentage rent . . . . . . . . . . . . . . . . . . . . 1,013 1,418 1,359
Capital leases:
Percentage rent . . . . . . . . . . . . . . . . . . . . 356 295 315
------- ------- ------
$5,283 $5,209 $4,397
------- ------- ------
------- ------- ------
Fixtures and equipment:
Operating leases . . . . . . . . . . . . . . . . . . . . $ 947 $ 922 $ 840
------- ------- ------
------- ------- ------
-------------------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE> 36
FINANCING Jacobson Credit Corp. has available an unsecured line of
credit of $35,000,000 under a three year Revolving Credit
Agreement with two banks. The Agreement provides for either
or both of two interest rate alternatives, at the Company's
option, which historically are below the prime rate of
interest of the lending banks. Borrowings under this
Agreement mature on June 30, 1996. On each June 30, this
maturity date extends one year unless terminated by written
notice. The Agreement requires a facility fee equal to 1/4 of
1% of the line per annum. Compensating balances are not
required. There were no borrowings outstanding under the
Agreement at January 29, 1994.
<TABLE>
<CAPTION>
Short-term borrowings and interest rates for the past three years
were as follows:
-------------------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum amount outstanding . . . . . . . . . . . . . . . . $16,500 $30,700 $20,500
Daily weighted average amount outstanding . . . . . . . . . $ 4,393 $ 7,215 $ 3,735
Daily weighted average interest rate . . . . . . . . . . . 3.8% 4.0% 5.6%
-------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
At year end, long-term debt, less current maturities, consisted
of the following:
January January January
-------------------------------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6-3/4% Convertible Subordinated Debentures due 2011 . . . . $ 34,500 $ 34,500 $34,500
Mortgage notes and collateral trust bonds due
through 2005, at rates from 6.44% to 9.5% . . . . . . . . 40,482 36,039 37,157
7.73% unsecured term loan due 2002 . . . . . . . . . . . . 20,000 20,000 --
Industrial development revenue bond obligations,
due through 2015, at variable rates below prime . . . . . 9,865 10,509 11,288
10% Subordinated Debentures, net of original
issue discount . . . . . . . . . . . . . . . . . . . . . -- -- 10,000
-------- -------- -------
104,847 101,048 92,945
Capital lease obligations . . . . . . . . . . . . . . . . . 3,356 4,222 4,569
-------- -------- -------
$108,203 $105,270 $97,514
-------- -------- -------
-------- -------- -------
-------------------------------------------------------------------------------------------------------
</TABLE>
The 6-3/4% Convertible Subordinated Debentures are convertible
to shares of the Company's common stock at any time prior to
maturity, unless previously redeemed, at $32.67 per share,
subject to adjustment in certain events. The
debentures are redeemable, in whole or in part, at the
option of the Company at declining premiums to December
15, 1996, and thereafter at par. Mandatory annual
sinking fund payments of $1,725,000 are required
beginning December 15, 1996. At January 29, 1994,
1,056,000 shares of authorized common stock were
reserved for conversion.
The Company has a ten-year Term Loan Agreement with two banks
which provides for borrowings of up to $40,000,000 on an
unsecured basis at market rates in effect at the time of such
borrowings. The Term Loan Agreement provides for
payments of interest only through December 31, 1995,
with quarterly principal repayments commencing March 31, 1996.
The Company has $20,000,000 outstanding under this
facility at January 29, 1994 at a fixed rate of 7.73%.
F-9
<PAGE> 37
Loan agreements include, among other things, covenants
requiring minimum working capital, minimum net worth and
minimum cash flow and restricting capital stock redemptions and
dividend payments. Under the most restrictive net worth
covenant, at January 29, 1994, $9,051,000 was available for
capital stock redemptions and dividend payments.
<TABLE>
<CAPTION>
Aggregate maturities of long-term debt for the next five years
are as follows:
----------------------------------------------------------------------------------------------------
Capital
Long-Term Lease
(in thousands) Debt Obligations (1) Total
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,192 $1,779 $3,971
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,911 1,684 3,595
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,768 790 6,558
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,028 509 6,537
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,329 203 6,532
(1) Excluding imputed interest.
----------------------------------------------------------------------------------------------------
</TABLE>
Based on the quoted market price of the 6-3/4% Convertible
Subordinated Debentures due 2011 and on the current rates
offered to the Company for other long-term debt of similar
remaining maturities, the estimated fair value of total
long-term debt, excluding capital lease obligations, was less
than the carrying value by approximately $5,700,000 at January
29, 1994 and $3,300,000 at January 30, 1993.
ACCRUED
EXPENSES
<TABLE>
<CAPTION>
Accrued expenses at year-end were as follows:
-------------------------------------------------------------------------------------------------
January January January
(in thousands) 1994 1993 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wages and vacation pay . . . . . . . . . . . . . . . . . . . $ 6,272 $ 6,541 $ 5,682
Pension . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,100 1,621 2,333
Taxes other than income taxes . . . . . . . . . . . . . . . . 2,310 2,583 2,849
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 801 867 1,048
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,251 3,135 2,680
------- ------- -------
$13,734 $14,747 $14,592
------- ------- -------
------- ------- -------
-------------------------------------------------------------------------------------------------
</TABLE>
GAIN ON SALE In 1993, the Company relocated its Ann Arbor, Michigan, store
OF PROPERTY operations to the Briarwood Mall and sold its interest in
its downtown store facility at an after-tax gain of $636,000.
F-10
<PAGE> 38
STOCK OPTIONS At January 29, 1994, 153,160 shares of Jacobson Stores Inc.
common stock were reserved for issuance under a stock option
plan adopted in 1983. The option price is not less than the
fair market value at the date of grant. After December 4,
1993, no more options may be granted under this plan. The
Company's shareholders will be asked to approve a proposed new
stock option plan at the 1994 Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
Option activity for the past three years was as follows:
--------------------------------------------------------------------------------------------------------------
Number Option Price
of Shares Per Share
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at January 26, 1991 . . . . . . . . . . . . . . . 144,980 $14.00 - 25.58
Activity during 1991:
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,555 16.50 - 19.80
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 14.00
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,075 14.00 - 25.58
------- --------------
Options outstanding at January 25, 1992 . . . . . . . . . . . . . . . 139,425 14.00 - 25.03
Activity during 1992:
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 13.75 - 16.00
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 14.00
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,020 14.00 - 25.03
------- --------------
Options outstanding at January 30, 1993 . . . . . . . . . . . . . . . 196,325 13.75 - 21.75
Activity during 1993:
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 12.25 - 14.00
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,165 13.75 - 21.75
------- --------------
Options outstanding at January 29, 1994 . . . . . . . . . . . . . . . 153,160 $12.25 - 21.75
------- --------------
------- --------------
--------------------------------------------------------------------------------------------------------------
</TABLE>
PREFERRED The Company has a Preferred Stock Purchase Rights Plan, under
STOCK which a Right is attached to each share of the Company's Common
PURCHASE Stock. Each Right entitles the registered holder to purchase
RIGHTS from the Company one one-hundredth of a share of Series A
Preferred Stock at an exercise price of $100, subject to
adjustment. The Company has reserved 100,000 shares of
Series A Preferred Stock for issuance on exercise of the
Rights. The Rights trade with the Company's Common Stock and
will become exercisable 10 days after any person or group
acquires 25% or more of the Company's Common Stock, or
commences or announces an offer for 30% or more of the
Company's Common Stock. After the Rights become exercisable,
if the Company is acquired in a merger or other business
combination or if 50% or more of its assets or earning power
are sold, each Right will entitle the holder to purchase, at
the then current exercise price of the Right, shares of common
stock of the acquiring company having a market value of twice
the exercise price of the Right. Alternatively, if a 25%
shareholder acquires the Company by means of a reverse merger
in which the Company and its stock survive, or if such
shareholder engages in self-dealing transactions with the
Company or acquires beneficial ownership of 40% or more of the
Company's Common Stock other than by means of a fair offer to
buy all shares, each Right (except those of the acquiring
person or group) will entitle its holder to purchase, on
exercise, shares of the Company's Common Stock having a market
value of twice the current exercise price of each Right. The
Rights may be redeemed by the Company for one cent per Right
until 30 days after a person or group acquires 25% or more of
the Company's Common Stock, and will expire on October 25,
1998.
F-11
<PAGE> 39
RETIREMENT The Company has a trusteed non-contributory defined benefit
PLANS pension plan covering substantially all of its employees.
Benefits under the plan are based on a career average
pay formula. Service cost and the projected benefit obligation
under the projected unit credit actuarial method reflect the
impact of estimated increases in compensation on future
pension benefits. Unrecognized pension costs and credits,
including actuarial gains and losses, are amortized over the
average remaining service period of those employees expected
to receive pension benefits. The Company has no unrecognized
prior service cost. Pension expense was $1,160,000 in 1993,
$1,083,000 in 1992 and $729,000 in 1991. The Company's
funding policy satisfies the minimum funding requirements of
the Employee Retirement Income Security Act of 1974 and the
Internal Revenue Code of 1986. Pension plan assets are held
and managed by an independent trustee.
<TABLE>
<CAPTION>
Net periodic pension expense, the funded status of the plan,
and the related actuarial assumptions for the past three
years are as follows:
-------------------------------------------------------------------------------------------------
Components of Net Pension Expense
(in thousands) 1993 1992 1991
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits earned during the year . . . . . . . $1,799 $1,639 $1,290
Interest cost on projected benefit obligation . . . . . . . . . 2,602 2,394 2,138
Actual return on assets . . . . . . . . . . . . . . . . . . . . (1,365) (2,337) (6,288)
Net amortization and deferral . . . . . . . . . . . . . . . . . (1,876) (613) 3,589
------ ------- ------
Net pension expense . . . . . . . . . . . . . . . . . . . . . . $1,160 $1,083 $ 729
------ ------ ------
------ ------ ------
<CAPTION>
-------------------------------------------------------------------------------------------------
Funded Status December 31,
---------------------------------
(in thousands) 1993 1992 1991
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,697 $29,083 $25,257
Non-vested . . . . . . . . . . . . . . . . . . . . . . . . . 1,626 1,569 1,543
------- ------- -------
Accumulated benefit obligation . . . . . . . . . . . . . . . . $35,323 $30,652 $26,800
------- ------- -------
------- ------- -------
Projected benefit obligation . . . . . . . . . . . . . . . . . $40,957 $35,098 $30,622
Fair market value of assets . . . . . . . . . . . . . . . . . . 39,872 36,970 33,321
------- ------- -------
Plan assets in excess of (less than) projected
benefit obligation . . . . . . . . . . . . . . . . . . . . . (1,085) 1,872 2,699
Unrecognized net assets at transition . . . . . . . . . . . . . (1,129) (1,454) (1,779)
Unrecognized net loss . . . . . . . . . . . . . . . . . . . . . 11,330 6,284 3,406
------- ------- -------
Net prepaid pension cost . . . . . . . . . . . . . . . . . . . $ 9,116 $ 6,702 $ 4,326
------- ------- -------
------- ------- -------
<CAPTION>
-------------------------------------------------------------------------------------------------
Actuarial Assumptions 1993 1992 1991
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . 7.5% 8.0% 8.5%
End of year . . . . . . . . . . . . . . . . . . . . . . . . . 7.0 7.5 8.0
Expected return on plan assets . . . . . . . . . . . . . . . . 9.0 9.0 9.0
Rate of increase in compensation . . . . . . . . . . . . . . . 5.0 5.0 5.0
-------------------------------------------------------------------------------------------------
</TABLE>
The Company contributed and charged to expense $339,000
in 1993, $171,000 in 1992 and $405,000 in 1991 for
multi-employer pension plans. These contributions were
determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours
worked. Under the provisions of the Multi-Employer Pension
Plan Amendments Act of 1980, if the Company should
substantially or totally withdraw from a multi-employer
pension fund, it would be required to continue contributions
to such plan to the extent of its portion of the plan's
unfunded vested liability. Management has no plans to
terminate operations that would subject the Company to such
liability.
F-12
<PAGE> 40
CONDENSED
BALANCE
SHEETS
<TABLE>
<CAPTION>
Condensed balance sheets of Jacobson Stores Realty
Company, Jacobson Credit Corp. and merchandising
operations are shown below:
-----------------------------------------------------------------------------------------------------
January January January
(in thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------------
JACOBSON STORES REALTY COMPANY
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets . . . . . . . . . . . . . . . . . . . . . . . $ 159 $ 338 $ 48
Advances to Jacobson Stores Inc. . . . . . . . . . . . . . . 17,764 19,323 16,310
Property and equipment, net . . . . . . . . . . . . . . . . . 63,186 56,498 60,038
Investments and other assets . . . . . . . . . . . . . . . . 1,146 793 889
--------- --------- ---------
Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,255 $ 76,952 $ 77,285
--------- --------- ---------
--------- --------- ---------
Current liabilities . . . . . . . . . . . . . . . . . . . . . $ 3,655 $ 3,187 $ 2,951
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 50,089 46,324 48,018
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 2,841 3,445 3,661
Equity of Jacobson Stores Inc. . . . . . . . . . . . . . . . 25,670 23,996 22,655
--------- --------- ---------
Liabilities and Equity . . . . . . . . . . . . . . . . . $ 82,255 $ 76,952 $ 77,285
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
JACOBSON CREDIT CORP.
