SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
JACOBSON STORES INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Jacobson Stores Inc.
NOTICE
OF
ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE>
Jacobson Stores Inc.
3333 Sargent Road, Jackson, Michigan 49201-8847
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
May 22, 1997
TO THE SHAREHOLDERS OF
JACOBSON STORES INC.:
The 1997 Annual Meeting of Shareholders of Jacobson Stores Inc. will
be held at the corporate offices, 3333 Sargent Road, Jackson, Michigan
49201-8847, on Thursday, May 22, 1997, at 11:30 a.m., local time, for the
following purposes:
(1) To elect P. Gerald Mills as a Class I Director, to serve until the
1999 Annual Meeting of Shareholders or until his successor is elected
and qualified; and Paul W. Gilbert, Patricia S. Longe, Philip H. Power
and Robert L. Rosenfeld as Class II Directors, to serve until the 2000
Annual Meeting of Shareholders or until their successors are elected
and qualified;
(2) To consider and act on a proposal to amend the Jacobson Stores
Inc. Stock Option Plan of 1994 to (i) increase the aggregate number of
shares of Common Stock that may be issued upon exercise of options
granted under the plan from 400,000 to 900,000, and (ii) provide that
no individual may be granted options to purchase more than 600,000
shares of Common Stock in the aggregate in any fiscal year of the
Company;
(3) To consider and act on a proposal to appoint Arthur Andersen LLP,
independent public accountants,
as auditors for the fiscal year ending January 31, 1998; and
(4) To transact any other business that may properly come before the
meeting or any adjournments
thereof.
Common shareholders of record at the close of business on March 31,
1997 will be entitled to notice of and to vote at the meeting.
Your attention is directed to the proxy statement submitted with this
notice.
By order of the Board of Directors,
RICHARD Z. ROSENFELD, Secretary
Jackson, Michigan, April 8, 1997.
Shareholders are requested to specify their choice, date, sign and return the
enclosed proxy in the enclosed envelope.
<PAGE>
JACOBSON STORES INC.
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
This proxy statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Jacobson Stores Inc. (the "Company")
for use at its 1997 Annual Meeting of Shareholders, to be held Thursday, May
22, 1997, at 11:30 a.m., local time, at the corporate offices, 3333 Sargent
Road, Jackson, Michigan 49201-8847, and at any adjournments thereof, for the
purposes set forth in the accompanying notice. This proxy statement and the
enclosed form of proxy are first sent or given to security holders on or
about April 8, 1997.
If the enclosed proxy is properly executed and returned to Norwest
Shareowner Services, P.O. Box 64859, St. Paul, MN 55164-0859, all shares
represented will be voted in the manner specified. A proxy may be revoked at
any time before it is exercised.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 1, 1997, 5,779,021-2/3 shares of the Company's Common
Stock, par value $1 per share, were outstanding and entitled to vote. Common
shareholders of record at the close of business on March 31, 1997 will be
entitled to notice of and to vote at the meeting. Each shareholder is
entitled to one vote for each Common share held on the record date. Shares
may not be voted cumulatively.
The following table and the explanations on page 3 provide information
as of March 1, 1997 (or, in four cases as explained on page 3, December 31,
1996) about each person known to the Company to be the beneficial owner of
more than 5% of the Company's Common Stock, which is its only class of voting
securities:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class
- -----------------------------------------------------------------------------
<S> <C> <C>
Robert L. Rosenfeld, Ph.D 1,112,336(1) 19.2
4535 Fourth Road North
Arlington, Virginia 22203-2342
Mark K. Rosenfeld 1,092,237(1) 18.9
404 South Higby Street
Jackson, Michigan 49203
David A. Rosenfeld 1,091,061(1) 18.9
875 Battery
San Francisco, California 94111
David L. Babson and Company Incorporated 693,800(2) 12.0
One Memorial Drive
Cambridge, Massachusetts 02142-1300
Dimensional Fund Advisors Inc. 387,700 6.7
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Franklin Resources, Inc. 359,200 6.2
777 Mariners Island Blvd
San Mateo, California 94404
Comerica Bank 314,482(3) 5.4
One Detroit Center
Detroit, Michigan 48275
1
<PAGE>
<FN>
(1) Includes 1,090,736 shares subject to a Voting and Transfer Restriction
Agreement which includes 1,000 shares that may be acquired by Mark K.
Rosenfeld on exercise of options, 2,500 shares that may be acquired by
Robert L. Rosenfeld on exercise of options and 459 shares that may be
acquired by Mark K. Rosenfeld or his wife as custodian and by his adult
son on the conversion of debentures.
(2) Includes 202,800 shares over which it has shared voting power.
(3) Includes 270,766 shares over which it has shared voting and investment
powers, and 1,925 shares over which it has shared investment power.
</TABLE>
The following table and explanation provide information as of March 1,
1997 about shares of the Company's Common Stock beneficially owned by each
director, each of the executive officers identified on page 9, and all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership(1) of Class
- -----------------------------------------------------------------------------
<S> <C> <C>
Herbert S. Amster 10,559 (2) *
Joseph H. Fisher 8,329 (3) *
James B. Fowler 13,016 (4) *
Paul W. Gilbert 31,336 (5) *
Herman S. Kohlmeyer, Jr 213,000 (6) 3.7
Theodore R. Kolman 5,625 (7) *
Kathleen McCree Lewis 3,500 (8) *
Patricia Shontz Longe, Ph.D 5,000 (8) *
P. Gerald Mills 101,000 (9) 1.7
Robert L. Moles 9,737(10) *
Michael T. Monahan 3,500 (8) *
Philip H. Power 3,800 (8) *
Mark K. Rosenfeld 1,092,237(11) 18.9
Richard Z. Rosenfeld 128,064(12) 2.2
Robert L. Rosenfeld, Ph.D 1,112,336(11) 19.2
James L. Wolohan 3,500 (8) *
All directors and executive officers
(18 persons) 1,648,300(13) 27.7
<FN>
* Less than 1% of the class
<PAGE>
(1) Includes shares the spouse and/or children of the named individual
owns or has the right to acquire individually or jointly with the
named individual. Also includes shares that may be acquired on
exercise of options which are exercisable within 60 days after March
1, 1997.
(2) Includes 5,809 shares subject to shared voting and/or investment
power and 2,500 shares that may be acquired on exercise of options.
(3) Includes 2,643 shares subject to shared voting and/or investment power
and 5,375 shares that may be acquired on exercise of options.
(4) Includes 1,187 shares subject to shared voting and/or investment power and
3,000 shares that may be acquired on exercise of options.
(5) Includes 16,000 shares subject to shared voting and/or investment power,
13,500 shares that may be acquired on exercise of options and 1,836
shares that may be acquired on conversion of debentures subject to
shared voting and/or investment power.
(6) Includes 206,000 shares subject to shared voting and/or investment power
and 2,500 shares that may be acquired on exercise of options.
(7) Includes 5,625 shares that may be acquired on exercise of options.
(8) Includes 2,500 shares that may be acquired on exercise of options.
(9) Includes 100,000 shares that may be acquired on exercise of options.
(10) Includes 6,375 shares that may be acquired on exercise of options.
(11) Includes 1,090,736 shares subject to a Voting and Transfer Restriction
Agreement which includes 1,000 shares that may be acquired by Mark K.
Rosenfeld on exercise of options, 2,500 shares that may be acquired by
Robert L. Rosenfeld on exercise of options and 459 shares that may be
acquired by Mark K. Rosenfeld or his wife as custodian and by his
adult son on the conversion of debentures.
(12) Includes 40,710 shares subject to shared voting and/or investment power
and 2,000 shares that may be acquired on exercise of options.
(13) Includes 1,090,736 shares subject to a Voting and Transfer Restriction
Agreement, 160,062 shares that may be acquired on exercise of options,
and 2,295 shares that may be acquired on the conversion of debentures
subject to shared voting and/or investment power.
</TABLE>
2
<PAGE>
Information about beneficial ownership, set forth in the stock
ownership tables, is based on information furnished by the shareholder,
director, or executive officer.
The following additional information is furnished in explanation of
the stock ownership tables:
261,265-1/3 shares of Common Stock registered in the names of Robert
L. Rosenfeld individually and as trustee, and his wife, 256,329 shares in the
names of David A. Rosenfeld and his wife, 298,417 shares in the names of Mark
K. Rosenfeld and his wife individually and as trustee or custodian, and an
adult son of Mark K. Rosenfeld, and 270,766 shares in the Marjorie L.
Rosenfeld Trust, are subject to a Voting and Transfer Restriction Agreement.
Comerica Bank is Co-Trustee (with Robert L. Rosenfeld) of the Marjorie L.
Rosenfeld Trust and shares voting and investment power over the 270,766
shares held in that trust. Any two of the three brothers may vote all shares
subject to the Agreement. The transfer of the shares is restricted by the
terms of the Agreement. The Agreement continues until December 31, 2000,
unless it is terminated earlier according to its terms. Each party disclaims
any beneficial interest in the shares owned by his brothers and the wife,
trusts and issue of his brothers. All shares subject to the Agreement, as
well as 3,959 shares that may be acquired on exercise of options and
conversion of debentures, as referred to in note (11) above, are shown in the
stock ownership tables as beneficially owned by each of the brothers, but are
counted only once in the total for all directors and executive officers.
40,279 shares of Common Stock are held by Richard Z. Rosenfeld as
trustee under revocable Trust Agreement dated December 14, 1968, established
by Jacques A. Preis. Richard Z. Rosenfeld disclaims any beneficial interest
in the shares, but they are shown as beneficially owned by him.
As of December 31, 1996, David L. Babson and Company Incorporated, a
registered investment advisor, exercised investment discretion with respect
to 693,800 shares of the Company's Common Stock which were owned by various
investors. The foregoing information is based solely on a Schedule 13G
report, dated March 10, 1997, filed by David L. Babson and Company
Incorporated, with the Securities and Exchange Commission.
As of December 31, 1996, Comerica Bank held, as beneficial owner, an
aggregate of 314,482 shares of the Company's Common Stock, which includes
1,898 shares which may be acquired on the conversion of debentures, in
various fiduciary capacities, including 28,890 shares as Trustee of the
Company's Pension Plan. Comerica Bank has sole voting power over 43,491
shares, sole dispositive power over 11,083 shares, shared voting power over
270,766 shares and shared investment power over 272,691 shares, including
270,766 shares held in the Marjorie L. Rosenfeld Trust for which Comerica
Bank acts as Co-Trustee with Robert L. Rosenfeld. The foregoing information
is based solely on a Schedule 13G report, dated January 30, 1997, filed by
Comerica Bank with the Securities and Exchange Commission and discussions
with Comerica Bank officers.
As of December 31, 1996, Dimensional Fund Advisors Inc., a registered
investment advisor, was deemed to have beneficial ownership of 387,700 shares
of the Company's Common Stock held in portfolios of DFA Investment Dimensions
Group Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group Trust
and the DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, for all of which Dimensional Fund Advisors Inc.
serves as investment manager. Dimensional Fund Advisors Inc. disclaims
beneficial ownership of all such shares. The foregoing information is based
solely on a Schedule 13G report, dated February 5, 1997, filed by Dimensional
Fund Advisors Inc. with the Securities and Exchange Commission.
