FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1998
Commission File No. 0-6319
JACOBSON STORES INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Michigan 38-0686330
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(STATE OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
3333 Sargent Road, Jackson, Michigan 49201-8847
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code: 517-764-6400
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 par value
Series A Preferred Stock Purchase Rights
6 3/4% Convertible Subordinated Debentures due 2011
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT. THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE
TO THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES
OF SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF
FILING.
$54,537,000 as of March 1, 1998
(THE PERSONS CONSIDERED AFFILIATES FOR THE PURPOSE OF THE FOREGOING
COMPUTATION ARE IDENTIFIED ON PAGE 20 OF THIS REPORT.)
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
Common Stock, $1 par value: 5,779,021 2/3 shares outstanding
as of March 1, 1998
DOCUMENTS INCORPORATED BY REFERENCE
LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE
PART OF THE FORM 10K INTO WHICH THE DOCUMENT IS INCORPORATED:
SPECIFIED PORTIONS OF PROXY STATEMENT FOR 1998 ANNUAL MEETING OF
SHAREHOLDERS, TO BE HELD MAY 28, 1998: PART III
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC.
FORM 10K
FISCAL YEAR ENDED JANUARY 31, 1998
INDEX
Page
----
<S> <C> <C>
PART I.
Item 1. Business. 1
Item 2. Properties. 7
Item 3. Legal Proceedings. 9
Item 4. Submission of Matters to a Vote of Security Holders. 9
<CAPTION>
Executive Officers of the Registrant. 10
<S> <C> <C>
PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. 12
Item 6. Selected Financial Data. 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 19
Item 8. Financial Statements and Supplementary Data. 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 19
PART III.
Item 10. Directors and Executive Officers of the Registrant. 20
Item 11. Executive Compensation. 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management. 20
Item 13. Certain Relationships and Related Transactions. 20
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8K. 21
SIGNATURES 25
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1/F-19
FINANCIAL STATEMENT SCHEDULES S-1
INDEX OF EXHIBITS E-1/E-3
</TABLE>
<PAGE>
PART I
------
ITEM 1. BUSINESS.
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INTRODUCTION
------------
The registrant, Jacobson Stores Inc., a Michigan corporation and
successor to a business founded in 1868, operates specialty stores catering
to discerning customers with preferences for quality merchandise. The Company
emphasizes quality merchandise, fully staffed stores, personalized customer
service and attractive, comfortable shopping surroundings. Each store
features fashion apparel and accessories for the family, and most offer
decorative accents for the home.
The Company owns a substantial portion of the real property used in
its business, primarily through its consolidated, wholly-owned real estate
subsidiary, Jacobson Stores Realty Company ("Jacobson Realty"). The Company
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 Company has stores in twenty-four cities in
Michigan, Indiana, Kansas, Kentucky, Ohio and Florida. The principal
merchandising and distribution functions are performed at 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.
MERCHANDISE AND MARKETING
Merchandise. Jacobson's directs its primary merchandising and
marketing efforts to discerning customers with preferences for quality
merchandise. Stores are merchandised with fashion apparel and accessories for
the family, and most offer decorative accents for the home.
1
<PAGE>
The percentage contribution to sales by major class of merchandise for the
last three fiscal years was as follows:
<TABLE>
<CAPTION>
Year Ended
----------------------------
January January January
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Women's apparel and accessories.............. 66.7% 67.2% 66.7%
Men's apparel and accessories................ 13.6 13.3 13.2
Accessories for the home..................... 8.2 7.8 7.9
Children's apparel and accessories........... 7.7 7.6 7.9
Miscellaneous................................ 3.8 4.1 4.3
------ ----- -----
100.0% 100.0% 100.0%
====== ===== =====
</TABLE>
Personal Service. Jacobson's stores are fully staffed with
knowledgeable sales associates to ensure that customers receive prompt
personal attention. Jacobson's sales associates are experienced and
well-trained through video presentations, seminars and close working
relationships with buyers and merchandise managers. Sales associates maintain
personal trade lists of their customers' sizes, colors, fashion preferences,
and important dates, and contact customers by telephone or personal note to
alert them to the arrival of new merchandise or to remind them of birthdays
or anniversaries. Management believes that personal relationships between
sales associates and their clientele promote customer loyalty and contribute
to the Company's growth. Jacobson's has a liberal return policy and accepts
merchandise purchased at Jacobson's for return or exchange if the customer is
not satisfied. Other special services include free gift wrapping and free
parking. All Jacobson's sales associates are compensated on some form of
commission program.
Sales Promotion. The Company uses newspaper, radio, television and
direct mail advertising, as well as in-store events and billing statement
enclosures, to stimulate sales. Advertising generally focuses on current
fashions and merchandise classifications. The Company's policy is to price
merchandise fairly and competitively and to limit its use of sale events to
selected special promotions and seasonal clearances. Management believes that
its pricing practices enhance credibility and customer loyalty. Jacobson's
instore events include fashion shows and wardrobing seminars to communicate
fashion trends to customers.
Store Design. Jacobson's stores are designed to project an
attractive, comfortable atmosphere similar to the style customers find in
their own homes. All aspects of the store interiors and fixturing are
coordinated by the Company's store planning personnel, using quality
fixtures, carpeting, lighting and displays.
2
<PAGE>
CREDIT POLICY
Jacobson's issues its own credit card as a customer service. The
Company offers three credit plans to its cardholders: an Option plan
requiring a minimum monthly payment of 20% of the outstanding balance; an
Extended Payment plan available primarily for furs, fine jewelry, and
furniture purchases in the Company's two stores which carry furniture; and a
Tabletop plan granting extended payment terms without finance charge for
qualifying purchases of china, crystal, silver, and table linens.
Sales under Jacobson's credit plans averaged 42.0% of sales for the
last three fiscal years and accounted for 38.1% of the Company's sales in
fiscal 1997. In addition, sales under third party credit cards (VISA,
MasterCard and American Express) averaged 41.4% of sales for the last three
fiscal years and accounted for 45.8% of the Company's sales in fiscal 1997.
Accounts written off, net of recoveries, have averaged 0.6% of credit sales
over the last three years and totalled 0.6% of credit sales in 1997.
The Company maintains purchasing history on its 232,000 active
Jacobson's card holders as well as on third party charge customers, which
permits targeting of direct mail advertising and automatic increases in
credit limits of its cardholders.
OPERATIONS
The Company operates in two regions, the Midwest and Florida. The
principal merchandising and distribution functions for the Midwest stores are
performed at a regional distribution facility in Jackson, Michigan. The
principal merchandising and distribution functions for the Florida stores are
performed at a regional distribution facility in Winter Park, Florida.
Functions common to all stores, such as management coordination, sales
promotion, data processing and accounting, are centralized at the corporate
headquarters in Jackson, Michigan.
Jacobson's stores in Michigan are located in Birmingham, Grosse
Pointe, Livonia and Rochester (all suburbs of Detroit), Ann Arbor, East Grand
Rapids, East Lansing and Saginaw; in Indiana, in Indianapolis; in Kansas, in
Leawood; in Kentucky, in Louisville; in Ohio, in Columbus and Toledo; and in
Florida, in Boca Raton, Clearwater, Fort Myers, Jacksonville, Longwood,
Naples, North Palm Beach, Osprey, Sarasota, Tampa and Winter Park. Stores in
the Midwest range from 101,000 to 199,000 square feet. The Florida stores
range from 23,000 to 90,000 square feet. In 1997, the Company closed
underperforming stores in Jackson, Kalamazoo and Dearborn, Michigan, and
closed its clearance center in Troy, Michigan.
3
<PAGE>
In 1997, Jacobson's extended its evening hours in most communities to
better serve customers. Stores are generally open seven days each week for
71 hours.
Annual sales, percentage increase in sales, average gross square
footage of stores in operation during the fiscal year, and approximate sales
per average gross square foot were as follows:
<TABLE>
<CAPTION>
Year Ended
---------------------------------
January January January
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net sales (in thousands)........................... $447,471 $432,469 $414,267
Percentage increase in sales:
All stores...................................... 3.5% 4.4% 1.2%
Comparable stores............................... 7.3% (1.5)% (1.1)%
Average gross square footage (in thousands)........ 2,387 2,658 2,537
Approximate sales per average gross square foot.... 187 163 163
</TABLE>
PURCHASING, CONTROL AND DISTRIBUTION OF INVENTORY
Jacobson's purchases merchandise from several thousand suppliers, no
one of which accounted for as much as 6.0% of the Company's net purchases
during fiscal 1997. The Company maintains separate staffs of buyers for its
Midwest and Florida stores to better respond to customer lifestyles and
merchandise preferences. Merchandising decisions are directed by 2 general
merchandise managers, 12 divisional merchandise managers and 77 buyers. In
addition, the Company is a member of the Frederick Atkins Buying Office, a
domestic and foreign buying office serving 18 retailers, which provides
merchandising counsel, product information, direct store import capability,
and other services.
An online computerized merchandise information system provides the
Company's buyers with detailed reports of current sales and inventory levels
for each store, by department, class, vendor, style, color and size. This
system permits the Company's merchandising staff to analyze trends on a daily
basis, to identify fastselling and slowselling merchandise and to respond to
customer buying preferences when making reorder and markdown decisions.
Merchandise is generally shipped directly from vendors to the
Company's regional distribution centers in Jackson, Michigan and in Winter
Park, Florida, where it is inspected for quality by the Company's buyers,
priced and shipped to the stores by Jacobson's fleet of trucks.
Jacobson's adopted the LIFO method of inventory valuation in 1968. At
the end of fiscal 1997, LIFO reserves totalled $18,633,000, or approximately
17.8% of pre-LIFO inventory values. Physical inventories are taken once each
year. Inventory shrinkage at retail over the past three fiscal years has
averaged 1.7% of retail sales.
4
<PAGE>
EXPANSION AND CONSOLIDATION
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 significant one time charges to effect
the closing and to recognize any impairment of assets resulting from the
closing decision. 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 recognize estimated severance and related
benefits and expense to hold the closed facilities pending disposition and to
state property and equipment at estimated fair value. The Company recognized
a $340,000 pre-tax credit to this reserve in 1997 to write-off the remaining
severance and benefit reserves after all payments were made and to adjust the
write-down of the property and equipment reserve after the sale of a portion
of the related property at greater than the original estimated value.
