FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 2, 1998
Commission file number 0-6319
JACOBSON STORES INC.
(Exact name of registrant as specified in its charter)
Michigan 38-0686330
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
3333 Sargent Road, Jackson, Michigan 49201
(Address of principal executive offices, including zip code)
(517) 764-6400
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock ($1 Par Value):
5,779,646-2/3 Shares outstanding as of May 2, 1998
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For Quarter Ended May 2, 1998
INDEX
Page
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
. Consolidated Balance Sheets - May 2, 1998 and
January 31, 1998 1
. Consolidated Statements of Earnings - Thirteen Week Periods
Ended May 2, 1998 and April 26, 1997 2
. Consolidated Statements of Cash Flows - Thirteen Week
Periods Ended May 2, 1998 and April 26, 1997 3
. Notes to Consolidated Financial Statements 4
Review by Independent Public Accountants 7
Exhibit:
. Report of Independent Public Accountants 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
All items except those set forth above are inapplicable
and have been omitted.
SIGNATURES 14
INDEX OF EXHIBITS
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
May 2, January 31,
1998 1998
------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,373 $ 3,883
Receivables from customers, net 32,214 34,124
Merchandise inventories 90,357 86,075
Prepaid expenses and other assets 1,250 1,333
Deferred taxes 3,696 3,696
--------- ---------
Total current assets 133,890 129,111
--------- ---------
PROPERTY AND EQUIPMENT, NET 84,803 83,707
--------- ---------
OTHER ASSETS 20,536 20,461
--------- ---------
$ 239,229 $ 233,279
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,860 $ 3,972
Accounts payable 30,883 32,108
Accrued expenses 15,746 13,856
Accrued income taxes 1,334 360
--------- ---------
Total current liabilities 51,823 50,296
--------- ---------
LONG-TERM DEBT 106,226 104,138
--------- ---------
DEFERRED TAXES 5,236 5,262
--------- ---------
OTHER LIABILITIES 4,198 4,382
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock 5,967 5,966
Paid-in surplus 7,111 7,109
Retained earnings 59,067 56,525
Treasury stock (399) (399)
--------- ---------
71,746 69,201
--------- ---------
$ 239,229 $ 233,279
========= =========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
- 1 -
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per share data)
(unaudited)
Thirteen Weeks Ended
--------------------
May 2, April 26,
1998 1997
------ ---------
<S> <C> <C>
NET SALES $114,825 $111,908
-------- --------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses 72,762 72,314
Selling, general and administrative expenses 36,204 33,800
Interest expense, net 1,948 2,448
-------- --------
Total costs and expenses 110,914 108,562
-------- --------
EARNINGS BEFORE INCOME TAXES 3,911 3,346
PROVISION FOR INCOME TAXES 1,369 1,171
-------- --------
NET EARNINGS $ 2,542 $ 2,175
======== ========
EARNINGS PER COMMON SHARE:
Basic $ 0.44 $ 0.38
Diluted 0.42 0.38
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
- 2 -
<PAGE>
[CAPTION]
<TABLE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Thirteen Weeks Ended
--------------------
May 2, April 26,
1998 1997
------ ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,542 $ 2,175
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 2,120 2,344
Deferred taxes (26) 1,201
Other liabilities (184) 215
Change in:
Receivables from customers, net 1,910 5,925
Merchandise inventories (4,282) (1,487)
Prepaid expenses and other assets 83 644
Accounts payable and accrued expenses 665 (8,883)
Current income taxes 974 --
-------- --------
Net cash provided by operating activities 3,802 2,134
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (3,216) (119)
Other non-current assets (75) (257)
-------- --------
Net cash used in investing activities (3,291) (376)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt 2,596 49,500
Reduction of long-term debt (620) (52,018)
Proceeds of exercise of stock options 3 --
-------- --------
Net cash provided by (used in)
financing activities 1,979 (2,518)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,490 (760)
Cash and cash equivalents, beginning of period 3,883 4,871
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,373 $ 4,111
======== ========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended May 2, 1998
The condensed financial statements included herein have been prepared
by the Company without audit and reflect all adjustments which are,
in the opinion of management, necessary to achieve a fair statement
of results for the interim periods. Except as described under the
caption "Store Closing Costs", all adjustments are of a normal and
recurring nature.
Because of the nature of the specialty department store business, the
results for the thirteen week periods ended May 2, 1998 and April 26,
1997 (which do not include the Christmas holiday season) are not
indicative of the results for the year as a whole.
Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles has been condensed or amended, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the
financial statements and notes to consolidated financial statements
included in the Company's latest annual report on Form 10-K.
(1) STORE CLOSING COSTS
In March 1997, the Company closed underperforming stores in Jackson,
Kalamazoo and Dearborn, Michigan. The Company incurred a $4,200,000
pre-tax charge in fiscal 1996 to effect the closings and to state
property and equipment at estimated fair value. For the thirteen
weeks ended May 2, 1998, store closing reserve activity was as
follows:
<TABLE>
<CAPTION>
(in thousands)
--------------
<S> <C>
Reserve at January 31, 1998 $ 2,623
Payments against reserve 147
Charges (credits) against reserve --
Reserve at May 2, 1998 $ 2,476
========
</TABLE>
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended May 2, 1998
At May 2, 1998, $2,210,000 of the store closing reserve is
attributable to property and equipment and is reflected as a
reduction of property and equipment on the consolidated balance
sheets. The balance of the store closing reserve is included in
accrued expenses and represents estimated expense to hold closed
facilities pending disposition.
(2) EARNINGS PER SHARE
Basic earnings per share are computed by dividing reported earnings
available to common shareholders by weighted average common shares
outstanding. Diluted earnings per share give effect to potential
common shares represented by stock options and the Company's 6-3/4%
Convertible Subordinated Debentures due 2011, except if
anti-dilutive. Earnings per common share are calculated as follows:
<TABLE>
<CAPTION>
(dollars and shares in thousands) 1998 1997
------------------------------------------- ------- -------
<S> <C> <C>
Earnings available to common shareholders $ 2,542 $ 2,175
======= =======
Weighted average common shares outstanding 5,779 5,779
Dilutive stock options 204 -
------- -------
Shares used to calculate diluted
earnings per common share 5,983 5,779
======= =======
Earnings per common share:
Basic $ .44 $ .38
Diluted .42 .38
===== =====
</TABLE>
(3) CUSTOMER CREDIT AND RECEIVABLES
Receivables from customers were as follows:
<TABLE>
<CAPTION>
May 2, January 31,
(in thousands) 1998 1998
----------------------------------- -------- -----------
<S> <C> <C>
Receivables from customers $ 32,961 $ 34,761
Less reserve for doubtful accounts 747 637
-------- --------
$ 32,214 $ 34,124
======== ========
</TABLE>
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
For Quarter Ended May 2, 1998
(4) MERCHANDISE INVENTORIES
Merchandise inventories were as follows:
<TABLE>
<CAPTION>
May 2, January 31,
(in thousands) 1998 1998
----------------------------------- ------- -----------
<S> <C> <C>
Inventories at first-in, first out
(FIFO) cost $ 109,319 $ 104,708
Less LIFO reserves 18,962 18,633
--------- ---------
$ 90,357 $ 86,075
========= =========
</TABLE>
(5) PROPERTY AND EQUIPMENT
Property and equipment are set forth below:
<TABLE>
<CAPTION>
May 2, January 31,
(in thousands) 1998 1998
---------------------------- --------- ---------
<S> <C> <C>
Property and equipment $ 175,024 $ 171,808
Less accumulated depreciation
and amortization 90,221 88,101
--------- ---------
$ 84,803 $ 83,707
========= =========
</TABLE>
(6) STOCK OPTIONS
Subsequent to the close of the quarter covered by this report, at
their Annual Meeting on May 28, 1998, the Company's shareholders
approved an amendment to the Jacobson Stock Option Plan of 1994 which
increased the available shares under the plan to 1,400,000 shares.
(7) SUPPLEMENTARY CASH FLOW INFORMATION
The Company considers all short-term investments with a maturity at
date of purchase of three months or less to be cash equivalents.
Interest paid (net of interest capitalized) totalled $1,483,000 and
$2,020,000 in the thirteen week periods ended May 2, 1998 and April
26, 1997, respectively. The Company paid income taxes totalling
$423,000 in the thirteen week period ended May 2, 1998, and received
income tax refunds of $30,000 in the thirteen week period ended April
26, 1997.
- 6 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended May 2, 1998
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have performed a
limited review of the condensed consolidated financial statements for
the thirteen week period ended May 2, 1998. Since they did not
perform an audit, they express no opinion on the financial statements
referred to above.
- 7 -
<PAGE>
EXHIBIT
ARTHUR ANDERSEN LLP
Report of Independent Public Accountants
To Jacobson Stores Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
JACOBSON STORES INC. (a Michigan corporation) and subsidiaries as of May 2,
1998 and the related condensed consolidated statements of earnings and cash
flows for the thirteen week period then ended. These financial statements are
the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Jacobson Stores Inc. and
subsidiaries as of January 31, 1998, and the related consolidated statements
of earnings, shareholders' equity and cash flows for the year then ended (not
presented herein), and, in our report dated March 6, 1998, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of January 31, 1998, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
/s/ ARTHUR ANDERSEN LLP
Detroit, Michigan
May 15, 1998
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended May 2, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The registrant, Jacobson Stores Inc., a Michigan corporation and successor to
a business founded in 1868, offers distinctive apparel and accessories for
women, men and children, as well as decorative accents for the home. The
Company operates 24 specialty stores in Michigan, Indiana, Kansas, Kentucky,
Ohio and Florida, catering to discerning customers with preferences for
quality merchandise and personalized service provided by knowledgeable sales
associates.
The Company owns a substantial portion of the real property used in its
business, primarily through its consolidated, wholly-owned real estate
subsidiary, Jacobson Stores Realty Company ("Jacobson Realty"). The Company
also has a consolidated wholly-owned finance subsidiary, Jacobson Credit
Corp. ("Jacobson Credit"). As used in this report, the terms "registrant",
"Company" and "Jacobson's" refer to Jacobson Stores Inc. and its subsidiaries
unless the context indicates otherwise.
Jacobson's operates in two regions and maintains separate staffs of buyers
for each region in order to better respond to customers' lifestyles and
merchandise preferences. The principal merchandising and distribution
functions are performed through regional facilities. Functions common to all
stores, such as management coordination, sales promotion, data processing and
accounting, are centralized at the corporate headquarters in Jackson,
Michigan.
a. OPERATING RESULTS: THIRTEEN WEEKS ENDED MAY 2, 1998 COMPARED TO
THIRTEEN WEEKS ENDED APRIL 26, 1997
Sales for the quarter ended May 2, 1998, totalled $114,825,000, an
increase of 2.6% from 1997. Sales from comparable stores (excluding four
stores closed in 1997) increased 9.3%. By region, Midwest sales
increased 0.9% (12.5% increase in comparable stores) and Florida sales
increased 5.1%. In 1998, the Company expects an increase in the sales
volume of its current stores sufficient to offset the sales of the four
stores closed during 1997 and the impact of the extra week in fiscal
1997.
The Company's gross profit percentage increased to 36.6% for the
thirteen weeks this year from 35.4% in 1997, reflecting principally
lower markdowns and lower estimated shrink reserves.
Selling, general and administrative expenses, expressed as a percentage
of sales, increased to 31.5% in the quarter from 30.2% one year ago. The
increase is due primarily to higher sales promotion expense.
- 9 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended May 2, 1998
Interest expense, expressed as a percentage of sales, decreased to 1.7%
for the quarter from 2.2% one year ago, primarily due to lower
borrowings under the revolving credit facility and other long-term debt.
1998 net earnings for the thirteen weeks totalled $2,542,000, or 44
cents per common share, compared to $2,175,000, or 38 cents per common
share last year. As a percent of sales, net earnings were 2.2% in 1998
compared to 1.9% in 1997.
Store closing promotions conducted at the three stores closed in March
1997 increased net earnings for the quarter last year by $788,000, or 14
cents per share.
b. LIQUIDITY AND CAPITAL RESOURCES
At May 2, 1998, the Company's current ratio was 2.58 to 1 and working
capital totalled $82,067,000, including $6,373,000 of cash and cash
equivalents. At January 31, 1998, the current ratio was 2.57 to 1 and
working capital totalled $78,815,000, including $3,883,000 of cash and
cash equivalents.
The Company utilizes cash flows from operations and revolving credit
line borrowings to fund its seasonal working capital needs. To support
its present and planned working capital requirements, the Company has a
$100,000,000 revolving credit facility under a Revolving Credit
Agreement with a commercial lender. The revolving credit facility
currently provides for borrowings of up to $80,000,000, subject to a
borrowing base limitation and lender reserves. The Company may, at its
option, increase the maximum available borrowings under the revolving
credit facility to up to $100,000,000 in the aggregate, subject to the
borrowing base limitation and lender reserves. As of May 2, 1998, the
Company had borrowed $37,609,000 under this facility and had $42,391,000
of borrowing availability. For the quarter ended May 2, 1998, the daily
weighted average interest rate on borrowings under the Revolving Credit
Agreement was 8.2%.