As of December 31, 1996, (i) Franklin Resources, Inc., a parent
holding company, (ii) Charles B. Johnson and Rupert H. Johnson, Jr.,
principal shareholders of Franklin Resources, Inc., and (iii) Franklin
Advisory Services, Inc., an investment advisor, were deemed to have sole
voting and investment power over 359,200 shares of the Company's Common
Stock. The address of Franklin Advisory Services, Inc. is One Parker Plaza,
Sixteenth Floor, Ft. Lee, New Jersey 07024. The foregoing information is
based solely on a Schedule 13G report, dated February 12, 1997, filed by
Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and
Franklin Advisory Services, Inc. with the Securities and Exchange Commission.
The shareholdings reported above exclude the beneficial interest of
the executive officers of the Company in 256,364 shares of Common Stock held
in the Company's pension and profit sharing plans.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, executive officers, and any persons holding 10% or more of its
Common Stock are required to report their ownership of the Company's Common
Stock and any changes in that ownership to the Securities and Exchange
Commission (the "S.E.C."). The Company is required to report in this proxy
statement any late filings of reports of stock transactions in fiscal 1996,
and any known failure to file a required report. Based on written
representations of its directors, executive officers and 10% shareholders,
and copies of reports that have been filed with the S.E.C. and furnished to
the Company, the Company believes that all such persons complied with the
filing requirements for all transactions in fiscal 1996.
3
<PAGE>
ELECTION OF DIRECTORS
The Company's Restated Articles of Incorporation provide for a Board
of Directors consisting of not less than three members as determined by the
affirmative vote of at least two-thirds of the entire Board. The directors
are 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
shareholders, the successors of the class of directors whose term expires at
that meeting are elected for a three-year term. In addition, each director
chosen to fill a newly-created directorship resulting from an increase in the
number of directors, such as P. Gerald Mills, holds office until the next
election of directors by the shareholders. Therefore, at the 1997 Annual
Meeting of Shareholders, the successor to Mr. Mill's directorship will be
elected for a two-year term. If a quorum is present, the five nominees
receiving the greatest number of votes cast at the meeting or its adjournment
will be elected. Withheld votes and broker non-votes will not be deemed votes
cast, but will be counted for purposes of determining whether a quorum is
present.
The directors whose term of office expires at the 1997 Annual Meeting
of Shareholders are P. Gerald Mills (Class I Director), Paul W. Gilbert,
Patricia Shontz Longe, Philip H. Power and Robert L. Rosenfeld (Class II
Directors). The Board of Directors has determined that the number of
directors shall be twelve and has nominated P. Gerald Mills, currently a
director, as Class I Director, to serve until the 1999 Annual Meeting of
Shareholders and until his successor is elected and qualified; and Paul W.
Gilbert, Patricia Shontz Longe, Philip H. Power and Robert L. Rosenfeld, each
of whom is currently a director, as Class II Directors, to serve until the
2000 Annual Meeting of Shareholders and until their successors are elected
and qualified. The terms of office of the Class III and Class I Directors
will expire at the annual meetings of shareholders in 1998 and 1999,
respectively.
It is intended that each proxy given pursuant to this solicitation
will be voted in favor of election of each of the five director nominees
named, unless the shareholder withholds authority to vote for any one or more
or all nominees in the manner indicated on the proxy.
Management has no reason to believe that any nominee will be unable to
serve; but if any should be unable to serve, the persons named in the
enclosed proxy will vote for a substitute nominee or nominees, and/or for
fewer nominees, according to their judgment.
Proxies cannot be voted for more than five nominees.
The following information is furnished with respect to the members of
the Board of Directors and nominees:
<TABLE>
<CAPTION>
First Current
Principal Occupation and Became Term
Name Positions with the Company Age Director Class Expires
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Herbert S. Amster (1,4) Management consultant 62 1967 I 1999
Paul W. Gilbert (1,2) Vice Chairman of the Board, 52 1988 II 1997
Jacobson Stores Inc.
Herman S. Kohlmeyer, Jr. (1) enior Vice President-Investments, 64 1971 I 1999
Prudential Securities, Inc.,
New Orleans, Louisiana
Kathleen McCree Lewis Attorney; member, Dykema Gossett 49 1993 III 1998
PLLC, Detroit, Michigan
Patricia Shontz Longe, Ph.D. (2,4) Economist; Senior partner, 63 1973 II 1997
The Longe Company, investment,
management and economic consulting
company, Naples, Florida
P. Gerald Mills (1,3) Chairman of the Board, President and 68 1996 I 1997
Chief Executive Officer,
Jacobson Stores Inc.
Michael T. Monahan (1,4) President, Comerica Bank, 58 1990 III 1998
Detroit, Michigan
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
First Current
Principal Occupation and Became Term
Name Positions with the Company Age Director Class Expires
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Philip H. Power (2,4) Chairman of the Board, Suburban 58 1985 II 1997
Communications Corporation,
newspaper publisher, Livonia, Michigan
Mark K. Rosenfeld Former Chairman of the Board 51 1976 I 1999
and Chief Executive Officer,
Jacobson Stores Inc.
Richard Z. Rosenfeld (1,4) Of Counsel, Rosenfeld, 65 1957 III 1998
Grover & Frang, P.C., Attorneys,
Jackson, Michigan; Secretary,
Jacobson Stores Inc.
Robert L. Rosenfeld, Ph.D. (2) Program Manager, Defense 59 1967 II 1997
Advanced Research Projects Agency,
U.S. Department of Defense,
Arlington, Virginia
James L. Wolohan Chairman, President and Chief 45 1993 III 1998
Executive Officer, Wolohan
Lumber Co., Saginaw, Michigan
<FN>
(1) Members of Executive Committee.
(2) Class II Directors, whose current term expires at the 1997 Annual
Meeting; nominated to serve until 2000.
(3) Class I Director, whose current term expires at the 1997 Annual
Meeting; nominated to serve until 1999.
(4) See information on page 6 under the caption "Certain Relationships
and Related Transactions".
</TABLE>
Mr. Amster has been an independent management consultant for the past
five years. He is a director of TriMas Corporation, Mechanical Dynamics,
Inc., First of America Bank-Michigan, N.A., and a director and Chairman of
the Board of the Industrial Technology Institute.
Mr. Gilbert was Vice President and Controller of the Company,
1976-1984, Senior Vice President and Chief Financial Officer, 1984-1988,
Executive Vice President and Chief Financial Officer, 1988-1993, and
Treasurer, 1991-1993, and has been Vice Chairman of the Board since 1993.
Mr. Kohlmeyer was First Vice President of Thomson McKinnon Securities,
Inc., 1981-1987, and has been Senior Vice President-Investments of Prudential
Securities, Inc., a broker-dealer, since 1988.
Ms. Lewis has been a member of Dykema Gossett PLLC, a law firm, and
its predecessor since 1973.
Dr. Longe was Professor of Business Administration in the Graduate
School of Business Administration of the University of Michigan for more than
five years prior to 1986. She has been senior partner of The Longe Company,
an investment, management and economic consulting company, of Naples,
Florida, since 1981. She is a director of DTE Energy Company, The Detroit
Edison Company, The Kroger Company, Comerica Incorporated, and The
Warner-Lambert Company.
Mr. Mills was Chairman and Chief Executive Officer of Dayton
Corporation, 1978-1981; was Chairman and Chief Executive Officer, The J. L.
Hudson Company, 1981-1983; was Chairman and Chief Executive Officer, Dayton
Hudson Department Store Company and Executive Vice President, Dayton Hudson
Corporation, 1983-1985; was Chairman and Chief Executive Officer, Millston
Corporation, a specialty store retailer, 1986-1992; and was a business
consultant from 1992 to 1996. He has served as Chairman of the Board and
Chief Executive Officer of the Company since October 31, 1996, and also as
President of the Company since December 20, 1996.
Mr. Monahan was an executive officer of Manufacturers Bank, N.A. for
more than five years, and was President and Chief Operating Officer,
1989-1992. Following the merger of Comerica Incorporated and Manufacturers
National Corporation in 1992, he has been President and a director of
Comerica Bank. In addition, he has been President and a director of Comerica
Incorporated since 1993.
5
Mr. Power founded Suburban Communications Corporation, a publisher of
newspapers, in 1965, and has been its Chairman of the Board since that date.
He is a director of Daedalus Enterprises, Inc. and a Regent of the University
of Michigan.
Mark K. Rosenfeld was an executive officer of the Company from 1976 to
1996, was President, 1982-1993, Chief Operating Officer, 1987-1992, Chief
Executive Officer, 1992-1996, and Chairman of the Board, 1993-1996. He is a
director of TCF Financial Corporation and the Ramco-Gershenson Properties
Trust.
Richard Z. Rosenfeld was a member of Rosenfeld, Grover & Frang, P.C.,
a law firm, from 1981 until his retirement in 1995, and he continues to serve
of Counsel to the firm. He has been Secretary of Jacobson Stores Inc. since
1964.
Dr. Robert L. Rosenfeld held various engineering and administrative
positions with Consumers Power Company, a public utility, from 1970-1984; was
Principal Engineer with Technical Analysis Corporation, technical
consultants, 1984-1985; and has been Program Manager, Defense Advanced
Research Projects Agency (formerly Advanced Research Projects Agency from
1993-1996) since 1985.
Mr. Wolohan has held executive positions with Wolohan Lumber Co. for
more than ten years. He was Vice President and General Merchandise Manager,
1984-1986, President and Chief Operating Officer, 1986-1987, has been
President and Chief Executive Officer since 1987, and has also been Chairman
of the Board since 1994.
Robert L. and Mark K. Rosenfeld are brothers. Richard Z. Rosenfeld is
their first cousin.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and its subsidiaries have business relationships and
transactions in the ordinary course of business with the following entities,
of which the directors of the Company named below are officers or directors.
The Company considers that the terms of all transactions referred to are
comparable to those which would have been reached with unaffiliated parties.
The Company and its subsidiaries regularly deposit money with and
borrow money from various banks, including Comerica Bank and First of America
Bank-Michigan, N.A. Michael T. Monahan is President and a director of
Comerica Bank, and President and a director of Comerica Incorporated.
Patricia Shontz Longe is a director of Comerica Incorporated, the holding
company which operates Comerica Bank. Herbert S. Amster is a director of
First of America Bank-Michigan, N.A. During its last fiscal year, the Company
and its subsidiaries paid $1,495,000 of interest to First of America
Bank-Michigan, N.A. at rates ranging from 6.44% to 8.08%. At January 25,
1997, the total unpaid principal balance of all borrowings of the Company and
its subsidiaries from that bank was $20,483,000. Information on the Company's
banking relationships with Comerica Bank in fiscal 1996 is reported on page
14 under the caption "Compensation Committee Interlocks and Insider
Participation."
The Company regularly advertises in various newspapers and other
periodicals, including newspapers published by Suburban Communications
Corporation, of which Philip H. Power is Chairman of the Board. During its
last fiscal year, the Company paid newspapers published by Suburban
Communications Corporation $148,000 for advertising space.
The Company retained Rosenfeld, Grover & Frang, P.C. for legal
services in fiscal 1996. Richard Z. Rosenfeld serves of Counsel to that law
firm. Information on the fees paid by the Company to that law firm is
reported on page 14 under the caption "Compensation Committee Interlocks and
Insider Participation".
COMPENSATION OF DIRECTORS
The Company compensates its directors at the rate of $9,000 per year
($12,000 for committee chair) plus $750 for each Board meeting attended and
each committee meeting attended; except that no director fees are paid to any
director who is a full-time employee of the Company (Mr. Mills and Mr.