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 245 $ 212 $ 71
Advances to Jacobson Stores Inc. . . . . . . . . . . . . . 7,993 7,962 7,965
--------- --------- ---------
Assets . . . . . . . . . . . . . . . . . . . . . . $ 8,238 $ 8,174 $ 8,036
--------- --------- ---------
--------- --------- ---------
Current liabilities . . . . . . . . . . . . . . . . . . . . $ 53 $ 85 $ 84
Equity of Jacobson Stores Inc. . . . . . . . . . . . . . . 8,185 8,089 7,952
--------- --------- ---------
Liabilities and Equity . . . . . . . . . . . . . . $ 8,238 $ 8,174 $ 8,036
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. (merchandising operations)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets. . . . . . . . . . . . . . . . . . . . . . . . $136,887 $148,908 $139,177
Property and equipment, net . . . . . . . . . . . . . . . . . 33,340 32,288 30,322
Investments and other assets . . . . . . . . . . . . . . . . 17,442 15,022 12,656
--------- --------- ---------
Assets . . . . . . . . . . . . . . . . . . . . . . . . . $187,669 $196,218 $182,155
--------- --------- ---------
--------- --------- ---------
Current liabilities . . . . . . . . . . . . . . . . . . . . . $ 40,235 $ 45,407 $ 44,046
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 58,114 58,946 49,496
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 7,801 7,175 6,476
Advances from subsidiaries . . . . . . . . . . . . . . . . . 25,757 27,285 24,275
Shareholders' equity . . . . . . . . . . . . . . . . . . . . 55,762 57,405 57,862
--------- --------- ---------
Liabilities and Equity . . . . . . . . . . . . . . . . . $187,669 $196,218 $182,155
--------- --------- ---------
--------- --------- ---------
-----------------------------------------------------------------------------------------------------
</TABLE>
F-13
<PAGE> 41
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CHANGE IN ACCOUNTING POLICY. Effective January 31, 1993 (the first day of the
fiscal year), the Company adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Adoption had an
immaterial impact on net earnings.
BASIS OF REPORTING. Jacobson Stores Inc. operates specialty department stores
in 25 cities in Michigan, Ohio, Indiana and Florida. The consolidated
financial statements include the accounts of the Company and two wholly-owned
subsidiaries, Jacobson Stores Realty Company and Jacobson Credit Corp. All
significant inter-company transactions and balances have been eliminated.
FISCAL YEAR. The Company's fiscal year ends on the last Saturday in January.
Fiscal years 1993 and 1991 consisted of 52 weeks and ended January 29, 1994 and
January 25, 1992, respectively. Fiscal 1992 consisted of 53 weeks and ended
January 30, 1993.
SALES. Sales are net of returns and include sales by leased departments.
Restaurant and alteration revenues are reflected as a reduction of cost of
merchandise sold. Finance charge revenues are recorded as income when earned
and are reflected as a reduction of selling, general and administrative
expenses.
RECEIVABLES FROM CUSTOMERS. An account is reviewed for write-off if payment of
20% (one full monthly payment) has not been received during the previous four
month period or if it is otherwise determined that the account is
uncollectible.
MERCHANDISE INVENTORIES. All merchandise inventories are valued at cost, which
is lower than market, as determined by the retail last-in, first-out (LIFO)
method.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Major
replacements and improvements are charged to the property and equipment
accounts. Maintenance, repairs and minor replacements are charged to expense
as incurred. When assets are sold, retired, or fully depreciated, their cost
and related accumulated depreciation and amortization are removed from the
property and equipment accounts, and any gain or loss is reflected in the
statements of earnings.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization are provided on
the straight-line basis over the estimated useful lives of the property and
equipment, or over the respective lease terms, if such periods are shorter.
CAPITALIZATION OF INTEREST. Interest expense incurred on properties under
development is capitalized to reflect properly the costs of properties up to
the time they produce revenues. The amounts capitalized are then amortized
over the respective lives of the depreciable assets.
PRE-OPENING EXPENSES. Expenditures of a non-capital nature associated with
opening a new store are charged to expense using the straight-line method in
the twelve months immediately following the opening.
INCOME TAXES. Deferred income taxes result from differences between the tax
basis of an asset or liability and its reported amount in the financial
statements (temporary differences) and are adjusted for changes in tax laws and
rates.
EARNINGS PER SHARE. Primary earnings per share are computed by dividing net
earnings by the weighted average shares of common stock and common stock
equivalents outstanding during the year. Weighted average shares outstanding,
excluding treasury shares, were 5,779,117 in 1993, 5,785,187 in 1992 and
5,786,190 in 1991. Fully diluted earnings per share are computed based on the
additional assumption that the Company's 6-3/4% Convertible Subordinated
Debentures due 2011 were converted to common stock at the date of issuance with
a corresponding increase in net earnings to reflect reduction in related
interest expense, net of income taxes. Weighted average shares outstanding
used in the computation of fully diluted earnings per share were 6,835,132 in
1993, 6,841,188 in 1992 and 6,846,379 in 1991.
FINANCIAL INSTRUMENTS. With the exception of long-term debt and shareholders'
equity, the Company records all financial instruments, including cash
equivalents, receivables from customers and accounts payable, at or in amounts
approximating market value.
F-14
<PAGE> 42
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jacobson Stores Inc.:
We have audited the accompanying consolidated balance sheets of JACOBSON STORES
INC. (a Michigan corporation) and subsidiaries as of January 29, 1994, January
30, 1993, and January 25, 1992 and the related consolidated statements of
earnings, shareholders' equity and cash flows for each of the three fiscal
years in the period ended January 29, 1994. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Jacobson Stores Inc. and
subsidiaries as of January 29, 1994, January 30, 1993, and January 25, 1992 and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended January 29, 1994, in conformity with generally
accepted accounting principles.
As explained in the Notes to Consolidated Financial Statements, effective
January 31, 1993, the Company changed its method of accounting for income taxes
in accordance with SFAS No. 109, "Accounting For Income Taxes."
Detroit, Michigan
March 4, 1994.
/s/ ARTHUR ANDERSEN & CO.
F-15
<PAGE> 43
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
QUARTERLY INFORMATION (unaudited)
OPERATING The unaudited quarterly operating results shown
RESULTS below were prepared using the same accounting policies
that are applied to the annual data.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Quarter
------------------------------------------
(in thousands, except per share data) First Second Third Fourth
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
----
Net sales . . . . . . . . . . . . . . . . . . . . . . . $96,063 $88,049 $90,436 $129,268
Cost of merchandise sold, buying and
occupancy expenses . . . . . . . . . . . . . . . . . 62,187 62,856 56,351 85,488
Selling, general and administrative expenses . . . . . 31,276 29,726 31,355 33,402
Interest expense, net . . . . . . . . . . . . . . . . . 1,945 1,875 1,885 1,839
Gain on sale of property . . . . . . . . . . . . . . . -- -- (979) --
Earnings (loss) before income taxes . . . . . . . . . . 655 (6,408) 1,824 8,539
Net earnings (loss) . . . . . . . . . . . . . . . . . . 426 (4,166) 1,186 5,568
Earnings (loss) per share:
Primary . . . . . . . . . . . . . . . . . . . . . . . $ .07 $(.72) $.21 $.96
Fully diluted . . . . . . . . . . . . . . . . . . . . .07 (.72) .21 .87
1992 (1)
----
Net sales . . . . . . . . . . . . . . . . . . . . . . . $91,574 $89,643 $88,012 $142,402
Cost of merchandise sold, buying and
occupancy expenses . . . . . . . . . . . . . . . . . 58,635 64,724 55,540 94,063
Selling, general and administrative expenses . . . . . 29,048 28,165 30,478 37,527
Interest expense, net . . . . . . . . . . . . . . . . . 1,869 1,746 1,763 2,179
Earnings (loss) before income taxes . . . . . . . . . . 2,022 (4,992) 231 8,633
Net earnings (loss) . . . . . . . . . . . . . . . . . . 1,314 (3,244) 150 5,690
Earnings (loss) per share:
Primary . . . . . . . . . . . . . . . . . . . . . . . $.23 $(.56) $.03 $.98
Fully diluted . . . . . . . . . . . . . . . . . . . . .23 (.56) .03 .89
1991
----
Net sales . . . . . . . . . . . . . . . . . . . . . . . $90,831 $87,933 $87,820 $129,093
Cost of merchandise sold, buying and
occupancy expenses . . . . . . . . . . . . . . . . . 58,070 61,732 54,221 86,844
Selling, general and administrative expenses . . . . . 28,679 27,300 29,792 34,163
Interest expense, net . . . . . . . . . . . . . . . . . 2,125 2,041 2,029 2,187
Earnings (loss) before income taxes . . . . . . . . . . 1,957 (3,140) 1,778 5,899
Net earnings (loss) . . . . . . . . . . . . . . . . . . 1,272 (2,041) 1,156 3,831
Earnings (loss) per share:
Primary . . . . . . . . . . . . . . . . . . . . . . . $.22 $(.35) $.20 $.66
Fully diluted . . . . . . . . . . . . . . . . . . . . .22 (.35) .20 .61
(1) 53 week year
---------------------------------------------------------------------------------------------------
</TABLE>
F-16
<PAGE> 44
The Company's business is seasonal in nature. Traditionally, a higher
proportion of sales and net earnings is generated in the fourth quarter (which
includes the Christmas season). The anticipated effective annual tax rate is
used to compute income taxes on a quarterly basis. The gross margins used in
calculating cost of goods sold for interim periods include an allocation of the
estimated annual LIFO provision. This charge cannot be determined precisely
until the year-end inventory value is known and the Bureau of Labor Statistics
Department Store Index is published in late February.
The impact of LIFO on earnings per share as it was reported and as it would
have been had the actual charge (benefit) been known when the quarterly
allocations were made is shown below.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
As Reported As Reallocated
------------------------------- ---------------------------------
Quarter 1993 1992 1991 1993 1992 1991
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $ .08 $ .07 $.07 $ .03 $(.01) $.06
2nd (.09) .07 .07 (.12) - .05
3rd .07 .07 .07 .03 - .05
4th (.08) (.23) .03 .04 (.01) .08
----- ----- ----- ----- ----- -----
$(.02) $(.02) $.24 $(.02) $(.02) $.24
----- ----- ---- ----- ----- ----
----- ----- ---- ----- ----- ----
- -------------------------------------------------------------------------------------------
</TABLE>
F-17
<PAGE> 45
ARTHUR ANDERSEN & CO.
Report of Independent Public Accountants
To Jacobson Stores Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of Jacobson Stores Inc. included in this Form
10-K as pages F-1 through F-14 and have issued our report thereon dated March
4, 1994. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed in Item 14(a)(2) are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN & CO.
Detroit, Michigan
March 4, 1994.