The Company closed its Troy, Michigan, clearance center in late May
1997.
REAL ESTATE POLICY
Jacobson's owns or has long-term leases of the real estate used in
the operation of its business. The Company owns 65.4% of the total square
footage used in its business. The Company maintains a continuing program of
property improvements and renewal of existing stores and support facilities.
At January 31, 1998, mortgage loans and related secured financings comprised
38.4% of consolidated debt.
COMPETITION
The specialty store business is highly competitive. The Company's
stores are in active competition with other department and specialty stores
and with regional and national department store chains, some of which are
considerably larger than the Company and have substantially greater financial
and other resources. Jacobson's competes principally on the basis of
availability of fashion merchandise, quality, personalized service and
attractive store surroundings, as well as fair pricing and advertising. The
Company believes it is a respected retail merchandiser in the communities it
serves, and that its merchandising policies and reputation enable it to
maintain its competitive position.
5
<PAGE>
ASSOCIATES
Jacobson's believes that its associates are among its key resources.
Management stresses development programs for associates and promotion from
within. The Company employs approximately 4,600 associates, 3,500 fulltime
and 1,100 parttime. During the holiday season, the number of associates
increases to approximately 5,200.
(a) GENERAL DEVELOPMENT OF BUSINESS.
Some of the principal developments affecting Jacobson's store
locations during fiscal 1997 are summarized on page 5 of this report under
the caption "Expansion and Consolidation".
In May 1997, Joseph H. Fisher, Senior Vice President-General
Merchandise Manager, resigned and Herman J. Heinle was promoted to Senior
Vice President-General Merchandise Manager. In September 1997, Robert L.
Moles, Senior Vice President-Stores, resigned. In November 1997, James A.
Rodefeld was promoted to Executive Vice President-Marketing & Stores.
To fund its working capital requirements, the Company has a
$100,000,000 revolving credit facility under a Revolving Credit Agreement
with a commercial lender. The facility 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. Loans under the
facility bear interest at either or both of two variable interest rate
alternatives as chosen by the Company. One of the interest rates may decrease
if the Company meets specified performance measures, which were not met in
1997. The facility also permits up to $5,000,000 in letters of credit, which
decrease the amount available for loans under the facility.
Borrowings under the facility mature on March 24, 2000, with
automatic one year renewals on such maturity date, unless the facility is
terminated by notice from any party to the others at least 90 days before the
facility would otherwise terminate. The Company may also terminate the
facility early upon 90 days notice if it pays a termination fee equal to
one-half of one percent a year (for what would have been the remaining term
of the facility) of the average daily balance of loans and letters of credit
under the facility since its inception. The facility carries a line of credit
fee equal to one-quarter of one percent a year of the excess of the aggregate
commitments under the facility (currently $80,000,000) over the amount of
loans and letters of credit outstanding and an agent's fee of $45,000 a year.
Borrowings under the facility are guaranteed by the Company's subsidiaries
and secured by accounts receivables, inventory and related intangible assets
and the proceeds thereof of the Company and its subsidiaries.
The Company discontinued its cash dividend in 1996. The
revolving credit facility limits cash dividends to 50.0% of net income for
the immediately preceding fiscal year, subject to a maximum of $.50 per
outstanding share per year and borrowing availability restrictions. As of
January 31, 1998, the Company had borrowed $35,032,000 under this facility at
an average annual interest rate of 8.3% and had $44,968,000 of borrowing
availability under this facility.
6
<PAGE>
(b) INDUSTRY SEGMENTS AND LINES OF BUSINESS.
Jacobson's operates in a single industry, the specialty store
industry.
The percentage contribution to sales by major class of
merchandise for each of the last three fiscal years is set forth on page 2 of
this report.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
The nature of Jacobson's business, the categories of merchandise
it sells, and the percentage contribution to sales by merchandise category
during the past three fiscal years, are set forth on pages 16 of this report.
The specialty store business is seasonal. The holiday season
(from the day after Thanksgiving to January 1) generally accounts for 15-20%
of Jacobson's net sales.
By reason of the seasonal nature of the business, Jacobson's and
others in the industry experience significant build-up of inventory and
accounts receivable at certain times of the year. To support the seasonal
requirements, the Company has a revolving credit line currently permitting
borrowings of up to $80,000,000 (which the Company may increase to up to
$100,000,000), subject to a borrowing base limitation and lender reserves.
Further information on this line of credit is set forth on page 6 and in the
Notes to the Company's Consolidated Financial Statements for the three fiscal
years ended January 1998, filed as part of this report (see "Financing" on
page F-11).
Competitive conditions in the specialty store business are
discussed on page 5 of this report.
Information with respect to the Company's associates is provided
on page 6 of this report.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES.
The registrant has no foreign operations and no material export
sales.
ITEM 2. PROPERTIES.
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The following table shows the location and approximate size of
Jacobson's stores and its offices and principal warehouse and distribution
facilities; whether owned by the registrant or leased; and the expiration
dates (including renewal options) of principal real estate leases. The
majority of owned properties are subject to mortgages.
7
<PAGE>
Jacobson's management considers that these properties, as well as its
furniture, fixtures, machinery and equipment, are well maintained, suitable
and adequate for their intended purposes, and in general fully utilized.
<TABLE>
<CAPTION>
Approximate Expiration
Total Square Dates of
Feet of Principal
Locations Building(s) Ownership Leases
--------- ----------- --------- ---------
<S> <C> <C> <C>
MICHIGAN
Ann Arbor.................. 101,000 Owned ----
East Lansing............... 117,000 Partly owned (1) 2028
Saginaw.................... 199,000 Partly owned (2) 1998
Grosse Pointe.............. 151,000 Partly owned (3) 1998
Birmingham................. 179,000 Partly owned (4) 2008
East Grand Rapids.......... 148,000 Owned ----
Rochester.................. 106,000 Partly owned (5) 2046
Livonia.................... 150,000 Owned ----
Central Office and Regional
Distribution Center
(Jackson)............... 238,000 Owned ----
INDIANA
Indianapolis............... 120,000 Leased 2048
KANSAS
Leawood.................... 120,000 Leased 2051
KENTUCKY
Louisville................. 161,000 Leased 2036
OHIO
Toledo..................... 120,000 Owned ----
Columbus................... 119,000 Partly owned (6) 2079
FLORIDA
Sarasota................... 27,000 Partly owned (6) 2014
Winter Park................ 23,000 Leased 2013
Longwood................... 49,000 Leased 2020
North Palm Beach........... 90,000 Leased 2022
Osprey..................... 32,000 Leased 2025
Clearwater................. 52,000 Leased 2039
Fort Myers................. 51,000 Partly owned (7) 2085
Jacksonville............... 82,000 Owned ----
Tampa...................... 48,000 Leased 2030
Naples..................... 46,000 Leased 2042
Boca Raton................. 80,000 Leased 2052
Regional Distribution
Center (Winter Park).... 84,000 Owned ----
8
<PAGE>
</FN>
(1) Building is owned; approximately half of land is owned and half
leased.
(2) Approximately 29,000 square feet leased from month to month; balance
owned.
(3) Grosse Pointe Apparel store (120,000 square feet) is owned. The
Grosse Pointe Store for the Home (31,000 square feet) has been sold
and is operated by the Company under a short-term lease from the
purchaser until July 1998, when it will consolidate operations in
its existing Apparel Store.
(4) Birmingham Fashion Apparel Store (98,000 square feet) is owned. The
Men's, Children's and Home Store (81,000 square feet) includes
approximately 64,000 square feet owned; the balance is leased.
(5) Approximately 71,000 square feet and related parking area are owned.
The balance of the shopping center is leased, of which 35,000 square
feet are operated as part of Jacobson's store.
(6) Building is owned on leased land.
(7) Building is owned; land and parking area are leased.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
- ---------------------------
(a) No material legal proceedings are pending to which Jacobson
Stores Inc. or any of its subsidiaries is a party or to which any of their
property is subject, other than ordinary routine litigation incidental to the
registrant's business, and no such proceeding is known by the registrant to
be contemplated.
(b) Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------
Not applicable.
9
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT.
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The table below sets forth the name and age of each executive officer
of the registrant, all positions and offices with Jacobson Stores Inc. and
its wholly-owned subsidiaries held by each such person, and the period during
which the officer has served in such positions. Each has been elected to hold
office until the 1999 Annual Meeting of the Board of Directors (except in the
case of retirement or other termination of employment) or until a successor
is elected and qualified.
<TABLE>
<CAPTION>
Held
Office
Name Age Positions and Offices Since
---- --- --------------------- -----
<S> <C> <C> <C>
P. Gerald Mills 69 Chairman of the Board, President, 1996
Chief Executive Officer, and
Director Jacobson Stores Inc. and
wholly-owned subsidiaries
Paul W. Gilbert 53 Vice Chairman of the Board, and 1993
Director, Jacobson Stores Inc. and
wholly-owned subsidiaries
James A. Rodefeld 59 Executive Vice President-Marketing & 1997
Stores, Jacobson Stores Inc.
Herman J. Heinle 46 Senior Vice President- 1997
General Merchandise Manager,
Jacobson Stores Inc.
Theodore R. Kolman 57 Senior Vice President- 1991
General Merchandise Manager,
Jacobson Stores Inc.
Beverly A. Rice 64 Senior Vice President-Fashion & 1997
Merchandising Strategy, Jacobson
Stores Inc.
Timothy J. Spalding 42 Vice President-Controller, 1991
Jacobson Stores Inc. and
wholly-owned subsidiaries
</TABLE>
There is no arrangement or understanding between any of the officers
and any other person pursuant to which the officer was selected as an
officer, except that each of the executive officers is party to an employment
agreement with the Company pursuant to which he or she is required to be
elected to the offices with the Company he currently holds, or such other
capacity as the Board of Directors, or the Chief Executive Officer, as
applicable, deems advisable.