- 10 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended May 2, 1998
c. CASH FLOWS
Cash and cash equivalents increased $2,490,000 in the thirteen weeks
ended May 2, 1998, compared to a decrease of $760,000 in the thirteen
weeks ended April 26, 1997. Cash flows are impacted by operating,
investing and financing activities. In the thirteen weeks this year,
cash provided by operating activities totaled $3,802,000, compared to
$2,134,000 in 1997. Net operating cash inflows in the 1998 period
resulted primarily from earnings before non-cash charges and collection
of receivables from customers, partially offset by seasonal inventory
increases. In the thirteen weeks last year, net operating cash inflows
were attributable primarily to earnings before non-cash charges and to
receivable collections and inventory sell-off in stores closed during the
quarter, partially offset by paydown of store closing reserves and other
payables and accruals.
Investing activities used cash of $3,291,000 in the thirteen weeks this
year compared to $376,000 used in 1997. Capital expenditures totalled
$3,216,000 in the first thirteen weeks of 1998 compared to $119,000 in
the comparable 1997 period.
Financing activities provided cash of $1,979,000 in the thirteen weeks
this year compared to $2,518,000 used last year. In the thirteen weeks
in 1998, the Company borrowed $2,596,000 under its revolving credit
facility and used $620,000 to service current maturities of long-term
debt. In 1997, the Company borrowed $49,500,000 under its revolving
credit facility to repay the then outstanding principal balance under
its former Credit Agreement and used $2,518,000 to service current
maturities of long-term debt.
The Company believes its cash flows from operations, along with its
borrowing capacity and access to financial markets are adequate to fund
its operations and debt maturities.
d. CORPORATE DEVELOPMENT
The Company has no commitments for any new store locations at the
present time. The Company reviews the performance of its less profitable
existing stores from time to time to determine whether it would be in
the Company's best interest to close any of these stores. Store closings
could have a significant impact on the Company's sales, expenses and
capital requirements and would likely entail additional significant
one-time charges to effect the closing and to recognize any impairment
of assets resulting from the closing decision.
- 11 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART I: FINANCIAL INFORMATION
For Quarter Ended May 2, 1998
In 1997, the Company sold its Store for the Home in Grosse Pointe,
Michigan. The Company continues to operate the store under a short-term
lease from the purchaser until July 1998, when it will consolidate
operations in its existing apparel store.
The Year 2000 issue results from early computer programming that used
two digits rather than four to define the applicable year. If not
corrected, this defect could, as we move to the Year 2000, result in
systems failures or miscalculations leading to disruptions in a
company's operation. The Company has taken actions to address this
potential problem. In 1997, the Company established a task force which
identified areas of concern and assigned a risk factor and priority to
each area. Specific action plans have been developed to fix or replace
all non-compliant software and hardware that could pose a significant
risk to the Company's operations. The total amount estimated to be spent
to remediate the Company's Year 2000 issues is not expected to be
material to its business, operations, or financial condition.
Each of the above statements regarding future revenues, expenses or
business plans (including statements regarding the sufficiency of the
Company's capital resources to fund future operations) may be a "forward
looking statement" within the meaning of the Securities Exchange Act of
1934. Such statements are subject to important factors and uncertainties
that could cause actual results to differ materially from those in the
forward-looking statement, including the continued support of the
Company's trade creditors and factors, the risks inherent in the level
of the Company's long-term debt compared to its equity, the Company's
ability to reduce its operating expenses, general trends in retail
clothing apparel purchasing, especially during the Christmas season, and
the factors set forth in this Management's Discussion and Analysis of
Financial Condition and Results of Operations.
- 12 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
PART II: OTHER INFORMATION
For Quarter Ended May 2, 1998
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(a) Employment Agreement, dated as of June 11, 1998, between
Jacobson Stores Inc. and P. Gerald Mills
10(b) Employment Agreement, dated as of June 11, 1998, between
Jacobson Stores Inc. and Paul W. Gilbert
10(c) Employment Agreement, dated as of June 11, 1998, between
Jacobson Stores Inc. and James A. Rodefeld
15 Letter from Independent Public Accountants
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during its
fiscal quarter ended May 2, 1998.
All exhibits except as set forth above have been omitted as not applicable or
not required.
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<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
For Quarter Ended May 2, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACOBSON STORES INC.
--------------------
(Registrant)
Date: June 15, 1998 BY: /c/ P. Gerald Mills
----------------------- -----------------------
P. GERALD MILLS
Chairman of the Board, President and
Chief Executive Officer
Date: June 15, 1998 BY: /c/ Paul W. Gilbert
----------------------- -----------------------
PAUL W. GILBERT
Vice Chairman of the Board
(Principal Financial Officer)
- 14 -
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
INDEX OF EXHIBITS
10(a) Employment Agreement, dated as of June 11, 1998, between
Jacobson Stores Inc. and P. Gerald Mills
10(b) Employment Agreement, dated as of June 11, 1998, between
Jacobson Stores Inc. and Paul W. Gilbert
10(c) Employment Agreement, dated as of June 11, 1998, between
Jacobson Stores Inc. and James A. Rodefeld
15 Letter from Independent Public Accountants
27 Financial Data Schedule
All exhibits except as set forth above have been omitted as not applicable
or not required.
Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of June 11, 1998, between
JACOBSON STORES INC., a Michigan corporation, of Jackson, Michigan (the
"Company"), and P. GERALD MILLS, of Chelsea, Michigan ("Mills").
THE PARTIES HEREBY AGREE that the Employment Agreement between them
dated as of April 15, 1998 is restated, effective May 28, 1998, as follows:
1. Employment and Term. The Company employs Mills as Chairman of the
Board and Chief Executive Officer, and Mills agrees to serve in that capacity
and/or in such other capacity or capacities as the Board of Directors of the
Company deems advisable, for a term commencing October 31, 1996 and
continuing through April 15, 2000, unless terminated sooner pursuant to the
provisions of paragraph 5, for the compensation and on the terms set forth in
this Agreement.
2. Compensation.
(a) Salary. Subject to the provisions of paragraph 5, Mills's
salary shall be Three Hundred Thousand Dollars ($300,000.00) per year.
(b) Bonus. Mills shall participate in the 1996 Jacobson Stores
Inc. Management Incentive Plan and, while employed by the Company, in any
successor management incentive plan established from time to time by the
Company.
(c) Vacation and Other Benefits. While he is employed by the
Company, Mills shall be entitled to four weeks of vacation each year
beginning in fiscal 1997. Mills shall also participate in such plans and
additional benefits as may generally be available from time to time to other
executive officers of the Company and for which Mills is eligible.
(d) Stock Option. Effective October 31, 1996, Mills was granted
an option to purchase 300,000 of the Company's Common Shares, par value $1.00
a share, at $8.375 a share (the "Option"). Mills's right to purchase 200,000
Common Shares subject to the Option was subject to shareholder approval of an
amendment to the Jacobson Stock Option Plan of 1994 (the "Plan") increasing
the number of shares subject to the Plan, which was obtained at the 1997
Annual Meeting of Shareholders.
3. Deferred Compensation. Mills may determine that payment of any
part of Mills's salary for any year shall be deferred pursuant to, and on the
terms and conditions set forth in, the Jacobson Stores Inc. Deferred
Compensation Plan, as amended from time to time. If any part of Mills's
salary for a year is deferred, one-twelfth of such amount shall be deferred
each month during the year. Interest shall accrue on deferred compensation
from the last day of the month for which
<PAGE>
the compensation is deferred. Neither Mills, his estate, his wife, nor any
beneficiary shall have any power to assign or encumber the right to receive
deferred compensation, and any attempted assignment or encumbrance thereof
shall be null and void.
4. Duties. Mills agrees, as long as his employment by the Company
continues, to devote his best efforts to furthering the interests of the
Company; to comply with all regulations and policies of the Company; and to
perform the duties requested by the Board of Directors of the Company.
5. Termination. Mills's employment under this Agreement shall
terminate on the earliest to occur of the following: (i) immediately upon
Mills's death, (ii) at the Company's option, immediately when notice to Mills
of such termination is given after Mills's "Disability" (as defined below),
(iii) at the Company's option, immediately when notice to Mills of such
termination is given on or after the occurrence of "Cause" (as defined below)
for termination of his employment under this Agreement, (iv) not less than 30
days after notice of such termination is given to Mills by the Company, (v)
not less than six months after notice of such termination is given to the
Company by Mills (unless the Company elects to have such termination occur
earlier), and (vi) April 15, 2000. "Disability" means (1) if Mills is covered
by a Company-provided disability insurance policy, the definition of
disability contained in, and entitling Mills to benefits under, that policy,
or (2) if Mills is not covered by such a policy, Mills's inability, whether
physical or mental, to perform the normal duties of Mills's position for six
consecutive months. "Cause" means (1) Mills's continued failure either to (A)
devote substantially full time to Mills's employment duties (except because
of Mills's illness or Disability) or (B) make a good faith effort to perform
Mills's employment duties; (2) any other willful act or omission which Mills
knew, or had reason to know, would materially injure the Entity; (3) any
breach by Mills of the provisions of paragraph 7, or (4) Mills's conviction
of a felony involving dishonesty or fraud. Notice will be deemed to be given
on the earliest of (i) when delivered, or (ii) three business days after
mailed by certified or registered mail, postage prepaid, return receipt
requested, or (iii) one business day after sent by recognized overnight
courier, if to Mills, to Mills's address on the Company's corporate records,
and if to the Company, to the address of its principal executive offices. The
following events during the term of this Agreement shall have the following
respective effects on the obligations of the Company pursuant to this
Agreement:
(a) Death. If employment is terminated due to Mills's death, the
Company shall have no obligation to pay any salary or other amounts or
benefits under this Agreement or otherwise for any period after the date of
termination of employment, but benefits may continue to the extent provided
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. Mills shall be entitled to
his accrued salary through the date of termination and the pro rata bonus, if
any, that would have been payable to Mills under any bonus plan in effect at
the time of termination of Mills's employment if Mills had been employed by
the Company for the entire year in which Mills's employment terminates, but
based on the actual number of days Mills was employed by the Company in that
year and the actual salary paid to Mills by the Company with respect to the
period through the date of termination.
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(b) Disability. If employment is terminated due to Mills's
Disability, the Company shall have no obligation to pay any salary or other
amounts or benefits under this Agreement or otherwise for any period after
the date of termination of employment, but benefits may continue to the
extent provided 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.
Mills shall be entitled to his accrued salary through the date of termination
and the pro rata bonus, if any, that would have been payable to Mills under
any bonus plan in effect at the time of termination of Mills's employment if
Mills had been employed by the Company for the entire year in which Mills's
employment terminates, but based on the actual number of days Mills was
employed by the Company in that year and the actual salary paid to Mills by
the Company with respect to the period through the date of termination.
(c) Termination for Cause. If employment is terminated for Cause,
or if Mills resigns before the expiration of the term of this Agreement, the
Company shall have no obligation to pay any salary or any other amount in
lieu thereof for any period after the date of termination of employment.
Mills shall be entitled to his accrued salary through the date of termination
and the pro rata bonus, if any, that would have been payable to Mills under
any bonus plan in effect at the time of termination of Mills's employment if
Mills had been employed by the Company for the entire year in which Mills's
employment terminates, but based on the actual number of days Mills was
employed by the Company in that year and the actual salary paid to Mills by
the Company with respect to the period through the date of termination.
(d) Termination Without Cause. Except as otherwise provided in
paragraph 5.(e), if the Company terminates Mills's employment without Cause
before the expiration of the term of this Agreement (other than as a result
of Mills's death or Disability), the Company shall (i) continue to pay an
amount equal to Mills's salary, at the annual rate in effect immediately
prior to such termination of employment, and shall continue to provide
medical and hospitalization insurance with the same coverage (including any
spouse and dependent coverage) and in the same amounts as the insurance
maintained by the Company immediately prior to such termination of
employment, for the balance of the term of this Agreement, without regard to
any termination as a result of Mills's death, Disability, termination by the
Company for Cause, retirement, resignation or termination by the Company
without Cause, or one year, whichever is greater, and (ii) pay the pro rata
bonus, if any, that would have been payable to Mills under any bonus plan in
effect at the time of termination of Mills's employment if Mills had been
employed by the Company for the entire year in which Mills's employment
terminates, but based on the actual number of days Mills was employed by the
Company in that year and the actual salary paid to Mills by the Company with
respect to the period through the date of termination. In such event, Mills
shall use reasonable efforts to find new employment. Commencing one year
after termination, the Company's continuing payment obligation, if any, shall
be reduced by the amount of any other salary, consulting fees, or other
compensation or remuneration for services, however designated, received by
Mills with respect to any remaining part of the period covered by the
Company's obligation, and its continuing medical and hospitalization
insurance obligation shall be reduced by the amount of any other medical and
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hospitalization insurance provided to Mills with respect to any remaining
part of such period. The Option shall be exercisable to purchase all of the
Common Shares subject to the Option immediately, to the extent not already
purchased, 30 days before such termination of Mills's employment by the
Company.
(e) Change in Control.
(i) Right to Receive Benefits. Mills shall receive the
severance benefits described in paragraph 5.(e)(ii) if (1) a
"Change in Control" (as defined in paragraph 5.(e)(iii)) occurs
during the "Period" (as defined in paragraph 5.(e)(iv)), and (2)
either (A) at any time during the period beginning 90 days
before, and ending two years after, the Change in Control, Mills
terminates his employment with the "Entity" (as defined in
paragraph 5.(e)(vii)) for "Good Reason" (as defined in paragraph
5.(e)(viii)) or the "Entity" terminates Mills's employment
without Cause, or (B) at any time during the 3rd month after the
Change in Control, Mills terminates his employment with the
"Entity" for any reason or for no reason.