Gilbert). Directors are eligible to defer director fees, with interest
thereon, until after termination of service as a director of the Company. The
interest rate used by the Company's Deferred Compensation Plan, which is
currently equal to the one-year Treasury Bill rate plus 125 basis points, or
6.81%, is determined from time to time by the Compensation Committee of the
Board of Directors.
Directors Amster, Kohlmeyer and Monahan received $15,000, $3,000, and
$3,000 respectively for serving on a special committee of the Board of
Directors during fiscal 1996.
6
Under the Company's Stock Option Plan of 1994, non-statutory stock
options were granted in 1996 to the following directors who are not full-time
employees of the Company, at $11-1/8 ($8-3/8 with respect to Mark K.
Rosenfeld's option and $9-1/2 with respect to Mr. Fowler's option) which were
the fair market values on the dates of grant:
<TABLE>
<CAPTION>
Name Options
-----------------------------------------------
<S> <C>
Herbert S. Amster 500 sh.
James B. Fowler 1,000
Herman S. Kohlmeyer, Jr. 500
Kathleen McCree Lewis 500
Patricia Shontz Longe, Ph.D. 500
Michael T. Monahan 500
Philip H. Power 500
Mark K. Rosenfeld 1,000
Richard Z. Rosenfeld 500
Robert L. Rosenfeld, Ph.D. 500
James L. Wolohan 500
</TABLE>
The term of each director option is five years. No director options
have been exercised.
The Company retained Rosenfeld, Grover & Frang, P.C. for legal
services in fiscal 1996. Richard Z. Rosenfeld serves of Counsel to that law
firm. Information on the fees paid by the Company to that law firm is
reported on page 14 under the caption "Compensation Committee Interlocks and
Insider Participation".
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held nine meetings during the year
ended January 25, 1997.
There are four permanent committees of the Board of Directors:
Executive Committee, Audit Committee, Compensation Committee and Directors
Committee.
The Audit Committee consists of Directors Amster (Chair), Lewis, Power
and Robert L. Rosenfeld. It met three times during the year. The Audit
Committee reviews the Company's accounting policies and reporting practices,
and the adequacy of the system of internal controls; reviews and evaluates
the scope and results of the audits completed by the Company's internal
auditor; recommends to the Board, subject to shareholder approval, the
selection of independent public accountants; reviews the quality standards
maintained in their audit of the Company's financial statements; and
evaluates their independence and professional competence, as well as the
scope and results of their audit.
The Compensation Committee consists of Directors Kohlmeyer (Chair),
Monahan, Richard Z. Rosenfeld and Wolohan. It met six times during the year.
It provides general oversight for the compensation and benefit policies of
the Company, reviews the development of corporate management and succession,
including considering the Chairman of the Board, President and Chief
Executive Officer's recommendations for officer promotions and compensation,
reviews the salaries, bonuses and total compensation levels of Company
officers, reviews the Company's employee benefit plans and policies,
administers the Company's Deferred Compensation Plan, evaluates the
performance and makes recommendations to the Board of Directors as to the
compensation of all of the Company's executive officers, and serves as the
employee option committee under the Company's Stock Option Plan of 1994.
7
<PAGE>
The Directors Committee consists of Directors Monahan (Chair),
Kohlmeyer, Longe, Mills and Richard Z. Rosenfeld. It met twice during the
year. It considers nominees for directorship in the Company. The Company's
Restated Articles of Incorporation contain procedures to be followed by any
shareholder who intends to nominate a candidate for the Board of Directors. A
written notice should be delivered to the Secretary of the Company not less
than 120 days before the anniversary date of the Company's proxy statement
for the previous year's annual meeting of shareholders. The notice should set
forth the name, age, business address and residence address of each nominee
proposed; the principal occupation or employment of each nominee; the number
of shares of stock of the Company which are beneficially owned by each
nominee; a statement that the nominee is willing to be nominated; and such
other information concerning each nominee as is required under the rules of
the Securities and Exchange Commission in a proxy statement soliciting
proxies for the election of such nominees. Any nomination not made in
accordance with this procedure will be void.
During the year, every director except Longe attended at least 75% of
the meetings of the Board and any committees on which the director served.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table and footnotes summarize the compensation for the
last three fiscal years of (i) all individuals serving as the Company's Chief
Executive Officer during fiscal 1996, (ii) the Company's four most highly
compensated executive officers other than the Chief Executive Officer who
were serving as executive officers of the Company at the end of fiscal 1996,
and (iii) an additional individual who was among the Company's four most
highly compensated executive officers other than the Chief Executive Officer,
but was not serving as an executive officer of the Company at the end of
fiscal 1996:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
-------------
Awards
-------------
Annual Securities
Compensation(1) Underlying
--------------- Options/ All Other
Salary Bonus SARs Compensation(2)
Name and Principal Position Year ($) ($) (#) ($)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
P. Gerald Mills 1996 52,700 0 300,000(4) 0
Chairman of the Board,
President and Chief Executive
Officer(3)
Mark K. Rosenfeld(5) 1996 237,269 0 1,000 81,210
Former Chairman of the Board 1995 310,000 0 30,000 2,171
and Chief Executive Officer 1994 310,000 0 5,000 2,037
Paul W. Gilbert 1996 246,866 0 40,000 1,444
Vice Chairman of the Board 1995 220,000 0 24,000 1,449
1994 210,000 0 3,000 1,463
James B. Fowler (6) 1996 211,385 0 26,000 23,978
Former President 1995 210,000 0 24,000 1,377
1994 210,000 0 3,000 1,382
Theodore R. Kolman 1996 137,443 5,923 0 832
Senior Vice President- 1995 128,000 366 9,000 719
General Merchandise Manager 1994 120,000 0 1,500 676
Robert L. Moles 1996 132,443 0 0 800
Senior Vice/ President- 1995 130,000 0 11,000 786
Stores 1994 126,000 0 1,500 737
Joseph H. Fisher 1996 129,770 2,801 0 778
Senior Vice President- 1995 112,000 2,813 8,500 620
General Merchandise Manager 1994 109,000 0 1,500 589
<FN>
(1) The only types of other annual compensation for each of the named
executive officers were in the form of perquisites in amounts less than
the level required for reporting.
(2) The amounts shown as other compensation include for 1996: (a) Company
contributions to the Jacobson's Retirement Savings & Profit Sharing Plan
(401(k) plan) (Mr. Rosenfeld $900; Mr. Gilbert $900; Mr. Fowler $900;
Mr. Kolman $832; Mr. Moles $800; and Mr. Fisher $778); (b) the taxable
economic benefit, or portion of the premium paid by the Company that is
attributable to term life insurance coverage under split-dollar life
insurance agreements (Mr. Rosenfeld $343; Mr. Gilbert $544; and Mr.
Fowler $528); (c) the dollar increase in the excess of the cash
surrender value of split dollar life insurance policies over the
cumulative net premiums paid by the Company (Mr. Rosenfeld $2,467); and
(d) amounts payable in connection with the termination of such executive
officer's employment (Mr. Rosenfeld $77,500; Mr. Fowler $22,550).
9
<PAGE>
(3) P. Gerald Mills became Chairman of the Board and Chief Executive Officer
of the Company on October 31, 1996; and became President on December 20,
1996.
(4) Options to purchase 200,000 of these shares are subject to shareholder
approval of an amendment to the Stock Option Plan of 1994 described
later in this Proxy Statement. If such approval is not obtained, the
Company must pay Mr. Mills, in cash, the difference between the fair
market value of those shares and their exercise price on the date they
would have vested (100,000 shares on each of October 31, 1997 and 1998).
(5) Mark K. Rosenfeld resigned as Chairman of the Board and Chief Executive
Officer of the Company, effective October 31, 1996.
(6) James B. Fowler resigned as President and a Director of the Company,
effective December 20, 1996.
</TABLE>
OPTIONS
The table below reports options granted during the last fiscal year to
each of the executive officers of the Company listed in the Summary
Compensation Table above. The Company has not granted any stock appreciation
rights (SARs).
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Potential
- ----------------------------------------------------------------------------------------- Realizable Value at
Number of % of Total Assumed Annual
Securities Options/SARs Rates of Stock Price
Underlying Granted to Appreciation
Options/SARs Employees Exercise for Option Term
Granted in Fiscal or Base Price Expiration --------------------------
Name (#) Year ($/sh) Date 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
P. Gerald Mills 300,000 77.6 $ 8.375 October 30, 2006 $1,580,098 $4,004,278
Mark K. Rosenfeld 1,000 0.3 8.375 October 30, 2001 5,267 13,348
Paul W. Gilbert 25,000 6.5 8.375 October 30, 2006 131,675 333,690
15,000 3.9 11.000 July 30, 2006 103,768 262,968
James B. Fowler 1,000 0.3 9.500 December 19, 2001 2,625 5,800
10,000 2.6 8.375 October 30, 2006 52,670 133,476
15,000 3.9 11.000 July 30, 2006 103,768 262,968
Theodore R. Kolman 0 -- -- -- -- --
Robert L. Moles 0 -- -- -- -- --
Joseph H. Fisher 0 -- -- -- -- --
</TABLE>
Each option referred to in the foregoing table is a non-statutory option
and has a term of ten years (except the five year director options for 1,000
shares granted to Mark K. Rosenfeld and Mr. Fowler). The option for 300,000
shares granted to Mr. Mills vests at the rate of 33-1/3% per year, commencing
on the date of grant. Mr. Mills' option also vests 100% immediately 30 days
before termination of his employment by the Company without cause. In
addition, the option to purchase 200,000 of these shares is subject to
shareholder approval of an amendment to the Stock Option Plan of 1994
described later in this Proxy Statement. If such approval is not obtained,
the Company must pay Mr. Mills, in cash, the difference between the fair
market value of those shares and their exercise price on the date they would
have vested (100,000 shares on each of October 31, 1997 and 1998).
Employee options granted to Messrs. Gilbert and Fowler vest at the rate
of 25% per year, commencing on the first anniversary of the date of grant.
Mark K. Rosenfeld's and Mr. Fowler's director options for 1,000 shares were
100% vested on the date of grant. The exercise price is not less than the
market value of the Company's Common Stock on the date of grant. Mark K.
Rosenfeld's employee options expired as a result of his retirement, effective
October 31, 1996; his director option is shown in the table above. All but
one of Mr. Fowler's employee options and his director option for 1,000 shares
expired as a result of his resignation, effective December 20, 1996; the
remaining employee option for 3,000 shares expired March 20, 1997.
10
<PAGE>
The table below reports options exercised in the last fiscal year by
each of the executive officers of the Company listed in the Summary
Compensation Table above, and the number and fiscal year-end value of options
held by each such executive officer.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options/SARs
Shares Acquired Value Options/SARs at Fiscal Year-end at Fiscal Year-end (1)
on Exercise Realized (1) (#) ($)
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
P. Gerald Mills 0 0 100,000/200,000 0/0
Mark K. Rosenfeld (2) 0 0 1,000/0 0/0
Paul W. Gilbert 0 0 13,500/56,500 0/0
James B. Fowler (3) 0 0 3,000/0 0/0
Theodore R. Kolman 0 0 5,626/6,375 0/0
Robert L. Moles 0 0 6,375/7,625 0/0
Joseph H. Fisher 0 0 5,375/6,125 0/0
<FN>
(1) Market value of underlying securities at exercise or fiscal year-end,
minus the exercise or base price.