Each executive officer except Mr. Mills, Ms. Rice and Mr. Rodefeld
has held managerial or executive positions with Jacobson's for more than five
years.
10
<PAGE>
P. Gerald Mills has served as Chairman of the Board and Chief
Executive Officer of the Company since October 1996, and also as President of
the Company since December 1996. Mr. Mills was Chairman and Chief Executive
Officer of Dayton Corporation, 1978-1981; was Chairman and Chief Executive
Officer, the J. L. Hudson Company, 1981-1983; was Chairman and Chief
Executive Officer, Dayton Hudson Department Store Company and Executive Vice
President, Dayton Hudson Corporation, 1983-1985; was Chairman and Chief
Executive Officer, Millston Corporation, a specialty store retailer,
1986-1992; and he was a business consultant from 1992-1996.
Paul W. Gilbert has been Vice Chairman of the Board of the Company
since 1993. Mr. Gilbert was Vice President and Controller of the Company,
1976-1984, Senior Vice President and Chief Financial Officer, 1984-1988,
Executive Vice President and Chief Financial Officer 1988-1993, and Treasurer
1991-1993.
James A. Rodefeld has been Executive Vice President-Marketing &
Stores since November 1997. Mr. Rodefeld was Chief Executive Officer,
Sycamore Stores, Inc., 1987-1992, was self-employed as a business consultant,
1992-1997, and Senior Vice President-Marketing of the Company, January to
November, 1997.
Herman J. Heinle has been Senior Vice President, General Merchandise
Manager of the Company since May 1997. Mr. Heinle was Vice President,
Divisional Merchandise Manager of the Company 1988-1997.
Theodore R. Kolman has been Senior Vice President-General
Merchandise Manager of the Company since 1991.
Beverly A. Rice has been Senior Vice President-Fashion and
Merchandising Strategy of the Company since January 1997. Ms. Rice was Vice
President, General Manager, N. Theobald, Inc., a specialties gift and home
store 1988-1995, from which she retired.
Timothy J. Spalding has been Vice President-Controller since 1991.
11
<PAGE>
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
- ---------------------------------------------------------
STOCKHOLDER MATTERS.
--------------------
The Company's Common Stock is traded on The Nasdaq National Market
tier of The Nasdaq Stock Market, under the symbol "JCBS."
The quarterly range of high and low sales price quotations of
Jacobson's Common Stock and dividends paid per share for each quarter of
fiscal 1997 and 1996 are shown in the following schedule:
<TABLE>
<CAPTION>
Dividends
Per
Year Quarter High Low Share
---- ------- ---- --- ---------
<S> <C> <C> <C> <C>
1997 4th $13 3/4 $10 1/2 $ -0-
---- 3rd 13 1/4 7 7/8 -0-
2nd 10 3/8 7 3/8 -0-
1st 9 1/2 7 1/8 -0-
1996 4th $10 5/8 $ 7 1/2 $ -0-
---- 3rd 11 1/2 7 1/4 .12 1/2
2nd 12 3/8 9 .12 1/2
1st 10 8 1/2 .12 1/2
</TABLE>
The approximate number of shareholders of record of Jacobson's Common
Stock as of March 1, 1998 was 1,330.
The Company's revolving credit loan facility limits cash dividends to
50.0% of net income for the immediately preceding fiscal year, subject to a
maximum of $.50 per outstanding share per year and borrowing availability
restrictions.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for fiscal 1993 through 1997 is as follows:
<TABLE>
<CAPTION>
(in thousands except
per share data) 1997(1) 1996 1995 1994 1993
------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales, including leased
departments .............. $447,471 $432,469 $414,267 $409,154 $403,816
Earnings (loss) before income
taxes .................... 1,905 (17,289) (6,541) 6,388 4,610
Net earnings (loss) ......... 1,214 (11,462) (4,206) 4,088 3,014
Total assets ................ 233,279 260,418 262,514 268,589 248,818
Long-term debt, less current
portion .................. 104,138 130,147 119,727 120,424 108,203
Per common share:
Net earnings (loss) -
Basic and Diluted ..... $ 0.21 $ (1.98) $ (0.73) $ 0.71 $ 0.52
Cash dividends ........... -- 0.37 1/2 0.50 0.50 0.50
<FN>
(1) 53 week year.
</TABLE>
=============================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS.
------------------------------------
RESULTS OF OPERATIONS
The following table shows the percentage relationship to sales of the items
presented for the periods indicated.
<TABLE>
<CAPTION>
1997(1) 1996 1995
------- ---- ----
<S> <C> <C> <C>
Net sales........................... 100.0% 100.0% 100.0%
Gross profit........................ 32.7 32.1 32.5
Selling, general and administrative
expenses......................... 31.0 32.9 32.2
Interest expense, net............... 2.1 2.2 2.1
Store closing costs (credit)........ (0.1) 1.0 --
Gain on sale of property............ (0.7) -- (0.2)
Earnings (loss) before income taxes. 0.4 (4.0) (1.6)
Net earnings (loss)................. 0.3 (2.7) (1.0)
<FN>
(1) 53 week year.
</TABLE>
13
<PAGE>
1997 versus 1996
- ----------------
Sales in 1997 totalled $447,471,000, an increase of 3.5% from 1996.
Comparable store sales increased 7.3%, including a 6.7% increase in the
Midwest stores and an 8.6% increase in the Florida stores. The 1997 fiscal
year included 53 weeks. On an equivalent 52 week basis, the total sales gain
was 1.8% and comparable store sales increased 5.6% (up 5.2% in Midwest stores
and 6.4% in Florida stores). The overall 1997 sales increase reflects the
increase in comparable store sales, the first full year impact of new stores
in Leawood, Kansas, and Boca Raton, Florida, opened in March and November
1996, respectively, and the extra week in 1997, partially offset by the
closing of three underperforming stores in March 1997. In 1998, the Company
expects an increase in comparable store sales to offset the impact of the
extra week and the sales volume of stores closed in 1997.
Women's apparel and accessories represented 66.7% of the Company's
total business in 1997. Other major components were men's 13.6%, children's
7.7%, home accessories 8.2%, and miscellaneous 3.8%.
The Company's gross profit percentage increased to 32.7% in 1997 from
32.1% in 1996, due primarily to reduced inventory shortage and elimination of
incentive discounts offered to new charge customers in 1996, partially offset
by a higher LIFO provision which increased cost of goods sold by $1,553,000
in 1997 compared to $268,000 in 1996.
Selling, general and administrative expenses decreased to 31.0% of
sales in 1997 from 32.9% in 1996. The decrease is due primarily to expense
leverage resulting from increased sales, Company-wide expense reduction
initiatives and severance obligations in 1996 associated with changes of
senior management, partially offset by higher sales promotion expense.
Interest expense totalled 2.1% of sales in 1997 compared with 2.2% in
1996.
The Company established a $4,200,000 reserve in 1996 in connection
with the closing of three under-performing stores in March 1997. In 1997, the
Company recognized a $340,000 pre-tax credit to write-off the remaining
severance and benefit reserves after all payments were made and to adjust the
write-down of the property and equipment reserve after sale of a portion of
the related property at greater than the original estimated value.
In 1997, the Company realized pre-tax gains on sales of property
totalling $2,987,000, including the sale of its Grosse Pointe Store for the
Home and immaterial gains on the sale of two non-operating properties.
1997 net earnings totalled $1,214,000, or 21 cents per common share,
compared with a 1996 net loss of $11,462,000, or $1.98 per share. As a
percentage of sales, net earnings were 0.3% in 1997 and the 1996 net loss was
2.7%. 1997 results included after-tax gains on sales of property and store
closing reserve credits totalling $2,196,000, or 38 cents per common share.
1996 results included after-tax store closing costs and severance obligations
totalling $3,713,000, or 64 cents per share.
14
<PAGE>
1996 Versus 1995
- ----------------
Sales in 1996 totalled $432,469,000, an increase of 4.4% from 1995.
The overall increase in sales was due primarily to new stores opened in
Leawood, Kansas in March 1996 and in Boca Raton, Florida in November 1996, as
comparable store sales decreased 1.5%. The comparable store sales decrease
included a 4.0% decrease in sales in the Company's Midwest stores, partially
offset by a 4.8% increase in the Company's Florida stores. Sales in the
Company's Midwest stores were pressured as a result of increased competition,
including the addition of 950,000 square feet of retail space to the Somerset
Collection, a regional shopping mall in the metropolitan Detroit area, in
August 1996.
Women's apparel and accessories represented 67.2% of the Company's
total business in 1996. Other major components were men's 13.3%, children's
7.6%, home accessories 7.8% and miscellaneous 4.1%.
The Company's gross profit percentage decreased to 32.1% in 1996 from
32.5% in 1995, reflecting higher markdowns and incentive discounts offered to
new charge customers, partially offset by lower buying costs and a lower LIFO
provision which increased cost of goods sold by $268,000 in 1996 compared to
$1,324,000 in 1995.
Selling, general and administrative expenses, expressed as a
percentage of sales, increased to 32.9% compared with 32.2% in 1995,
primarily due to $1,400,000 in severance obligations associated with changes
of senior management in 1996 and the decrease in comparable store sales and
resulting lack of expense leverage.
Interest expense, expressed as a percentage of sales, increased to
2.2% from 2.1% in 1995, primarily as a result of higher revolving credit
borrowings, partially offset by lower borrowings on other long-term debt.
The Company incurred a $4,200,000 pre-tax charge in 1996 due to the
closing of three under-performing stores, which it announced in January 1997.
These costs included severance and related benefits ($900,000), reserves to
state property and equipment at estimated fair value ($2,350,000) and other
costs such as expense to hold closed facilities pending disposition
($950,000).
1996 net loss totalled $11,462,000, or $1.98 per common share,
compared with a 1995 loss of $4,206,000, or 73 cents per share. As a
percentage of sales, net losses were 2.7% and 1.0% of sales in 1996 and 1995,
respectively. 1996 results included after-tax store closing costs and
contractual severance obligations totalling $3,713,000, or 64 cents per
share. 1995 results included an after-tax gain on sale of property totalling
$693,000, or 12 cents per share.