S-1
<PAGE> 46
SCHEDULE V
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE V - PROPERTY AND EQUIPMENT
FOR THE THREE FISCAL YEARS ENDED JANUARY 29, 1994
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance Balance
Beginning Additions Sales and End of
Description of Period at Cost Retirements Transfers Period
- ------------------------------------- ---------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
52 WEEKS ENDED JANUARY 25, 1992:
Land and improvements $ 9,214 $ 22 $ (15) $ -- $ 9,221
Buildings and improvements 81,285 885 (602) 197 81,765
Furniture, fixtures and equipment 29,864 1,884 (1,706) 631 30,673
Leasehold improvements 9,652 111 (386) -- 9,377
Construction in progress 39 881 -- (828) 92
Capital leases -
Buildings and improvements 3,136 -- (139) -- 2,997
Furniture, fixtures and equipment 7,243 2,142 (694) -- 8,691
-------- ------- -------- -------- --------
$140,433 $ 5,925 $(3,542) $ -- $142,816
-------- ------- -------- -------- --------
-------- ------- -------- -------- --------
53 WEEKS ENDED JANUARY 30, 1993:
Land and improvements $ 9,221 $ 78 $ -- $ -- $ 9,299
Buildings and improvements 81,765 1,141 (512) 4 82,398
Furniture, fixtures and equipment 30,673 1,463 (1,297) 782 31,621
Leasehold improvements 9,377 241 (3) 12 9,627
Construction in progress 92 3,111 -- (798) 2,405
Capital leases -
Buildings and improvements 2,997 -- (416) -- 2,581
Furniture, fixtures and equipment 8,691 1,257 (1,208) -- 8,740
-------- ------- ------- -------- --------
$142,816 $ 7,291 $(3,436) $ -- $146,671
-------- ------- -------- -------- --------
52 WEEKS ENDED JANUARY 29, 1994:
Land and improvements $ 9,299 $ 12 $ (222) $ 240 $ 9,329
Buildings and improvements 82,398 459 (1,781) 8,532 89,608
Furniture, fixtures and equipment 31,621 2,520 (1,896) 6,625 38,870
Leasehold improvements 9,627 241 (863) 206 9,211
Construction in progress 2,405 14,287 -- (15,603) 1,089
Capital leases -
Buildings and improvements 2,581 -- (533) -- 2,048
Furniture, fixtures and equipment 8,740 1,085 (1,470) -- 8,355
-------- ------- ------- -------- --------
$146,671 $18,604 $(6,765) $ -- $158,510
-------- ------- -------- --------- --------
-------- ------- -------- --------- --------
</TABLE>
S-2
<PAGE> 47
SCHEDULE VI
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VI - DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
FOR THE THREE FISCAL YEARS ENDED JANUARY 29, 1994
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
Balance Charged to Balance
Beginning Costs and Sales and End of
Description of Period Expenses Retirements Transfers Period
- ------------------------------------- ---------- ---------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
52 WEEKS ENDED JANUARY 25, 1992:
Land and improvements $ 861 $ 197 $ (15) $ -- $ 1,043
Buildings and improvements 24,869 3,196 (602) -- 27,463
Furniture, fixtures and equipment 12,219 3,401 (1,706) -- 13,914
Leasehold improvements 3,005 504 (386) -- 3,123
Capital leases -
Buildings and improvements 2,400 122 (139) -- 2,383
Furniture, fixtures and equipment 3,604 1,457 (531) -- 4,530
------- ------ ------- -------- -------
$46,958 $8,877 $(3,379) $ -- $52,456
------- ------ -------- -------- -------
------- ------ -------- -------- -------
53 WEEKS ENDED JANUARY 30, 1993:
Land and improvements $ 1,043 $ 199 $ -- $ -- $ 1,242
Buildings and improvements 27,463 3,233 (512) -- 30,184
Furniture, fixtures and equipment 13,914 3,424 (1,297) -- 16,041
Leasehold improvements 3,123 510 (3) -- 3,630
Capital leases -
Buildings and improvements 2,383 119 (416) -- 2,086
Furniture, fixtures and equipment 4,530 1,380 (1,208) -- 4,702
------- ------ ------- -------- -------
$52,456 $8,865 $(3,436) $ -- $57,885
------- ------ -------- -------- -------
------- ------ -------- -------- -------
52 WEEKS ENDED JANUARY 29, 1994:
Land and improvements $ 1,242 $ 205 $ -- $ -- $ 1,447
Buildings and improvements 30,184 3,382 (1,243) -- 32,323
Furniture, fixtures and equipment 16,041 3,813 (1,754) -- 18,100
Leasehold improvements 3,630 490 (407) -- 3,713
Capital leases -
Buildings and improvements 2,086 93 (507) -- 1,672
Furniture, fixtures and equipment 4,702 1,421 (1,394) -- 4,729
------- ------ ------- -------- -------
$57,885 $9,404 $(5,305) $ -- $61,984
------- ------ -------- -------- -------
------- ------ -------- -------- -------
</TABLE>
S-3
<PAGE> 48
SCHEDULE VIII
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE FISCAL YEARS ENDED JANUARY 29, 1994
(in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions Deductions
Balance Charged to For Balance
Beginning Costs and Bad Debts End of
Description of Period Expenses Written Off Period
- ---------------------------------------- ---------- ----------- ------------ ------
<S> <C> <C> <C> <C>
52 WEEKS ENDED JANUARY 25, 1992:
Receivables from customers -
Reserve for doubtful accounts $1,108 $1,480 $(1,688) $ 900
------ ------ ------- ------
------ ------ ------- ------
53 WEEKS ENDED JANUARY 30, 1993:
Receivables from customers -
Reserve for doubtful accounts $ 900 $1,116 $(1,115) $ 901
------ ------ ------- ------
------ ------ ------- ------
52 WEEKS ENDED JANUARY 29, 1994:
Receivables from customers -
Reserve for doubtful accounts $ 901 $ 720 $ (791) $ 830
------ ------ ------- ------
------ ------ ------- ------
</TABLE>
S-4
<PAGE> 49
SCHEDULE X
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE X - SUPPLEMENTAL INCOME STATEMENT INFORMATION
FOR THE THREE FISCAL YEARS ENDED JANUARY 29, 1994
(in thousands)
<TABLE>
<CAPTION>
Column A Column B
Charged to Costs
Item and Expenses
---- ----------------
<S> <C>
52 WEEKS ENDED JANUARY 25, 1992:
Maintenance and repairs $ 1,621
Depreciation and amortization 8,877
Taxes, other than income taxes:
Payroll 7,481
Property 4,442
Other 1,433
Rental of real property, fixtures and equipment 5,237
Advertising costs 10,582
-------
-------
53 WEEKS ENDED JANUARY 30, 1993:
Maintenance and repairs $ 1,630
Depreciation and amortization 8,865
Taxes, other than income taxes:
Payroll 7,454
Property 4,389
Other 1,349
Rental of real property, fixtures and equipment 6,131
Advertising costs 10,702
-------
-------
52 WEEKS ENDED JANUARY 29, 1994:
Maintenance and repairs $ 1,737
Depreciation and amortization 9,404
Taxes, other than income taxes:
Payroll 7,167
Property 4,134
Other 1,116
Rental of real property, fixtures and equipment 6,230
Advertising costs 11,331
-------
-------
</TABLE>
S-5
<PAGE> 50
INDEX OF EXHIBITS
Exhibit
- -------
3(a) By-laws, Jacobson Stores Inc., as amended March 17, 1994
10(a) Employment Agreement dated March 23, 1994 between Jacobson
Stores Inc. and Mark K. Rosenfeld
10(b) Employment Agreement dated March 23, 1994 between Jacobson
Stores Inc. and Paul W. Gilbert
10(c) Employment Agreement dated March 23, 1994 between Jacobson
Stores Inc. and James B. Fowler
10(d) Executive Employment Agreement dated March 26, 1994 between
Jacobson Stores Inc. and Robert L. Moles
10(e) 1994 Management Incentive Plan
11 Computation of Earnings per Share
21 Schedule of subsidiaries
23 Consent of Arthur Andersen & Co.
In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)
<TABLE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
3(b) Restated Articles of Incorporation, Exhibit 19(a) to Form
Jacobson Stores Inc., as amended 10-Q, Quarter Ended
and restated May 25, 1989 April 29, 1989
3(c) Certificate of Designation, Exhibit 3(a) to Form
Preferences and Rights of 10-Q, Quarter Ended
Preferred Stock of Jacobson October 29, 1988
Stores Inc.
4(a) Election under Section 780, Exhibit 28 to Form
Michigan Business Corporation Act 10-Q, Quarter Ended
October 27, 1984
4(b) Indenture dated as of December 15, File #33-10532: Exhibit
1986 between Jacobson Stores Inc. 4(a) to Form S-2
and National Bank of Detroit, as (Amendment No. 1), filed
Trustee December 12, 1986
</TABLE>
E-1
<PAGE> 51
<TABLE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
4(c) Rights Agreement dated as of Exhibit I to Form 8-A
October 4, 1988 between Jacobson and Exhibit 4 to Form
Stores Inc. and Manufacturers 8-K, October 7, 1988;
National Bank of Detroit, as Exhibit 1 to Amendment
Rights Agent; Change of Rights No. 1 to Form 8-A,
Agent, Effective June 1, 1989 May 16, 1989
4(d) Jacobson Credit Corp. $35,000,000 Exhibit 4(a) to Form
Amended and Restated Revolving 10-Q, Quarter Ended
Credit Agreement, dated as of October 24, 1992
November 20, 1992
4(e) Jacobson Stores Inc. $40,000,000 Exhibit 4(b) to Form
Term Loan Agreement, dated as of 10-Q, Quarter Ended
November 20, 1992 October 24, 1992
9 Voting and Transfer Restriction Exhibit 9 to Form 10-K,
Agreement, effective December 31, Year Ended January 26,
1990 1991
10(f) Restated Executive Employment Exhibit 10(a) to Form
Agreement dated March 23, 1993 10-K, Year Ended
between Jacobson Stores Inc. January 30, 1993
and Nathan Forman
10(g) Employment Agreement dated Exhibit 10(a) to Form
August 25, 1992 between 10-Q, Quarter Ended
Jacobson Stores Inc. and July 25, 1992
John R. Fowler
10(h) Jacobson Stores Inc. Deferred Exhibit 10(c) to Form
Compensation Plan 10-K, Year Ended
January 26, 1991
</TABLE>
With the exception of Exhibits 4(b), 4(d) and 4(e), instruments
defining the rights of holders of long-term debt of the registrant and its
subsidiaries have been omitted. The amount of debt authorized under each such
instrument is less than 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis. The registrant agrees to furnish a copy
of any such instrument to the Securities and Exchange Commission upon request.
In addition to Exhibits 10(a) to 10(d), inclusive, and 10(f), the
registrant has employment agreements with four other executive officers, which
are not considered material in amount or significance.
E-2
<PAGE> 1
EXHIBIT 3(a)
JACOBSON STORES INC.
(A MICHIGAN CORPORATION)
BYLAWS
(As amended March 17, 1994)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I - OFFICES . . . . . . . . . . . . . . . . 1
ARTICLE II - MEETINGS OF SHAREHOLDERS. . . . . . . . 1
Section 1. Time and Places of Meetings . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . 1
Section 3. Notice of Annual Meeting. . . . . . . . 1
Section 4. Shareholder List. . . . . . . . . . . . 1
Section 5. Adjournment of Annual Meeting . . . . . 2
Section 6. Delayed Annual Meeting. . . . . . . . . 2
Section 7. Special Meetings. . . . . . . . . . . . 2
Section 8. Notice of Special Meetings. . . . . . . 2
Section 9. Quorum. . . . . . . . . . . . . . . . . 2
Section 10. Vote Required . . . . . . . . . . . . . 3
Section 11. Voting Rights . . . . . . . . . . . . . 3
Section 12. Conduct of Meetings . . . . . . . . . . 3
Section 13. Inspectors of Election. . . . . . . . . 4
ARTICLE III - DIRECTORS . . . . . . . . . . . . . . . 4
Section 1. Number and Term of Directors. . . . . . 4
Section 2. Powers. . . . . . . . . . . . . . . . . 4
Section 3. Vacancies . . . . . . . . . . . . . . . 4
Section 4. Resignation and Removal . . . . . . . . 4
Section 5. Nominations . . . . . . . . . . . . . . 5
Section 6. Compensation of Directors . . . . . . . 5
Section 7. Place of Meetings . . . . . . . . . . . 5
Section 8. Annual Organizational Meeting . . . . . 5
Section 9. Regular Meetings. . . . . . . . . . . . 5
Section 10. Special Meetings. . . . . . . . . . . . 5
Section 11. Purpose Need Not be Stated. . . . . . . 5
Section 12. Quorum. . . . . . . . . . . . . . . . . 6
Section 13. Action Without a Meeting. . . . . . . . 6
Section 14. Meeting by Telephone or Similar
Equipment . . . . . . . . . . . . . . 6
Section 15. Written Notice. . . . . . . . . . . . . 6
Section 16. Waiver of Notice. . . . . . . . . . . . 6
</TABLE>
-i-
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE IV - COMMITTEES OF DIRECTORS . . . . . . . . 7
Section 1. Executive Committee . . . . . . . . . . 7
Section 2. Audit Committee . . . . . . . . . . . . 7
Section 3. Organization and Compensation
Committee . . . . . . . . . . . . . . 8
Section 4. Nominating Committee. . . . . . . . . . 8
Section 5. Other Committees. . . . . . . . . . . . 8
Section 6. Membership and Vacancies on Committees. 8
Section 7. Reporting on Committee Actions. . . . . 8
ARTICLE V - OFFICERS. . . . . . . . . . . . . . . . 8
Section 1. Election of Officers. . . . . . . . . . 8
Section 2. Chairman of the Board . . . . . . . . . 8
Section 3. Vice Chairman of the Board. . . . . . . 9
Section 4. President . . . . . . . . . . . . . . . 9
Section 5. Chief Executive Officer . . . . . . . . 9
Section 6. Chief Operating Officer . . . . . . . . 9
Section 7. Vice Presidents . . . . . . . . . . . . 10
Section 8. Secretary . . . . . . . . . . . . . . . 10
Section 9. Treasurer . . . . . . . . . . . . . . . 10
Section 10. Controller. . . . . . . . . . . . . . . 10
Section 11. Assistant Secretary and Assistant
Treasurer . . . . . . . . . . . . . . 11
Section 12. Delegation of Powers. . . . . . . . . . 11
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS. . . . . . . . . 11
Section 1. Obligation to Indemnify and Right
of Indemnification. . . . . . . . . . 11
Section 2. Third Party Actions . . . . . . . . . . 11
Section 3. Actions by or in the Right of the
Corporation . . . . . . . . . . . . . 12
Section 4. Successful Defense. . . . . . . . . . . 12
Section 5. Determination of Conduct. . . . . . . . 12
Section 6. Partial Indemnification . . . . . . . . 13
Section 7. Payment of Expenses in Advance. . . . . 13
Section 8. Indemnification Not Exclusive . . . . . 13
Section 9. Contract Right. . . . . . . . . . . . . 13
Section 10. Insurance . . . . . . . . . . . . . . . 14
Section 11. Continuation. . . . . . . . . . . . . . 14
Section 12. Definitions . . . . . . . . . . . . . . 14
Section 13. Savings Clause. . . . . . . . . . . . . 15
Section 14. Other Employees and Agents. . . . . . . 15
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VII - SUBSIDIARIES. . . . . . . . . . . . . . 15
Section 1. Subsidiaries. . . . . . . . . . . . . . 15
Section 2. Subsidiary Officers not Executive
Officers. . . . . . . . . . . . . . . 15
ARTICLE VIII - CERTIFICATES OF STOCK . . . . . . . . . 16
Section 1. Form. . . . . . . . . . . . . . . . . . 16
Section 2. Facsimile Signature . . . . . . . . . . 16
Section 3. Lost Certificates . . . . . . . . . . . 16
Section 4. Transfers of Stock. . . . . . . . . . . 16
Section 5. Fixing of Record Date by Board. . . . . 17
Section 6. Provision for Record Date in the
Absence of Board Action . . . . . . . 17
Section 7. Adjournments. . . . . . . . . . . . . . 17
Section 8. Registered Shareholders . . . . . . . . 17
ARTICLE IX - GENERAL PROVISIONS. . . . . . . . . . . 18
Section 1. Dividends . . . . . . . . . . . . . . . 18
Section 2. Checks. . . . . . . . . . . . . . . . . 18
Section 3. Fiscal Year . . . . . . . . . . . . . . 18
Section 4. Seal. . . . . . . . . . . . . . . . . . 18
ARTICLE X - CONTROL SHARE ACQUISITIONS. . . . . . . 18
ARTICLE XI - AMENDMENTS. . . . . . . . . . . . . . . 18
</TABLE>
-iii-
<PAGE> 4
BYLAWS
OF
JACOBSON STORES INC.