(ii) Severance Benefits. If Mills is entitled to severance
benefits under paragraph 5.(e)(i), he will receive the following:
(1) an amount equal to the annual salary Mills was
receiving immediately before the Change in Control for the
period (the "Time") from the date of such termination through
two years after the date of such termination; and
(2) a pro rata bonus for the year of such termination
equal to (1) the bonus paid or payable to Mills with respect
to the last full fiscal year of the Company before the Change
in Control (the "Bonus"), multiplied by (2) a fraction, the
numerator of which shall be the number of days in the
Company's fiscal year in which such termination occurs
through the date of such termination, and the denominator of
which shall be the total number of days in the Company's
fiscal year in which such termination occurs; and
(3) an amount equal to the Time (in years and fractions
of a partial year) multiplied by the amount of the Bonus; and
(4) a continuation during the Time of (1) the medical,
dental, life, disability, hospitalization, optical and
prescription drug benefits Mills and Mills's dependents were
receiving from the Company at the time of the Change in
Control (provided that if it is no longer practical for the
Company to furnish such benefits, Mills will be reimbursed by
the Company during the Time for the cost to Mills of
obtaining such benefits), and (2) any automobile allowance or
benefits (including automobile insurance and maintenance
benefits), and continued use of any
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automobile, provided to Mills by the Company at the time of
the Change in Control; and
(5) If the total amount of all payments of cash or
property in the nature of compensation contingent on a change
in the ownership or effective control of the Company or in
the ownership of a substantial portion of the Company's
assets, including, without limitation, the benefits provided
pursuant to this paragraph 5.(e)(ii) and payments relating to
any stock options or restricted stock that vest as a result
of a Change in Control, shall exceed the maximum amount that
may be paid to Mills and not be deemed a "parachute payment"
resulting in an excise tax to Mills and a loss of
compensation deduction to the Company, all within the meaning
of Section 280G of the Internal Revenue Code of 1986, as
amended, or any successor provision, the Company will pay to
Mills (i) the amount of any excise tax imposed on Mills under
Section 4999 of the Internal Revenue Code of 1986, as
amended, or any successor provision, as a result of any
payments by the Company to Mills pursuant to this paragraph
5.(e)(ii) and (ii) any income tax imposed on Mills as a
result of the payments under this paragraph 5.(e)(ii)(5)).
The benefits provided in paragraphs 5.(e)(ii)(1),
5.(e)(ii)(2), 5.(e)(ii)(3) and 5.(e)(ii)(5) shall be paid to
Mills in an undiscounted lump sum within 10 business days
after the date of such termination. The Company may withhold
from such payments all federal, state, city and other taxes
to the extent such taxes are required to be withheld by
applicable law.
(iii) "Change in Control". For purposes of this Agreement, a
"Change in Control" occurs on the first day any one or more of
the following occurs:
(1) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), together with all affiliates
and associates of such person (as such terms are defined in
Rule 12b-2 under the Exchange Act) but excluding all
"Excluded Persons" (as defined in paragraph 5.(e)(v)),
becomes the direct or indirect beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of securities
of the Company representing (A) 40% or more of the combined
voting power of all of the Company's outstanding securities
entitled to vote generally in the election of the Company's
directors, or (B) 40% or more of the combined shares of the
Company's capital stock then outstanding, all except in
connection with any merger, consolidation, reorganization or
share exchange involving the Company;
(2) the consummation of any merger, consolidation,
reorganization or share exchange involving the Company,
unless the holders of the Company's capital stock outstanding
immediately before such transaction own more than 50% of the
combined outstanding shares of capital stock and have more
than 50% of the combined voting power in the surviving entity
after such transaction and they own such securities in
substantially the same proportions (relative to each other)
as they owned the Company's capital stock immediately before
such transaction;
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(3) the consummation of any sale or other disposition
(in one transaction or a series of related transactions) of
all, or substantially all, of the Company's assets to a
person whose acquisition of 40% or more of the combined
shares of the Company's capital stock then outstanding would
have caused a Change in Control under paragraph
5.(e)(iii)(1)); or
(4) the "Continuing Directors" (as defined in paragraph
5.(e)(vi)) cease to be a majority of the Company's directors.
A determination by the Company's Continuing Directors (by
resolution of at least a majority of the Continuing Directors) as
to whether a Change in Control has occurred for purposes of this
Agreement, the date on which it has occurred or both shall be
conclusive for purposes of this Agreement.
(iv) "Period". The period (the "Period") will begin on the
date of this Agreement and end on the first to occur of (a) the
end of the term of this Agreement, without regard to any
termination as a result of Mills's death, Disability, termination
by the Company for Cause, retirement, resignation or termination
by the Company without Cause, (b) Mills's death, (c) Mills's
Disability, and (d) 90 days after the termination of Mills's
employment (voluntarily or involuntarily and with or without
Cause or Good Reason) if (1) such termination occurs before a
Change in Control, and (2) a Change in Control does not occur
during such 90 day period. Notwithstanding the foregoing, (1) if
Mills becomes entitled to severance benefits under paragraph
5.(e)(i), the provisions of paragraph 5.(e)(ii) of this Agreement
will continue until Mills's eligibility to receive severance
benefits under this Agreement ceases and such provisions and the
other provisions of this Agreement not limited by the Period,
including, without limitation, paragraphs 5.(g), 7, 10 and 11
will survive the end of the Period.
(v) "Excluded Persons". For purposes of this Agreement, the
"Excluded Persons" are (i) Mills, (ii) any "group" (as that term
is used in Section 13(d) of the Exchange Act and the rules
thereunder) that includes Mills or in which Mills is, or has
agreed to become, an equity participant, (iii) any entity in
which Mills is, or has agreed to become, an equity participant,
(iv) the Company, (v) any subsidiary of the Company, (vi) any
employee benefit plan of the Company or any subsidiary of the
Company or the related trust, (vii) any entity to the extent it
is holding capital stock of the Company for or pursuant to the
terms of any employee benefit plan of the Company or any
subsidiary of the Company, and (viii) any director or officer of
the Company as of the date of this Agreement. For purposes of
this Agreement, Mills shall not be deemed an "equity participant"
in any group or entity (i) in which Mills owns for investment
purposes only no more than 5% of the stock of a publicly-traded
entity whose stock is either listed on a national stock exchange
or quoted in The Nasdaq National Market, if Mills is not
otherwise affiliated with such group or entity,
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or (ii) if Mills's participation is fully-disclosed to, and
approved by, the Company's Board of Directors and the Continuing
Directors before the Change in Control occurs.
(vi) "Continuing Directors". For purposes of this Agreement,
the "Continuing Directors" are the directors of the Company as of
the date of this Agreement, and any person who subsequently
becomes a director if such person is appointed to be a director
by a majority of the Continuing Directors or if such person's
initial nomination for election or initial election as a director
is recommended or approved by a majority of the Continuing
Directors.
(vii) "Entity". For purposes of this Agreement, the "Entity"
shall mean both (1) the Company and, (2) in connection with a
Change in Control defined in paragraph 5.(e)(iii)(2) or paragraph
5.(e)(iii)(3), the survivor of the merger, consolidation,
reorganization or share exchange involving the Company and the
buyer of all, or substantially all, of the Company's assets, if
such additional entity described in this clause (2) (if other
than the Company) has offered to employ Mills on such terms that
would not constitute "Good Reason" for termination of Mills's
employment if imposed by the Company. Therefore, for purposes of
this paragraph 5.(e), Mills shall not be deemed to have
terminated Mills's employment with the Entity for "Good Reason"
and the "Entity" shall not be deemed to have terminated Mills's
employment without Cause unless such actions are taken by all
entities included within the definition of "Entity". In addition,
for purposes of this paragraph 5.(e), Mills shall not be deemed
to have terminated Mills's employment with the Entity for "Good
Reason" and the "Entity" shall not be deemed to have terminated
Mills's employment without Cause if (1) the survivor of the
merger, consolidation, reorganization or share exchange involving
the Company and the buyer of all, or substantially all, of the
Company's assets has offered to employ Mills on such terms that
would not constitute "Good Reason" for termination of Mills's
employment if imposed by the Company, (2) Mills refuses such
employment, and (3) the Company terminates Mills's employment for
any reason or for no reason.
(viii) "Good Reason". Termination of Mills's employment for
"Good Reason" means Mills's voluntary termination of employment
with the Entity before or after a Change in Control as a result
of (1) any change by the Entity (without Mills's consent) in
Mills's title from Mills's title immediately before such Change
in Control, (2) any decrease by the Entity (without Mills's
consent) in Mills's compensation or incentives from Mills's
compensation and incentives immediately before such Change in
Control, except with respect to benefits covered by clause (3);
provided that Mills's bonus shall not be deemed to have decreased
if Mills has a substantially similar opportunity to earn a bonus
as Mills did in the last full fiscal year before the Change in
Control, (3) any decrease by the Entity (without Mills's consent)
in Mills's benefits from Mills's benefits immediately before such
Change in Control, unless such decrease is applied in the same
manner to all executive officers of the Entity, (4) a substantial
change by the Entity (without Mills's consent) in Mills's duties
or responsibilities from Mills's duties and responsibilities
immediately before such Change in Control, (5) any requirement by
the Entity (to which Mills does not consent)
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that Mills change Mills's primary place of business to be outside
the metropolitan Jackson area, (6) Mills's removal from, or
failure to be elected to, the Entity's Board of Directors or the
Entity's failure to nominate Mills for election to the Entity's
Board of Directors, or (7) if the Change in Control results in a
new entity being a successor to the Company's business, the
failure of the new entity to assume expressly in writing the
Company's obligations under this Agreement and under any written
employment agreement between Mills and the Company in effect
immediately before the Change in Control. "Good Reason" will not
include Mills's death, Disability or Retirement (as defined
below), or Mills's resignation other than as provided in the
preceding sentence. For purposes of this Agreement, "Retirement"
means Mills's retirement from the Entity in accordance with the
Entity's normal policies.
(f) Transfer of Insurance Policies. If Mills's employment
by the Company is terminated for any reason except Mills's death, the Company
will cooperate with Mills, to the extent Mills so desires, to transfer to
Mills, at no cost to the Company and in exchange for a payment by Mills to
the Company equal to the value of the Company's interest in the policies, any
life and disability insurance maintained by the Company on his behalf
immediately before the termination of his employment, to the extent permitted
by the applicable insurance policies.
(g) No Other Employment Benefits. The severance benefits
provided in this Agreement are exclusive and in lieu of any other severance
benefits to which Mills may be entitled, except for any benefits under the
terms of any stock options or restricted stock agreements Mills may have.
6. Payment. Amounts equal to, or based on, salary, other than
deferred compensation, as well as death benefits, if any, pursuant to
paragraph 5.(a), other than proceeds of life insurance, and amounts equal to,
or based on, salary, if any, other than deferred compensation and proceeds of
life insurance, paid pursuant to paragraphs 5.(b), 5.(c) and 5.(d), shall be
paid in monthly or other regular periodic installments no less frequent than
monthly. Amounts equal to the pro rata portion of Mills's bonus for the year
of termination paid pursuant to paragraphs 5.(a), 5.(b), 5.(c) and 5.(d)
shall be paid at the time they are paid to other participants in the
applicable bonus plan. Deferred compensation, with interest thereon, shall be
paid as provided in the Jacobson Stores Inc. Deferred Compensation Plan, as
amended from time to time. The amounts described in paragraph 5.(e) shall be
paid as described in paragraph 5.(e)(ii)(5). All such payments shall be made
to Mills while he is living; and in the event of his death, the payments
shall be made to Mills's wife, if she is then living, or to his estate or any
beneficiary or beneficiaries he designates in writing during his lifetime.
7. Confidentiality and Non-Solicitation.
(a) Non-Competition. Mills will not, during Mills's
employment with the Company, directly or indirectly engage in any activity
which is competitive with any business in which the Company engages.
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(b) Confidential Information. Mills will not at any time
during or after his employment with the Company, directly or indirectly,
disclose or make accessible to any person or entity or use in any way for his
own personal gain (i) any confidential and secret information as to the
prices, costs, discounts, or profit margins of any goods or services sold,
purchased or handled by the Company (or its subsidiaries), or (ii) any
confidential or secret information relating to the Company's (or its
subsidiaries') financial structure, store layouts, supply sources, designs,
procedures, information systems, administration or operations, except as
authorized or directed by the Company and except that the foregoing
restrictions will not apply to information generally available to others in
the Company's line of business, information in the public domain, information
disclosed or made available by the Company to any other person on a
non-confidential basis or disclosures Mills is required by law to make. Upon
termination of Mills's employment with the Company for any reason, Mills will
immediately return to the Company all confidential materials over which he
exercises any control.
(c) Non-Solicitation. Mills will not at any time during his
employment by the Company and for two years thereafter, directly or
indirectly, solicit for any purpose, interfere with, entice away from the
Company (or its subsidiaries) or hire any employee or agent of the Company
(or its subsidiaries) who was employed by the Company within one year before
the termination of his employment.