(2) Mark K. Rosenfeld's options expired as a result of his retirement,
effective October 31, 1996 (except for the option for 1,000 shares
shown in the table above).
(3) All but one of Mr. Fowler's options expired as a result of his
resignation, effective December 20, 1996. The remaining option for
3,000 shares (shown in the table above) expired effective March 20,
1997.
</TABLE>
LONG-TERM INCENTIVE PLANS
The Company does not have a long-term incentive plan.
PENSION PLAN
The following table summarizes benefits under the Company's pension
plan:
<TABLE>
<CAPTION>
Years of Service
Average -----------------------------------------------
Remuneration 15 20 25 30
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$125,000 $ 18,850 $ 25,100 $ 31,350 $ 37,600
150,000 22,600 30,100 37,600 45,100
175,000 26,350 35,100 43,850 52,600
200,000 30,100 40,100 50,100 60,100
225,000 33,850 45,100 56,350 67,600
250,000 37,600 50,100 62,600 75,100
300,000 45,100 60,100 75,100 90,100
350,000 52,600 70,100 87,600 105,100
</TABLE>
The Plan recognizes a maximum of 30 years credited service.
Benefits under the plan are based on an employee's cash compensation,
including contributions to the Company's 401(k) plan, but excluding
deferred compensation and compensation which exceeds the applicable
limitation under the Internal Revenue Code. Benefits are computed on
the basis of total compensation for the 30 calendar years during which
an employee's compensation was highest, or the entire period of
employment if less than 30 years. Benefits are paid as a monthly
annuity, and are not subject to deduction for social security or other
offset amounts.
For each of the executive officers named in the Summary Compensation
Table, all of their salary reported in the Summary Compensation Table,
including the Company's contributions on their behalf to the 401(k)
plan, are eligible for consideration in computing their benefits under
the pension plan, subject to the applicable limitation under the
Internal Revenue Code. That limitation was $150,000 for 1996, 1995 and
1994.
11
<PAGE>
The years of credited service of the executive officers named in the
Summary Compensation Table are:
<TABLE>
<CAPTION>
Years of Service
----------------
<S> <C>
P. Gerald Mills 0 years
Mark K. Rosenfeld 25 years
Paul W. Gilbert 22 years
James B. Fowler 25 years
Theodore R. Kolman 6 years
Robert L. Moles 30 years
Joseph H. Fisher 21 years
</TABLE>
Executive Officer Employment and Severance Agreements
The Company's employment agreement with P. Gerald Mills is for a term
of three years commencing October 31, 1996 at an annual salary of $221,000.
The Agreement authorizes Mr. Mills to defer payment of any part of the salary
and interest thereon until after his retirement or death pursuant to the
Company's Deferred Compensation Plan. None of Mr. Mills' salary for the year
ended January 1997 was deferred. Pursuant to the agreement, Mr. Mills is
entitled (i) to participate in the Company's management incentive plan, (ii)
to four weeks of vacation a year beginning in fiscal 1997, (iii) to
participate in such other plans and fringe benefits as are generally
available to other executives and for which he is eligible, and (iv) to an
option to purchase 300,000 shares of Common Stock, which was granted to him
on October 31, 1996. The option to purchase 200,000 of these shares is
subject to shareholder approval of an amendment to the Stock Option Plan of
1994 described later in this Proxy Statement. If such approval is not
obtained, the Company must pay Mr. Mills, in cash, the difference between the
fair market value of those shares and their exercise price on the date they
would have vested (100,000 shares on each of October 31, 1997 and 1998).
The agreement provides that in the event of the termination of Mr.
Mills' employment during the term of the agreement, (i) he will be entitled
to any benefits contained in any wage continuation program, insurance or
other employee benefit plans that are generally applicable to all executive
officers of the Company and that are maintained by the Company at that time,
if such termination is a result of Mr. Mills' death or permanent incapacity,
(ii) he will be entitled to his accrued salary through the date of
termination and a pro rata bonus, if any, for the year of such termination,
based on the actual number of days worked in that year, and (iii) if such
termination is by the Company without good cause, Mr. Mills' option to
purchase 300,000 shares of Common Stock described above will become 100%
vested 30 days before such termination. Pursuant to the agreement, Mr. Mills
has also agreed to confidentiality and non-solicitation provisions.
The Company's employment agreement with Mr. Gilbert is for a term of
three years commencing February 1, 1996 at an annual salary of $275,000. The
agreement authorizes Mr. Gilbert to defer payment of any part of the salary
and interest thereon until after his retirement or death pursuant to the
Company's Deferred Compensation Plan. None of Mr. Gilbert's salary for the
year ended January 1997 was deferred. The agreement also provides that, in
the event of Mr. Gilbert's death during the term of the agreement, (i) his
salary will continue for two years at the rate in effect immediately before
his death, (ii) he will receive a pro-rata bonus for the year of his death,
based on the actual number of days worked in that year, and (iii) the Company
will continue to maintain medical and hospitalization insurance for his
spouse and dependents for five years. The Company may offset against these
payments the proceeds of any increased insurance it provides on Mr. Gilbert's
life after January 31, 1996.
If Mr. Gilbert's employment is terminated as a result of his permanent
incapacity during the term of the agreement, (i) his salary will continue for
two years at the rate in effect immediately before his incapacity and then at
one-half such rate for one more year, (ii) he will receive a pro-rata bonus
for the year of his termination, based on the actual number of days worked in
that year, and (iii) the Company will continue to maintain medical,
hospitalization and life insurance for the executive and his spouse and
dependents for five years. The Company may offset against these payments (i)
any disability benefits paid under any insurance maintained by the Company,
and (ii) if Mr. Gilbert dies while these payments are being made, the
proceeds of any increased insurance the Company provides on Mr. Gilbert's
life after January 31, 1996.
If the Company terminates employment without good cause before the
expiration of the term, (i) Mr. Gilbert's salary will continue, at the rate
in effect immediately before termination, and the Company will provide
continued medical and hospitalization insurance, for the balance of the term
or one year, whichever is greater, and (ii) he will receive a pro-rata bonus
for the year of his termination, based on the actual number of days worked in
that year. Commencing one year after termination, the Company's continuing
payment obligation, if any, will be reduced by the amount of any salary,
consulting fees, or other compensation or remuneration for services
thereafter received by him with respect to any remaining part of the period
covered by the Company's obligation, and the Company's continuing medical and
hospitalization insurance obligation shall be reduced by the amount of any
other medical and hospitalization insurance provided to the executive with
respect to any remaining part of such period.
12
<PAGE>
The Company and Mr. Gilbert have entered into a change in control
severance agreement providing the benefits described below if (i) a change in
control of the Company occurs within the period described below, and (ii) (A)
Mr. Gilbert's employment is terminated by the Company without cause or by Mr.
Gilbert for good reason during the period beginning 90 days before the change
in control and ending two years after the change in control, or (B) Mr.
Gilbert terminates his employment with the Company at any time during the
13th month after the change in control for any reason or for no reason. The
change in control must occur on or before the earliest of (A) the expiration
of the term of the written employment agreement between the executive and the
Company, (B) the executive's death or disability, and (C) January 31, 2001.
For purposes of the agreement, a change in control generally includes
(i) the acquisition by any person or group (excluding specified persons
affiliated with the Company) of 40% or more of the Company's voting
securities, (ii) various business combinations involving the Company if the
Company's shareholders do not own more than 50% of the surviving entity,
(iii) specified sales of substantially all of the Company's assets, and (iv)
the continuing directors of the Company cease to be a majority of the
Company's directors.
The severance benefits provided by the agreement are (i) continued
salary through the later of two years after termination of employment and the
termination date of Mr. Gilbert's written employment agreement with the
Company (the "Time"), (ii) a pro-rata bonus for the year of termination,
equal to the prior year's bonus adjusted for the actual number of days worked
in the year of termination, (iii) an amount equal to the prior year's bonus
multiplied by the Time (in years and fractions of a partial year), and (iv)
continued medical, dental, life, disability, hospitalization, optical and
prescription drug coverage, automobile allowances and benefits and, if
applicable, payments under the Company's Split Dollar Agreement with Mr.
Gilbert during the Time. The benefits are limited, however, to the amount
equal to $1.00 less than the amount that would result in Mr. Gilbert
receiving a parachute payment resulting in an excise tax under Section 280G
of the Internal Revenue Code. Pursuant to the agreement, Mr. Gilbert has also
agreed to non-competition, confidentiality and non-solicitation provisions.
The Company had an employment agreement with Mark K. Rosenfeld. The
Company and Mr. Rosenfeld terminated the employment agreement effective
October 31, 1996 pursuant to a severance agreement, dated as of October 31
1996, as amended. Pursuant to the severance agreement, Mr. Rosenfeld resigned
from all of his positions with the Company, except as a director, effective
October 31, 1996. The Company agreed to provide Mr. Rosenfeld with (i) his
accrued vacation through the date of termination, (ii) a continuation of his
$310,000 salary and his medical, dental and hospitalization insurance through
January 31, 2001, (iii) $6,000 for attorney's fees incurred in connection
with the severance agreement, and (iv) professional level outplacement
services at a cost to the Company not to exceed $5,000. The Company has also
agreed to pay for Mr. Rosenfeld's cost of any COBRA benefits he obtains.
Beginning October 31, 1997, the Company's continuing payment
obligation will be reduced by the amount of any salary, consulting fees, or
other compensation or remuneration for services thereafter received by him
with respect to any remaining part of the period through January 31, 2001
(other than third party director's fees, distributions from pass-through
entities that are not payments for services, and stock options that do not
result in taxable compensation income to Mr. Rosenfeld during the applicable
period), and the Company's continuing medical and hospitalization insurance
obligation will be reduced by the amount of any other medical and
hospitalization insurance provided to Mr. Rosenfeld with respect to any
remaining part of that period. The Company must also cooperate with Mr.
Rosenfeld to transfer to him any life and disability insurance maintained by
the Company on his behalf immediately before the termination of his
employment.
The Company had an employment agreement with Mr. Fowler. The Company
and Mr. Fowler terminated the employment agreement effective December 20,
1996 pursuant to a severance agreement, dated as of December 20, 1996.
Pursuant to the severance agreement, Mr. Fowler resigned from all of his
positions with the Company effective December 20, 1996. The Company agreed to
provide Mr. Fowler with (i) $22,083.33 a month from January 1, 1997 through
January 31, 1998, and (ii) a continuation of his medical and hospitalization
insurance through January 31, 1998. The Company has also agreed to pay for
Mr. Fowler's cost of any COBRA benefits he obtains.
The Company's employment agreements with Messrs. Kolman and Moles are
for a term of one year ending July 31, 1997, at an annual salary of $140,000
and $135,000, respectively. Pursuant to the agreements, each executive will
receive a bonus equal to 50% of his base salary if (i) his employment
continues through July 31, 1997 or his employment is terminated by the
Company without cause or by the executive for good reason before July 31,
1997, and (ii) he relocates if requested to do so by the Company during the
term of the agreement. The agreements also provide that if the Company
terminates the executive's employment without cause or if the executive
terminates his employment for good reason within one year after a change in
control (defined as described below in connection with the agreement with Mr.