(As amended March 17, 1994)
ARTICLE I
OFFICES
The corporation may have offices at such places, both within and without
the State of Michigan, as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. TIME AND PLACES OF MEETINGS. All meetings of the
shareholders shall be held, except as otherwise provided by statute or these
Bylaws, at such time and place as may be fixed from time to time by the Board
of Directors. Meetings of shareholders may be held within or without the State
of Michigan as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of the
shareholders shall be held on the fourth Thursday of May if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
such hour as shall be stated in the notice of the meeting, at which they shall
elect by a plurality vote the successors of the class of directors whose term
expires at the meeting, together with directors to fill vacancies or newly
created directorships, and transact such other business as may properly be
brought before the meeting.
SECTION 3. NOTICE OF ANNUAL MEETING. Written notice of the
annual meeting shall be given personally or by mail to each shareholder
entitled to vote thereat at least ten (10) and not more than sixty (60) days
before the date of the meeting. Attendance of a shareholder at a meeting shall
constitute a waiver of notice, except when the shareholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to
transaction of any business because the meeting is not lawfully called or
convened.
SECTION 4. SHAREHOLDER LIST. The officer or agent who has
charge of the stock ledger of the corporation shall prepare and make before
every meeting of shareholders, a complete list of the
<PAGE> 5
shareholders entitled to vote at the meeting, arranged by class or series in
alphabetical order, showing the address of and the number of shares registered
in the name of each shareholder. Such list shall be open to the examination of
any shareholder, for any purpose germane to the meeting, during the whole time
thereof, and may be inspected by any shareholder who is present.
SECTION 5. ADJOURNMENT OF ANNUAL MEETING. If a quorum be not
present at the annual meeting, the shareholders present in person or by proxy
may adjourn to such future time as shall be agreed upon by them, and notice of
such adjournment shall be mailed, postage prepaid, to each shareholder at least
five (5) days before such adjourned meeting; but if a quorum be present, they
may adjourn from day to day as they see fit and no notice of such adjournment
need be given.
SECTION 6. DELAYED ANNUAL MEETING. If for any reason other
than those enumerated in Section 5 of this Article, the annual meeting of the
shareholders shall not be held on the day hereinbefore designated, such meeting
may be called and held as a special meeting and the same proceedings may be had
thereat as at an annual meeting, PROVIDED, HOWEVER, that the notice of such
meeting shall be mailed to the shareholders at least fifteen (15) days prior to
the date fixed for such delayed annual meeting.
SECTION 7. SPECIAL MEETINGS. Except as otherwise required by
law and subject to the rights of the holders of Preferred Stock, special
meetings of shareholders of the corporation may be called only by (i) the Board
of Directors pursuant to a resolution approved by a majority of the entire
Board of Directors, (ii) any committee of the Board of Directors designated by
a resolution approved by a majority of the entire Board of Directors, (iii) the
Chief Executive Officer of the corporation, or (iv) any other officer or
officers designated by the Board of Directors by resolution approved by a
majority of the entire Board of Directors.
SECTION 8. NOTICE OF SPECIAL MEETINGS. Written notice of a
special meeting of shareholders, stating the time, place and object thereof,
shall be given personally or by mail to each shareholder entitled to vote
thereat, at least ten (10) and not more than sixty (60) days before the date
fixed for the meeting.
SECTION 9. QUORUM. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of the shareholders, except as otherwise provided by statute or
by the Articles of Incorporation. The shareholders present in person or by
proxy at such meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. Whether or not a quorum is present, the meeting may be adjourned by a
vote of the shares present.
2
<PAGE> 6
Except when the holders of a class or series of shares are entitled to
vote separately on an item of business, shares of all classes and series
entitled to vote shall be combined as a single class and series for the purpose
of determining a quorum. When the holders of a class or series of shares are
entitled to vote separately on an item of business, shares of that class or
series entitled to cast a majority of the votes of that class or series at a
meeting constitute a quorum of that class or series at that meeting, unless a
greater or lesser quorum is provided by statute or the Articles of
Incorporation.
SECTION 10. VOTE REQUIRED. When an action, other than the
election of directors, is to be taken by a vote of the shareholders, it shall
be authorized by a majority of the votes cast by the holders of shares entitled
to vote thereon, unless a greater vote is required by the Articles of
Incorporation of this corporation or by the laws of the State of Michigan.
Except as otherwise provided by the Articles of Incorporation, directors shall
be elected by a plurality of the votes cast at any election.
SECTION 11. VOTING RIGHTS. Except as otherwise provided by
the Articles of Incorporation or the resolution or resolutions of the Board of
Directors creating any class of stock, each shareholder shall at every meeting
of shareholders be entitled to one (1) vote in person or by proxy for each
share of the capital stock having voting power held by such shareholder. A
proxy shall be valid only with respect to the particular meeting, or any
adjournment or adjournments thereof, to which it specifically pertains.
SECTION 12. CONDUCT OF MEETINGS. Meetings of shareholders
generally shall be governed by the following rules:
(a) The chairman of the meeting shall have absolute authority
over matters of procedure, and there shall be no appeal from the ruling
of the chairman.
(b) If disorder should arise which prevents the continuation of
the legitimate business of the meeting, the chairman may quit the chair
and announce the adjournment of the meeting; and upon his so doing, the
meeting is immediately adjourned.
(c) The chairman may ask or require that anyone not a bona fide
shareholder or proxy leave the meeting.
(d) A resolution or motion shall be considered for vote only if
proposed by a shareholder or a duly authorized proxy and seconded by an
individual who is a shareholder or a duly authorized proxy other than
the individual who proposed the resolution or motion.
3
<PAGE> 7
SECTION 13. INSPECTORS OF ELECTION. The Board of Directors or, if
they shall not have so acted, the Chief Executive Officer may appoint, at or
prior to any meeting of shareholders, one or more persons (who may be employees
of the corporation) to serve as inspectors of election. The inspectors so
appointed shall determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes or ballots, hear and
determine challenges and questions arising in connection with the right to
vote, count and tabulate votes or ballots, determine the result, and do such
other acts as are proper to conduct the election or vote with fairness to all
shareholders.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM OF DIRECTORS. The number of directors
which shall constitute the whole Board shall be not less than three and shall
be determined from time to time by resolution of the Board of Directors as set
forth in the Articles of Incorporation, as the same may be amended. The
directors, other than those who may be elected by the holders of any class or
series of stock having a preference over Common Stock as to dividends or upon
liquidation, shall be divided into three classes, as nearly equal in number as
possible, with the term of office of one class expiring each year. At each
annual meeting of the shareholders, the successors of the class of directors
whose term expires at that meeting shall be elected and hold office for a term
expiring at the annual meeting of shareholders held in the third year following
the year of their election. Directors need not be shareholders.
SECTION 2. POWERS. The business of the corporation shall be
managed by its Board of Directors, which may exercise all such powers of the
corporation and do all such lawful acts and things as are not, by statute or by
the Articles of Incorporation or these Bylaws, directed or required to be
exercised or done by the shareholders.
SECTION 3. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
as provided in the Articles of Incorporation.
SECTION 4. RESIGNATION AND REMOVAL. Any director may resign at any
time and such resignation shall take effect upon receipt of written notice
thereof by the corporation, or at such subsequent time as set forth in the
notice of resignation. Any or all of the directors may be removed, but only
for cause, as provided in the Articles of Incorporation.
4
<PAGE> 8
SECTION 5. NOMINATIONS. Nominations of candidates for election as
directors of the corporation at any meeting of shareholders called for election
of directors may be made by the Board of Directors, the Chairman of the Board,
or a nominating committee appointed by the Board of Directors, or by any
shareholder entitled to vote in the election of directors generally as set
forth in the Articles of Incorporation.
SECTION 6. COMPENSATION OF DIRECTORS. Each director who is not a
salaried officer of or legal counsel to the corporation may receive as
compensation for his or her services in that capacity such sums and such
benefits as shall from time to time be determined by the Board of Directors,
plus traveling expenses and other expenses necessary for attendance at regular
or special meetings of the Board of Directors and committees of the Board.
Members of special or standing committees may be allowed like compensation for
attending committee meetings. Nothing herein shall be construed to preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 7. PLACE OF MEETINGS. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Michigan.
SECTION 8. ANNUAL ORGANIZATIONAL MEETING. The annual
organizational meeting of the Board of Directors may be held before or after
the annual meeting of shareholders, for the purpose of electing officers and
such other purposes as may come before the meeting. No notice of such meeting
shall be necessary in order legally to constitute the meeting, provided a
quorum of directors then in office shall be present. If such meeting is not
held on the same date and in the same place as the annual meeting of
shareholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
SECTION 9. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board.
SECTION 10. SPECIAL MEETINGS. Subject to the provisions of Section
15 of this Article III, special meetings of the Board of Directors may be
called by the Chairman of the Board, President, or Secretary or by any two (2)
Continuing Directors (as defined in the Articles of Incorporation) on two (2)
days' notice to each director.
SECTION 11. PURPOSE NEED NOT BE STATED. Neither the business to be
transacted at nor the purpose of any regular or special meeting of the Board of
Directors need be specified in the notice of such meeting.
5
<PAGE> 9
SECTION 12. QUORUM. At all meetings of the Board of Directors a
majority of the directors shall constitute a quorum for the transaction of
business, and the acts of a majority of the directors present at any meeting at
which there is a quorum shall be acts of the Board of Directors except as may
be otherwise specifically provided by statute or by the Articles of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 13. ACTION WITHOUT A MEETING. Unless otherwise restricted
by the Articles of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if, before or after the
action, all members of the Board or of such committee, as the case may be,
consent thereto in writing and such written consent is filed with the minutes
or proceedings of the Board or committee.