(d) Equitable Remedies. Paragraphs 7.(a), 7.(b) and 7.(c)
are intended, among other things, to protect the confidential information
described in paragraph 7.(b) and relate to matters which are of a special and
unique character, and their violation may cause irreparable injury to the
Company, the amount of which will be extremely difficult, if not impossible,
to determine and which cannot be adequately compensated by monetary damages
alone. Therefore, if Mills breaches or threatens to breach any of those
paragraphs, in addition to any other remedies which may be available to the
Company under this agreement or at law or equity, the Company may obtain an
injunction, restraining order, or other equitable relief against Mills and
such other persons and entities as are appropriate.
8. Modification. This Agreement is the complete agreement between
Mills and the Company and may be modified only by a written instrument
executed by both parties.
9. Law. The internal laws of the State of Michigan shall govern
this Agreement, its construction, and the determination of any rights, duties
or remedies of the parties arising out of or relating to this Agreement..
10. Costs of Enforcement. The Company shall pay on demand all of
Mills's reasonable out-of-pocket fees, costs and expenses (including
reasonable attorneys' fees, court costs and other legal expenses and costs of
investigation) incurred by Mills in connection with the enforcement of this
Agreement (as amended from time to time and including any successor to this
Agreement) or in connection with any disputes concerning the meaning or
interpretation of this Agreement (as amended from time to time and including
any successor to this Agreement). During the pendency
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of any such enforcement proceeding or dispute, the Company shall continue to
pay the disputed amounts and benefits provided in this Agreement (as amended
from time to time and including any successor to this Agreement), and if it
fails to do so, the Company shall pay Mills interest, at the prime or base
rate announced from time to time by Comerica Bank, on such amounts from the
date they were due through the date they are actually paid. The obligations
contained in this paragraph 10 shall survive the end of the Period.
11. Arbitration.
(a) Agreement to Arbitrate. Any disputes between the
parties with respect to the terms and conditions of this Agreement (as
amended from time to time and including any successor to this Agreement)
(other than those disputes with respect to which equitable relief (such as
specific performance or an injunction) is the appropriate remedy) that are
not resolved within 30 days after one party notifies the other party in
writing of the dispute shall be resolved by and through binding arbitration
conducted under the auspices of the American Arbitration Association (or any
like organization successor thereto) in Jackson, Michigan. Both the foregoing
agreement of the parties to arbitrate any and all claims, and the results,
determination, finding, judgment and/or award rendered through such
arbitration, shall be final and binding on the parties to this Agreement and
may be specifically enforced by legal proceedings, and, pursuant to MCLA ss.
600.5001, the parties agree that a judgment of any Michigan circuit court may
be rendered upon any arbitration award rendered pursuant to this paragraph
11. The parties agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this arbitration
agreement and that any party may, in his or its sole discretion, ask for
specific performance and/or injunctive relief in order to enforce or prevent
any violations of the provisions of this arbitration agreement.
(b) Procedure. Such arbitration shall be initiated by the
written notice of the dispute described in paragraph 11.(a), and such
arbitration shall be a compulsory and binding proceeding on each party. Such
arbitration proceeding shall be conducted under the commercial arbitration
rules (formal or informal) of the American Arbitration Association before one
arbitrator, and the arbitrator in any such arbitration shall be such person
who is expert in the subject matter of the dispute. The costs of the
arbitrator and the arbitration shall be borne by the Company. Each party will
bear separately the cost of its or his respective attorneys, witnesses and
experts in connection with such arbitration, subject to the Company's
obligations under paragraph 10. Time is of the essence of this arbitration
procedure, and the arbitrator shall be requested to render his or her
decision within 10 days following completion of the arbitration.
12. Successor Obligations. This Agreement will be binding upon and
inure to the benefit of the Company and its successors and assigns, and the
Company will require any successor to, or transferee of, all or substantially
all of its business or assets to assume all of the Company's obligations
under this Agreement (such successor or assign will be deemed, for purposes
of this Agreement, to be the Company). This Agreement will be binding upon
Mills and will inure to Mills's benefit, but Mills may not assign this
Agreement without the Company's prior written consent.
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13. Duplicate Copies. This Agreement may be executed in
counterparts, both of which together will be deemed an original of this
Agreement.
14. Severability. The provisions of this Agreement will be deemed
severable, and if any part of any provision is held illegal, void or invalid
under applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding. If
any provision of this Agreement is held illegal, void or invalid in its
entirety, the remaining provisions of this Agreement will not in any way be
affected or impaired but will remain binding in accordance with their terms.
15. Miscellaneous Provisions. This Agreement supersedes all
previous employment agreements between the parties. In addition to all other
remedies available at law, it shall be specifically enforceable by any court
having jurisdiction. Paragraph headings are for convenience only and shall
not affect the construction of any provision. The rights and obligations
hereunder shall survive the expiration of the term of this Agreement.
IN THE PRESENCE OF: JACOBSON STORES INC.
By: /c/ Paul W. Gilbert
---------------------
Paul W. Gilbert,
Vice Chairman of the Board
By: /c/ Richard Z. Rosenfeld
-------------------------
Richard Z. Rosenfeld,
Secretary
/c/ P. Gerald Mills
--------------------
P. Gerald Mills
11
Exhibit 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of June 11, 1998, between
JACOBSON STORES INC., a Michigan corporation, of Jackson, Michigan (the
"Company"), and PAUL W. GILBERT, of Jackson, Michigan ("Gilbert").
THE PARTIES HEREBY AGREE that the Employment Agreement between them,
dated as of April 15, 1998 is restated, effective May 28, 1998, as follows:
1. Employment and Term. The Company employs Gilbert as Vice Chairman
of the Board, and Gilbert agrees to serve in that capacity and/or in such
other capacity or capacities as the Board of Directors of the Company deems
advisable, for a term commencing April 15, 1998 and continuing through April
14, 2001, unless terminated sooner pursuant to the provisions of paragraph 5,
for the compensation and on the terms set forth herein. The term shall
automatically be extended for one additional year each April 15, beginning
April 15, 1999, unless either party gives the other party notice before April
15 that the term shall not be extended and unless terminated sooner pursuant
to the provisions of paragraph 5. For example, if one party gives notice on
April 14, 1999 that the term will not be extended, the term will end on April
14, 2001, unless terminated sooner pursuant to the provisions of paragraph 5.
2. Compensation. Subject to the provisions of paragraph 5,
Gilbert's salary shall be Three Hundred Thousand Dollars ($300,000.00) per
year. Gilbert shall also participate in such plans and additional benefits as
may generally be available from time to time to other executive officers of
the Company.
3. Deferred Compensation. Gilbert may determine that payment of any
part of Gilbert's salary for any year shall be deferred pursuant to, and on
the terms and conditions set forth in, the Jacobson Stores Inc. Deferred
Compensation Plan, as amended from time to time. If any part of Gilbert's
salary for a year is deferred, one-twelfth of such amount shall be deferred
each month during the year. Interest shall accrue on deferred compensation
from the last day of the month for which the compensation is deferred.
Neither Gilbert, his estate, his wife, nor any beneficiary shall have any
power to assign or encumber the right to receive deferred compensation, and
any attempted assignment or encumbrance thereof shall be null and void.
4. Duties. Gilbert agrees, as long as his employment by the Company
continues, to devote his entire time and best efforts to furthering the
interests of the Company; to comply with all regulations and policies of the
Company; and to perform the duties requested by the Chief Executive Officer
or the Board of Directors of the Company.
5. Termination. Gilbert's employment under this Agreement shall
terminate on the earliest to occur of the following: (i) immediately upon
Gilbert's death, (ii) at the Company's option, immediately when notice to
Gilbert of such termination is given after Gilbert's "Disability" (as defined
below), (iii) at the Company's option, immediately when notice to Gilbert of
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termination is given on or after the occurrence of "Cause" (as defined
below) for termination of his employment under this Agreement, (iv) not less
than 30 days after notice of such termination is given to Gilbert by the
Company or not less than six months after notice of such termination is given
to the Company by Gilbert (unless the Company elects to have such termination
occur earlier), and (v) the end of the term as described in paragraph 1.
"Disability" means (1) if Gilbert is covered by a Company-provided disability
insurance policy, the definition of disability contained in, and entitling
Gilbert to benefits under, that policy, or (2) if Gilbert is not covered by
such a policy, Gilbert's inability, whether physical or mental, to perform
the normal duties of Gilbert's position for six consecutive months. "Cause"
means (1) Gilbert's continued failure either to (A) devote substantially full
time to Gilbert's employment duties (except because of Gilbert's illness or
Disability) or (B) make a good faith effort to perform Gilbert's employment
duties; (2) any other willful act or omission which Gilbert knew, or had
reason to know, would materially injure the Entity; (3) any breach by Gilbert
of the provisions of paragraph 7, or (4) Gilbert's conviction of a felony
involving dishonesty or fraud. Notice will be deemed to be given on the
earliest of (i) when delivered, or (ii) three business days after mailed by
certified or registered mail, postage prepaid, return receipt requested, or
(iii) one business day after sent by recognized overnight courier, if to
Gilbert, to Gilbert's address on the Company's corporate records, and if to
the Company, to the address of its principal executive offices. The following
events during the term of this Agreement shall have the following respective
effects on the obligations of the Company pursuant hereto:
(a) Death. If employment is terminated due to Gilbert's
death, the Company shall (i) continue to pay an amount equal to Gilbert's
salary, at the annual rate of his salary in effect immediately prior to his
death, from the date of his death until two years after the date of his
death, and (ii) pay the pro rata bonus, if any, that would have been payable
to Gilbert under any bonus plan in effect at the time of termination of
Gilbert's employment if Gilbert had been employed by the Company for the
entire year in which Gilbert's employment terminates, but based on the actual
number of days Gilbert was employed by the Company in that year and the
actual salary paid to Gilbert by the Company with respect to the period
through the date of termination. The Company may offset against the payments
described in this paragraph 5.(a) the proceeds of any life insurance policy
insuring Gilbert's life (i) that is acquired after January 31, 1996 and does
not replace insurance provided by the Company to Gilbert as of January 31,
1996, and (ii) that are paid to a beneficiary designated by Gilbert or to his
estate, if the Company paid the premiums with respect to such insurance. If
the Company makes such an offset with respect to payments under paragraph
5.(a)(i), the remaining amounts due pursuant to paragraph 5.(a)(i) shall be
paid in equal installments over the same period set forth in paragraph
5.(a)(i). In addition to payments pursuant to this paragraph 5.(a), the
Company will continue to maintain medical and hospitalization insurance with
the same spouse and dependent coverage and in the same amounts as the
insurance maintained by the Company immediately prior to his death, for five
years after the date of Gilbert's death. In addition, the principal amount of
split dollar life insurance currently maintained by the Company for Gilbert,
less the total premium payments made by the Company, shall be paid to
beneficiaries designated by Gilbert. Gilbert shall cooperate with the Company
in connection with its obtaining any additional life insurance on Gilbert's
life and any additional disability insurance with respect to Gilbert in
connection with the payments required by this paragraph 5.(a), paragraph
5.(b) or otherwise.
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(b) Disability. If employment is terminated due to
Gilbert's Disability, the Company shall (i) continue to pay an amount equal
to Gilbert's salary, at the annual rate in effect immediately prior to the
date of his termination due to his Disability ("Termination Date"), from the
Termination Date until two years after the Termination Date, and after two
years after the Termination Date at one-half such annual rate until three
years after the Termination Date, and (ii) pay the pro rata bonus, if any,
that would have been payable to Gilbert under any bonus plan in effect at the
Termination Date if Gilbert had been employed by the Company for the entire
year in which Gilbert's employment terminates, but based on the actual number
of days Gilbert was employed by the Company in that year and the actual
salary paid to Gilbert by the Company with respect to the period through the
Termination Date. In addition, the Company will continue to maintain medical,
hospitalization and life insurance with the same coverage (including any
spouse and dependent coverage) and in the same amounts as the insurance
maintained by the Company immediately prior to his incapacity, for five years
after the Termination Date. The Company may offset against any of the
payments described in this paragraph 5.(b), disability benefits, if any, paid
under any insurance maintained by the Company. In addition, if Gilbert dies
at any time during the period payments are required under this paragraph
5.(b), the Company may offset against any of the payments described in this
paragraph 5.(b) the proceeds of any life insurance policy insuring Gilbert's
life (i) that is acquired after January 31, 1996 and does not replace
insurance provided by the Company to Gilbert as of January 31, 1996, and (ii)
that are paid to a beneficiary designated by Gilbert or to his estate, if the
Company paid the premiums with respect to such insurance. If the Company
makes such an offset with respect to payments under paragraph 5.(b)(i), the
remaining amounts due pursuant to paragraph 5.(b)(i) shall be paid in equal
installments over the same period set forth in paragraph 5.(b)(i). Gilbert
shall cooperate with the Company in connection with its obtaining any
additional life insurance on Gilbert's life and any additional disability
insurance with respect to Gilbert in connection with the payments required by
this paragraph 5.(b), paragraph 5.(a) or otherwise.
(c) Termination for Cause. If employment is terminated for
Cause, or if Gilbert resigns before the expiration of the term of this
Agreement, the Company shall have no obligation to pay any salary or any
other amount in lieu thereof for any period after the date of termination of
employment.