15
<PAGE>
INFLATION
The Company cannot determine the precise effects of inflation on its
business. Because of inflation, historically the Company has experienced
increases in the cost of merchandise and in certain operating expenses. The
Company generally has been able to offset the effects of these increased
expenses by adjusting prices, by using the LIFO method for valuing all
merchandise inventories and by controlling expenses. The Company's ability to
adjust prices is limited by competitive pressures in its market areas. The
Department Store Inventory Price Indexes, published by the Bureau of Labor
Statistics (BLS), are used to measure inflation's impact on inventories in
the LIFO valuation. The BLS Index decreased 0.5% overall in 1997, increased
0.9% in 1996 and increased 0.7% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 1998, the Company's current ratio was 2.57 to 1 and
working capital totalled $78,815,000, including $3,883,000 of cash and cash
equivalents. At January 25, 1997, the Company's current ratio was 2.81 to 1
and working capital totalled $96,053,000, including $4,871,000 of cash and
cash equivalents. At January 27, 1996, the Company's current ratio was 2.91
to 1 and working capital totalled $95,091,000, including $3,068,000 of cash
and cash equivalents.
The Company uses 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. Loans under the facility bear interest at either or both of
two variable interest rate alternatives as chosen by the Company. One of the
interest rates may decrease if the Company meets specified performance
measures, which were not met in 1997. The facility also permits up to
$5,000,000 in letters of credit, which decrease the amount available for
loans.
Borrowings under the Revolving Credit facility mature on March 24,
2000, with automatic one year renewals on such maturity date, unless the
facility is terminated by notice from any party to the others at least 90
days before the facility would otherwise terminate. The Company may also
terminate the facility early upon 90 days notice if it pays a termination fee
equal to one-half of one percent a year (for what would have been the
remaining term of the facility) of the average daily balance of loans and
letters of credit under the facility since its inception. The facility
carries a line of credit fee equal to one-quarter of one percent a year of
the excess of the aggregate commitments under the facility (currently
$80,000,000) over the amount of loans and letters of credit outstanding and
an agent's fee equal to $45,000 a year. Borrowings under the facility are
guaranteed by the Company's subsidiaries and secured by accounts receivable,
inventory and related intangible assets and the proceeds thereof of the
Company and its subsidiaries.
16
<PAGE>
The Revolving Credit facility limits cash dividends to 50.0% of net
income for the immediately preceding fiscal year, subject to a maximum of
$.50 per outstanding share per year and borrowing availability restrictions.
At January 31, 1998, the Company had borrowed $35,032,000 under this facility
and had $44,968,000 of borrowing availability under the borrowing base
calculated as of that date. In 1997, the daily weighted average interest rate
on borrowings under the Revolving Credit Agreement was 8.3%.
A part of the Company's financial strategy is to own, or obtain
long-term leases on its properties. Capital expenditures to modernize and
refixture existing stores and support facilities generally are financed with
internally generated funds. Any new stores and major expansion projects
generally are financed by first mortgages or comparable financing through the
Company's consolidated, wholly-owned real estate subsidiary, Jacobson Stores
Realty Company, or through long-term leases.
CASH FLOWS
Cash and cash equivalents decreased $988,000 in 1997, increased
$1,803,000 in 1996 and decreased $490,000 in 1995. Cash flows are impacted by
operating, investing and financing activities. In 1997, operating activities
provided $24,518,000 of cash compared to $292,000 used in 1996 and
$10,005,000 provided in 1995. The increase in 1997 compared to 1996 reflects
primarily the improved earnings performance, cash generated from store
closings in 1997, and cash used in 1996 for the start-up inventory for new
stores in Leawood, Kansas and Boca Raton, Florida. These changes were
partially offset by reduced merchandise payables. The decrease in 1996 versus
1995 is due principally to the larger loss and inventory requirements of two
new stores opened in 1996.
Investing activities provided cash of $881,000 in 1997 and used cash
of $5,832,000 and $7,375,000 in 1996 and 1995, respectively. Investing
activities included capital expenditures for new stores, and modernization
and refixturing of existing stores and support facilities totalling
$4,114,000, $5,590,000 and $6,540,000 in 1997, 1996 and 1995, respectively.
Proceeds from sales of property totalled $4,068,000 and $1,199,000 in 1997
and 1995, respectively. There were no property sales in 1996. In addition,
the Company incurred capital lease obligations (not included in cash
investing activities above) primarily for computer hardware and related
software totalling $145,000 and $199,000 in 1996 and 1995, respectively.
There were no new capital lease obligations in 1997.
Financing activities used cash of $26,387,000 in 1997, provided cash
of $7,927,000 in 1996 and used cash of $3,120,000 in 1995. In March 1997, the
Company borrowed $49,500,000 under its current Revolving Credit Agreement to
repay the then outstanding principal balance under its former Credit
Agreement. Also in 1997, the Company repaid $13,968,000 under its current
Revolving Credit Agreement, prepaid $5,642,000 of principal on a mortgage
obligation, purchased and retired $1,755,000 of 6 3/4% Convertible
Subordinated Debentures, satisfying its annual sinking fund payment, and used
$5,022,000 to service current maturities of long-term debt. In 1996, the
Company borrowed $14,300,000 more under its former Credit Agreement than it
had borrowed in 1995 and used $4,206,000 of cash to service current
maturities of long-term debt, including the $1,725,000 annual sinking fund
payment on its 6-3/4% Convertible Subordinated Debentures. In 1995, the
Company borrowed $3,700,000 more under its former Credit Agreement than it
had borrowed in 1994 and used $3,930,000 of cash to service current
maturities of long-term debt. The Company did not pay a common stock dividend
in 1997. The Company paid common stock dividends of $2,167,000 in 1996 and
$2,890,000 in 1995.
17
<PAGE>
Cash generated from disposition of properties related to three stores
closed in March 1997 will be used to fund operations and to reduce Revolving
Credit borrowings. 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.
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. In March 1997, the Company closed under-performing
stores in Jackson, Kalamazoo and Dearborn, Michigan. The Company incurred a
$4,200,000 pre-tax charge in 1996 to recognize estimated severance and
related benefits and expense to hold the closed facilities pending
disposition, and to state property and equipment at estimated fair value. In
1997, the Company paid $1,237,000 in severance benefits and expenses to hold
closed facilities pending disposition, and recognized a $340,000 pre-tax
credit to write-off the remaining severance and benefit reserves after all
payments were made and to adjust the write-down of the property and equipment
reserve after sale of a portion of the related property at greater than the
original estimated value.
The Company closed its Troy, Michigan clearance center in May 1997.
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. During the year, the
Company established a task force which has identified areas of concern and
assigned a risk factor and priority to each area. Specific action plans are
being developed to fix or replace all non-compliant software 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.
18
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- -----------------------------------------------------
The following financial statements and supplementary financial
information are filed as part of this report on pages F-1 through F-19:
Consolidated Statements of Earnings, Three Fiscal Years Ended January
31, 1998.
Consolidated Statements of Cash Flows, Three Fiscal Years Ended
January 31, 1998.
Consolidated Balance Sheets, January 31, 1998, January 25, 1997, and
January 27, 1996.
Consolidated Statements of Shareholders' Equity, Three Fiscal years
Ended January 31, 1998.
Notes to Consolidated Financial Statements.
Summary of Significant Accounting Policies.
Quarterly Information (Unaudited).
Report of Independent Public Accountants.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
None.
19
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- ------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------------------------------------------------------------
MANAGEMENT.
-----------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
The information called for by Part III is incorporated by reference
from those portions of the registrant's definitive proxy statement for its
1998 Annual Meeting of Shareholders to be held May 28, 1998, filed with the
Securities and Exchange Commission pursuant to Regulation 14A within 120 days
after the end of the fiscal year covered by this Form 10K, appearing under
the following captions:
"Voting Securities and Principal Holders Thereof" (pages 1-3,
inclusive, of the proxy statement).
"Election of Directors" (pages 4-8, inclusive, thereof).
"Executive Compensation" (pages 9-16, inclusive, thereof); but
excluding from this incorporation by reference everything
appearing under the captions "Compensation Committee Report on
Executive Compensation" and "Performance Graph" (pages 14-16,
inclusive, thereof).
Information with respect to executive officers of the Company is set
forth on pages 10-11 of this report.
For the purpose of stating the aggregate market value of voting stock
held by nonaffiliates on the cover of this report, the registrant considers
that the directors of the registrant, the executive officers listed on page
10 of this report, the Marjorie L. Rosenfeld Trust, David A. Rosenfeld, the
Jacobson's Retirement Savings & Profit Sharing Plan, the Jacobson Pension
Plan, and The Jacobson Stores Foundation are affiliates, and that all other
shareholders are nonaffiliates. This statement is without prejudice to the
classification of any shareholder at other times or for other purposes.
20
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
- ----------------------------------------------------------------
FORM 8K.
--------
(a) The following financial statements, financial statement
schedules, and exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Page
----
<S> <C>
(1) FINANCIAL STATEMENTS:
---------------------
Consolidated Statements of Earnings, Three Fiscal Years
Ended January 31, 1998. F-1
Consolidated Statements of Cash Flows, Three Fiscal Years
Ended January 31, 1998. F-2
Consolidated Balance Sheets, January 31, 1998,
January 25, 1997, and January 27, 1996. F-3
Consolidated Statements of Shareholders' Equity, Three
Fiscal Years Ended January 31, 1998. F-4
Notes to Consolidated Financial Statements. F-5/
F-15
Summary of Significant Accounting Policies. F-16
Quarterly Information (Unaudited). F-17/
F-18
Report of Independent Public Accountants. F-19
(2) FINANCIAL STATEMENT SCHEDULES:
Schedule VIII - Valuation and Qualifying Accounts and
Reserves, Year Ended January 31, 1998. S-1
</TABLE>
All schedules, except as set forth above, have been omitted since the
information required to be submitted has been included in the consolidated
financial statements or notes thereto or has been omitted as not applicable
or not required.