SECTION 14. MEETING BY TELEPHONE OR SIMILAR EQUIPMENT. The Board of
Directors or any committee designated by the Board of Directors may participate
in a meeting of such Board or committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to
this section shall constitute presence in person at such meeting.
SECTION 15. WRITTEN NOTICE. Notices to directors shall be in
writing and delivered personally or mailed to the directors at their addresses
appearing on the books of the corporation. Notice by mail shall be deemed to
be given at the time when the same shall be mailed. Notice to directors may
also be given by telegram. Notwithstanding the foregoing, notice shall be
given by telegram if the date of the meeting to which such notice relates is
within three (3) days of the date that such notice is given.
SECTION 16. WAIVER OF NOTICE. Whenever any notice is required to be
given under the provision of the statutes or of the Articles of Incorporation
or of these Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. The attendance of a director at a
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting has not been lawfully called or
convened.
6
<PAGE> 10
ARTICLE IV
COMMITTEES OF DIRECTORS
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may appoint
an Executive Committee composed of three or more Directors. The Executive
Committee shall have and may exercise the following authority of the Board of
Directors:
(a) The Executive Committee shall have the authority of the Board
of Directors, between meetings of the Board, to take such actions and
adopt such resolutions as may be necessary, appropriate or convenient in
the ordinary course of business of the corporation; including (without
limitation) the authorization of leases of real or personal property,
seasonal borrowings, bank depository resolutions, and regular quarterly
dividends on Preferred Stock of the corporation.
(b) Whenever and as often as the Board of Directors designates,
the Executive Committee shall have such further authority as the Board
of Directors designates, subject to prohibitions set forth in the
Business Corporation Act of Michigan; including the full powers and
authorities of the Board of Directors, between meetings of the Board,
to take any and all actions and adopt any and all resolutions that may
be necessary, appropriate or convenient with respect to any matters
designated by the Board of Directors.
The Executive Committee may meet with or without prior notice on call of
any member; provided, that when the Executive Committee consists of three
members, it shall be necessary for all three members to participate and concur
in decisions of the Committee, and when the Committee consists of more than
three members, it shall be necessary for at least three members or a majority
of the members of the Committee (whichever is greater) to participate and
concur in decisions of the Committee. Such participation may be attendance at
a meeting, by telephone, by written consent, or otherwise.
SECTION 2. AUDIT COMMITTEE. The Board of Directors may appoint an
Audit Committee composed of five or more directors. No director who is then an
officer of the corporation or any subsidiary of the corporation shall be
eligible to serve on the Audit Committee. The Audit Committee shall confer
with the independent certified public accountants employed by the corporation,
and with the corporation's internal auditors; review the scope of the audit and
other matters relating to the independent accountants' services; review
internal accounting controls; review recommendations of the independent
accountants; and perform such other functions as the Board of Directors may
from time to time specifically confer on the Committee.
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SECTION 3. ORGANIZATION AND COMPENSATION COMMITTEE. The Board of
Directors may appoint an Organization and Compensation Committee, consisting of
five or more Directors. The Organization and Compensation Committee shall
review the development of corporate management and succession, review salaries
and bonuses of officers and other key managerial employees, review the
corporation's employee benefit plans and policies, and perform such other
functions as the Board of Directors may from time to time specifically confer
on the Committee.
SECTION 4. NOMINATING COMMITTEE. The Board of Directors may
appoint a Nominating Committee, consisting of three or more Directors, to
consider nominees for directorship in the corporation.
SECTION 5. OTHER COMMITTEES. The Board of Directors may establish
and appoint such other committees of the Board of Directors, consisting of such
directors and having such powers and duties, as the Board determines.
SECTION 6. MEMBERSHIP AND VACANCIES ON COMMITTEES. The Board of
Directors may remove members from or add members to any committee of the Board,
and fill vacancies on such committee.
SECTION 7. REPORTING ON COMMITTEE ACTIONS. All actions taken by
any committee of the Board shall be reported to the Board of Directors at the
next meeting of the Board. However, no delay in reporting any action of any
committee shall affect the validity of such action, or of any actions taken in
the name and on behalf of the corporation pursuant thereto.
ARTICLE V
OFFICERS
SECTION 1. ELECTION OF OFFICERS. All officers of the corporation
shall be elected by the Board of Directors.
SECTION 2. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the shareholders, and at all meetings of the Board
of Directors, and shall have such other duties and powers as may be imposed or
given by the Board of Directors. He shall be a non-voting member of the
Organization and Compensation Committee, and shall be a voting member of all
other standing committees of the Board of Directors, except that he shall not
be a member of the Audit Committee. In case of the absence or inability to act
of the President or Chief Executive Officer, the Chairman of the Board shall
exercise all of the duties and responsibilities of such officer until the Board
of Directors shall otherwise direct.
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SECTION 3. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board, if any, shall be elected from the membership of the Board of Directors;
and in the absence or disability of the Chairman of the Board, shall have such
other duties and powers as may be imposed or given by the Board of Directors.
In case of the absence or inability to act of the Chairman of the Board, the
Vice Chairman of the Board shall exercise all of the duties and
responsibilities of such officer until the Board of Directors shall otherwise
direct. In the absence or disability of the Chairman of the Board, he shall be
a non-voting member of the Organization and Compensation Committee, and shall
be a voting member of all other standing committees of the Board of Directors,
except that he shall not be a member of the Audit Committee.
SECTION 4. PRESIDENT. The President shall, subject to the
direction of the Board of Directors or the Chief Executive Officer, if any, see
that all orders and resolutions of the Board of Directors are carried into
effect, and shall perform all other duties necessary or appropriate to the
office, subject, however, to the right of the Chief Executive Officer and of
the directors to delegate any specific powers to any other officer or officers
of the corporation. In case of the absence or inability to act of both the
Chairman of the Board and the Vice Chairman of the Board, or the Chief
Executive Officer, the President shall exercise all of the duties and
responsibilities of such officer until the Board of Directors shall otherwise
direct. In the absence or disability of the Chairman and Vice Chairman of the
Board, the President shall be a non-voting member of the Organization and
Compensation Committee, and a voting member of all other standing committees of
the Board of Directors, except that he shall not be a member of the Audit
Committee.
SECTION 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer,
in addition to the duties as Chairman or Vice Chairman of the Board or
President, as the case may be, shall have final authority, subject to the
control of the Board of Directors, over the general policy and business of the
corporation and shall have the general control and management of the business
and affairs of the corporation. The Chief Executive Officer shall have the
power, subject to the control of the Board of Directors, to appoint, suspend,
or discharge and to prescribe the duties and to fix the compensation of such
agents and employees of the corporation, other than the officers appointed by
the Board, as the Chief Executive officer may deem necessary.
SECTION 6. CHIEF OPERATING OFFICER. There may be elected a Chief
Operating Officer who shall, if elected, have general charge, control and
supervision over the administration and operations of the corporation and shall
have such other duties and powers as may be imposed or given by the Board of
Directors. If no Chief Operating Officer is elected, the duties and powers of
the Chief
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Operating Officer shall be performed by the Chief Executive Officer.
SECTION 7. VICE PRESIDENTS. Any Executive Vice President, any
Senior Vice President, and each Vice President shall have such authority and
responsibilities as designated by the Board of Directors, the Executive
Committee, the Chairman or Vice Chairman of the Board, or the President.
SECTION 8. SECRETARY. The Secretary shall attend all meetings of
the shareholders and of the Board of Directors, and of the Executive Committee,
and shall preserve in books of the corporation true minutes of the proceedings
of all such meetings; shall keep the seal of the corporation and shall have
authority to affix the same to all instruments where its use is required; shall
give all notices required by statute, bylaw or resolution; and shall perform
such other duties as may be delegated by the Board of Directors, the Executive
Committee, the Chairman or Vice Chairman of the Board, or the President.
SECTION 9. TREASURER. The Treasurer shall have custody of all
corporate funds and securities and shall keep in books belonging to the
corporation full and accurate accounts of all receipts and disbursements; shall
deposit all monies, securities and other valuable effects in the name of the
corporation in such depositaries as may be designated for that purpose by the
Board of Directors; shall disburse the funds of the corporation as may be
ordered by the Board, taking proper vouchers for such disbursements, and shall
render to the Board of Directors, Chairman and Vice Chairman of the Board, and
President, at the regular meetings of the Board, and whenever requested by
them, an account of all transactions as Treasurer and of the financial
condition of the corporation; shall deliver to the Chairman and Vice Chairman
of the Board and the President, and shall keep in force, a bond in form, amount
and with a surety or sureties satisfactory to the Board, conditioned for
faithful performance of the duties of office, by the Treasurer and any
Assistant Treasurers and for restoration to the corporation in case of death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and property of whatever kind belonging to the corporation; and shall in
addition perform such other duties as may be delegated by the Board of
Directors, the Executive Committee, the Chairman or Vice Chairman of the Board,
or the President.
SECTION 10. CONTROLLER. The Controller shall be responsible for
establishment and maintenance of internal accounting and other control systems
for this corporation and its wholly-owned subsidiaries; liaison with
independent auditors; and such other duties as may be designated by the Board
of Directors, the Executive Committee, the Chairman or Vice Chairman of the
Board, or the President.
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SECTION 11. ASSISTANT SECRETARY AND ASSISTANT TREASURER. Any
Assistant Secretary, in the absence of the Secretary, shall perform the duties
and exercise the powers of the Secretary. Any Assistant Treasurer, in the
absence of or disability of the Treasurer, shall perform the duties and
exercise the power of the Treasurer. If there is more than one Assistant
Secretary and/or Assistant Treasurer, their respective duties and
responsibilities shall be as designated by the Board of Directors, the
Executive Committee, the Chairman or Vice Chairman of the Board, or the
President.
SECTION 12. DELEGATION OF POWERS. For any reason deemed sufficient
by the Board of Directors, whether occasioned by absence or otherwise, the
Board may delegate all or any of the powers and duties of any officer to any
other officer or Director, but no officer or Director shall execute,
acknowledge or verify any instrument in more than one capacity.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
SECTION 1. OBLIGATION TO INDEMNIFY AND RIGHT TO INDEMNIFICATION.
This corporation shall indemnify each of its directors and officers, and each
person who hereafter becomes a director and/or officer of the corporation, and
each such person shall be entitled to such indemnification without further
action on his or her part, against all expense, liability and loss, arising in
any manner by reason of the fact that such person is or was a director and/or
officer of the corporation, or by reason of any acts of such person, or
omissions of such person to act, as a director and/or officer of the
corporation, to the fullest extent permitted by any present or future provision
of law, including without limitation the indemnification and advancement of
expenses provided for in Section 2-12, inclusive, of this Article VI.
SECTION 2. THIRD PARTY ACTIONS. The corporation shall indemnify
any person who was or is a party or is threatened to be made a party to a
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative and whether formal or informal,
other than an action by or in the right of the corporation, by reason of the
fact that he or she is or was a director and/or officer of the corporation, or
is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, whether for
profit or not, against expenses, including attorneys' fees, judgments,
penalties, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit, or proceeding, if
the person
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acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation or its shareholders, and
with respect to a criminal action or proceeding, if the person had no
reasonable cause to believe his or her conduct was unlawful. The termination
of an action, suit, or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, does not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interest of the corporation or its shareholders, and, with respect to a
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
SECTION 3. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party to or is
threatened to be made a party to a threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that he or she is or was a director and/or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses, including actual and reasonable
attorneys' fees, and amounts paid in settlement incurred by the person in
connection with the action or suit, if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and its shareholders. However, indemnification
shall not be made for a claim, issue, or matter in which the person has been
found liable to the corporation unless and only to the extent that the court in
which the action or suit was brought has determinated upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnification for the
expenses which the court considers proper.
SECTION 4. SUCCESSFUL DEFENSE. To the extent that a director or
officer of the corporation has been successful on the merits or otherwise in
defense of an action, suit, or proceeding referred to in Section 2 or 3 of this
Article VI, or in defense of a claim, issue, or matter in the action, suit, or
proceeding, he or she shall be indemnified against expenses, including actual
and reasonable attorneys' fees, incurred by him or her in connection with the
action, suit, or proceeding brought to enforce the mandatory indemnification
provided for in this section.
SECTION 5. DETERMINATION OF CONDUCT. Subject to any rights under
any contract between the corporation and any director or officer, any
indemnification under Section 2 or 3 of this Article VI, unless ordered by a
court, shall be made by the corporation only as authorized in the specific case
upon a determination that
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indemnification of the director or officer is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Sections 2 and 3. This determination shall be made in any of the following
ways:
(a) By a majority vote of a quorum of the Board
consisting of directors who were not parties to the action,
suit or proceeding.