(d) Termination Without Cause. Except as otherwise provided
in paragraph 5.(e), if the Company terminates Gilbert's employment without
Cause before the expiration of the term of this Agreement (other than as a
result of Gilbert's death or Disability), the Company shall (i) continue to
pay an amount equal to Gilbert's salary, at the annual rate in effect
immediately prior to such termination of employment, and shall continue to
provide medical and hospitalization insurance with the same coverage
(including any spouse and dependent coverage) and in the same amounts as the
insurance maintained by the Company immediately prior to such termination of
employment, for the balance of the term of this Agreement, without regard to
any termination as a result of Gilbert's death, Disability, termination by
the Company for Cause, retirement, resignation or termination by the Company
without Cause, or one year, whichever is greater, and (ii) pay the pro rata
bonus, if any, that would have been payable to Gilbert under any bonus plan
in effect at the time of termination of Gilbert's employment if Gilbert had
been employed by the Company for the entire year in which Gilbert's
employment terminates, but based on the
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actual number of days Gilbert was employed by the Company in that year and
the actual salary paid to Gilbert by the Company with respect to the period
through the date of termination. In such event, Gilbert shall use reasonable
efforts to find new employment. Commencing one year after termination, the
Company's continuing payment obligation, if any, shall be reduced by the
amount of any other salary, consulting fees, or other compensation or
remuneration for services, however designated, received by Gilbert with
respect to any remaining part of the period covered by the Company's
obligation, and its continuing medical and hospitalization insurance
obligation shall be reduced by the amount of any other medical and
hospitalization insurance provided to Gilbert with respect to any remaining
part of such period.
(e) Change in Control.
(i) Right to Receive Benefits. Gilbert shall
receive the severance benefits described in paragraph 5.(e)(ii) if
(1) a "Change in Control" (as defined in paragraph 5.(e)(iii))
occurs during the "Period" (as defined in paragraph 5.(e)(iv)), and
(2) either (A) at any time during the period beginning 90 days
before, and ending two years after, the Change in Control, Gilbert
terminates his employment with the "Entity" (as defined in
paragraph 5.(e)(vii)) for "Good Reason" (as defined in paragraph
5.(e)(viii)) or the "Entity" terminates Gilbert's employment
without Cause, or (B) at any time during the 3rd month after the
Change in Control, Gilbert terminates his employment with the
"Entity" for any reason or for no reason.
(ii) Severance Benefits. If Gilbert is entitled
to severance benefits under paragraph 5.(e)(i), he will receive the
following:
(1) an amount equal to the annual salary
Gilbert was receiving immediately before the Change in
Control for the period (the "Time") from the date of such
termination through the later of (1) two years after the
date of such termination, and (2) the balance of the term
of this Agreement, without regard to any termination as a
result of Gilbert's death, Disability, termination by the
Company for Cause, retirement, resignation or termination
by the Company without Cause; and
(2) a pro rata bonus for the year of such
termination equal to (1) the bonus paid or payable to
Gilbert with respect to the last full fiscal year of the
Company before the Change in Control (the "Bonus"),
multiplied by (2) a fraction, the numerator of which shall
be the number of days in the Company's fiscal year in
which such termination occurs through the date of such
termination, and the denominator of which shall be the
total number of days in the Company's fiscal year in which
such termination occurs; and
(3) an amount equal to the Time (in
years and fractions of a partial year) multiplied by the
amount of the Bonus; and
(4) a continuation during the Time of
(1) the medical, dental, life, disability,
hospitalization, optical and prescription drug benefits
Gilbert and Gilbert's
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dependents were receiving from the Company at the time of
the Change in Control (provided that if it is no longer
practical for the Company to furnish such benefits,
Gilbert will be reimbursed by the Company during the Time
for the cost to Gilbert of obtaining such benefits), (2)
the Company's obligations under the Split Dollar
Agreement, dated as of January 31, 1992, between the
Company and Gilbert, and (3) any automobile allowance or
benefits (including automobile insurance and maintenance
benefits), and continued use of any automobile, provided
to Gilbert by the Company at the time of the Change in
Control; and
(5) If the total amount of all payments
of cash or property in the nature of compensation
contingent on a change in the ownership or effective
control of the Company or in the ownership of a
substantial portion of the Company's assets, including,
without limitation, the benefits provided pursuant to this
paragraph 5.(e)(ii) and payments relating to any stock
options or restricted stock that vest as a result of a
Change in Control, shall exceed the maximum amount that
may be paid to Gilbert and not be deemed a "parachute
payment" resulting in an excise tax to Gilbert and a loss
of compensation deduction to the Company, all within the
meaning of Section 280G of the Internal Revenue Code of
1986, as amended, or any successor provision, the Company
will pay to Gilbert (i) the amount of any excise tax
imposed on Gilbert under Section 4999 of the Internal
Revenue Code of 1986, as amended, or any successor
provision, as a result of any payments by the Company to
Gilbert pursuant to this paragraph 5.(e)(ii) and (ii) any
income tax imposed on Gilbert as a result of the payments
under this paragraph 5.(e)(ii)(5)). The benefits provided
in paragraphs 5.(e)(ii)(1), 5.(e)(ii)(2), 5.(e)(ii)(3) and
5.(e)(ii)(5) shall be paid to Gilbert in an undiscounted
lump sum within 10 business days after the date of such
termination. The Company may withhold from such payments
all federal, state, city and other taxes to the extent
such taxes are required to be withheld by applicable law.
(iii) "Change in Control". For purposes of this
Agreement, a "Change in Control" occurs on the first day any one or
more of the following occurs:
(1) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), together with
all affiliates and associates of such person (as such
terms are defined in Rule 12b-2 under the Exchange Act)
but excluding all "Excluded Persons" (as defined in
paragraph 5.(e)(v)), becomes the direct or indirect
beneficial owner (within the meaning of Rule 13d-3 under
the Exchange Act) of securities of the Company
representing (A) 40% or more of the combined voting power
of all of the Company's outstanding securities entitled to
vote generally in the election of the Company's directors,
or (B) 40% or more of the combined shares of the Company's
capital stock then outstanding, all except in connection
with any merger, consolidation, reorganization or share
exchange involving the Company;
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(2) the consummation of any merger,
consolidation, reorganization or share exchange involving
the Company, unless the holders of the Company's capital
stock outstanding immediately before such transaction own
more than 50% of the combined outstanding shares of
capital stock and have more than 50% of the combined
voting power in the surviving entity after such
transaction and they own such securities in substantially
the same proportions (relative to each other) as they
owned the Company's capital stock immediately before such
transaction;
(3) the consummation of any sale or other
disposition (in one transaction or a series of related
transactions) of all, or substantially all, of the
Company's assets to a person whose acquisition of 40% or
more of the combined shares of the Company's capital stock
then outstanding would have caused a Change in Control
under paragraph 5.(e)(iii)(1)); or
(4) the "Continuing Directors" (as
defined in paragraph 5.(e)(vi)) cease to be a majority of
the Company's directors.
A determination by the Company's Continuing Directors (by
resolution of at least a majority of the Continuing Directors) as
to whether a Change in Control has occurred for purposes of this
Agreement, the date on which it has occurred or both shall be
conclusive for purposes of this Agreement.
(iv) "Period". The period (the "Period") will begin
on the date of this Agreement and end on the first to occur of (a)
the end of the term of this Agreement, without regard to any
termination as a result of Gilbert's death, Disability, termination
by the Company for Cause, retirement, resignation or termination by
the Company without Cause, (b) Gilbert's death, (c) Gilbert's
Disability, and (d) 90 days after the termination of Gilbert's
employment (voluntarily or involuntarily and with or without Cause
or Good Reason) if (1) such termination occurs before a Change in
Control, and (2) a Change in Control does not occur during such 90
day period. Notwithstanding the foregoing, (1) if Gilbert becomes
entitled to severance benefits under paragraph 5.(e)(i), the
provisions of paragraph 5.(e)(ii) of this Agreement will continue
until Gilbert's eligibility to receive severance benefits under
this Agreement ceases and such provisions and the other provisions
of this Agreement not limited by the Period, including, without
limitation, paragraphs 5.(h), 7, 10 and 11 will survive the end of
the Period.
(v) "Excluded Persons". For purposes of this
Agreement, the "Excluded Persons" are (i) Gilbert, (ii) any "group"
(as that term is used in Section 13(d) of the Exchange Act and the
rules thereunder) that includes Gilbert or in which Gilbert is, or
has agreed to become, an equity participant, (iii) any entity in
which Gilbert is, or has agreed to become, an equity participant,
(iv) the Company, (v) any subsidiary of the Company, (vi) any
employee benefit plan of the Company or any subsidiary of the
Company or the related trust, (vii) any entity to the extent it is
holding capital stock of the Company for or pursuant to the terms
of any employee benefit plan of the Company or any subsidiary of
the Company, and (viii) any director or officer of the Company as
of the date of this Agreement. For
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purposes of this Agreement, Gilbert shall not be deemed an "equity
participant" in any group or entity (i) in which Gilbert owns for
investment purposes only no more than 5% of the stock of a
publicly-traded entity whose stock is either listed on a national
stock exchange or quoted in The Nasdaq National Market, if Gilbert
is not otherwise affiliated with such group or entity, or (ii) if
Gilbert's participation is fully-disclosed to, and approved by, the
Company's Board of Directors and the Continuing Directors before
the Change in Control occurs.
(vi) "Continuing Directors". For purposes of this
Agreement, the "Continuing Directors" are the directors of the
Company as of the date of this Agreement, and any person who
subsequently becomes a director if such person is appointed to be a
director by a majority of the Continuing Directors or if such
person's initial nomination for election or initial election as a
director is recommended or approved by a majority of the Continuing
Directors.
(vii) "Entity". For purposes of this Agreement, the
"Entity" shall mean both (1) the Company and, (2) in connection
with a Change in Control defined in paragraph 5.(e)(iii)(2) or
paragraph 5.(e)(iii)(3), the survivor of the merger, consolidation,
reorganization or share exchange involving the Company and the
buyer of all, or substantially all, of the Company's assets, if
such additional entity described in this clause (2) (if other than
the Company) has offered to employ Gilbert on such terms that would
not constitute "Good Reason" for termination of Gilbert's
employment if imposed by the Company. Therefore, for purposes of
this paragraph 5.(e), Gilbert shall not be deemed to have
terminated Gilbert's employment with the Entity for "Good Reason"
and the "Entity" shall not be deemed to have terminated Gilbert's
employment without Cause unless such actions are taken by all
entities included within the definition of "Entity". In addition,
for purposes of this paragraph 5.(e), Gilbert shall not be deemed
to have terminated Gilbert's employment with the Entity for "Good
Reason" and the "Entity" shall not be deemed to have terminated
Gilbert's employment without Cause if (1) the survivor of the
merger, consolidation, reorganization or share exchange involving
the Company and the buyer of all, or substantially all, of the
Company's assets has offered to employ Gilbert on such terms that
would not constitute "Good Reason" for termination of Gilbert's
employment if imposed by the Company, (2) Gilbert refuses such
employment, and (3) the Company terminates Gilbert's employment for
any reason or for no reason.
(viii) "Good Reason". Termination of Gilbert's
employment for "Good Reason" means Gilbert's voluntary termination
of employment with the Entity before or after a Change in Control
as a result of (1) any change by the Entity (without Gilbert's
consent) in Gilbert's title from Gilbert's title immediately before
such Change in Control, (2) any decrease by the Entity (without
Gilbert's consent) in Gilbert's compensation or incentives from
Gilbert's compensation and incentives immediately before such
Change in Control, except with respect to benefits covered by
clause (3); provided that Gilbert's bonus shall not be deemed to
have decreased if Gilbert has a substantially similar opportunity
to earn a bonus as Gilbert did in the last full fiscal year before
the Change in Control, (3) any decrease by the Entity (without
Gilbert's consent) in Gilbert's benefits from Gilbert's benefits
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<PAGE>
immediately before such Change in Control, unless such decrease is
applied in the same manner to all executive officers of the Entity,
(4) a substantial change by the Entity (without Gilbert's consent)
in Gilbert's duties or responsibilities from Gilbert's duties and
responsibilities immediately before such Change in Control, (5) any
requirement by the Entity (to which Gilbert does not consent) that
Gilbert change Gilbert's primary place of business to be outside
the metropolitan Jackson area, (6) Gilbert's removal from, or
failure to be elected to, the Entity's Board of Directors or the
Entity's failure to nominate Gilbert for election to the Entity's
Board of Directors, or (7) if the Change in Control results in a
new entity being a successor to the Company's business, the failure
of the new entity to assume expressly in writing the Company's
obligations under this Agreement and under any written employment
agreement between Gilbert and the Company in effect immediately
before the Change in Control. "Good Reason" will not include
Gilbert's death, Disability or Retirement (as defined below), or
Gilbert's resignation other than as provided in the preceding
sentence. For purposes of this Agreement, "Retirement" means
Gilbert's retirement from the Entity in accordance with the
Entity's normal policies.
(f) Split Dollar Life Insurance. If Gilbert's employment
by the Company is terminated for any reason except Gilbert's death, the split
dollar life insurance policy referred to in paragraph 5.(a) shall be disposed
of in accordance with the terms of a certain Split Dollar Agreement dated
January 31, 1992 between the parties, as the same may be amended from time to
time.