21
<PAGE>
(3) EXHIBITS:
Each management contract or compensatory plan required to be
filed as an exhibit pursuant to Item 14(c) of this report is indicated by an
asterisk (*).
10(a)* Employment Agreement, dated as of April 15, 1998,
between Jacobson Stores Inc. and P. Gerald Mills.
10(b)* Employment Agreement, dated as of April 15, 1998,
between Jacobson Stores Inc. and Paul W. Gilbert.
10(c)* Employment Agreement, dated as of April 15, 1998,
between Jacobson Stores Inc. and James A. Rodefeld.
10(d)* Executive Employment Agreement, dated as of April 15,
1998, between Jacobson Stores Inc. and Herman J.
Heinle.
10(e)* Executive Employment Agreement, dated as of April 15,
1998, between Jacobson Stores Inc. and Theodore R.
Kolman.
10(f)* Jacobson Stores Inc. Deferred Compensation Plan, as
amended and restated March 26, 1998.
10(g)* Jacobson Stores Inc. Management Incentive Plan, dated
March 26, 1998.
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)
<TABLE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- ------------
<S> <C> <C>
3(i)(a) Restated Articles of Incorporation, Exhibit 19(a) to Form 10-Q,
Jacobson Stores Inc., as amended and Quarter Ended April 29,
restated May 25, 1989. 1989.
3(i)(b) Certificate of Designation, Preferences Exhibit 3(a) to Form 10-Q,
and Rights of Preferred Stock of Quarter Ended October 29,
Jacobson Stores Inc. 1988.
3(ii) By-laws, Jacobson Stores Inc., as Exhibit 3(ii) to Form 10-Q,
amended November 20, 1997. Quarter Ended October 25,
1997.
22
<PAGE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- ------------
<S> <C> <C>
4(a) Revolving Credit Agreement, dated as Exhibit 4(c) to Form 10-K,
of March 24, 1997, between Jacobson Year Ended January 25, 1997.
Stores Inc. and The CIT Group/Business
Credit, as agent.
4(b) Election under Section 780, Michigan Exhibit 28 to Form 10-Q,
Business Corporation Act. Quarter Ended October 27,
1984.
4(c) Indenture dated as of December 15, File #3310532:
1986 between Jacobson Stores Inc. Exhibit 4(a) to Form S-2
and National Bank of Detroit, as (Amendment No. 1), filed
Trustee. December 12, 1986.
4(d) Rights Agreement dated as of October 4, Exhibit I to Form 8A and
1988 between Jacobson Stores Inc. and Exhibit 4 to Form 8-K,
Manufacturers National Bank of Detroit, October 7, 1988; Exhibit 1 to
as Rights Agent; Change of Rights Agent, Amendment No. 1 to Form 8-A,
Effective June 1, 1989; Change of Rights May 16, 1989; Exhibit 1 to
Agent, Effective May 31, 1994. Amendment No. 2 to Form 8-A,
June 9, 1994.
10(h)* Release and Settlement Agreement effective Exhibit 10(a) to Form 10-Q,
May 25, 1997, between Jacobson Stores Inc. Quarter Ended July 26, 1997.
and Joseph H. Fisher.
10(i)* Release and Waiver Agreement dated Exhibit 10(a) to Form 10-Q,
October 7, 1997, between Jacobson Quarter Ended October 25, 1997.
Stores Inc. and Robert L. Moles.
10(j)* Split Dollar Agreement, dated January 31, Exhibit 10(k) to Form 10-K
1992, between Jacobson Stores Inc. and Year Ended January 27, 1996.
Paul W. Gilbert.
10(k)* Jacobson's Stock Option Plan of 1983, Exhibit 19 to Form 10-Q,
as amended and restated, effective Quarter Ended October 26, 1991.
May 28, 1987, and as further amended
May 24, 1990 and August 22, 1991.
23
<PAGE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
10(l)* Jacobson Stock Option Plan of 1994. Exhibit A to Proxy Statement
in connection with the Annual
Meeting of Shareholders held
on May 26, 1994.
10(m)* First Amendment to Jacobson Stock Exhibit 10(m) to Form 10-K,
Option Plan of 1994. Year Ended January 27, 1996.
10(n)* Second Amendment to Jacobson Stock Exhibit 10(b) to Form 10-Q,
Option Plan of 1994. Quarter Ended July 26, 1997.
10(o)* Third Amendment to Jacobson Stock Exhibit A to Proxy Statement
Option Plan of 1994 dated April 10, 1998 for 1998
Annual Meeting.
10(p)* 1997 Management Incentive Plan Exhibit 10(c) to Form 10-Q,
Quarter Ended July 26, 1997.
10(q)* Severance Agreement dated as of Exhibit 10(b) to Form 10-K,
October 31, 1996, between Jacobson Year Ended January 25, 1997.
Stores Inc. and Mark K. Rosenfeld.
10(r)* Amendment to Severance Agreement dated Exhibit 10(c) to Form 10-K,
as of December 12, 1996, between Jacobson Year Ended January 25, 1997.
Stores Inc. and Mark K. Rosenfeld.
21 Schedule of Subsidiaries Exhibit 21 to Form 10-K, Year
Ended January 27, 1996.
</TABLE>
With the exception of Exhibits 4(a) and 4(c), instruments
defining the rights of holders of long-term debt of the registrant and its
subsidiaries have been omitted. The amount of debt authorized under each such
omitted instrument is less than 10% of the total assets of the registrant and
its subsidiaries on a consolidated basis. The registrant agrees to furnish a
copy of any such instrument to the Securities and Exchange Commission upon
request.
In addition to Exhibits 10(a) to 10(e), inclusive, and 10(h),
10(i), 10(q) and 10(r), the registrant has employment agreements with two
other executive officers, which are not considered material in amount or
significance.
(b) The Company did not file any reports on Form 8-K during its
fourth fiscal quarter ended January 31, 1998.
(c) See Item 14(a)(3).
(d) See Item 14(a)(2).
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
DATE: April 10, 1998 JACOBSON STORES INC.
By: /s/ P. Gerald Mills
---------------------------------------
P. Gerald Mills, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
JACOBSON STORES INC. Date
----
By: /s/ P. Gerald Mills April 10, 1998
------------------------------------
P. Gerald Mills, Chairman of the
Board, President and Chief
Executive Officer, and Director
(Principal Executive Officer)
By: /s/ Paul W. Gilbert April 10, 1998
------------------------------------
Paul W. Gilbert, Vice Chairman
of the Board, and Director
(Principal Financial Officer)
By: /s/ Timothy J. Spalding April 10, 1998
------------------------------------
Timothy J. Spalding, Vice
President and Controller
(Principal Accounting Officer)
25
<PAGE>
JACOBSON STORES INC. Date
-----
By: /s/ Herbert S. Amster April 10, 1998
------------------------------------
Herbert S. Amster, Director
By: /s/ Herman S. Kohlmeyer, Jr. April 10, 1998
------------------------------------
Herman S. Kohlmeyer, Jr., Director
By: /s/ Kathleen McCree Lewis April 10, 1998
------------------------------------
Kathleen McCree Lewis, Director
By: April 10, 1998
------------------------------------
Patricia Shontz Longe, Director
By: /s/ Michael T. Monahan April 10, 1998
------------------------------------
Michael T. Monahan, Director
By: April 10, 1998
------------------------------------
Philip H. Power, Director
By: /s/ Mark K. Rosenfeld April 10, 1998
------------------------------------
Mark K. Rosenfeld, Director
By: /s/ Richard Z. Rosenfeld April 10, 1998
------------------------------------
Richard Z. Rosenfeld, Director
By: /s/ Robert L. Rosenfeld April 10, 1998
------------------------------------
Robert L. Rosenfeld, Director
By: /s/ James L. Wolohan April 10, 1998
------------------------------------
James L. Wolohan, Director
26
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Year Ended
---------------------------------------
January 31, January 25, January 27,
(in thousands except per share data) 1998(1) 1997 1996
- ------------------------------------ ---------- ---------- -----------
<S> <C> <C> <C>
NET SALES ..................................... $ 447,471 $ 432,469 $ 414,267
--------- --------- ---------
COSTS AND EXPENSES:
Cost of merchandise sold, buying and
occupancy expenses ...................... 300,918 293,826 279,493
Selling, general and administrative expenses 138,797 142,348 133,572
Interest expense, net ...................... 9,178 9,384 8,808
Store closing costs (credit) ............... (340) 4,200 --
Gain on sale of property ................... (2,987) -- (1,065)
--------- --------- ---------
Total costs and expenses ............ 445,566 449,758 420,808
--------- --------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES ........... 1,905 (17,289) (6,541)
PROVISION (CREDIT) FOR INCOME TAXES ........... 691 (5,827) (2,335)
--------- --------- ---------
NET EARNINGS (LOSS) ........................... $ 1,214 $ (11,462) $ (4,206)
========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE:
Basic and Diluted .......................... $ 0.21 $ (1.98) $ (0.73)
========= ========= =========
<FN>
(1) 53 week year.
The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
--------------------------------------
January 31, January 25, January 27,
(in thousands) 1998(1) 1997 1996
- -------------- ------- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) ............................. $ 1,214 $(11,462) $ (4,206)
Gain on sale of property ........................ (2,987) -- (1,065)
Store closing costs (credit) .................... (340) 4,200 --
Adjustments to reconcile net earnings (loss) to
cash provided by (used in)
operating activities:
Depreciation and amortization ................ 9,128 10,195 10,266
Deferred taxes ............................... 263 (5,449) 537
Other liabilities ............................ 570 1,436 911
Change in:
Receivables from customers, net ........... 7,586 1,424 850
Merchandise inventories ................... 8,800 (5,626) 6,599
Prepaid expenses and other assets ......... 1,590 1,005 (289)
Accounts payable and accrued expenses ..... (2,521) 1,811 (569)
Current income taxes ...................... 1,215 2,174 (3,029)
-------- -------- --------
Net cash provided by (used in) operating
activities ............................ 24,518 (292) 10,005
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property .................. 4,068 -- 1,199
Additions to property and equipment ............. (4,114) (5,590) (6,540)
Other non-current assets ........................ 927 (242) (2,034)
-------- -------- --------
Net cash provided by (used in) investing
activities ............................ 881 (5,832) (7,375)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt ..................... 49,500 14,300 3,700
Reduction of long-term debt ..................... (75,887) (4,206) (3,930)
Cash dividends paid ............................. -- (2,167) (2,890)
-------- -------- --------
Net cash provided by (used in) financing
activities ............................ (26,387) 7,927 (3,120)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .. (988) 1,803 (490)
Cash and cash equivalents, beginning of year .... 4,871 3,068 3,558
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR ............ $ 3,883 $ 4,871 $ 3,068
======== ======== ========
<FN>
(1) 53 week year.