(b) If the quorum described in subdivision (a) is
not obtainable, then by a majority vote of a committee of
directors who are not parties to the action. The committee
shall consist of not less than two (2) disinterested directors.
(c) By independent legal counsel in a written opinion.
(d) By the shareholders.
SECTION 6. PARTIAL INDEMNIFICATION. If a person is entitled to
indemnification under Section 2 or 3 of this Article VI for a portion of the
expenses, including attorneys' fees, judgment, penalties, fines, and amounts
paid in settlement, but not for the total amount thereof, the corporation shall
indemnify the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is entitled to be
indemnified.
SECTION 7. PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in
defending a civil or criminal action, suit, or proceeding described in Section
2 of 3 of this Article VI shall be paid by the corporation in advance of the
final disposition of the action, suit, or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay the expenses if
it is ultimately determined that the person is not entitled to be indemnified
by the corporation. The undertaking shall be by unlimited general obligation
of the person on whose behalf advances are made but need not be secured.
SECTION 8. INDEMNIFICATION NOT EXCLUSIVE. The indemnification and
advancement of expenses provided for in Sections 2-7, inclusive, of this
Article VI are not exclusive of other rights to which a person seeking
indemnification and advancement of expenses may be entitled under the Restated
Articles of Incorporation, Bylaws, or a contractual agreement. However, the
total amount of expenses advanced and indemnified from all sources combined
shall not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
SECTION 9. CONTRACT RIGHT. The right to indemnification conferred
in this Article VI shall be a contract right between the corporation and each
director and officer of the corporation, or
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individual who is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, who serves in such
capacity at any time while this Article VI is in effect. No amendment or
repeal of all or any part of this Article VI, nor the adoption of any provision
inconsistent with this Article VI, shall apply to any acts or omissions
occurring prior to such amendment or repeal, or give rise to or increase any
liability of any director or officer with respect to any acts or omissions
occurring prior to such amendment or repeal.
SECTION 10. INSURANCE. The corporation may maintain insurance, at
its expense, to protect itself and any directors, officers, employees or agents
of the corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not
the corporation would have the power to indemnify such persons against such
expense, liability or loss under any applicable provision of law.
SECTION 11. CONTINUATION. The indemnification and advancement of
expenses provided for in this Article VI shall continue as to a person who
ceases to be a director or officer, and shall inure to the benefit of the
heirs, executors, and administrators of the person.
SECTION 12. DEFINITIONS. For purposes of this Article VI:
(a) References to the "corporation" include all constituent
corporations absorbed in a consolidation or merger and the resulting or
surviving corporation, so that a person who is or was a director,
officer, employee or agent of the constituent corporation or is or was
serving at the request of the constituent corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, or other
enterprise whether for profit or not shall stand in the same position
under the provisions of this Article VI with respect to the resulting or
surviving corporation as the person would if he or she had served the
resulting or surviving corporation in the same capacity.
(b) References to "other enterprises" include employee benefit
plans; references to "fines" include excise taxes assessed with respect
to any employee benefit plan; and references to "serving at the request
of the corporation" include any service which imposes duties on, or
involves services by, such director or officer with respect to any
employee benefit plan, its participants or beneficiaries; and a person
who acted in good faith and in a manner he or she reasonably believed to
be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed
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to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article VI.
SECTION 13. SAVINGS CLAUSE. If any provision of this Article VI
shall be invalidated on any ground by any court, the corporation shall
nevertheless indemnify each of its directors and offices against expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement with
respect to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, including third party actions and actions by
or in the right of the corporation, to the fullest extent permitted by any
applicable law.
SECTION 14. OTHER EMPLOYEES AND AGENTS. The corporation may,
pursuant to authorization of the Board of Directors, provide indemnification
and advancement of expenses to employees and agents of the corporation other
than directors and officers, to the same extent as provided for directors and
officers, or otherwise as the Board of Directors determines.
ARTICLE VII
SUBSIDIARIES
SECTION 1. SUBSIDIARIES. The Board of Directors, the Chairman of
the Board, President, or any other executive officer designated by the Board of
Directors may vote the shares of stock owned by this corporation in any
subsidiary, whether wholly or partly owned by this corporation, in such manner
as they may deem in the best interests of this corporation, including, without
limitation, for the election of directors of any subsidiary corporation, or for
any amendments to the charter or bylaws of any such subsidiary corporation, or
for the liquidation, merger, or sale of assets of any such subsidiary
corporation. The Board of Directors, the Chairman of the Board, President, or
any other executive officer designated by the Board of Directors may cause to
be elected to the Board of Directors of any such subsidiary corporation such
persons as they shall designate, any of whom may, but need not be, directors,
executive officers, or other employees or agents of this corporation. The
Board of Directors, the Chairman of the Board, President, or any other
executive officer designated by the Board of Directors may instruct the
directors of any such subsidiary corporation as to the manner in which they are
to vote upon any issue properly coming before them as the directors of such
subsidiary corporation, and such directors shall have no liability to this
corporation as the result of any action taken in accordance with such
instructions.
SECTION 2. SUBSIDIARY OFFICERS NOT EXECUTIVE OFFICERS. The
officers of any subsidiary corporation shall not, by virtue of holding such
title and position, be deemed to be executive officers
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of this corporation, nor shall any such officer of a subsidiary corporation,
unless he or she shall also be a director or executive officer of this
corporation, be entitled to have access to any files, records or other
information relating or pertaining to this corporation, its business and
finances, or to attend or receive the minutes of any meetings of the Board of
Directors or any committee of this corporation, except as and to the extent
expressly authorized and permitted by the Board of Directors, the Chairman of
the Board, or President of this corporation.
ARTICLE VIII
CERTIFICATES OF STOCK
SECTION 1. FORM. Every holder of stock in the corporation shall be
entitled to have a certificate in the name of the corporation, signed by the
Chairman of the Board or the President or a Vice President and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares of stock in the corporation owned
by such person.
SECTION 2. FACSIMILE SIGNATURE. When a certificate is signed (1)
by a transfer agent or an assistant transfer agent, or (2) by a transfer clerk
acting on behalf of the corporation, and/or by a registrar, the signature of
any such Chairman, President, Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary may be a facsimile. In case any officer,
transfer agent, or registrar who has signed, or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a
new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificates, or the owner's
legal representative, to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost or destroyed.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the corporation
or the transfer agent of the corporation of a
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certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
SECTION 5. FIXING OF RECORD DATE BY BOARD. For the purpose of
determining the shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or to express consent to or dissent
from any corporate action in writing without a meeting, or for the purpose of
determining shareholders entitled to receive payment of any dividend or the
distribution or allotment of any rights or evidences of interest arising out of
any change, conversion or exchange of capital stock, or for the purpose of any
other action, the Board of Directors may fix, in advance, a date as the record
date for any such determination of shareholders. Such date shall be at least
ten (10) and not more than sixty (60) days before the date of any such meeting,
and not more than sixty (60) days before any other action. Only shareholders
of record on a record date so fixed shall be entitled to notice of, and to vote
at, such meeting or to receive payment of any dividend or the distribution or
allotment of any rights or evidences of interest arising out of any change,
conversion or exchange of capital stock.
SECTION 6. PROVISION FOR RECORD DATE IN THE ABSENCE OF BOARD
ACTION. If a record date is not fixed by the Board of Directors: (a) the
record date for determination of shareholders entitled to notice of or to vote
at a meeting of shareholders shall be the close of business on the day next
preceding the day on which notice is given, or, if no notice is given, the day
next preceding the date on which the meeting is held; and (b) the record date
for determining shareholders entitled to express consent to corporate action in
writing, without a meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent is expressed;
and (c) the record date for determining shareholders for any other purpose
shall be the close of business on the day on which the resolution of the Board
relating thereto is adopted.
SECTION 7. ADJOURNMENTS. When a determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders has been
made as provided in this Article, the determination applies to any adjournment
of the meeting, unless the Board fixes a new record date for the adjourned
meeting.
SECTION 8. REGISTERED SHAREHOLDERS. The corporation shall be
entitled to recognize the exclusive rights of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express
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or other notice thereof, except as otherwise provided by the laws of Michigan.
ARTICLE IX
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to the provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting pursuant to law. Dividends may be paid in cash, in property, or in
shares of capital stock, subject to the provisions of the Articles of
Incorporation.
SECTION 2. CHECKS. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the corporation shall
be fixed by resolution of the Board of Directors.
SECTION 4. SEAL. The corporate seal shall have inscribed thereon
the name of the corporation. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE X
CONTROL SHARE ACQUISITIONS
The provisions of Chapter 7B of the Michigan Business Corporation Act
(Sections 450.790 - 450.799, inclusive, Michigan Compiled Laws, being Sections
21.200(790) - 21.200(799), inclusive, Michigan Statutes Annotated), as the same
exist or may hereafter be amended, shall not apply to control share
acquisitions of shares of stock of this corporation.
ARTICLE XI
AMENDMENTS
These Bylaws may be altered or repealed at any regular meeting of the
shareholders or of the Board of Directors or at any special meeting of the
shareholders or of the Board of Directors.
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EXHIBIT 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on March 23, 1994, between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the "Company"), and
MARK K. ROSENFELD, of Jackson, Michigan ("Rosenfeld").
THE PARTIES HEREBY AGREE that the Employment Agreement between them,
dated June 3, 1993, is restated, effective February 1, 1994, as follows:
1. EMPLOYMENT AND TERM. The Company employs Rosenfeld as
Chairman of the Board and Chief Executive Officer, and Rosenfeld agrees to
serve in those capacities and/or in such other capacity or capacities as the
Board of Directors of the Company deems advisable, for a term of five years
commencing February 1, 1994 and continuing through January 31, 1999, unless
terminated sooner pursuant to the provisions of paragraph 5, for the
compensation and on the terms set forth herein.
2. COMPENSATION. Subject to the provisions of paragraph 5,
Rosenfeld's salary shall be Three Hundred Ten Thousand Dollars ($310,000.00)
per year.
3. DEFERRED COMPENSATION. The Board of Directors may determine
that payment of any part of Rosenfeld's salary for any year shall be deferred
on the terms set forth herein. For the purposes hereof, each year of
employment shall commence on February 1 of one calendar year and continue
through January 31 of the following year. If any part of Rosenfeld's salary
for a year is deferred, one-twelfth of such amount shall be deferred each month
during the year. Interest shall accrue on deferred compensation from the last
day of the month for which the compensation is deferred, at the interest rate
as determined from time to time pursuant to the Company's Deferred Compensation
Plan, compounded annually. The deferred compensation, with interest thereon,
shall be paid as specified in paragraph 6. Neither Rosenfeld, his estate, his
wife, nor any beneficiary shall have any power to assign or encumber the right
to receive deferred compensation, and any attempted assignment or encumbrance
thereof shall be null and void.
4. DUTIES. Rosenfeld agrees, as long as his employment by the
Company continues, to devote his entire time and best efforts to furthering the
interests of the Company; to comply with all regulations and policies of the
Company; and to perform the duties requested by the Board of Directors of the
Company.
<PAGE> 2
5. DEATH, INCAPACITY AND OTHER EVENTS. The following events
during the term of this Agreement shall have the following respective effects
on the obligations of the Company pursuant hereto:
(a) DEATH. If employment is terminated due to Rosenfeld's death,
the Company shall pay an amount equal to Rosenfeld's salary, at the annual rate
of his salary in effect immediately prior to his death, from the date of his
death until January 31, 1997, and after January 31, 1997 at one-half such
annual rate, for the balance of the term of this Agreement or one year,
whichever is greater. In addition, $100,000 principal amount of split dollar
life insurance maintained by the Company, less the total premium payments made
by the Company, shall be paid to beneficiaries designated by Rosenfeld.
(b) PERMANENT INCAPACITY. If employment is terminated due to
Rosenfeld's permanent incapacity (established to the reasonable satisfaction of
the Board of Directors of the Company), the Company shall continue to pay
Rosenfeld's salary, at the annual rate in effect immediately prior to his
incapacity, from the date of his incapacity until January 31, 1997, and after
January 31, 1997 at one-half such annual rate, for the balance of the term of
this Agreement or one year, whichever is greater. In addition to payments
pursuant to this paragraph 5(b), disability benefits will be paid if available
under any insurance maintained by the Company; and the Company will continue to
maintain medical and hospitalization insurance with the same coverage
(including any dependent coverage) and in the same amounts as the insurance
maintained by the Company immediately prior to his incapacity, for the balance
of the term of this Agreement or one year, whichever is greater.
(c) TERMINATION FOR GOOD CAUSE. If employment is terminated for
good cause (as determined in good faith by the Board of Directors of the
Company), or if Rosenfeld resigns before the expiration of the term of this
Agreement, the Company shall have no obligation to pay any salary or any other
amount in lieu thereof for any period after the date of termination of
employment.