(g) Transfer of Insurance Policies. If Gilbert's
employment by the Company is terminated for any reason except Gilbert's death
or Disability, the Company will cooperate with Gilbert, to the extent Gilbert
so desires, to transfer to Gilbert, at no cost to the Company and in exchange
for a payment by Gilbert to the Company equal to the value of the Company's
interest in the policies, the life and disability insurance maintained by the
Company on his behalf immediately before the termination of his employment,
to the extent permitted by the applicable insurance policies. If Gilbert's
employment by the Company is terminated as a result of Gilbert's Disability,
the Company will cooperate with Gilbert, to the extent Gilbert so desires, to
transfer to Gilbert, at no cost to the Company and in exchange for a payment
by Gilbert to the Company equal to the value of the Company's interest in the
policies, the life insurance maintained by the Company on his behalf as of
the date five years after the termination of his employment, to the extent
permitted by the applicable insurance policies.
(h) No Other Employment Benefits. The severance benefits
provided in this Agreement are exclusive and in lieu of any other severance
benefits to which Gilbert may be entitled, except for any benefits under the
terms of any stock options or restricted stock agreements Gilbert may have.
6. Payment. Amounts equal to, or based on, salary, other than
deferred compensation, as well as death benefits pursuant to paragraph 5.(a),
other than proceeds of life insurance, and amounts equal to, or based on,
salary, other than deferred compensation and proceeds of life insurance, paid
pursuant to paragraphs 5.(b) and 5.(d), shall be paid in monthly or other
regular periodic installments no less frequent than monthly. Amounts equal to
the pro rata portion of Gilbert's bonus for the year of termination paid
pursuant to paragraphs 5.(a), 5.(b), and 5.(d) shall
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<PAGE>
be paid at the time they are paid to other participants in the applicable
bonus plan. Deferred compensation, with interest thereon, shall be paid as
provided in the Jacobson Stores Inc. Deferred Compensation Plan, as amended
from time to time. The amounts described in paragraph 5.(e) shall be paid as
described in paragraph 5.(e)(ii)(5). All such payments shall be made to
Gilbert while he is living; and in the event of his death, the payments shall
be made to Gilbert's wife, if she is then living, or to his estate or any
beneficiary or beneficiaries he designates in writing during his lifetime.
7. Non-Competition; Confidentiality and Non-Solicitation.
(a) Non-Competition. Gilbert will not, during Gilbert's
employment with the Company, directly or indirectly engage in any activity
which is competitive with any business in which the Company engages.
(b) Confidential Information. Gilbert will not at any time
during or after Gilbert's employment with the Company, directly or
indirectly, disclose or make accessible to any person or entity or use in any
way for Gilbert's own personal gain (i) any confidential and secret
information as to the prices, costs, discounts, or profit margins of any
goods or services sold, purchased or handled by the Company (or its
subsidiaries), or (ii) any confidential or secret information relating to the
Company's (or its subsidiaries') financial structure, store layouts, supply
sources, designs, procedures, information systems, administration or
operations, except as authorized or directed by the Company and except that
the foregoing restrictions will not apply to information generally available
to others in the Company's line of business, information in the public
domain, information disclosed or made available by the Company to any other
person on a non-confidential basis or disclosures Gilbert are required by law
to make. Upon termination of Gilbert's employment with the Company for any
reason, Gilbert will immediately return to the Company all confidential
materials over which Gilbert exercise any control.
(c) Non-Solicitation. Gilbert will not at any time during
Gilbert's employment by the Company and for two years thereafter, directly or
indirectly, solicit for any purpose, interfere with, entice away from the
Company (or its subsidiaries) or hire any employee or agent of the Company
(or its subsidiaries) who was employed by the Company within one year before
the termination of Gilbert's employment.
(d) Equitable Remedies. Paragraphs 7.(a), 7.(b) and 7.(c)
are intended, among other things, to protect the confidential information
described in paragraph 7.(b) and relate to matters which are of a special and
unique character, and their violation may cause irreparable injury to the
Company, the amount of which will be extremely difficult, if not impossible,
to determine and which cannot be adequately compensated by monetary damages
alone. Therefore, if Gilbert breaches or threatens to breach any of those
paragraphs, in addition to any other remedies which may be available to the
Company under this Agreement or at law or equity, the Company may obtain an
injunction, restraining order, or other equitable relief against Gilbert and
such other persons and entities as are appropriate.
8. Modification. This Agreement is the complete agreement between
Gilbert and the Company and may be modified only by a written instrument
executed by both parties.
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9. Law. The internal laws of the State of Michigan shall govern
this Agreement, its construction, and the determination of any rights, duties
or remedies of the parties arising out of or relating to this Agreement.
10. Costs of Enforcement. The Company shall pay on demand all of
Gilbert's reasonable out-of-pocket fees, costs and expenses (including
reasonable attorneys' fees, court costs and other legal expenses and costs of
investigation) incurred by Gilbert in connection with the enforcement of this
Agreement (as amended from time to time and including any successor to this
Agreement) or in connection with any disputes concerning the meaning or
interpretation of this Agreement (as amended from time to time and including
any successor to this Agreement). During the pendency of any such enforcement
proceeding or dispute, the Company shall continue to pay the disputed amounts
and benefits provided in this Agreement (as amended from time to time and
including any successor to this Agreement), and if it fails to do so, the
Company shall pay Gilbert interest, at the prime or base rate announced from
time to time by Comerica Bank, on such amounts from the date they were due
through the date they are actually paid. The obligations contained in this
paragraph 10 shall survive the end of the Period.
11. Arbitration.
(a) Agreement to Arbitrate. Any disputes between the
parties with respect to the terms and conditions of this Agreement (as
amended from time to time and including any successor to this Agreement)
(other than those disputes with respect to which equitable relief (such as
specific performance or an injunction) is the appropriate remedy) that are
not resolved within 30 days after one party notifies the other party in
writing of the dispute shall be resolved by and through binding arbitration
conducted under the auspices of the American Arbitration Association (or any
like organization successor thereto) in Jackson, Michigan. Both the foregoing
agreement of the parties to arbitrate any and all claims, and the results,
determination, finding, judgment and/or award rendered through such
arbitration, shall be final and binding on the parties to this Agreement and
may be specifically enforced by legal proceedings, and, pursuant to MCLA ss.
600.5001, the parties agree that a judgment of any Michigan circuit court may
be rendered upon any arbitration award rendered pursuant to this paragraph
11. The parties agree and acknowledge that money damages may not be an
adequate remedy for any breach of the provisions of this arbitration
agreement and that any party may, in his or its sole discretion, ask for
specific performance and/or injunctive relief in order to enforce or prevent
any violations of the provisions of this arbitration agreement.
(b) Procedure. Such arbitration shall be initiated by the
written notice of the dispute described in paragraph 11.(a), and such
arbitration shall be a compulsory and binding proceeding on each party. Such
arbitration proceeding shall be conducted under the commercial arbitration
rules (formal or informal) of the American Arbitration Association before one
arbitrator, and the arbitrator in any such arbitration shall be such person
who is expert in the subject matter of the dispute. The costs of the
arbitrator and the arbitration shall be borne by the Company. Each party will
bear separately the cost of its or his respective attorneys, witnesses and
experts in connection with such arbitration, subject to the Company's
obligations under paragraph 10. Time
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is of the essence of this arbitration procedure, and the arbitrator shall be
requested to render his or her decision within 10 days following completion
of the arbitration.
12. Successor Obligations. This Agreement will be binding upon and
inure to the benefit of the Company and its successors and assigns, and the
Company will require any successor to, or transferee of, all or substantially
all of its business or assets to assume all of the Company's obligations
under this Agreement (such successor or assign will be deemed, for purposes
of this Agreement, to be the Company). This Agreement will be binding upon
Gilbert and will inure to Gilbert's benefit, but Gilbert may not assign this
Agreement without the Company's prior written consent.
13. Duplicate Copies. This Agreement may be executed in
counterparts, both of which together will be deemed an original of this
Agreement.
14. Severability. The provisions of this Agreement will be deemed
severable, and if any part of any provision is held illegal, void or invalid
under applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding. If
any provision of this Agreement is held illegal, void or invalid in its
entirety, the remaining provisions of this Agreement will not in any way be
affected or impaired but will remain binding in accordance with their terms.
15. Miscellaneous Provisions. This Agreement supersedes all previous
employment and severance agreements between the parties. In addition to all
other remedies available at law, it shall be specifically enforceable by any
court having jurisdiction. Paragraph headings are for convenience only and
shall not affect the construction of any provision. The rights and
obligations hereunder, particularly but without limitation including
paragraph 5.(e), shall survive the expiration of the term of this Agreement.
IN THE PRESENCE OF: JACOBSON STORES INC.
By: /c/ P. Gerald Mills
---------------------
P. Gerald Mills,
Chairman of the Board and
Chief Executive Officer
By: /c/ Richard Z. Rosenfeld
-------------------------
Richard Z. Rosenfeld,
Secretary
/c/ Paul W. Gilbert
--------------------
Paul W. Gilbert
11
Exhibit 10(c)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of June 11, 1998, between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the "Company"),
and JAMES A. RODEFELD, of Jackson, Michigan ("Rodefeld").
THE PARTIES HEREBY AGREE that the Employment Agreement between them,
dated as of April 15, 1998 is restated, effective May 28, 1998, as follows:
1. Employment and Term. The Company employs Rodefeld as Executive
Vice President -- Marketing & Stores, and Rodefeld agrees to serve in that
capacity and/or in such other capacity or capacities as the Board of
Directors of the Company deems advisable, for a term commencing April 15,
1998 and continuing through April 14, 2001, unless terminated sooner pursuant
to the provisions of paragraph 5, for the compensation and on the terms set
forth herein. The term shall automatically be extended for one additional
year each April 15, beginning April 15, 1999, unless either party gives the
other party notice before April 15 that the term shall not be extended and
unless terminated sooner pursuant to the provisions of paragraph 5. For
example, if one party gives notice on April 14, 1999 that the term will not
be extended, the term will end on April 14, 2001, unless terminated sooner
pursuant to the provisions of paragraph 5.
2. Compensation. Subject to the provisions of paragraph 5, Rodefeld's
salary shall be Two Hundred Thousand Dollars ($200,000.00) per year. Rodefeld
shall also participate in such plans and additional benefits as may generally
be available from time to time to other executive officers of the Company.
3. Deferred Compensation. Rodefeld may determine that payment of any
part of Rodefeld's salary for any year shall be deferred pursuant to, and on
the terms and conditions set forth in, the Jacobson Stores Inc. Deferred
Compensation Plan, as amended from time to time. If any part of Rodefeld's
salary for a year is deferred, one-twelfth of such amount shall be deferred
each month during the year. Interest shall accrue on deferred compensation
from the last day of the month for which the compensation is deferred.
Neither Rodefeld, his estate, his wife, nor any beneficiary shall have any
power to assign or encumber the right to receive deferred compensation, and
any attempted assignment or encumbrance thereof shall be null and void.
4. Duties. Rodefeld agrees, as long as his employment by the Company
continues, to devote his entire time and best efforts to furthering the
interests of the Company; to comply with all regulations and policies of the
Company; and to perform the duties requested by the Chief Executive Officer
or the Board of Directors of the Company.
5. Termination. Rodefeld's employment under this Agreement shall
terminate on the earliest to occur of the following: (i) immediately upon
Rodefeld's death, (ii) at the Company's option, immediately when notice to
Rodefeld of such termination is given after Rodefeld's
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"Disability" (as defined below), (iii) at the Company's option, immediately
when notice to Rodefeld of such termination is given on or after the
occurrence of "Cause" (as defined below) for termination of his employment
under this Agreement, (iv) not less than 30 days after notice of such
termination is given to Rodefeld by the Company or not less than six months
after notice of such termination is given to the Company by Rodefeld (unless
the Company elects to have such termination occur earlier), and (v) the end
of the term as described in paragraph 1. "Disability" means (1) if Rodefeld
is covered by a Company-provided disability insurance policy, the definition
of disability contained in, and entitling Rodefeld to benefits under, that
policy, or (2) if Rodefeld is not covered by such a policy, Rodefeld's
inability, whether physical or mental, to perform the normal duties of
Rodefeld's position for six consecutive months. "Cause" means (1) Rodefeld's
continued failure either to (A) devote substantially full time to Rodefeld's
employment duties (except because of Rodefeld's illness or Disability) or (B)
make a good faith effort to perform Rodefeld's employment duties; (2) any
other willful act or omission which Rodefeld knew, or had reason to know,
would materially injure the Entity; (3) any breach by Rodefeld of the
provisions of paragraph 7, or (4) Rodefeld's conviction of a felony involving
dishonesty or fraud. Notice will be deemed to be given on the earliest of (i)
when delivered, or (ii) three business days after mailed by certified or
registered mail, postage prepaid, return receipt requested, or (iii) one
business day after sent by recognized overnight courier, if to Rodefeld, to
Rodefeld's address on the Company's corporate records, and if to the Company,
to the address of its principal executive offices. The following events
during the term of this Agreement shall have the following respective effects
on the obligations of the Company pursuant hereto:
(a) Death. If employment is terminated due to Rodefeld's
death, the Company shall (i) continue to pay an amount equal to Rodefeld's
salary, at the annual rate of his salary in effect immediately prior to his
death, from the date of his death until two years after the date of his
death, and (ii) pay the pro rata bonus, if any, that would have been payable
to Rodefeld under any bonus plan in effect at the time of termination of
Rodefeld's employment if Rodefeld had been employed by the Company for the
entire year in which Rodefeld's employment terminates, but based on the
actual number of days Rodefeld was employed by the Company in that year and
the actual salary paid to Rodefeld by the Company with respect to the period
through the date of termination. The Company may offset against the payments
described in this paragraph 5.(a) the proceeds of any life insurance policy
insuring Rodefeld's life (i) that is acquired after April 15, 1998 and does
not replace insurance provided by the Company to Rodefeld as of April 15,
1998, and (ii) that are paid to a beneficiary designated by Rodefeld or to
his estate, if the Company paid the premiums with respect to such insurance.