</TABLE>
- -----------------------------------------------------------------------------
SUPPLEMENTARY CASH FLOW INFORMATION
The Company considers all short-term investments with a maturity at date of
purchase of three months or less to be cash equivalents.
Investing and financing activities not reported in the Consolidated
Statements of Cash Flows, because they do not involve cash, include equipment
acquired through capital lease obligations of $145,000 in 1996 and $199,000
in 1995. There were no new capital lease obligations in 1997.
Interest paid (net of interest capitalized) was $9,330,000 in 1997,
$9,233,000 in 1996 and $8,570,000 in 1995. The Company received income tax
refunds totalling $782,000 in 1997 and $2,541,000 in 1996. Income tax
payments were $64,000 in 1995.
The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, January 25, January 27,
(in thousands) 1998 1997 1996
- -------------- ---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ....... $ 3,883 $ 4,871 $ 3,068
Receivables from customers, net . 34,124 41,710 43,134
Merchandise inventories ......... 86,075 94,875 89,249
Prepaid expenses and other assets 1,333 2,923 3,928
Refundable income taxes ......... -- 855 3,029
Deferred taxes .................. 3,696 3,994 2,363
--------- --------- ---------
Total current assets ......... 129,111 149,228 144,771
--------- --------- ---------
PROPERTY AND EQUIPMENT, NET ........ 83,707 89,802 96,597
--------- --------- ---------
OTHER ASSETS ....................... 20,461 21,388 21,146
--------- --------- ---------
$ 233,279 $ 260,418 $ 262,514
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 3,972 $ 4,350 $ 4,531
Accounts payable ................ 32,108 31,320 30,537
Accrued expenses ................ 13,856 17,505 14,612
Accrued income taxes ............ 360 -- --
--------- --------- ---------
Total current liabilities ..... 50,296 53,175 49,680
--------- --------- ---------
LONG-TERM DEBT ..................... 104,138 130,147 119,727
--------- --------- ---------
DEFERRED TAXES ..................... 5,262 5,297 9,115
--------- --------- ---------
OTHER LIABILITIES .................. 4,382 3,812 2,376
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Common stock .................... 5,966 5,966 5,966
Paid-in surplus ................. 7,109 7,109 7,109
Retained earnings ............... 56,525 55,311 68,940
Treasury stock .................. (399) (399) (399)
--------- --------- ---------
69,201 67,987 81,616
--------- --------- ---------
$ 233,279 $ 260,418 $ 262,514
========= ========= =========
=============================================================================
<FN>
The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common Paid-in Retained Treasury
(in thousands except number of shares) Stock Surplus Earnings Stock
- -------------------------------------- ----- ------- -------- --------
<S> <C> <C> <C> <C>
BALANCE, January 28, 1995............................. $5,966 $7,109 $76,036 $(399)
FIFTY-TWO WEEKS ENDED January 27, 1996:
Net loss........................................... (4,206)
Dividends paid, 50 cents per share................. (2,890)
------ ------ ------- -----
BALANCE, January 27, 1996............................. 5,966 7,109 68,940 (399)
FIFTY-TWO WEEKS ENDED January 25, 1997:
Net loss........................................... (11,462)
Dividends paid, 37 1/2cents per share................ (2,167)
------ ------ ------- -----
BALANCE, January 25, 1997............................. 5,966 7,109 55,311 (399)
FIFTY-THREE WEEKS ENDED January 31, 1998:
Net earnings....................................... 1,214
------ ------ ------- -----
BALANCE, January 31, 1998............................. $5,966 $7,109 $56,525 $(399)
====== ====== ======= =====
=============================================================================
<FN>
PREFERRED STOCK
Authorized 1,000,000 shares, $1 par value; no shares outstanding at January
27, 1996, January 25, 1997 and January 31, 1998.
COMMON STOCK
Authorized 15,000,000 shares, $1 par value; 5,966,2212/3 shares issued at
January 27, 1996, January 25, 1997 and January 31, 1998. Shares issued
include 187,200 shares in treasury at January 27, 1996, January 25, 1997 and
January 31, 1998.
The accompanying notes (pages F-5 through F-15) and summary of significant
accounting policies (page F-16) are an integral part of these statements.
</TABLE>
F-4
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STORE CLOSING COSTS
In March 1997, the Company closed three underperforming stores in Jackson,
Kalamazoo and Dearborn, Michigan. The Company incurred a $4,200,000 pre-tax
charge in fiscal 1996 to recognize estimated severance and related benefits
and expense to hold the closed facilities pending disposition and to state
property and equipment at estimated fair value. Store closing reserve
activity was as follows:
<TABLE>
<CAPTION>
(in thousands) 1997 1996
- -------------- ---- ----
<S> <C> <C>
Severance and related benefits .. $ 4,200 $ --
Payments against reserve ........ (1,237) --
Charges (credits) against reserve (340) 4,200
------- -------
Reserve at end of year .......... $ 2,623 $ 4,200
======= =======
</TABLE>
The property and equipment reserve totalled $2,210,000 at January 31, 1998,
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. After recognition of the fair value reserve, the
adjusted net book value of property and equipment of the three closed stores
totalled $2,375,000 at January 31, 1998.
Store closing credits totalled $224,000 after-tax in 1997. In 1996, store
closing costs totalled $2,772,000 after-tax.
GAIN ON SALE OF PROPERTY
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. In 1997, after-tax gains on sales of property
totalled $1,972,000, including the Grosse Pointe property and immaterial
gains on two non-operating properties. In 1995, the Company sold its former
Children's Store in Birmingham, Michigan, at an after-tax gain of $693,000.
<TABLE>
<CAPTION>
TAXES
The provision (credit) for income taxes consisted of:
(in thousands) 1997 1996 1995
<S> <C> <C> <C>
Currently payable.................................. $428 $ (378) $(2,872)
Deferred .......................................... 263 (5,449) 537
---- ------- -------
$691 $(5,827) $(2,335)
==== ======= =======
</TABLE>
Income taxes as a percent of earnings (loss) before income taxes differed
from the statutory Federal income tax rate as follows:
<TABLE>
<CAPTION>
(percent of earnings before income taxes) 1997 1996 1995
<S> <C> <C> <C>
Statutory Federal income tax rate................. 34.0% (34.0)% (34.0)%
Tax reserves released............................. -- -- (2.6)
Other............................................. 2.3 0.3 0.9
---- ----- -----
36.3% (33.7)% (35.7)%
==== ===== =====
</TABLE>
F-5
<PAGE>
Deferred income taxes represent temporary differences in the recognition of
certain items for income tax and financial reporting purposes and are
classified as current or non-current in the consolidated balance sheets based
on the classification of the assets and liabilities which gave rise to the
temporary differences. The components of the net deferred income tax
liability at January 31, 1998, January 25, 1997 and January 27, 1996 were as
follows:
<TABLE>
<CAPTION>
January January January
(in thousands) 1998 1997 1996
- -------------- ------ ------- -------
<S> <C> <C> <C>
Deferred Tax Liabilities:
Accelerated depreciation....................................... $3,292 $ 3,930 $4,279
Additional pension cost deductible for tax purposes............ 5,208 5,811 5,759
Other.......................................................... 354 827 822
------ ------- ------
8,854 10,568 10,860
------ ------- ------
Deferred Tax Assets:
Store closing reserves......................................... 906 1,428 --
Accrued vacation pay........................................... 1,283 1,267 1,246
Additional inventory capitalized for tax purposes.............. 980 1,076 1,079
Alternative minimum tax credit carryforward.................... 962 922 --
Net operating loss carryforward................................ -- 1,119 --
Deferred rent.................................................. 944 558 303
Other.......................................................... 2,213 2,895 1,480
------ ------- ------
7,288 9,265 4,108
------ ------- ------
Net deferred tax liability..................................... $1,566 $ 1,303 $6,752
====== ======= ======
</TABLE>
=============================================================================
The Company believes it is more likely than not that deferred tax assets will
be used to offset future tax obligations. Accordingly, the Company has not
recorded a related valuation allowance.
Taxes other than income taxes were as follows:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
- -------------- ---- ---- ----
<S> <C> <C> <C>
Payroll taxes.................................... $ 8,195 $ 8,074 $ 8,012
Real estate and personal property taxes.......... 4,337 4,317 4,021
Other taxes...................................... 913 1,084 1,305
------- ------- -------
$13,445 $13,475 $13,338
======= ======= =======
</TABLE>
F-6
<PAGE>
ADVERTISING EXPENSE
The Company expenses advertising costs the first time the advertising takes
place. Advertising expense totalled $16,735,000 in 1997, $13,962,000 in 1996
and $13,625,000 in 1995.
INTEREST EXPENSE
Components of net interest expense are summarized below:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
-------------- ---- ---- ----
<S> <C> <C> <C>
Revolving Credit line..................................... $ 3,630 $ 2,071 $ 617
Real estate obligations................................... 3,083 3,383 3,539
Long-term debt............................................ 2,452 3,934 4,558
Capital lease obligations................................. 77 120 206
------- ------- ------
9,242 9,508 8,920
Less interest earned on short-term investments............ 64 46 36
Less interest capitalized on properties under development. -- 78 76
------- ------- ------
$ 9,178 $ 9,384 $8,808
======= ======= ======
</TABLE>
=============================================================================
CUSTOMER CREDIT AND RECEIVABLES
Credit sales under Jacobson credit plans were 38.1% of total sales in 1997,
44.6% in 1996 and 43.6% in 1995. Credit plans consist of option and extended
payment accounts.