(d) TERMINATION WITHOUT GOOD CAUSE. Except as provided in
paragraph 5(e), if the Company terminates Rosenfeld's employment without good
cause before the expiration of the term of this Agreement, the Company shall
continue to pay an amount equal to Rosenfeld's salary, at the annual rate in
effect immediately prior to such termination of employment, and shall continue
to provide medical and hospitalization insurance with the same coverage
(including any dependent coverage) and in the same amounts as the insurance
maintained by the Company immediately prior to such termination of employment,
for the balance of the term of this Agreement or one year, whichever is
greater. In such event, Rosenfeld shall use reasonable efforts to find new
employment.
2
<PAGE> 3
Commencing one year after termination, the Company's continuing payment
obligation, if any, shall be reduced by the amount of any other salary,
consulting fees, or other compensation or remuneration for services, however
designated, received by Rosenfeld with respect to any remaining part of the
period covered by the Company's obligation, and its continuing medical and
hospitalization insurance obligation shall be reduced by the amount of any
other medical and hospitalization insurance provided to Rosenfeld with respect
to any remaining part of such period.
(e) CHANGE IN CONTROL. If there is a change in the ownership or
effective control of the Company or in the ownership of substantially all of
the assets of the Company during the term of this Agreement, and within two
years after such change the Company either (i) terminates Rosenfeld's
employment, (ii) substantially changes his responsibilities without his
consent, or (iii) requires him to relocate without his consent, the Company
shall continue to pay an amount equal to Rosenfeld's salary, at the annual rate
in effect immediately prior to such change in ownership or effective control,
and shall continue to provide medical and hospitalization insurance with the
same coverage (including any dependent coverage) and in the same amounts as the
insurance maintained by the Company immediately prior to such change in
ownership or effective control, for the balance of the term of this Agreement
or two years, whichever is greater.
(f) SPLIT DOLLAR LIFE INSURANCE. If Rosenfeld's employment by the
Company is terminated for any reason except Rosenfeld's death, the split dollar
life insurance policy referred to in paragraph 5(a) shall be disposed of in
accordance with the terms of a certain Split Dollar Agreement dated December
20, 1977 between the parties, as the same may be amended from time to time.
(g) NO OTHER EMPLOYMENT BENEFITS. Except for the payments and
benefits expressly provided for in this paragraph 5, Rosenfeld shall not be
entitled to any salary, bonus, or any other employment benefits, however
designated, after his termination of employment with the Company.
6. PAYMENT. Salary other than deferred compensation, as well as
death benefits pursuant to paragraph 5(a), and amounts equal to salary paid
pursuant to paragraphs 5(d) and (e), shall be paid in monthly or other regular
periodic installments. Deferred compensation, with interest thereon, shall be
paid within sixty days after Rosenfeld's death, permanent incapacity,
termination of employment, retirement, or resignation, as applicable; or, at
the option of the Company, it may be paid in equal monthly or other regular
intervals over a period of not more than ten years commencing sixty days after
such event. All such payments shall be made to Rosenfeld while he is living;
and in the event of his death, the payments shall be made to Rosenfeld's wife,
if she is then living, or to his estate or any beneficiary or beneficiaries he
designates in writing during his lifetime.
3
<PAGE> 4
7. MISCELLANEOUS PROVISIONS. This Agreement supersedes all
previous employment agreements between the parties. It shall be construed
according to the laws of Michigan, and shall be binding on and enforceable by
the parties and their successors in interest. In addition to all other remedies
available at law, it shall be specifically enforceable by any court having
jurisdiction. Paragraph headings are for convenience only and shall not affect
the construction of any provision. The rights and obligations hereunder,
particularly but without limitation including paragraph 5(e), shall survive the
expiration of the term of this Agreement.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Madeleine V. Haines By: /s/ Paul W. Gilbert
--------------------------
Paul W. Gilbert,
Vice Chairman of the Board
/s/ Dawn M. Rhoades By: /s/ Richard Z. Rosenfeld
--------------------------
Richard Z. Rosenfeld,
Secretary
/s/ Madeleine V. Haines /s/ Mark K. Rosenfeld
--------------------------
Mark K. Rosenfeld
4
<PAGE> 1
EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on March 23, 1994, between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the "Company"), and
PAUL W. GILBERT, of Jackson, Michigan ("Gilbert").
THE PARTIES HEREBY AGREE that the Employment Agreement between them,
dated June 3, 1993, is restated, effective February 1, 1994, as follows:
1. EMPLOYMENT AND TERM. The Company employs Gilbert as Vice
Chairman of the Board, and Gilbert agrees to serve in that capacity and/or in
such other capacity or capacities as the Board of Directors of the Company
deems advisable, for a term of three years commencing February 1, 1994 and
continuing through January 31, 1997, unless terminated sooner pursuant to the
provisions of paragraph 5, for the compensation and on the terms set forth
herein.
2. COMPENSATION. Subject to the provisions of paragraph 5,
Gilbert's salary shall be Two Hundred Ten Thousand Dollars ($210,000.00) per
year.
3. DEFERRED COMPENSATION. The Board of Directors may determine
that payment of any part of Gilbert's salary for any year shall be deferred on
the terms set forth herein. For the purposes hereof, each year of employment
shall commence on February 1 of one calendar year and continue through January
31 of the following year. If any part of Gilbert's salary for a year is
deferred, one- twelfth of such amount shall be deferred each month during the
year. Interest shall accrue on deferred compensation from the last day of the
month for which the compensation is deferred, at the interest rate as
determined from time to time pursuant to the Company's Deferred Compensation
Plan, compounded annually. The deferred compensation, with interest thereon,
shall be paid as specified in paragraph 6. Neither Gilbert, his estate, his
wife, nor any beneficiary shall have any power to assign or encumber the right
to receive deferred compensation, and any attempted assignment or encumbrance
thereof shall be null and void.
4. DUTIES. Gilbert agrees, as long as his employment by the
Company continues, to devote his entire time and best efforts to furthering the
interests of the Company; to comply with all regulations and policies of the
Company; and to perform the duties requested by the Chief Executive Officer or
the Board of Directors of the Company.
<PAGE> 2
5. DEATH, INCAPACITY AND OTHER EVENTS. The following events
during the term of this Agreement shall have the following respective effects
on the obligations of the Company pursuant hereto:
(a) DEATH. If employment is terminated due to Gilbert's death, the
Company shall have no obligation to pay any salary for the period after the
date of death. The Company shall maintain $300,000 principal amount of split
dollar life insurance, which amount, less the total premium payments made by
the Company, shall be payable to beneficiaries designated by Gilbert.
(b) PERMANENT INCAPACITY. If employment is terminated due to
Gilbert's permanent incapacity (established to the reasonable satisfaction of
the Board of Directors of the Company), the Company shall continue to pay
Gilbert's salary, at the annual rate in effect immediately prior to his
incapacity, from the date of his incapacity until January 31, 1995, and after
January 31, 1995 at one-half such annual rate, for the balance of the term of
this Agreement. In addition to payments pursuant to this paragraph 5(b),
disability benefits will be paid if available under any insurance maintained by
the Company; and the Company will continue to maintain medical and
hospitalization insurance with the same coverage (including any dependent
coverage) and in the same amounts as the insurance maintained by the Company
immediately prior to his incapacity, for the balance of the term of this
Agreement.
(c) TERMINATION FOR GOOD CAUSE. If employment is terminated for
good cause (as determined in good faith by the Board of Directors of the
Company), or if Gilbert resigns before the expiration of the term of this
Agreement, the Company shall have no obligation to pay any salary or any other
amount in lieu thereof for any period after the date of termination of
employment.
(d) TERMINATION WITHOUT GOOD CAUSE. Except as provided in
paragraph 5(e), if the Company terminates Gilbert's employment without good
cause before the expiration of the term of this Agreement, the Company shall
continue to pay an amount equal to Gilbert's salary, at the annual rate in
effect immediately prior to such termination of employment, and shall continue
to provide medical and hospitalization insurance with the same coverage
(including any dependent coverage) and in the same amounts as the insurance
maintained by the Company immediately prior to such termination of employment,
for the balance of the term of this Agreement or one year, whichever is
greater. In such event, Gilbert shall use reasonable efforts to find new
employment.
2
<PAGE> 3
Commencing one year after termination, the Company's continuing payment
obligation, if any, shall be reduced by the amount of any other salary,
consulting fees, or other compensation or remuneration for services, however
designated, received by Gilbert with respect to any remaining part of the
period covered by the Company's obligation, and its continuing medical and
hospitalization insurance obligation shall be reduced by the amount of any
other medical and hospitalization insurance provided to Gilbert with respect to
any remaining part of such period.
(e) CHANGE IN CONTROL. If there is a change in the ownership or
effective control of the Company or in the ownership of substantially all of
the assets of the Company during the term of this Agreement, and within two
years after such change the Company either (i) terminates Gilbert's employment,
(ii) substantially changes his responsibilities without his consent, or (iii)
requires him to relocate without his consent, the Company shall continue to pay
an amount equal to Gilbert's salary, at the annual rate in effect immediately
prior to such change in ownership or effective control, and shall continue to
provide medical and hospitalization insurance with the same coverage (including
any dependent coverage) and in the same amounts as the insurance maintained by
the Company immediately prior to such change in ownership or effective control,
for the balance of the term of this Agreement or two years, whichever is
greater.
(f) SPLIT DOLLAR LIFE INSURANCE. If Gilbert's employment by the
Company is terminated for any reason except Gilbert's death, the split dollar
life insurance policy referred to in paragraph 5(a) shall be disposed of in
accordance with the terms of a certain Split Dollar Agreement dated January 31,
1992 between the parties, as the same may be amended from time to time.
(g) NO OTHER EMPLOYMENT BENEFITS. Except for the payments and
benefits expressly provided for in this paragraph 5, Gilbert shall not be
entitled to any salary, bonus, or any other employment benefits, however
designated, after his termination of employment with the Company.
6. PAYMENT. Salary other than deferred compensation, and amounts
equal to salary paid pursuant to paragraphs 5(d) and (e), shall be paid in
monthly or other regular periodic installments. Deferred compensation, with
interest thereon, shall be paid within sixty days after Gilbert's death,
permanent incapacity, termination of employment, retirement, or resignation, as
applicable; or, at the option of the Company, it may be paid in equal monthly
or other regular intervals over a period of not more than ten years commencing
sixty days after such event. All such payments shall be made to Gilbert while
he is living; and in the event of his death, the payments shall be made to
Gilbert's wife, if she is then living, or to his estate or any beneficiary or
beneficiaries he designates in writing during his lifetime.
3
<PAGE> 4
7. MISCELLANEOUS PROVISIONS. This Agreement supersedes all
previous employment agreements between the parties. It shall be construed
according to the laws of Michigan, and shall be binding on and enforceable by
the parties and their successors in interest. In addition to all other remedies
available at law, it shall be specifically enforceable by any court having
jurisdiction. Paragraph headings are for convenience only and shall not affect
the construction of any provision. The rights and obligations hereunder,
particularly but without limitation including paragraph 5(e), shall survive the
expiration of the term of this Agreement.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Madeleine V. Haines By: /s/ Mark K. Rosenfeld
--------------------------
Mark K. Rosenfeld,
Chairman of the Board and
Chief Executive Officer
/s/ Dawn M. Rhoades By: /s/ Richard Z. Rosenfeld
--------------------------
Richard Z. Rosenfeld,
Secretary
/s/ Madeleine V. Haines /s/ Paul W. Gilbert
--------------------------
Paul W. Gilbert
4
<PAGE> 1
EXHIBIT 10(c)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into on March 23, 1994, between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the "Company"), and
JAMES B. FOWLER, of Jackson, Michigan ("Fowler").
THE PARTIES HEREBY AGREE that the Employment Agreement between them,
dated June 3, 1993, is restated, effective February 1, 1994, as follows:
1. EMPLOYMENT AND TERM. The Company employs Fowler as President,
and Fowler agrees to serve in that capacity and/or in such other capacity or
capacities as the Board of Directors of the Company deems advisable, for a term
of three years commencing February 1, 1994 and continuing through January 31,
1997, unless terminated sooner pursuant to the provisions of paragraph 5, for
the compensation and on the terms set forth herein.
2. COMPENSATION. Subject to the provisions of paragraph 5,
Fowler's salary shall be Two Hundred Ten Thousand Dollars ($210,000.00) per
year.