If the Company makes such an offset with respect to payments under paragraph
5.(a)(i), the remaining amounts due pursuant to paragraph 5.(a)(i) shall be
paid in equal installments over the same period set forth in paragraph
5.(a)(i). In addition to payments pursuant to this paragraph 5.(a), the
Company will continue to maintain medical and hospitalization insurance with
the same spouse and dependent coverage and in the same amounts as the
insurance maintained by the Company immediately prior to his death, for five
years after the date of Rodefeld's death. Rodefeld shall cooperate with the
Company in connection with its obtaining any additional life insurance on
Rodefeld's life and any additional disability insurance with respect to
Rodefeld in connection with the payments required by this paragraph 5.(a),
paragraph 5.(b) or otherwise.
(b) Disability. If employment is terminated due to Rodefeld's
Disability, the Company shall (i) continue to pay an amount equal to
Rodefeld's salary, at the annual rate in effect
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immediately prior to the date of his termination due to his Disability
("Termination Date"), from the Termination Date until two years after the
Termination Date, and after two years after the Termination Date at one-half
such annual rate until three years after the Termination Date, and (ii) pay
the pro rata bonus, if any, that would have been payable to Rodefeld under
any bonus plan in effect at the Termination Date if Rodefeld had been
employed by the Company for the entire year in which Rodefeld's employment
terminates, but based on the actual number of days Rodefeld was employed by
the Company in that year and the actual salary paid to Rodefeld by the
Company with respect to the period through the Termination Date. In addition,
the Company will continue to maintain medical, hospitalization and life
insurance with the same coverage (including any spouse and dependent
coverage) and in the same amounts as the insurance maintained by the Company
immediately prior to his incapacity, for five years after the Termination
Date. The Company may offset against any of the payments described in this
paragraph 5.(b), disability benefits, if any, paid under any insurance
maintained by the Company. In addition, if Rodefeld dies at any time during
the period payments are required under this paragraph 5.(b), the Company may
offset against any of the payments described in this paragraph 5.(b) the
proceeds of any life insurance policy insuring Rodefeld's life (i) that is
acquired after April 15, 1998 and does not replace insurance provided by the
Company to Rodefeld as of April 15, 1998, and (ii) that are paid to a
beneficiary designated by Rodefeld or to his estate, if the Company paid the
premiums with respect to such insurance. If the Company makes such an offset
with respect to payments under paragraph 5.(b)(i), the remaining amounts due
pursuant to paragraph 5.(b)(i) shall be paid in equal installments over the
same period set forth in paragraph 5.(b)(i). Rodefeld shall cooperate with
the Company in connection with its obtaining any additional life insurance on
Rodefeld's life and any additional disability insurance with respect to
Rodefeld in connection with the payments required by this paragraph 5.(b),
paragraph 5.(a) or otherwise.
(c) Termination for Cause. If employment is terminated for
Cause, or if Rodefeld resigns before the expiration of the term of this
Agreement, the Company shall have no obligation to pay any salary or any
other amount in lieu thereof for any period after the date of termination of
employment.
(d) Termination Without Cause. Except as otherwise provided in
paragraph 5.(e), if the Company terminates Rodefeld's employment without
Cause before the expiration of the term of this Agreement (other than as a
result of Rodefeld's death or Disability), the Company shall (i) continue to
pay an amount equal to Rodefeld's salary, at the annual rate in effect
immediately prior to such termination of employment, and shall continue to
provide medical and hospitalization insurance with the same coverage
(including any spouse and dependent coverage) and in the same amounts as the
insurance maintained by the Company immediately prior to such termination of
employment, for the balance of the term of this Agreement, without regard to
any termination as a result of Rodefeld's death, Disability, termination by
the Company for Cause, retirement, resignation or termination by the Company
without Cause, or one year, whichever is greater, and (ii) pay the pro rata
bonus, if any, that would have been payable to Rodefeld under any bonus plan
in effect at the time of termination of Rodefeld's employment if Rodefeld had
been employed by the Company for the entire year in which Rodefeld's
employment terminates, but based on the actual number of days Rodefeld was
employed by the Company in that year and the actual salary paid to Rodefeld
by the Company with respect to the period through the date of termination.
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In such event, Rodefeld shall use reasonable efforts to find new employment.
Commencing one year after termination, the Company's continuing payment
obligation, if any, shall be reduced by the amount of any other salary,
consulting fees, or other compensation or remuneration for services, however
designated, received by Rodefeld with respect to any remaining part of the
period covered by the Company's obligation, and its continuing medical and
hospitalization insurance obligation shall be reduced by the amount of any
other medical and hospitalization insurance provided to Rodefeld with respect
to any remaining part of such period.
(e) Change in Control.
(i) Right to Receive Benefits. Rodefeld shall receive
the severance benefits described in paragraph 5.(e)(ii) if (1) a
"Change in Control" (as defined in paragraph 5.(e)(iii)) occurs
during the "Period" (as defined in paragraph 5.(e)(iv)), and (2)
either (A) at any time during the period beginning 90 days before,
and ending two years after, the Change in Control, Rodefeld
terminates his employment with the "Entity" (as defined in paragraph
5.(e)(vii)) for "Good Reason" (as defined in paragraph 5.(e)(viii))
or the "Entity" terminates Rodefeld's employment without Cause, or
(B) at any time during the 3rd month after the Change in Control,
Rodefeld terminates his employment with the "Entity" for any reason
or for no reason.
(ii) Severance Benefits. If Rodefeld is entitled to
severance benefits under paragraph 5.(e)(i), he will receive the
following:
(1) an amount equal to the annual salary
Rodefeld was receiving immediately before the Change in
Control for the period (the "Time") from the date of such
termination through the later of (1) two years after the date
of such termination, and (2) the balance of the term of this
Agreement, without regard to any termination as a result of
Rodefeld's death, Disability, termination by the Company for
Cause, retirement, resignation or termination by the Company
without Cause; and
(2) a pro rata bonus for the year of such
termination equal to (1) the bonus paid or payable to Rodefeld
with respect to the last full fiscal year of the Company
before the Change in Control (the "Bonus"), multiplied by (2)
a fraction, the numerator of which shall be the number of days
in the Company's fiscal year in which such termination occurs
through the date of such termination, and the denominator of
which shall be the total number of days in the Company's
fiscal year in which such termination occurs; and
(3) an amount equal to the Time (in years and
fractions of a partial year) multiplied by the amount of the
Bonus; and
(4) a continuation during the Time of (1) the
medical, dental, life, disability, hospitalization, optical
and prescription drug benefits Rodefeld and Rodefeld's
dependents were receiving from the Company at the time of the
Change in Control (provided that if it is no longer practical
for the Company to furnish
4
<PAGE>
such benefits, Rodefeld will be reimbursed by the Company
during the Time for the cost to Rodefeld of obtaining such
benefits), and (2) any automobile allowance or benefits
(including automobile insurance and maintenance benefits), and
continued use of any automobile, provided to Rodefeld by the
Company at the time of the Change in Control; and
(5) If the total amount of all payments of cash
or property in the nature of compensation contingent on a
change in the ownership or effective control of the Company or
in the ownership of a substantial portion of the Company's
assets, including, without limitation, the benefits provided
pursuant to this paragraph 5.(e)(ii) and payments relating to
any stock options or restricted stock that vest as a result of
a Change in Control, shall exceed the maximum amount that may
be paid to Rodefeld and not be deemed a "parachute payment"
resulting in an excise tax to Rodefeld and a loss of
compensation deduction to the Company, all within the meaning
of Section 280G of the Internal Revenue Code of 1986, as
amended, or any successor provision, the Company will pay to
Rodefeld (i) the amount of any excise tax imposed on Rodefeld
under Section 4999 of the Internal Revenue Code of 1986, as
amended, or any successor provision, as a result of any
payments by the Company to Rodefeld pursuant to this paragraph
5.(e)(ii) and (ii) any income tax imposed on Rodefeld as a
result of the payments under this paragraph 5.(e)(ii)(5)). The
benefits provided in paragraphs 5.(e)(ii)(1), 5.(e)(ii)(2),
5.(e)(ii)(3) and 5.(e)(ii)(5) shall be paid to Rodefeld in an
undiscounted lump sum within 10 business days after the date
of such termination. The Company may withhold from such
payments all federal, state, city and other taxes to the
extent such taxes are required to be withheld by applicable
law.
(iii) "Change in Control". For purposes of this
Agreement, a "Change in Control" occurs on the first day any one or
more of the following occurs:
(1) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), together with all affiliates
and associates of such person (as such terms are defined in
Rule 12b-2 under the Exchange Act) but excluding all "Excluded
Persons" (as defined in paragraph 5.(e)(v)), becomes the
direct or indirect beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of securities of the
Company representing (A) 40% or more of the combined voting
power of all of the Company's outstanding securities entitled
to vote generally in the election of the Company's directors,
or (B) 40% or more of the combined shares of the Company's
capital stock then outstanding, all except in connection with
any merger, consolidation, reorganization or share exchange
involving the Company;
(2) the consummation of any merger,
consolidation, reorganization or share exchange involving the
Company, unless the holders of the Company's capital stock
outstanding immediately before such transaction own more than
50% of the combined outstanding shares of capital stock and
have more than 50% of the
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combined voting power in the surviving entity after such
transaction and they own such securities in substantially the
same proportions (relative to each other) as they owned the
Company's capital stock immediately before such transaction;
(3) the consummation of any sale or other
disposition (in one transaction or a series of related
transactions) of all, or substantially all, of the Company's
assets to a person whose acquisition of 40% or more of the
combined shares of the Company's capital stock then
outstanding would have caused a Change in Control under
paragraph 5.(e)(iii)(1)); or
(4) the "Continuing Directors" (as defined in
paragraph 5.(e)(vi)) cease to be a majority of the Company's
directors.
A determination by the Company's Continuing Directors (by resolution
of at least a majority of the Continuing Directors) as to whether a
Change in Control has occurred for purposes of this Agreement, the
date on which it has occurred or both shall be conclusive for
purposes of this Agreement.
(iv) "Period". The period (the "Period") will begin on
the date of this Agreement and end on the first to occur of (a) the
end of the term of this Agreement, without regard to any termination
as a result of Rodefeld's death, Disability, termination by the
Company for Cause, retirement, resignation or termination by the
Company without Cause, (b) Rodefeld's death, (c) Rodefeld's
Disability, and (d) 90 days after the termination of Rodefeld's
employment (voluntarily or involuntarily and with or without Cause or
Good Reason) if (1) such termination occurs before a Change in
Control, and (2) a Change in Control does not occur during such 90
day period. Notwithstanding the foregoing, (1) if Rodefeld becomes
entitled to severance benefits under paragraph 5.(e)(i), the
provisions of paragraph 5.(e)(ii) of this Agreement will continue
until Rodefeld's eligibility to receive severance benefits under this
Agreement ceases and such provisions and the other provisions of this
Agreement not limited by the Period, including, without limitation,
paragraphs 5.(g), 7, 10 and 11 will survive the end of the Period.
(v) "Excluded Persons". For purposes of this Agreement,
the "Excluded Persons" are (i) Rodefeld, (ii) any "group" (as that
term is used in Section 13(d) of the Exchange Act and the rules
thereunder) that includes Rodefeld or in which Rodefeld is, or has
agreed to become, an equity participant, (iii) any entity in which
Rodefeld is, or has agreed to become, an equity participant, (iv) the
Company, (v) any subsidiary of the Company, (vi) any employee benefit
plan of the Company or any subsidiary of the Company or the related
trust, (vii) any entity to the extent it is holding capital stock of
the Company for or pursuant to the terms of any employee benefit plan
of the Company or any subsidiary of the Company, and (viii) any
director or officer of the Company as of the date of this Agreement.
For purposes of this Agreement, Rodefeld shall not be deemed an
"equity participant" in any group or entity (i) in which Rodefeld
owns for investment purposes only no more than 5% of the stock of a
publicly-traded entity whose stock is either listed on a national
stock exchange or quoted in The Nasdaq National Market, if Rodefeld
is not
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otherwise affiliated with such group or entity, or (ii) if Rodefeld's
participation is fully-disclosed to, and approved by, the Company's
Board of Directors and the Continuing Directors before the Change in
Control occurs.
(vi) "Continuing Directors". For purposes of this
Agreement, the "Continuing Directors" are the directors of the
Company as of the date of this Agreement, and any person who
subsequently becomes a director if such person is appointed to be a
director by a majority of the Continuing Directors or if such
person's initial nomination for election or initial election as a
director is recommended or approved by a majority of the Continuing
Directors.