Revenues and direct costs associated with the Company's credit program are
summarized below:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
- -------------- ---- ---- ----
<S> <C> <C> <C>
Finance charge revenues and fees .................... $ 6,185 $ 5,844 $ 5,118
------- ------- -------
Cost of credit operation:
Credit and collection administration ............. 1,392 1,754 1,557
Allocated interest expense ....................... 2,922 3,028 2,935
Provision for doubtful accounts, net of recoveries 993 1,026 843
Provision (credit) for income taxes .............. 299 12 (74)
------- ------- -------
5,606 5,820 5,261
------- ------- -------
Net income from (cost of) credit program ............ $ 579 $ 24 $ (143)
======= ======= =======
As a percent of credit sales ..................... 0.3% - % (0.1)%
======= ======= =======
</TABLE>
=============================================================================
The finance charge rate assessed under the Company's credit plans increased
to 20.4% in 1996 (previously 18.0%). Allocated interest expense is computed
at the average rate of interest incurred on the Revolving Credit line applied
to the average total receivables from customers. The average rate was 8.3% in
1997, 7.5% in 1996 and 7.0% in 1995.
Receivables from customers at year-end were as follows:
<TABLE>
<CAPTION>
January January January
(in thousands) 1998 1997 1996
- -------------- ------ ------ ------
<S> <C> <C> <C>
Receivables from customers...............................$34,761 $42,460 $43,907
Less reserve for doubtful accounts....................... 637 750 773
------- ------- -------
$34,124 $41,710 $43,134
======= ======= =======
</TABLE>
=============================================================================
Accounts written off, net of recoveries, were $1,106,000 in 1997, $1,049,000
in 1996 and $863,000 in 1995 (0.65%, 0.54% and 0.48%, respectively, of credit
sales).
F-7
<PAGE>
MERCHANDISE INVENTORIES
All merchandise inventories are valued at cost, which is lower than market,
as determined by the retail last-in, first-out (LIFO) method. At year-end,
merchandise inventories were as follows:
<TABLE>
<CAPTION>
January January January
(in thousands) 1998 1997 1996
- -------------- ------- ------- -------
<S> <C> <C> <C>
Inventories at first-in, first-out (FIFO) cost....... $104,708 $111,955 $106,061
Less LIFO reserves................................... 18,633 17,080 16,812
-------- -------- --------
$ 86,075 $ 94,875 $ 89,249
======== ======== ========
</TABLE>
=============================================================================
PROPERTY AND EQUIPMENT
Property and equipment at year-end are set forth below:
<TABLE>
<CAPTION>
January January January
(in thousands) 1998 1997 1996
- -------------- ------- ------- -------
<S> <C> <C> <C>
Land and improvements............................................. $ 8,496 $ 9,010 $ 9,418
Buildings and improvements........................................ 87,948 90,739 92,082
Furniture, fixtures and equipment................................. 49,710 49,364 47,864
Leasehold improvements............................................ 13,038 12,286 10,601
Construction in progress.......................................... 3,384 1,727 2,751
Capital leases.................................................... 9,232 9,954 9,809
------- -------- -------
171,808 173,080 172,525
Less accumulated depreciation and amortization.................... 88,101 83,278 75,928
------- -------- -------
$83,707 $ 89,802 $96,597
======= ======== =======
</TABLE>
=============================================================================
Depreciation and amortization amounted to $9,128,000 in 1997, $10,195,000 in
1996 and $10,266,000 in 1995.
CAPITAL AND MAINTENANCE EXPENDITURES
Capital expenditures, including amounts under capital leases, for the past
three years are summarized below:
<TABLE>
<CAPTION>
Stores and Store Support Facilities
(in thousands) Modernization and Equipment Total
- -------------- --------------- ------------------ -----
<S> <C> <C> <C>
1997............................................. $ 1,332 $2,782 $4,114
1996............................................. 4,444 1,291 5,735
1995............................................. 4,449 2,290 6,739
</TABLE>
=============================================================================
Stores and store modernization expenditures include those made for the
acquisition of land, buildings and improvements, and related fixtures and
equipment for new stores and expansion and re-fixturing of existing stores.
Support facilities and equipment expenditures relate to corporate office and
distribution centers and other non-store expenditures.
Repairs and maintenance expense totalled $1,972,000 in 1997, $2,201,000 in
1996 and $1,943,000 in 1995.
F-8
<PAGE>
LONG-TERM LEASES
At January 31, 1998, the Company was obligated under non-cancelable long-term
leases for certain stores or portions of stores, and for certain fixtures and
equipment. Many of the leases contain renewal options. Most require payment
of taxes, insurance, and other costs applicable to the property and some
require additional rentals based on percentages of sales.
Future minimum rental commitments as of January 31, 1998, for all
non-cancelable leases which had a remaining term of more than one year were
as follows:
<TABLE>
<CAPTION>
Operating Capital
(in thousands) Leases Leases
- -------------- -------- ------
<S> <C> <C>
1998................................................................... $ 6,981 $298
1999................................................................... 7,979 208
2000................................................................... 7,542 76
2001................................................................... 7,522 76
2002................................................................... 7,440 7
Thereafter............................................................. 108,147 --
-------- ----
Total minimum lease payments........................................... $145,611 665
========
Less imputed interest.................................................. 76
----
Capital lease obligations, including current maturities of $258........ $589
====
</TABLE>
=============================================================================
Capital leases provide the Company with the economic benefits and risks of
ownership. These leases are capitalized and treated as installment purchases
of depreciable property. Capital leases are included in the accompanying
consolidated balance sheets as property and equipment while the related lease
obligations are included in long-term debt. Interest based on these
obligations and amortization based on the lease terms are charged to current
operations in lieu of rental expense. All other leases are considered
operating leases. Operating leases are accounted for by recording rental
expense over the terms of the leases. Additional rentals based on percentages
of sales are recorded as rental expense for both capital and operating
leases.
Rental expense (net of rental income) was as follows:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
- -------------- ---- ---- ----
<S> <C> <C> <C>
Buildings and improvements:
Operating leases:
Minimum rent................................. $7,003 $5,651 $4,968
Percentage rent.............................. 1,652 1,034 1,032
Capital leases:
Percentage rent.............................. 272 292 288
------ ------ ------
$8,927 $6,977 $6,288
====== ====== ======
Fixtures and equipment:
Operating leases................................ $ 864 $ 802 $ 456
====== ====== ======
</TABLE>
=============================================================================
RETIREMENT PLANS
The Company has a trusteed non-contributory defined benefit pension plan
covering substantially all of its employees. Benefits under the plan are
based on a final average pay formula. Service cost and the projected benefit
obligation under the projected unit credit actuarial method reflect the
impact of estimated increases in compensation on future pension benefits.
Unrecognized pension costs and credits, including actuarial gains and losses,
are amortized over the average remaining service period of those employees
expected to receive pension benefits. Pension expense was $1,775,000 in 1997,
$2,113,000 in 1996 and $1,023,000 in 1995. The Company's funding policy
satisfies the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 and the Internal Revenue Code of 1986. Pension plan
assets are managed by independent investment managers.
F-9
<PAGE>
Net periodic pension expense, the funded status of the plan, and the related
actuarial assumptions for the past three years are as follows:
<TABLE>
<CAPTION>
Components of Net Pension Expense (in thousands) 1997 1996 1995
- ------------------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Service cost for benefits earned during the year.................. $ 2,341 $ 2,324 $ 1,741
Interest cost on projected benefit obligation..................... 3,868 3,634 3,318
Actual return on assets........................................... (13,259) (5,895) (11,176)
Net amortization and deferral..................................... 8,825 2,050 7,140
------- ------- ------
Net pension expense............................................... $ 1,775 $ 2,113 $ 1,023
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------------------
Funded Status (in thousands) 1997 1996 1995
- ---------------------------- ---- ---- ----
<S> <C> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested......................................................... $47,356 $43,402 $41,948
Non-vested..................................................... 1,347 2,201 2,100
------- ------- -------
Accumulated benefit obligation.................................... $48,703 $45,603 $44,048
======= ======= =======
Projected benefit obligation...................................... $53,059 $52,724 $51,196
Fair market value of assets....................................... 70,257 58,357 50,879
------- ------- -------
Plan assets greater (less) than projected benefit obligation...... 17,198 5,633 (317)
Unrecognized net assets at transition............................. -- (153) (478)
Unrecognized net loss (gain)...................................... (1,977) 10,227 14,367
------- ------- -------
Net prepaid pension cost.......................................... 15,221 15,707 13,572
Accrued pension expense........................................... -- 181 1,424
------- ------- -------
Prepaid pension cost(1)........................................... $15,221 $15,888 $14,996
======= ======= =======
<FN>
(1)Included in other assets on the consolidated balance sheets.
</TABLE>
<TABLE>
<CAPTION>
Actuarial Assumptions 1997 1996 1995
- --------------------- ---- ---- ----
<S> <C> <C> <C>
Discount rate:
Beginning of year.............................................. 7 1/2% 7 1/4% 8 1/2%
End of year.................................................... 7 1/4 7 1/2 7 1/4
Expected return on plan assets.................................... 9 9 9
Rate of increase in compensation.................................. 5 5 5
</TABLE>
=============================================================================
The Company contributed and charged to expense $263,000 in 1997, $294,000 in
1996 and $302,000 in 1995 for multi-employer pension plans. These
contributions were determined in accordance with the provisions of negotiated
labor contracts and generally are based on the number of hours worked. Under
the provisions of the Multi-Employer Pension Plan Amendments Act of 1980, if
the Company should substantially or totally withdraw from a multi-employer
pension fund, it would be required to continue contributions to such plan to
the extent of its portion of the plan's unfunded vested liability. Management
has no plans to terminate operations that would subject the Company to such
liability.
The Company has a qualified salary deferral plan under Internal Revenue Code
Section 401(k). All employees of the Company who have completed one year of
service and are at least age 21 are eligible to participate in this plan.
Under this plan, the Company may elect to match 20% of the first 3% of
employee contributions per participant. These matching contributions vest
immediately. The charges to operations for matching contributions to the plan
were $351,000 in 1997, $366,000 in 1996 and $364,000 in 1995.