Gilbert), in addition to the bonus described above, he will receive a lump
sum cash payment in an amount equal to his salary through the date one year
after the change in control occurred. If the Company terminates the
executive's employment without cause before July 31, 1997, in addition to the
bonus described above,
13
<PAGE>
the executive would receive (i) a lump sum cash payment equal to his salary
through July 31, 1997, and (ii) any benefits provided in any wage
continuation program, insurance or other employee benefit plans generally
applicable to all employees of the Company and that are maintained by the
Company at that time, through July 31, 1997. In addition, if the executive's
employment is terminated because of his death or permanent incapacity, he
will be entitled to benefits under any wage continuation program, insurance
or other employee benefit plans that are generally applicable to all
employees of the Company and that are maintained by the Company at that time.
The Company's employment agreement with Mr. Fisher is for a term of
one year ending January 25, 1997 at an annual salary of $140,000, and
continues thereafter on a month-to-month basis. The agreement provides that
if the Company terminates Mr. Fisher's employment within two years after a
change in ownership or effective control of the Company or in the ownership
of substantially all of its assets, his salary will continue for a period of
24 months. If his employment is terminated due to his death, permanent
incapacity or retirement, benefits may continue to the extent provided in any
generally-applicable wage continuation program, insurance or other employee
benefits plans maintained by the Company.
The Jacobson Stock Option Plan of 1994 provides that all options
granted to employees under that plan shall become immediately exercisable in
full immediately before a change in control of the Company. The definition of
change in control under the Plan is substantially the same as the definition
under the change in control severance agreement.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board of Directors has
consisted of Directors Kohlmeyer (Chair), Monahan, Richard Z. Rosenfeld and
Wolohan since May 25, 1995.
During fiscal 1996, Richard Z. Rosenfeld served as Secretary of the
Company. No executive officer of the Company serves as a director or as a
member of the Compensation Committee (or other board committee performing
equivalent functions or, in the absence of such committee, the entire board
of directors) of another entity, one of whose executive officers also serves
as a director of the Company.
Mr. Monahan is President and a director of Comerica Bank and President
and a director of Comerica Incorporated. During its last fiscal year, the
Company and its subsidiaries borrowed $23,423,000 from Comerica Bank, paid
$2,759,000 in interest to Comerica Bank at rates ranging from 6.93% to 8.25%,
paid $88,000 in fees to Comerica Bank pursuant to various loan agreements,
and paid $426,000 in rent to a subsidiary of Comerica Bank for leased
computer equipment and software. At January 25, 1997, the total unpaid
principal balance of all borrowings of the Company and its subsidiaries from
Comerica Bank and total rental to be paid under the equipment lease was
$39,890,000.
Comerica Bank is also a depository of funds of the Company and its
subsidiaries; trustee under an indenture relating to indebtedness of one of
the Company's subsidiaries; and trustee of the Company's Pension Plan, which
holds 28,890 shares of the Company's Common Stock. The Company paid
approximately $138,000 in fees for such services in fiscal 1996.
Richard Z. Rosenfeld serves of counsel to Rosenfeld, Grover & Frang,
P.C., and the firm provides legal services to the Company. Mr. Rosenfeld is
also Secretary to the Company. During its last fiscal year, the Company paid
Rosenfeld, Grover & Frang, P.C. $28,000 for legal services and $2,000 for
reimbursed expenses.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
provides general oversight for the compensation and benefit policies of the
Company, reviews the development of corporate management and succession,
including considering the Chairman of the Board and Chief Executive Officer's
recommendations for officer promotions and compensation, reviews the
salaries, bonuses and total compensation levels of Company officers, reviews
the Company's employee benefit plans and policies, administers the Company's
Deferred Compensation Plan, and evaluates the performance and makes
recommendations to the Board of Directors as to the compensation of all of
the Company's executive officers (including those named in the Summary
Compensation Table above). The Committee also serves as the employee option
committee under the Company's Stock Option Plan of 1994.
The Committee uses a number of resources to assist the Committee in
making informed decisions regarding compensation. In prior years, the
Committee has obtained Company research on industry practices and financial
performance, including those of companies included in the Company's peer
group index, as support to the Committee in fulfilling its responsibilities.
In addition, the Company and the Committee have, in prior years, consulted
with independent compensation consultants.
14
<PAGE>
The Company seeks to provide executive compensation that will support
achievement of the Company's goals while attracting and retaining talented
executives and rewarding superior performance. The Company implements this
policy through salaries, bonuses, stock options, and employment and severance
agreements, and benefit plans which are generally available to all Company
employees.
Base salary. The Company's practice is to set base salary levels for
the Company's executive officers which generally approximate the median
salary levels of executive officers in other companies of comparable size
within the retail industry, taking into consideration the position's
complexity, responsibility, working environment, and need for special
expertise. Increases in base salary are determined by the Committee's
subjective evaluation of the Company's performance and financial condition,
the executive's individual performance and position in the salary range, and
management's recommendations. Salary increases in 1996 were based primarily
on changes in the executives' responsibilities and the Committee's subjective
judgment that their salaries, adjusted for inflation, were low relative to
executives at comparable companies.
Bonuses. The Company has a bonus plan to compensate its executive
officers for achieving the Company's return on sales target set near the
beginning of each fiscal year and for their individual performance during the
year. Bonuses are intended to make a significant portion of each executive
officer's compensation dependent on the Company's performance and to provide
executive officers with incentives to achieve Company goals, increase
shareholder value, and work as a team. Bonuses are also intended to recognize
the executive officer's individual contributions to the Company.
For the fiscal year ended January 25, 1997, the Jacobson Stores Inc.
1996 Management Incentive Plan (the "1996 Plan") covered all the executive
officers of the Company. Pursuant to the 1996 Plan, a bonus pool was
established for each executive officer equal to 15% to 35% of the executive
officer's 1996 base salary if 100% of the corporate and individual
performance targets were reached. The bonus pool was to be reduced pro-rata
for performance less than the target and eliminated entirely if certain
minimum performance thresholds (80% of the targets) were not met, or
increased to a maximum of 22.5% to 52.5% of base salary if 125% of the
targets were achieved. For Messrs. Rosenfeld, Gilbert and Fowler, 75% of
their bonuses under the plan were payable based on the Company's targeted
return on sales, and 25% of their bonuses under the plan were payable at the
discretion of the Board, based on the Committee's recommendations after its
subjective evaluation of the executives' individual contributions to the
implementation of the Company's strategic business plan. For Messrs. Fisher,
Kolman and Moles, 50% of their bonuses under the plan were payable based on
the Company's targeted return on sales. For Messrs. Fisher and Kolman, 37.5%
was based on the gross margin (in dollars) and the remaining 12.5% was based
on the gross margin return on investment of the merchandise departments
supervised by Messrs. Fisher and Kolman respectively. For Mr. Moles, 25% was
based on the percentage comparable store sales increase and the remaining 25%
was based on the operating profit of stores supervised by him.
In 1996, the performance thresholds were met by Messrs. Fisher and
Kolman and bonuses were paid to these executives.
Stock Options. The Company's practice is to award stock options to the
Company's executive officers in amounts reflecting the Committee's subjective
evaluation of the executive officer's position and ability to influence the
Company's overall performance, previously issued option grants, the amount
necessary to attract new executives, and management's recommendations,
without any specific weight being given to any of these factors. Options are
intended to provide executives with an increased incentive to make
contributions to the long-term performance and growth of the Company, to join
the interests of the executive officers with the interests of the
shareholders of the Company, and to attract and retain qualified employees.
The Company made its 1996 annual key employee option grants before the end of
fiscal 1995, and expects to make its 1997 annual key employee option grants
after the end of fiscal 1996. Option grants in fiscal 1996 were made to new
executives to attract them to the Company, and to Messrs. Gilbert and Fowler
to provide them with additional incentives during a period of reorganization
and management changes.
Stock options granted in fiscal 1996 are non-statutory options, have a
term of ten years, and vest at the rate of 25% per year commencing on the
first anniversary of the date of grant (except for the options granted to Mr.
Mills which vest at the rate of one-third per year commencing on the date of
grant and the director options automatically granted to Mark K. Rosenfeld and
Mr. Fowler, which vested immediately upon grant), to provide a long-term
incentive. The exercise price is not less than the fair market value of the
underlying shares at the date of grant. Such options only provide
compensation if the Company's stock price increases.
Generally, the Compensation Committee reserves the right to recommend
the payment of compensation to the Company's executives in amounts it deems
appropriate regardless of whether such compensation is deductible for federal
income tax purposes.
15
Employment and Severance Agreements. The Company's practice is to have
written employment agreements with all officers and store general managers to
provide them with specified periods of employment, salaries and severance
benefits. In 1995, the Company also entered into change in control severance
agreements with its then top three executive officers after reviewing the
recommendations of an independent compensation consultant. In fiscal 1996,
the Company included change in control severance provisions in most of its
employment agreements with its executive officers. These agreements are
intended to encourage executives to focus their attention on performing their
duties to the Company, rather than on the security of their employment. The
employment and severance agreements with each of the Company's executive
officers named in the Summary Compensation Table are summarized on pages
12-14 of this proxy statement.
Bases for Compensation of Mark K. Rosenfeld and P. Gerald Mills.
Factors used by the Committee in evaluating Mark K. Rosenfeld's performance
as Chairman of the Board and Chief Executive Officer included the Company's
1996 financial performance, strategic planning, organizational development,
investor relations, formulation of major corporate policies, keeping the
Board fully informed on the condition of the Company, maintaining sound
corporate governance policies, and working with the directors to effectively
use their talents to the best strategic advantage to the Company. Mr.
Rosenfeld's 1996 salary was not increased from his 1995 base salary based on
management's recommendation and the Company's results of operations in fiscal
1995. No bonus was approved for Mr. Rosenfeld for fiscal 1996 because the
Company did not meet its threshold return on sales target for fiscal 1996
under the 1996 Plan. As described in "Stock Options", the Company's 1996
annual option grants were made before the beginning of fiscal 1996. The
number of shares subject to options granted to Mr. Rosenfeld in January 1996
reflected his position and ability to influence the Company's overall
performance, determined based on the Committee's subjective judgment after
reviewing management's recommendations, the amounts of proposed grants to
other employees and the amount of options previously granted to Mr.
Rosenfeld. The Committee recommended that the Company extend and revise its
employment agreement with Mr. Rosenfeld to encourage him to focus his
attention on performing his duties to the Company, rather than on the
security of his employment. The Committee recommended approval of the
agreement based on its subjective judgment of what was appropriate in the
circumstances. The terms of the severance agreement with Mr. Rosenfeld were
approved by the Compensation Committee based on its subjective judgment of
what was appropriate in the circumstances and on the terms of Mr. Rosenfeld's
employment agreement.
The Committee recommended that the Company enter into its employment
agreement with Mr. Mills, including its terms relating to salary,
participation in future bonus plans (beginning with the 1997 bonus plan) and
stock options (as described under "Executive Officer Employment and Severance
Agreements" above), based on its subjective judgment of what was appropriate
in Mr. Mills' agreement and its subjective judgment of the terms necessary to
attract Mr. Mills to the Company.