3. DEFERRED COMPENSATION. The Board of Directors may determine
that payment of any part of Fowler's salary for any year shall be deferred on
the terms set forth herein. For the purposes hereof, each year of employment
shall commence on February 1 of one calendar year and continue through January
31 of the following year. If any part of Fowler's salary for a year is
deferred, one-twelfth of such amount shall be deferred each month during the
year. Interest shall accrue on deferred compensation from the last day of the
month for which the compensation is deferred, at the interest rate as
determined from time to time pursuant to the Company's Deferred Compensation
Plan, compounded annually. The deferred compensation, with interest thereon,
shall be paid as specified in paragraph 6. Neither Fowler, his estate, his
wife, nor any beneficiary shall have any power to assign or encumber the right
to receive deferred compensation, and any attempted assignment or encumbrance
thereof shall be null and void.
4. DUTIES. Fowler agrees, as long as his employment by the
Company continues, to devote his entire time and best efforts to furthering the
interests of the Company; to comply with all regulations and policies of the
Company; and to perform the duties requested by the Chief Executive Officer or
the Board of Directors of the Company.
<PAGE> 2
5. DEATH, INCAPACITY AND OTHER EVENTS. The following events
during the term of this Agreement shall have the following respective effects
on the obligations of the Company pursuant hereto:
(a) DEATH. If employment is terminated due to Fowler's death, the
Company shall have no obligation to pay any salary for the period after the
date of death. The Company shall maintain $300,000 principal amount of split
dollar life insurance, which amount, less the total premium payments made by
the Company, shall be payable to beneficiaries designated by Fowler.
(b) PERMANENT INCAPACITY. If employment is terminated due to
Fowler's permanent incapacity (established to the reasonable satisfaction of
the Board of Directors of the Company), the Company shall continue to pay
Fowler's salary, at the annual rate in effect immediately prior to his
incapacity, from the date of his incapacity until January 31, 1995, and after
January 31, 1995 at one-half such annual rate, for the balance of the term of
this Agreement. In addition to payments pursuant to this paragraph 5(b),
disability benefits will be paid if available under any insurance maintained by
the Company; and the Company will continue to maintain medical and
hospitalization insurance with the same coverage (including any dependent
coverage) and in the same amounts as the insurance maintained by the Company
immediately prior to his incapacity, for the balance of the term of this
Agreement.
(c) TERMINATION FOR GOOD CAUSE. If employment is terminated for
good cause (as determined in good faith by the Board of Directors of the
Company), or if Fowler resigns before the expiration of the term of this
Agreement, the Company shall have no obligation to pay any salary or any other
amount in lieu thereof for any period after the date of termination of
employment.
(d) TERMINATION WITHOUT GOOD CAUSE. Except as provided in
paragraph 5(e), if the Company terminates Fowler's employment without good
cause before the expiration of the term of this Agreement, the Company shall
continue to pay an amount equal to Fowler's salary, at the annual rate in
effect immediately prior to such termination of employment, and shall continue
to provide medical and hospitalization insurance with the same coverage
(including any dependent coverage) and in the same amounts as the insurance
maintained by the Company immediately prior to such termination of employment,
for the balance of the term of this Agreement or one year, whichever is
greater. In such event, Fowler shall use reasonable efforts to find new
employment. Commencing
2
<PAGE> 3
one year after termination, the Company's continuing payment obligation, if
any, shall be reduced by the amount of any other salary, consulting fees, or
other compensation or remuneration for services, however designated, received
by Fowler with respect to any remaining part of the period covered by the
Company's obligation, and its continuing medical and hospitalization insurance
obligation shall be reduced by the amount of any other medical and
hospitalization insurance provided to Fowler with respect to any remaining part
of such period.
(e) CHANGE IN CONTROL. If there is a change in the ownership or
effective control of the Company or in the ownership of substantially all of
the assets of the Company during the term of this Agreement, and within two
years after such change the Company either (i) terminates Fowler's employment,
(ii) substantially changes his responsibilities without his consent, or (iii)
requires him to relocate without his consent, the Company shall continue to pay
an amount equal to Fowler's salary, at the annual rate in effect immediately
prior to such change in ownership or effective control, and shall continue to
provide medical and hospitalization insurance with the same coverage (including
any dependent coverage) and in the same amounts as the insurance maintained by
the Company immediately prior to such change in ownership or effective control,
for the balance of the term of this Agreement or two years, whichever is
greater.
(f) SPLIT DOLLAR LIFE INSURANCE. If Fowler's employment by the
Company is terminated for any reason except Fowler's death, the split dollar
life insurance policy referred to in paragraph 5(a) shall be disposed of in
accordance with the terms of a certain Split Dollar Agreement dated January 31,
1992 between the parties, as the same may be amended from time to time.
(g) NO OTHER EMPLOYMENT BENEFITS. Except for the payments and
benefits expressly provided for in this paragraph 5, Fowler shall not be
entitled to any salary, bonus, or any other employment benefits, however
designated, after his termination of employment with the Company.
6. PAYMENT. Salary other than deferred compensation, and amounts
equal to salary paid pursuant to paragraphs 5(d) and (e), shall be paid in
monthly or other regular periodic installments. Deferred compensation, with
interest thereon, shall be paid within sixty days after Fowler's death,
permanent incapacity, termination of employment, retirement, or resignation, as
applicable; or, at the option of the Company, it may be paid in equal monthly
or other regular intervals over a period of not more than ten years commencing
sixty days after such event. All such payments shall be made to Fowler while
he is living; and in the event of his death, the payments shall be made to
Fowler's wife, if she is then living, or to his estate or any beneficiary or
beneficiaries he designates in writing during his lifetime.
3
<PAGE> 4
7. MISCELLANEOUS PROVISIONS. This Agreement supersedes all
previous employment agreements between the parties. It shall be construed
according to the laws of Michigan, and shall be binding on and enforceable by
the parties and their successors in interest. In addition to all other remedies
available at law, it shall be specifically enforceable by any court having
jurisdiction. Paragraph headings are for convenience only and shall not affect
the construction of any provision. The rights and obligations hereunder,
particularly but without limitation including paragraph 5(e), shall survive the
expiration of the term of this Agreement.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Madeleine V. Haines By: /s/ Mark K. Rosenfeld
-------------------------
Mark K. Rosenfeld,
Chairman of the Board and
Chief Executive Officer
/s/ Dawn M. Rhoades By: /s/ Richard Z. Rosenfeld
-------------------------
Richard Z. Rosenfeld,
Secretary
/s/ Madeleine V. Haines /s/ James B. Fowler
-------------------------
James B. Fowler
4
<PAGE> 1
EXHIBIT 10(d)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into March 26, 1994 between JACOBSON STORES
INC., a Michigan corporation of Jackson, Michigan (the "Company"), and ROBERT
L. MOLES (the "Employee").
THE PARTIES AGREE AS FOLLOWS:
1. EMPLOYMENT AND TERMS. The Company employs Employee as Senior
Vice President-Stores, and Employee agrees to serve in that capacity commencing
January 29, 1994, and continuing through January 28, 1995, for the salary and
on the terms set forth herein.
2. COMPENSATION. The Company agrees to pay Employee salary at an
annual rate of $126,000, in bi-weekly or other regular intervals.
3. DUTIES. Employee agrees, as long as employment by the Company
continues, to devote Employee's entire time and best efforts to furthering the
interests of the Company; to comply with all regulations and policies of the
Company; and to perform the duties requested by any officers and executives of
the Company to whom the Employee is directed to report.
<PAGE> 2
4. TERMINATION.
(a) If employment is terminated due to Employee's death, permanent
incapacity or retirement, the Company shall have no obligation to pay any
salary for the period after the date of termination of employment; but benefits
may continue to the extent provided in any generally-applicable wage
continuation program, insurance, or other employee benefit plans maintained by
the Company.
(b) If employment is terminated by the Company, or if Employee
resigns before or at the expiration of the term, the Company shall have no
obligation to pay any salary or other employment benefits for any period after
the date of termination of employment.
(c) If there is a change in the ownership or effective control of
the Company or in the ownership of substantially all of the assets of the
Company during the term and the Company terminates Employee's employment within
two years after such change, the Company shall continue to pay salary (but no
other employment benefits) at a bi-weekly rate equal to the amount paid
bi-weekly pursuant to paragraph 2, for a period of 24 months. This paragraph
4(c) shall survive the expiration of the term.
(d) Unless this Agreement is terminated by either party or
superseded by another, it shall remain in effect from month-to- month after the
expiration of the term.
<PAGE> 3
5. PREVIOUS AGREEMENTS SUPERSEDED. This Agreement supersedes all
previous employment agreements between the parties.
6. MISCELLANEOUS PROVISIONS. This Agreement may be amended only
by written agreement signed by either the Chairman or the President of the
Company. It shall be construed according to the laws of Michigan, and shall be
binding on and enforceable by the parties and their successors in interest.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Paul W. Gilbert By: /s/ Mark K. Rosenfeld
-------------------------
Its Chairman & CEO
COMPANY
/s/ Paul W. Gilbert By: /s/ Robert L. Moles
-------------------------
EMPLOYEE
<PAGE> 1
EXHIBIT 10(e)
JACOBSON STORES INC.
1994 Management Incentive Plan
Senior management incentives are based on accomplishing the key goals of our
business plan. Incentives are structured to strive for excellence.
The management incentive plan is designed to:
. foster an awareness of the Company's objective of consistent, profitable
operation.
. motivate managers to meet the shorter term needs of shareholders without
sacrificing long-term profitability.
. encourage managers to "stretch" for higher levels of performance in the
future.
. establish target incentives for each participant so that each person is
aware of what payout percentages can be expected with various levels of
accomplishment.
. encourage long-term retention of key employees.
The principal features of the plan include:
. participation in the plan is limited to salaried officers of the
Company.
. the potential payout as a percent of the base salary of each
participant is as follows:
<TABLE>
<CAPTION>
Threshold Target Maximum
--------- ------ -------
% of target 80% 100% 125%
% of target award 0% 100% 150%
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chairman and CEO 17.5% 35% 50%
Vice Chairman 15 30 45
President 15 30 45
SVP - Stores 12.5 25 37.5
SVP - GMM 12.5 25 37.5
VP - Store Group Manager 10 20 30
VP - DMM 10 20 30
VP - Staff Positions 10 20 30
-----------------------------------------------------------------------------------------
</TABLE>
. specific performance criteria and weights are established at the
beginning of the year for each participant. At the most senior level,
primary emphasis is placed on corporate goal achievement (to emphasize
the importance of cooperation and the team approach); at the VP-Staff
level, primary emphasis is placed on individual goal achievement.
<PAGE> 1
EXHIBIT 11
----------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
Primary earnings per common share, as set forth in the consolidated statements
of earnings, are computed by dividing net earnings by the weighted average
number of shares of common stock and common stock equivalents outstanding
during the year. Fully diluted earnings per share are computed based on the
additional assumption that the Company's 6-3/4% Convertible Subordinated
Debentures due 2011 were converted to common stock at the date of issuance with
a corresponding increase in net earnings to reflect reduction in related
interest expense, net of income taxes, except if anti-dilutive.
These computations are set forth below (in thousands except per share data).
<TABLE>
<CAPTION>
52 Weeks Ended 53 Weeks Ended 52 Weeks Ended
January 29, January 30, January 25,
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE:
Weighted average number of shares
of common stock and common stock
equivalents outstanding -
Primary 5,779 5,785 5,786
Fully diluted 6,835 6,841 6,846
------ ------ ------
------ ------ ------
NET EARNINGS $3,014 $3,910 $4,218
------ ------ ------
------ ------ ------
NET EARNINGS, adjusted to reflect
reduction in interest expense
attributable to convertible
debentures, net of income tax $4,551 $5,447 $5,755
------ ------ ------
------ ------ ------
NET EARNINGS PER SHARE:
Primary $ 0.52 $ 0.68 $ 0.73
Fully diluted 0.52 0.68 0.73
------ ------ ------
------ ------ ------
</TABLE>
<PAGE> 1
EXHIBIT 21
----------
SCHEDULE OF SUBSIDIARIES
------------------------
<TABLE>
<CAPTION>
State of Percent of Voting
Name Incorporation Securities Owned
---- ------------- -----------------
<S> <C> <C>
Jacobson Stores Realty Michigan 100%
Company
Jacobson Credit Corp. Michigan 100%
275 North Woodward Corp. (1) Michigan 80%
</TABLE>
(1) 80% of the voting securities of 275 North Woodward Corp. are owned by
Jacobson Stores Realty Company. The remaining 20% are owned by parties
who are not affiliates of Jacobson's. 275 North Woodward Corp. is not a
significant subsidiary.
Each subsidiary does business under its own corporate name.
<PAGE> 1
EXHIBIT 23
ARTHUR ANDERSEN & CO.
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Form S-8 Registration Statement, File No. 2-88295.
/s/ ARTHUR ANDERSEN & CO.
Detroit, Michigan
April 13, 1994