(vii) "Entity". For purposes of this Agreement, the
"Entity" shall mean both (1) the Company and, (2) in connection with
a Change in Control defined in paragraph 5.(e)(iii)(2) or paragraph
5.(e)(iii)(3), the survivor of the merger, consolidation,
reorganization or share exchange involving the Company and the buyer
of all, or substantially all, of the Company's assets, if such
additional entity described in this clause (2) (if other than the
Company) has offered to employ Rodefeld on such terms that would not
constitute "Good Reason" for termination of Rodefeld's employment if
imposed by the Company. Therefore, for purposes of this paragraph
5.(e), Rodefeld shall not be deemed to have terminated Rodefeld's
employment with the Entity for "Good Reason" and the "Entity" shall
not be deemed to have terminated Rodefeld's employment without Cause
unless such actions are taken by all entities included within the
definition of "Entity". In addition, for purposes of this paragraph
5.(e), Rodefeld shall not be deemed to have terminated Rodefeld's
employment with the Entity for "Good Reason" and the "Entity" shall
not be deemed to have terminated Rodefeld's employment without Cause
if (1) the survivor of the merger, consolidation, reorganization or
share exchange involving the Company and the buyer of all, or
substantially all, of the Company's assets has offered to employ
Rodefeld on such terms that would not constitute "Good Reason" for
termination of Rodefeld's employment if imposed by the Company, (2)
Rodefeld refuses such employment, and (3) the Company terminates
Rodefeld's employment for any reason or for no reason.
(viii) "Good Reason". Termination of Rodefeld's
employment for "Good Reason" means Rodefeld's voluntary termination
of employment with the Entity before or after a Change in Control as
a result of (1) any change by the Entity (without Rodefeld's consent)
in Rodefeld's title from Rodefeld's title immediately before such
Change in Control, (2) any decrease by the Entity (without Rodefeld's
consent) in Rodefeld's compensation or incentives from Rodefeld's
compensation and incentives immediately before such Change in
Control, except with respect to benefits covered by clause (3);
provided that Rodefeld's bonus shall not be deemed to have decreased
if Rodefeld has a substantially similar opportunity to earn a bonus
as Rodefeld did in the last full fiscal year before the Change in
Control, (3) any decrease by the Entity (without Rodefeld's consent)
in Rodefeld's benefits from Rodefeld's benefits immediately before
such Change in Control, unless such decrease is applied in the same
manner to all executive officers of the Entity, (4) a substantial
change by the Entity (without Rodefeld's consent) in Rodefeld's
duties or responsibilities from Rodefeld's duties and
responsibilities immediately before such Change in Control, (5) any
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requirement by the Entity (to which Rodefeld does not consent) that
Rodefeld change Rodefeld's primary place of business to be outside
the metropolitan Jackson area, or (6) if the Change in Control
results in a new entity being a successor to the Company's business,
the failure of the new entity to assume expressly in writing the
Company's obligations under this Agreement and under any written
employment agreement between Rodefeld and the Company in effect
immediately before the Change in Control. "Good Reason" will not
include Rodefeld's death, Disability or Retirement (as defined
below), or Rodefeld's resignation other than as provided in the
preceding sentence. For purposes of this Agreement, "Retirement"
means Rodefeld's retirement from the Entity in accordance with the
Entity's normal policies.
(f) Transfer of Insurance Policies. If Rodefeld's employment
by the Company is terminated for any reason except Rodefeld's death or
Disability, the Company will cooperate with Rodefeld, to the extent Rodefeld
so desires, to transfer to Rodefeld, at no cost to the Company and in
exchange for a payment by Rodefeld to the Company equal to the value of the
Company's interest in the policies, the life and disability insurance
maintained by the Company on his behalf immediately before the termination of
his employment, to the extent permitted by the applicable insurance policies.
If Rodefeld's employment by the Company is terminated as a result of
Rodefeld's Disability, the Company will cooperate with Rodefeld, to the
extent Rodefeld so desires, to transfer to Rodefeld, at no cost to the
Company and in exchange for a payment by Rodefeld to the Company equal to the
value of the Company's interest in the policies, the life insurance
maintained by the Company on his behalf as of the date five years after the
termination of his employment, to the extent permitted by the applicable
insurance policies.
(g) No Other Employment Benefits. The severance benefits
provided in this Agreement are exclusive and in lieu of any other severance
benefits to which Rodefeld may be entitled, except for any benefits under the
terms of any stock options or restricted stock agreements Rodefeld may have.
6. Payment. Amounts equal to, or based on, salary, other than
deferred compensation, as well as death benefits pursuant to paragraph 5.(a),
other than proceeds of life insurance, and amounts equal to, or based on,
salary, other than deferred compensation and proceeds of life insurance, paid
pursuant to paragraphs 5.(b) and 5.(d), shall be paid in monthly or other
regular periodic installments no less frequent than monthly. Amounts equal to
the pro rata portion of Rodefeld's bonus for the year of termination paid
pursuant to paragraphs 5.(a), 5.(b), and 5.(d) shall be paid at the time they
are paid to other participants in the applicable bonus plan. Deferred
compensation, with interest thereon, shall be paid as provided in the
Jacobson Stores Inc. Deferred Compensation Plan, as amended from time to
time. The amounts described in paragraph 5.(e) shall be paid as described in
paragraph 5.(e)(ii)(5). All such payments shall be made to Rodefeld while he
is living; and in the event of his death, the payments shall be made to
Rodefeld's wife, if she is then living, or to his estate or any beneficiary
or beneficiaries he designates in writing during his lifetime.
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7. Non-Competition; Confidentiality and Non-Solicitation.
(a) Non-Competition. Rodefeld will not, during Rodefeld's
employment with the Company, directly or indirectly engage in any activity
which is competitive with any business in which the Company engages.
(b) Confidential Information. Rodefeld will not at any time
during or after Rodefeld's employment with the Company, directly or
indirectly, disclose or make accessible to any person or entity or use in any
way for Rodefeld's own personal gain (i) any confidential and secret
information as to the prices, costs, discounts, or profit margins of any
goods or services sold, purchased or handled by the Company (or its
subsidiaries), or (ii) any confidential or secret information relating to the
Company's (or its subsidiaries') financial structure, store layouts, supply
sources, designs, procedures, information systems, administration or
operations, except as authorized or directed by the Company and except that
the foregoing restrictions will not apply to information generally available
to others in the Company's line of business, information in the public
domain, information disclosed or made available by the Company to any other
person on a non-confidential basis or disclosures Rodefeld are required by
law to make. Upon termination of Rodefeld's employment with the Company for
any reason, Rodefeld will immediately return to the Company all confidential
materials over which Rodefeld exercise any control.
(c) Non-Solicitation. Rodefeld will not at any time during
Rodefeld's employment by the Company and for two years thereafter, directly
or indirectly, solicit for any purpose, interfere with, entice away from the
Company (or its subsidiaries) or hire any employee or agent of the Company
(or its subsidiaries) who was employed by the Company within one year before
the termination of Rodefeld's employment.
(d) Equitable Remedies. Paragraphs 7.(a), 7.(b) and 7.(c) are
intended, among other things, to protect the confidential information
described in paragraph 7.(b) and relate to matters which are of a special and
unique character, and their violation may cause irreparable injury to the
Company, the amount of which will be extremely difficult, if not impossible,
to determine and which cannot be adequately compensated by monetary damages
alone. Therefore, if Rodefeld breaches or threatens to breach any of those
paragraphs, in addition to any other remedies which may be available to the
Company under this Agreement or at law or equity, the Company may obtain an
injunction, restraining order, or other equitable relief against Rodefeld and
such other persons and entities as are appropriate.
8. Modification. This Agreement is the complete agreement between
Rodefeld and the Company and may be modified only by a written instrument
executed by both parties.
9. Law. The internal laws of the State of Michigan shall govern this
Agreement, its construction, and the determination of any rights, duties or
remedies of the parties arising out of or relating to this Agreement.
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10. Costs of Enforcement. The Company shall pay on demand all of
Rodefeld's reasonable out-of-pocket fees, costs and expenses (including
reasonable attorneys' fees, court costs and other legal expenses and costs of
investigation) incurred by Rodefeld in connection with the enforcement of
this Agreement (as amended from time to time and including any successor to
this Agreement) or in connection with any disputes concerning the meaning or
interpretation of this Agreement (as amended from time to time and including
any successor to this Agreement). During the pendency of any such enforcement
proceeding or dispute, the Company shall continue to pay the disputed amounts
and benefits provided in this Agreement (as amended from time to time and
including any successor to this Agreement), and if it fails to do so, the
Company shall pay Rodefeld interest, at the prime or base rate announced from
time to time by Comerica Bank, on such amounts from the date they were due
through the date they are actually paid. The obligations contained in this
paragraph 10 shall survive the end of the Period.
11. Arbitration.
(a) Agreement to Arbitrate. Any disputes between the parties
with respect to the terms and conditions of this Agreement (as amended from
time to time and including any successor to this Agreement) (other than those
disputes with respect to which equitable relief (such as specific performance
or an injunction) is the appropriate remedy) that are not resolved within 30
days after one party notifies the other party in writing of the dispute shall
be resolved by and through binding arbitration conducted under the auspices
of the American Arbitration Association (or any like organization successor
thereto) in Jackson, Michigan. Both the foregoing agreement of the parties to
arbitrate any and all claims, and the results, determination, finding,
judgment and/or award rendered through such arbitration, shall be final and
binding on the parties to this Agreement and may be specifically enforced by
legal proceedings, and, pursuant to MCLA ss. 600.5001, the parties agree that
a judgment of any Michigan circuit court may be rendered upon any arbitration
award rendered pursuant to this paragraph 11. The parties agree and
acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this arbitration agreement and that any party may, in
his or its sole discretion, ask for specific performance and/or injunctive
relief in order to enforce or prevent any violations of the provisions of
this arbitration agreement.
(b) Procedure. Such arbitration shall be initiated by the
written notice of the dispute described in paragraph 11.(a), and such
arbitration shall be a compulsory and binding proceeding on each party. Such
arbitration proceeding shall be conducted under the commercial arbitration
rules (formal or informal) of the American Arbitration Association before one
arbitrator, and the arbitrator in any such arbitration shall be such person
who is expert in the subject matter of the dispute. The costs of the
arbitrator and the arbitration shall be borne by the Company. Each party will
bear separately the cost of its or his respective attorneys, witnesses and
experts in connection with such arbitration, subject to the Company's
obligations under paragraph 10. Time is of the essence of this arbitration
procedure, and the arbitrator shall be requested to render his or her
decision within 10 days following completion of the arbitration.
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12. Successor Obligations. This Agreement will be binding upon and
inure to the benefit of the Company and its successors and assigns, and the
Company will require any successor to, or transferee of, all or substantially
all of its business or assets to assume all of the Company's obligations
under this Agreement (such successor or assign will be deemed, for purposes
of this Agreement, to be the Company). This Agreement will be binding upon
Rodefeld and will inure to Rodefeld's benefit, but Rodefeld may not assign
this Agreement without the Company's prior written consent.
13. Duplicate Copies. This Agreement may be executed in counterparts,
both of which together will be deemed an original of this Agreement.
14. Severability. The provisions of this Agreement will be deemed
severable, and if any part of any provision is held illegal, void or invalid
under applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding. If
any provision of this Agreement is held illegal, void or invalid in its
entirety, the remaining provisions of this Agreement will not in any way be
affected or impaired but will remain binding in accordance with their terms.
15. Miscellaneous Provisions. This Agreement supersedes all previous
employment and severance agreements between the parties. In addition to all
other remedies available at law, it shall be specifically enforceable by any
court having jurisdiction. Paragraph headings are for convenience only and
shall not affect the construction of any provision. The rights and
obligations hereunder, particularly but without limitation including
paragraph 5.(e), shall survive the expiration of the term of this Agreement.
IN THE PRESENCE OF: JACOBSON STORES INC.
By: /c/ P. Gerald Mills
------------------------
P. Gerald Mills,
Chairman of the Board and
Chief Executive Officer
By: /c/ Richard Z. Rosenfeld
-------------------------
Richard Z. Rosenfeld,
Secretary
/c/ James A. Rodefeld
--------------------------
James A. Rodefeld
11
EXHIBIT 15
ARTHUR ANDERSEN LLP
To Jacobson Stores Inc.:
We are aware that Jacobson Stores Inc. has incorporated by reference in its
Form S-8 Registration Statements File Nos. 2-88295, 033-53469 and 333-31989
and Form S-2 File No. 33-10532 its Form 10-Q for the quarter ended May 2,
1998, which includes our report dated May 15, 1998, covering the unaudited
interim condensed consolidated financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statement prepared or certified by our
firm or a report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Detroit, Michigan
June 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES AS
OF, AND FOR THE THIRTEEN WEEK PERIOD ENDED, MAY 2, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> MAY-02-1998
<PERIOD-TYPE> 3-MOS
<CASH> 6,373
<SECURITIES> 0
<RECEIVABLES> 32,961
<ALLOWANCES> 747
<INVENTORY> 90,357
<CURRENT-ASSETS> 133,890
<PP&E> 175,024
<DEPRECIATION> 90,221
<TOTAL-ASSETS> 239,229
<CURRENT-LIABILITIES> 51,823
<BONDS> 106,226
<COMMON> 5,967
0
0
<OTHER-SE> 65,779
<TOTAL-LIABILITY-AND-EQUITY> 239,229
<SALES> 114,825
<TOTAL-REVENUES> 114,825
<CGS> 72,762
<TOTAL-COSTS> 72,762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,948
<INCOME-PRETAX> 3,911
<INCOME-TAX> 1,369
<INCOME-CONTINUING> 2,542
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,542
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.42
</TABLE>