COMPENSATION COMMITTEE
Herman S. Kohlmeyer, Jr., Chairman
Michael T. Monahan
Richard Z. Rosenfeld
James L. Wolohan
16
<PAGE>
Performance Graph
The following graph compares the Company's cumulative shareholder
return on its Common Stock for the last five fiscal years with the cumulative
total return of retailers in a peer group index, and with the cumulative
total return of companies included in the Total Return Index for The Nasdaq
Stock Market (U.S. Companies), a broad equity market index.
<TABLE>
<CAPTION>
Comparison of Five Year Cumulative Total Return*
Among Jacobson Stores Inc., The Nasdaq Stock Market (U.S. Companies), and a Peer Group Index
1-25-92 1-30-93 1-29-94 1-28-95 1-27-96 1-25-97
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Jacobson's 100 77 75 65 57 51
Nasdaq Market 100 112 128 124 171 225
Peer Group 100 119 113 108 120 149
<FN>
*Assumes $100 invested on January 25, 1992 in Jacobson Common Stock, The
Nasdaq Stock Market (U.S. Companies), and an index comprised of peer group
companies. Total Return assumes reinvestment of dividends.
</TABLE>
(A paper copy of the Performance Graph as contained in the Company's
definitive proxy statement has been submitted to the Securities and Exchange
Commission under separate cover.)
The peer group is comprised of ten retail companies offering mainly
apparel and accessories, five of which are members of the same buying office
as the Company. The members of the peer group are as follows: Crowley, Milner
& Co.; Dayton Hudson Corporation; Dillard Department Stores, Inc.; Gantos,
Inc.; Gottschalks Inc.; Lamonts Apparel, Inc.; The May Department Stores
Company; Nordstrom, Inc.; Proffitt's, Inc.; and Strawbridge & Clothier. The
shareholder returns for each of these companies have been weighted according
to each company's stock market capitalization at the beginning of each
period.
AMENDMENT OF JACOBSON STOCK OPTION PLAN OF 1994
General
At the meeting, shareholders will be asked to consider and act upon a
proposal to amend the Jacobson Stores Inc. Stock Option Plan of 1994 (the
"Option Plan") to (i) increase the aggregate number of shares of Common Stock
that may be issued upon exercise of options granted under the plan from
400,000 to 900,000 and (ii) provide that no individual may be granted options
to purchase more than 600,000 shares of Common Stock in the aggregate in any
fiscal year of the Company (collectively, the "Amendment"). Pursuant to the
Option Plan, 400,000 shares of Common Stock, par value $1 per share ("Common
Shares"), are currently reserved for issuance on exercise of options granted
pursuant to the Option Plan to full-time key employees of the Company and its
subsidiaries and to directors of the Company (the "Participants").
Options granted under the Option Plan to employees may be "Incentive
Stock Options" (within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")), or "Nonstatutory Options" (options
that do not qualify as Incentive Stock Options). Directors may only receive
Nonstatutory Options under the Option Plan. The Option Plan contains various
provisions to ensure that Incentive Stock Options comply with Section 422.
The Company's Stock Option Plan of 1983 terminated in 1993, except as
to options granted before that date. As of March 1, 1997, options to purchase
77,600 Common Shares remained outstanding under the Stock Option Plan of
1983. Also, as of March 1, 1997, options to purchase 321,000 Common Shares
were outstanding under the Option Plan, no options granted under the Option
Plan had been exercised, and 79,000 Common Shares remained available for the
grant of options under the Option Plan. Therefore, the Board of Directors
approved the Amendment on October 31, 1996 and January 22, 1997, in part, to
increase the number of Common Shares available under the Option Plan, subject
to shareholder approval. In addition, an option to purchase 300,000 shares
has been granted to Mr. Mills, the Company's Chief Executive Officer, under
the Option Plan. The option to purchase 200,000 of these shares is subject to
shareholder approval of the Amendment.
The Board of Directors believes that it is in the best interests of
the Company and its shareholders to approve the Amendment to allow the
Company to continue to grant options to key employees and directors in
accordance with the terms of the Option Plan. The Amendment also adds an
annual individual limit on the number of shares that may be subject to
options granted
17
under the Option Plan to comply with one of the requirements for the
performance-based compensation exception to the $1,000,000 limitation on
deductions for compensation to specified executive officers of the Company
pursuant to Section 162(m) of the Code. See "Federal Income Tax
Consequences."
The Option Plan is intended to enhance the ability of the Company to
retain and attract superior directors, officers and other key personnel and
to provide them an incentive to achieve long-term corporate objectives
through ownership of stock in the Company. The Option Plan, however, could
have an "anti-takeover" effect, especially the provisions accelerating the
vesting of outstanding options upon any change in control of the Company.
Persons deemed to be affiliates of the Company, i.e., persons who
directly, or indirectly through one or more intermediaries, control, are
controlled by, or are under common control with, the Company, must resell
securities acquired under the Option Plan pursuant to a registration
statement under the Securities Act of 1933, as amended, and the rules and
regulations, thereunder (the "Securities Act"), Rule 144 under the Securities
Act or an applicable exemption under the Securities Act.
The Company is the issuer of the securities offered pursuant to the
Option Plan. The Common Shares of the Company issuable upon exercise of stock
options under the Option Plan may be either authorized and unissued or
reacquired Common Shares of the Company. The Option Plan is not subject to
any provisions of the Employee Retirement Income Security Act of 1974 and is
not qualified under Section 401(a) of the Code.
Approval of the Option Plan
The approval by a majority of the votes cast at the meeting and
entitled to vote on the action is necessary for shareholder approval of the
Amendment. Abstentions, withheld votes and broker non-votes will not be
deemed votes cast in determining approval of this proposal, but will be
counted in determining the number of Common Shares present or represented by
proxy in determining whether a quorum is present. The Board does not intend
to place the Amendment into effect unless such approval is obtained, and such
approval is sought pursuant to the terms of the Option Plan and in order to
exempt the granting of options under the Option Plan from the provisions of
Section 162(m) of the Code and in order to comply with the shareholder
approval requirements for securities traded on The Nasdaq National Market.
A copy of the Amendment is attached as Exhibit A to this Proxy
Statement. The major features of the Option Plan, as proposed to be amended,
are summarized below. As of March 1, 1997, the closing sales price of the
Company's Common Shares was $7-7/8.
Administration
All aspects of the Option Plan relating to options granted to eligible
employees ("Employee Options") are administered by a committee of the Board
of Directors of the Company designated by the Board of Directors (the
"Employee Options Committee"). The Employee Options Committee must consist of
not less than two directors, who are appointed by the Board. A person is not
eligible to serve on the Employee Options Committee if during the prior year
he or she was granted or awarded equity securities pursuant to any other plan
of the Company or any of its affiliates, except for Director Options pursuant
to the Option Plan or the Jacobson Stock Option Plan of 1983. Members of the
Employee Options Committee are subject to any additional restrictions
necessary to satisfy the requirements for disinterested administration of the
Option Plan pursuant to Rule 16b-3 under the Securities Exchange Act of 1934
(the "Exchange Act"). The Board of Directors may remove members from or add
members to the Employee Options Committee and fill vacancies on the Employee
Options Committee. The Compensation Committee currently serves as the
Employee Options Committee and the current members of that committee are
Herman S. Kohlmeyer, Jr., Michael T. Monahan, Richard Z. Rosenfeld and James
L. Wolohan.
With respect to options granted under the Option Plan to eligible
directors ("Director Options"), if any aspects of the Option Plan require
administration or interpretation, it is performed by a special committee of
the Board of Directors (the "Director Options Committee"), which consists of
all members of the Board of Directors who do not have and are not eligible to
receive Director Options.
Subject to the provisions of the Option Plan, the Employee Options
Committee has full power and authority to make all determinations necessary
or advisable with respect to the grant of Employee Options, including the
persons to whom Employee Options shall be granted, the number of shares
subject to each Employee Option, the option price, the timing of the grants,
whether the Employee Option will be an Incentive Option or a Nonstatutory
Option, the vesting period, if any, the term of the option and the other
terms and conditions of Employee Options. In making its determinations the
Employee Options Committee must consider senior management's recommendations
and may consider any other information it deems material. The Employee
Options Committee's determinations are not required to be uniform.
18
<PAGE>
The Employee Options Committee has full power and authority to
interpret the Option Plan and Employee Options. All decisions by the Employee
Options Committee and all decisions by the Director Options Committee are
final and conclusive. The Employee Options Committee and the Director Options
Committee (collectively, the "Committee") may adopt such procedures, rules
and regulations as it considers appropriate may hold meetings at such times
and places as it determines and may act on the affirmative vote of a majority
of its members or by written approval of all of its members.
No member of the Committee is liable to any person pursuant to the
Option Plan for any action or determination in good faith with respect to the
Option Plan or any Employee Options or Director Options (collectively,
"Options"). Each member of the Employee Options Committee is entitled to
indemnification by the Company with respect to all actions as a member of the
Employee Options Committee to the fullest extent permissible under the
Company's bylaws and the laws of Michigan.
Option Plan Participants
The persons eligible to receive Employee Options are the full-time
salaried officers and other full-time key employees of the Company or its
subsidiaries as determined by the Employee Options Committee. Subject to the
limitations of the Option Plan, Employee Options may be granted on more than
one occasion to the same employee. No member of the Employee Options
Committee is eligible to receive an Employee Option. Each current director of
the Company, and each person who becomes a director of the Company in the
future, except any full-time employee of the Company (each an "Eligible
Director") is eligible to receive Director Options. Approximately 56 key
employees and 10 directors are currently eligible to participate in the
Option Plan, all of whom have been granted options under the Option Plan.
Pursuant to the Amendment, subject to adjustments as described under
"Shares Subject to Grant", no person may be granted Options to purchase more
than 600,000 Common Shares in the aggregate in any fiscal year. Before the
Amendment, there was no such individual annual limit under the Option Plan.
In addition, grants are subject to the maximum number of shares remaining
with respect to which stock options may be granted at any time under the
Option Plan. There are also certain limitations on the maximum value of
Incentive Options which may become first exercisable by any person in any
year. Each grant under the Option Plan must be evidenced by a written
agreement containing the terms described in the Option Plan and, with respect
to Employee Options, such other terms and conditions not inconsistent with
the Option Plan as the Committee determines.
Shares Subject To Grant
The aggregate number of Common Shares which may be issued on exercise
of Options currently may not exceed 400,000 shares. The Amendment increases
that number to 900,000 shares. Any Common Shares subject to an Option that
expires or terminates unexercised in whole or in part may be the subject of a
new Option or Options.
In the event of a stock dividend or distribution, split-up or
combination, exchange of shares, recapitalization, merger, consolidation,
corporate acquisition or separation, reorganization or comparable corporate
transactions, appropriate adjustments (determined by the Board of Directors,
the Employee Options Committee or the Director Options Committee) will
automatically be made in the number and/or kind of shares of stock authorized
by the Option Plan deliverable on the exercise of Options, the option price,
or any combination of them, to maintain the proportionate interest of the
optionees and preserve the value of the options so that optionees shall have
the right thereafter to receive on the exercise of Options the kind and
amount of Common Shares or other securities or property which they would have
been entitled to receive if they had exercised the Options immediately before
the effective time of the transaction.
In the event of any dissolution or liquidation of the Company or any
change in control, the vesting period of all unvested and partially vested
Options will automatically be accelerated, and all such Options will be
exercisable in full immediately before the effective time of such
transaction. The Company must give to each holder of Employee Options written
notice of such transaction or proposed transaction at least thirty days
before the effective time of the transaction, or, if thirty days' notice is
not feasible, then such notice as is feasible under the circumstances so that
the holders of such Options will have the opportunity to exercise them before
the effective time of the transaction. For purposes of the Option Plan, a
change in control generally includes (i) the acquisition by any person or
group (excluding specified persons affiliated with the Company) of 40% or
more of the Company's voting securities, (ii) various business combinations
involving the Company if the Company's shareholders do not own more than 50%
of the surviving entity, (iii) specified sales of substantially all of the
Company's assets, and (iv) the continuing directors of the Company ceasing to
be a majority of the Company's directors.
19
Amendment or Termination of the Option Plan
The Board of Directors may at any time amend, suspend or discontinue
the Option Plan, or amend any Options at any time; except that, without
approval of the shareholders before or within twelve months after such
amendment, no amendment shall (i) materially increase the maximum number of
shares that may be issued on exercise of Options pursuant to the Option Plan,
except as described under "Shares Subject to Grant", (ii) materially modify
the class of employees eligible to receive Employee Options, (iii) reduce the
option price, except as described under "Shares Subject to Grant", (iv)
materially increase the benefits to any director or officer of the Company or
any subsidiary who is subject to the restrictions of Section 16(b) of the
Securities Exchange Act of 1934, (v) amend any of the provisions of the
Option Plan concerning Director Options or amend any of the Director Options,
or (vi) extend the term of the Option Plan. In addition, the Option Plan may
not be amended in any manner to cause Incentive Stock Options to fail to meet
the applicable requirements under Section 422 of the Code. Also, no amendment
or termination may adversely affect rights of any optionee under any Options
previously granted, without the consent of the optionee.
The provisions of the Option Plan relating to the eligibility of
directors and/or officers of the Company to receive Options, and the amount,
price and timing of grants of Options to directors and/or officers of the
Company, may not be amended more than once every six months, other than to
comport with changes in the Code or the Employee Retirement Income Security
Act.
Unless the Option Plan is sooner terminated by the Board of Directors,
Options may be granted under the Option Plan at any time on or before May 25,
2004, but not thereafter.
Stock Options
Grant of Stock Options
Both Incentive Options and Nonstatutory Options may be granted under
the Option Plan. Each Employee Option granted under the Option Plan must
identify the Options as Incentive Options or Nonstatutory Options, and must
state the number of Common Shares subject to the Option, the period, if any,
before the Option may be exercised, and the term within which the Option may
be exercised, which may not be more than 10 years from the date of grant.
Each Employee Option must also state the option price. Such price may not be
less than the fair market value of the Common Shares at the time the Option
is granted. In addition, any Incentive Option granted to an individual who,
at the time the Option is granted, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company must have
an option price that is at least 110% of the fair market value of the Common
Shares, and the Option may not be exercisable after five years from the date
of grant.
Each Incentive Option must also provide that no disposition of any
Common Shares issuable upon exercise of the Option may be made by the
optionee within two years from the date of the grant of the Option nor within
one year after the transfer of such shares to the optionee on exercise of the
Option. Each optionee must agree to inform the Company in writing before
making any sale, transfer, assignment, or other disposition of any of the
shares before the expiration of such holding periods.
Each person who becomes an Eligible Director while the Option Plan is
in effect receives, on the date such person becomes an Eligible Director, a
Director Option to purchase 1,000 Common Shares. In addition, immediately
after each Annual Meeting of Shareholders as long as the Option Plan is in
effect, each Eligible Director receives a Director Option to purchase 500
Common Shares; provided, that no person may receive the 500 Common Share
Director Option on the same day he or she receives a 1,000 Common Share
Director Option. Each Director Option must be clearly identified as a
Director Option and must state the number of Common Shares subject to the
Option. Each Director Option is exercisable at any time within five years
after the date of grant at an exercise price equal to the fair market value
of the Common Shares on the date of grant.
At the time of the exercise of any Option granted pursuant to the
Option Plan, the exercise notice must be accompanied by payment of the full
purchase price for the shares purchased. Options may be exercised in whole or
in part, but not for less than 50 shares and not for any fractional shares
upon any partial exercise, except on purchase of all remaining shares covered
by the Option.
The aggregate fair market value (determined as of the date the option
is granted) of the underlying stock with respect to which Incentive Options
are exercisable for the first time by such individual during any calendar
year (under all of such plans of the Company and its subsidiaries) cannot
exceed $100,000.
20
Continuation of Employment
If the employment of the holder of an Employee Option with the Company
or a subsidiary terminates, or if the holder of a Director Option ceases to
be a director of the Company, all unexercised Options held by such optionee
automatically expire at the same time as such termination, except (i) if the
holder of the Option retires on or after his or her 65th birthday, with
respect to Incentive Options and Nonstatutory Options, or pursuant to the
Company's retirement policy for directors, with respect to Director Options,
he or she may exercise any unexpired Option within three months, with respect
to Incentive Options, or one year, with respect to Nonstatutory Options and
Director Options, after the date of retirement, or until the expiration date
stated in the Option, whichever occurs first, (ii) if the holder of the
Option is permanently and totally disabled while employed by the Company or a
subsidiary (or while serving as a director of the Company with respect to
Director Options), he or she may exercise any unexpired Option within one
year after the date of such permanent and total disability, or until the
expiration date stated in the Option, whichever occurs first, (iii) if the
holder of the Option dies while employed by the Company or a subsidiary (or
while serving as a director of the Company with respect to Director Options),
his or her personal representative, executor or administrator, or person who
acquires the right to exercise the Option by bequest or inheritance or by
reason of the optionee's death, may exercise any unexpired Option within one
year after the date of death or until the expiration date stated in the
Option, whichever occurs first, and (iv) if any director is nominated by the
Board of Directors for re-election, but is not re-elected as a director of
the Company, due to any cause except such director's resignation or
declination to serve, the optionee may exercise any unexpired Director
Options held by such optionee within one year after the date of termination
of service as a director, or until the expiration date stated in the Director
Option, whichever occurs first.
The Employee Options Committee may, in its discretion, as a condition
to the grant of any Employee Option, require that any employee who is the
recipient of such Option to sign an agreement not to compete with the Company
or any subsidiary during employment or after termination of employment with
the Company or any subsidiary, which agreement may contain such terms and
conditions as the Employee Options Committee determines. No Employee Option
and no agreement pertaining thereto confers on the optionee any right with
respect to continuation of employment, nor affects any right of the Company
or any subsidiary to terminate employment.
Transferability of Options
Each Option must provide that it is not transferable by the optionee
otherwise than by will or the laws of descent and distribution and during the
lifetime of the optionee is exercisable only by the optionee.
Shareholder Rights
No holder of any Option has any rights as a shareholder of the Company
with respect to any shares covered by the Option until the issuance of the
shares upon exercise of the Option.
Non-exclusive Plan
Nothing in the Option Plan limits the authority of the Company to
grant options otherwise than under the Option Plan, or to assume options of
any other entity in connection with any merger, acquisition, or other
corporate transaction. Participation in the Option Plan does not affect an
employee's eligibility to participate in other employee benefit plans of the
Company.
Federal Income Tax Consequences
The rules governing the tax treatment of options and shares acquired
upon the exercise of options are quite technical. Therefore, the description
of federal income tax consequences set forth below is necessarily general in
nature and does not purport to be complete. Moreover, statutory provisions
are subject to change, as are their interpretations, and their application
may vary in individual circumstances. Finally, the tax consequences under
applicable state and local income tax laws may not be the same as under the
federal income tax laws.
Incentive Options
Incentive Options granted pursuant to the Option Plan are intended to
qualify as "Incentive Stock Options" within the meaning of Section 422 of the
Code. If the optionee makes no disposition of the shares acquired pursuant to
exercise of an Incentive Option within one year after the transfer of shares
to such optionee and within two years from grant of the option, such optionee
will realize no taxable income as a result of the grant or exercise of such
option, and any gain or loss that is subsequently realized may be treated as
long-term capital gain or loss, as the case may be. Under these
circumstances, the Company will not be entitled to a deduction for federal
income tax purposes with respect to either the issuance of such Incentive
Options or the transfer of shares upon their exercise.
21
<PAGE>
If shares acquired upon exercise of Incentive Options are disposed of
prior to the expiration of the above time periods, the optionee will
recognize ordinary income in the year in which the disqualifying disposition
occurs, the amount of which will generally be the lesser of (i) the excess of
the market value of the shares on the date of exercise over the option price,
or (ii) the gain recognized on such disposition. Such amount will ordinarily
be deductible by the Company for federal income tax purposes in the same
year, provided that the amount constitutes reasonable compensation and that
the Company satisfies certain federal income tax withholding requirements. In
addition, the excess, if any, of the amount realized on a disqualifying
disposition over the market value of the shares on the date of exercise will
be treated as capital gain.
Nonstatutory Options
An optionee who acquires shares by exercise of a Nonstatutory Option
generally realizes as taxable ordinary income, at the time of exercise, the
difference between the exercise price and the fair market value of the shares
on the date of exercise. Such amount will ordinarily be deductible by the
Company in the same year, provided that the amount constitutes reasonable
compensation and that the Company satisfies certain federal income tax
withholding requirements. Subsequent appreciation or decline in the value of
the shares will generally be treated as capital gain or loss on the sale or
other disposition of the shares.
Withholding Payments
Whenever the Company issues or transfers Common Shares under the
Option Plan, the Company has the right to require the recipient to remit to
the Company an amount sufficient to satisfy any federal, state or local tax
withholding requirements before the delivery of any certificates for the
shares.
Limitation on Compensation Deduction
Publicly-held corporations are precluded from deducting compensation
paid to certain of their executive officers in excess of $1 million per year.
The employees covered by the $1 million annual limitation on deductibility of
compensation include the chief executive officer and those employees whose
annual compensation is required to be reported to the Securities and Exchange
Commission because the employee is one of the company's four highest
compensated employees for the taxable year (other than the chief executive
officer). Compensation attributable to stock options generally is included in
an employee's compensation for purposes of the $1 million limitation on
deductibility of compensation.
However, there is an exception to the $1 million deduction limitation
for compensation (including compensation attributable to stock options) paid
pursuant to a qualified performance-based compensation plan. Compensation
attributable to a stock option is deemed to satisfy the qualified
performance-based compensation exception if (i) the grant is made by a
compensation committee comprised of outside directors, (ii) the plan under
which the options may be granted states the maximum number of shares with
respect to which options may be granted during a specified period to any
employee, (iii) under the terms of the option, the amount of compensation the
employee would receive is based solely on an increase in the value of the
shares after the date of the grant (e.g., the option is granted with an
exercise price at least equal to the fair market value as of the date of the
grant), and (iv) the individual eligible to receive grants, the maximum
number of shares for which grants may be made to any employee, the exercise
price of the options and other disclosures required by SEC proxy rules are
disclosed to, and subsequently approved by, shareholders.
If the amount of compensation a covered employee will receive under
the grant is not based solely on an increase in the value of the shares after
the date of the grant (e.g., an option is granted with an exercise price that
is less than the fair market value as of the date of the grant), none of the
compensation attributable to the grant is qualified performance-based
compensation unless the grant is made on account of the attainment of a
performance goal that has been previously established and approved by the
shareholders of the Company and otherwise qualifies under Section 162(m) of
the Code. The Company has not established any performance goals for grants
under the Option Plan that meet the requirements of the performance-based
compensation standard required by Section 162(m) of the Code.
In order to satisfy the shareholder approval requirement applicable to
qualified performance-based compensation plans, there must be a separate
shareholder vote in which a majority of the votes cast on the issue
(including abstentions to the extent abstentions are counted as voting under
applicable state law) are cast in favor of approval. The Option Plan is being
submitted to shareholders at the meeting, in part, to satisfy this
requirement. If the shareholder approval and the other requirements
applicable to qualified performance-based compensation plans are satisfied
(including grant by a committee of outside directors), the $1 million
compensation deduction limitation will not apply to stock options with an
exercise price equal to or greater than the fair market value of the
underlying shares on the date of grant. However, the grant of options by the
Board of Directors or by a committee not meeting the requirements of Section
162(m) and the grant of options with an exercise price less than the fair
market value of the underlying shares on the date of grant under the Option
Plan will not qualify for the performance-based compensation exception to the
$1 million compensation deduction limitation.
22
<PAGE>
An option to purchase 300,000 shares has been granted to Mr. Mills,
the Company's Chief Executive Officer, under the Option Plan. The option to
purchase 200,000 of these shares is subject to shareholder approval of the
Amendment. If such approval is not obtained, the Company must pay Mr. Mills,
in cash, the difference between the fair market value of those shares and
their exercise price on the date they would have vested (100,000 shares on
each of October 31, 1997, and 1998). Because Mr. Mills will receive
compensation even if shareholders do not approve the Amendment, these options
do not satisfy the performance-based compensation exception to the $1 million
compensation deduction limitation.
Accounting Treatment
Generally, under current accounting rules applicable to the Company,
neither the grant nor the exercise of an Incentive Option or a Nonstatutory
Option under the Option Plan requires any charge against earnings, if the
exercise price of the option is at least equal to the fair market value of
the shares on the date of grant. Footnote disclosure of the value of such
options, however, is required. If the exercise price is below the fair market
value of the shares on the date of grant, an earnings charge equal to the
difference will be required either at the date of grant or possibly over the
term of the option.
Option Grants Under the Option Plan
The Employee Options that will be granted under the Plan in the future
as a result of the Amendment are not currently determinable. Director Options
will be granted as described under "Stock Options - Grant of Stock Options"
above regardless of whether the Amendment is approved because sufficient
Common Shares remain available for grant under the Option Plan to make those
grants. The following table sets forth, as to P. Gerald Mills, Mark K.
Rosenfeld, Paul W. Gilbert, James B. Fowler, Theodore R. Kolman, Joseph H.
Fisher, Robert L. Moles, all current executive officers as a group, all
current directors who are not executive officers as a group, and all
employees, including all current officers who are not executive officers, as
a group, the options granted under the Option Plan during the fiscal year
ended January 25, 1997 and from January 26, 1997 through March 20, 1997.
23
<PAGE>
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
Jacobson Stock Option Plan of 1994
Number of Common Number of Common
Shares Subject to Options Shares Subject to Options
Granted Under the Plans Granted Under the Plans
In the Fiscal Year Ended From January 26, 1997
Name and Position January 25, 1997(1) To March 20, 1997(1)
----------------- ------------------------- -------------------------
<S> <C> <C>
P. Gerald Mills, Chairman of the Board, President
and Chief Executive Officer ..................................... 300,000 (2) 0
Mark K. Rosenfeld, Former Chairman of the Board
and Chief Executive Officer ..................................... 1,000 0
Paul W. Gilbert, Vice Chairman of the Board .......................... 40,000 0
James B. Fowler, Former President .................................... 26,000 0
Theodore R. Kolman, Senior Vice President -
General Merchandise Manager ..................................... 0 0
Robert L. Moles, Senior Vice President - Stores ...................... 0 0
Joseph H. Fisher, Senior Vice President -
General Merchandise Manager ..................................... 0 0
All current executive officers as a group
(8 persons)(3) .................................................. 355,000 0
All current directors who are not executive
officers as a group (10 persons)(4) ............................. 5,500 0
All employees including all current officers who
are not executive officers, as a group .......................... 0 6,000
<FN>
- ---------
(1) As described above, the Company made its 1996 annual key employee
option grants before the end of fiscal 1995, and expects to make its
1997 annual key employee option grants after the end of fiscal 1996,
although it did make its annual outside director option grants and
special key employee option grants in fiscal 1996. The dollar values of
such options cannot be determined because they depend on the market
value of the underlying shares on the date of exercise. No associate of
any director, nominee or executive officer has been granted Options
under the Option Plan. In addition, no person not named above has
received five percent or more of the options authorized under the
Option Plan, in the aggregate.
(2) An option to purchase 300,000 shares has been granted to Mr. Mills, the
Company's Chief Executive Officer, under the Option Plan. The option to
purchase 200,000 of these shares is subject to shareholder approval of
the Amendment. If such approval is not obtained, the Company must pay
Mr. Mills, in cash, the difference between the fair market value of
those shares and their exercise price on the date they would have
vested (100,000 shares on each of October 31, 1997 and 1998).
(3) Excludes Mark K. Rosenfeld and James B. Fowler.
(4) Includes Mark K. Rosenfeld.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
PROPOSED AMENDMENT, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY
OTHERWISE.
24
<PAGE>
APPOINTMENT OF AUDITORS
Arthur Andersen LLP, independent public accountants, have been
auditors for Jacobson Stores Inc. and its subsidiaries since 1960. One or
more representatives of that firm are expected to be present at the Annual
Meeting, with the opportunity to make a statement if they want to do so, and
will be available to respond to appropriate questions.
The Board of Directors has nominated Arthur Andersen LLP as the
auditors of Jacobson Stores Inc. and its subsidiary corporations for the
fiscal year ending January 31, 1998. The following resolution will be offered
at the meeting:
"RESOLVED, that Arthur Andersen LLP, independent public accountants, be
appointed auditors of Jacobson Stores Inc. and its subsidiary
corporations for the fiscal year ending January 31, 1998."
The Board of Directors recommends a vote FOR the resolution.
Approval of this proposal is given by a majority of the votes cast.
Broker non-votes and abstentions will not be deemed votes cast, but will be
counted for purposes of determining whether a quorum is present.
OTHER MATTERS
Management does not know of any other matter to be brought before the
meeting. If any other matters properly come before the meeting, the persons
named in the enclosed proxy will vote according to their judgment.
Votes in all matters will be counted by Norwest Shareowner Services
whose address is P.O. Box 64859, St. Paul, MN 55164-0859.
Cost of Solicitation
The cost of soliciting proxies will be paid by the Company. In
addition to solicitation by mail, proxies may be solicited personally or by
telephone by a few employees of the Company; and brokers, banks and others
known by the Company to hold Common Stock for other beneficial owners will be
requested to forward proxies and proxy soliciting material to the beneficial
owners and will be reimbursed for their expenses.
Proposals for 1998 Annual Meeting
Any shareholder's proposal intended to be presented at the 1998 Annual
Meeting must be in writing, must comply with the requirements set forth in
the Company's Restated Articles of Incorporation (summarized on page 8,
above) and with the requirements of the Securities and Exchange Commission,
should be addressed to Secretary, Jacobson Stores Inc., 3333 Sargent Road,
Jackson, Michigan 49201-8847, and must be received by the Company at that
address no later than December 9, 1997, in order to be considered for
inclusion in the Company's proxy material for that meeting.
By order of the Board of Directors,
RICHARD Z. ROSENFELD, Secretary
Jackson, Michigan, April 8, 1997.
25
<PAGE>
EXHIBIT A
SECOND AMENDMENT TO
JACOBSON STOCK OPTION PLAN OF 1994
WHEREAS, JACOBSON STORES INC., a Michigan corporation (the
"Company"), has previously adopted the Jacobson Stock Option Plan of 1994
(the "Plan");
WHEREAS, pursuant to Article V, Section 5 of the Plan, the
Company's Board of Directors may amend the Plan; or any Options; and
WHEREAS, the Company's Board of Directors now desires to amend the
Plan and the Options.
NOW, THEREFORE, IN CONSIDERATION of the premises and by resolution
of the Company's Board of Directors, the Plan and the Options are hereby
amended as follows:
1. Article II, Section 3 is amended to read as follows:
"Section 3. Aggregate Limit. The aggregate number of
shares of Common Stock which may be issued on exercise of Options
shall not exceed 900,000 shares, except in the event of any
adjustment pursuant to Article V, Section 3. Any shares of Common
Stock subject to an Option that expires or terminates unexercised
in whole or in part may be the subject to a new Option or Options.
No person may be granted Options to purchase more than 600,000
shares of Common Stock in the aggregate in any fiscal year of the
Company, subject to adjustment in the same manner provided in
Article V, Section 3."
26
<PAGE>
[ Form of Proxy -- Side 1 ]
PROXY COMMON STOCK
JACOBSON STORES INC.
1997 Annual Meeting of Shareholders -- May 22, 1997
The undersigned appoint(s) P. GERALD MILLS and MICHAEL T. MONAHAN as
proxies, each with power of substitution, and authorize(s) them to represent
and vote as indicated below all shares of Common Stock of Jacobson Stores Inc.
held of record by the undersigned on March 31, 1997, at the 1997 Annual
Meeting of Shareholders, to be held May 22, 1997, and at any adjournments
thereof.
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
listed below to vote for all nominees
(except as marked listed below
to the contrary
below)
Class I Directors, to serve until the 1999 Annual Meeting of
Shareholders:
P. Gerald Mills
Class II Directors, to serve until the 2000 Annual Meeting of
Shareholders:
Paul W. Gilbert, Patricia S. Longe, Philip H. Power and
Robert L. Rosenfeld
(To withhold authority to vote for any nominee(s), write that
person's name(s) in the following space:)
_______________________________
2. AMENDMENT OF JACOBSON STOCK OPTION PLAN OF 1994:
Proposal to amend the Jacobson Stock Option Plan of 1994, to
(i) increase the aggregate number of shares of Common Stock that
may be issued upon exercise of options granted under the plan from
400,000 to 900,000, and (ii) provide that no individual may be
granted options to purchase more than 600,000 shares of Common Stock
in the aggregate in any fiscal year of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
<PAGE>
[ Form of Proxy -- Side 2 ]
(Continued from the other side)
3. APPOINTMENT OF AUDITORS:
Proposal to appoint Arthur Andersen LLP as auditors for the
fiscal year ending January 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote on any
other matters that may properly come before the meeting or any
adjournments thereof.
This proxy is solicited on behalf of the Company's Board of Directors.
Properly executed proxies will be voted as specified. If no direction is given
or if no instructions to the contrary are indicated, proxies will be voted FOR
items 1, 2 and 3 and according to the judgment of the proxies on all other
matters.
The undersigned acknowledge(s) receipt of the Notice of the 1997 Annual
Meeting of Shareholders, the proxy statement for said meeting, and the Annual
Report of Jacobson Stores Inc. to its shareholders for the year ended January
25, 1997.
Please sign below exactly as name(s) appear(s) below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, or on behalf of a corporation or
partnership, please sign in the name of the shareholder, sign your name, and
give your title. Unsigned or improperly signed proxies will not be counted.
_______________________________
Signature
_______________________________
Signature
Dated: ________________, 1997
Please sign, date and return
this proxy promptly in the
enclosed envelope. This proxy
will not be used if you attend
the meeting in person and so
request.