F-10
<PAGE>
FINANCING
The Company has a $100,000,000 revolving credit facility under a Revolving
Credit Agreement with a commercial lender. The revolving credit facility
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 facility to up to $100,000,000 in the
aggregate, subject to the borrowing base limitation and lender reserves.
Loans under the facility bear interest at either or both of two variable
interest rate alternatives as chosen by the Company. One of the interest
rates may decrease if the Company meets specified performance measures, which
were not met in 1997. The facility also permits up to $5,000,000 in letters
of credit, which decrease the amount available for loans.
Borrowings under the Revolving Credit facility mature on March 24, 2000, with
automatic one year renewals on such maturity date, unless the facility is
terminated by notice from any party to the others at least 90 days before the
facility would otherwise terminate. The Company may also terminate the
facility early upon 90 days notice if it pays a termination fee equal to
one-half of one percent a year (for what would have been the remaining term
of the facility) of the average daily balance of loans and letters of credit
under the facility since its inception. The facility carries a line of credit
fee equal to one-quarter of one percent a year of the excess of the aggregate
commitments under the facility (currently $80,000,000) over the amount of
loans and letters of credit outstanding and an agent's fee of $45,000 a year.
Borrowings under the facility are guaranteed by the Company's subsidiaries
and secured by accounts receivable, inventory and related intangible assets
and proceeds thereof of the Company and its subsidiaries.
Revolving Credit line borrowings and interest rates for the past three years
were as follows:
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
- -------------- ---- ---- ----
<S> <C> <C> <C>
Maximum amount outstanding........................................ $54,899 $43,500 $30,300
Daily weighted average amount outstanding......................... 43,277 27,707 8,776
Daily weighted average interest rate.............................. 8.3% 7.5% 7.0%
</TABLE>
At year-end, long-term debt, less current maturities, consisted of the
following:
<TABLE>
<CAPTION>
January January January
(in thousands) 1998 1997 1996
- -------------- ------- ------- -------
<S> <C> <C> <C>
6 3/4% Convertible Subordinated Debentures due 2011............... $ 29,325 $ 31,050 $ 32,775
Mortgage notes and collateral trust bonds due through 2013,
at rates from 6.44% to 8.45%................................... 30,582 37,827 39,328
Term loan, at a fixed rate of 7.99%............................... -- 20,000 20,000
Industrial development revenue bond obligations,
due through 2015, at variable rates below prime................ 8,868 9,126 9,380
Notes under Revolving Credit line, at a blended rate below prime.. 35,032 31,500 17,200
-------- -------- --------
103,807 129,503 118,683
Capital lease obligations......................................... 331 644 1,044
-------- -------- --------
$104,138 $130,147 $119,727
======== ======== ========
</TABLE>
F-11
<PAGE>
The 6 3/4% Convertible Subordinated Debentures are convertible to shares of
the Company's common stock at any time prior to maturity, unless previously
redeemed, at $32.67 per share, subject to adjustment in certain events. The
debentures are redeemable at the option of the Company at par. Mandatory
annual sinking fund payments of $1,725,000 are required each December 15. At
January 31, 1998, 950,000 shares of authorized common stock were reserved for
conversion.
The Company's current loan agreements include, among other things, covenants
requiring minimum working capital and minimum net worth, and restricting
capital expenditures, capital stock redemptions and dividend payments. The
Revolving Credit Agreement limits cash dividends to 50.0% of net income for
the immediately preceding fiscal year, subject to a maximum of $.50 per
outstanding share per year and borrowing availability restrictions.
Aggregate maturities of long-term debt for the next five years are as
follows:
<TABLE>
<CAPTION>
Capital
Long-Term Lease
(in thousands) Debt Obligations(1) Total
- -------------- ---- -------------- -----
<C> <C> <C> <C>
1998...................................................... $ 3,714 $ 258 $ 3,972
1999...................................................... 3,972 186 4,158
2000...................................................... 39,122 66 39,188
2001...................................................... 12,838 72 12,910
2002...................................................... 3,549 7 3,556
<FN>
(1) Excluding imputed interest.
</TABLE>
=============================================================================
Based on the quoted market price of the 6 3/4% Convertible Subordinated
Debentures due 2011 and on the current rates offered to the Company for other
long-term debt of similar remaining maturities, the estimated fair value of
total long-term debt, excluding capital lease obligations, was less than the
carrying value by approximately $6,500,000 at January 31, 1998, $8,100,000 at
January 25, 1997 and $9,971,000 at January 27, 1996.
ACCRUED EXPENSES
Accrued expenses at year-end were as follows:
<TABLE>
<CAPTION>
January January January
(in thousands) 1998 1997 1996
- -------------- ---- ---- ----
<S> <C> <C> <C>
Wages and vacation pay............................................ $ 7,158 $ 7,804 $ 7,293
Pension........................................................... -- 181 1,424
Taxes other than income taxes..................................... 1,431 1,844 1,781
Interest.......................................................... 877 1,048 982
Other............................................................. 4,390 6,628 3,132
------- ------- -------
$13,856 $17,505 $14,612
======= ======= =======
</TABLE>
F-12
<PAGE>
STOCK OPTIONS
At January 31, 1998, 5,000 shares of Jacobson Stores Inc. common stock were
reserved for issuance under a stock option plan adopted in 1983. No more
options may be granted under this plan. At January 31, 1998, 615,750 shares
of Jacobson Stores Inc. common stock were reserved for issuance under a plan
adopted in 1994 and options for an additional 284,250 shares were available
for grant to directors and employees.
The Company follows the disclosure requirements of Financial Accounting
Standards Statement No. 123, "Accounting for Stock-Based Compensation", but
continues to account for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. Had compensation cost for these plans
been determined in accordance with SFAS No. 123, in 1997 the Company's net
earnings and earnings per common share would have been $501,000 ($0.09 per
share). Under SFAS No. 123, the Company's net loss and loss per common share
in 1996 and 1995 would have been $12,036,000 ($2.08 per share) and $4,306,000
($0.75 per share), respectively.
Option activity for the past three years was as follows:
<TABLE>
<CAPTION>
Number Weighted Average
of Shares Option Price
--------- ------------
<S> <C> <C>
Options outstanding at January 28, 1995 (including
exercisable options for 108,850 shares) ....... 140,600 $ 14.40
Activity during 1995:
Granted ....................................... 204,500 9.63
Expired ....................................... 13,750 17.83
-------
Options outstanding at January 27, 1996 (including
exercisable options for 108,663 shares) ....... 331,350 11.31
Activity during 1996:
Granted ....................................... 186,500 8.84
Expired ....................................... 122,250 10.70
-------
Options outstanding at January 25, 1997 (including
exercisable options for 239,350 shares) ....... 395,600 10.33
Activity during 1997:
Granted ....................................... 357,000 8.93
Expired ....................................... 131,850 12.33
-------
Options outstanding at January 31, 1998 (including
exercisable options for 304,313 shares) ....... 620,750 $ 9.14
======= ======
</TABLE>
=============================================================================
The weighted average fair value of options granted in 1997, 1996 and 1995
totalled $6.18, $5.27 and $5.75, respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes option
pricing model. The weighted average assumptions used in valuing the option
grants for 1997, 1996 and 1995, respectively, were expected life, 9.94, 9.89
and 9.85 years; interest rate, 6.73%, 6.35% and 6.46%; and volatility (the
measure by which the stock price has fluctuated or will be expected to
fluctuate during the period), 37.07%, 34.87% and 34.67%.
At January 31, 1998, 396,000 of the outstanding options have exercise prices
that range between $7.25-$9.13, with a weighted average exercise price of
$8.43. Of these options, 243,500 options are exercisable, with a weighted
average exercise price of $8.41 and a weighted average contractual maturity
of 8.9 years. The remaining 224,750 outstanding options have exercise prices
that range between $9.63-$14.38, with a weighted average exercise price of
$10.39. Of these options, 60,813 options are exercisable, with a weighted
average exercise price of $11.45 and a weighted average contractual maturity
of 5.2 years.
F-13
<PAGE>
PREFERRED STOCK PURCHASE RIGHTS
The Company has a Preferred Stock Purchase Rights Plan, under which a Right
is attached to each share of the Company's Common Stock. Each Right entitles
the registered holder to purchase from the Company one one-hundredth of a
share of Series A Preferred Stock at an exercise price of $100, subject to
adjustment. The Company has reserved 100,000 shares of Series A Preferred
Stock for issuance on exercise of the Rights. The Rights trade with the
Company's Common Stock and will become exercisable 10 days after any person
or group acquires 25% or more of the Company's Common Stock, or commences or
announces an offer for 30% or more of the Company's Common Stock. After the
Rights become exercisable, if the Company is acquired in a merger or other
business combination or if 50% or more of its assets or earning power are
sold, each Right will entitle the holder to purchase, at the then current
exercise price of the Right, shares of common stock of the acquiring company
having a market value of twice the exercise price of the Right.
Alternatively, if a 25% shareholder acquires the Company by means of a
reverse merger in which the Company and its stock survive, or if such
shareholder engages in self-dealing transactions with the Company or acquires
beneficial ownership of 40% or more of the Company's Common Stock other than
by means of a fair offer to buy all shares, each Right (except those of the
acquiring person or group) will entitle its holder to purchase, on exercise,
shares of the Company's Common Stock having a market value of twice the
current exercise price of each Right. The Rights may be redeemed by the
Company for one cent per Right until 30 days after a person or group acquires
25% or more of the Company's Common Stock, and will expire on October 25,
1998.
EARNINGS PER SHARE
Basic earnings per common share are computed by dividing reported earnings
available to common shareholders by weighted average common shares
outstanding. Diluted earnings per common share give effect to dilutive
potential common shares. Earnings per common share are calculated as follows:
<TABLE>
<CAPTION>
(dollars and shares in thousands) 1997 1996 1995
- --------------------------------- ---- ---- ----
<S> <C> <C> <C>
Earnings (loss) available to common shareholders ........... $ 1,214 $(11,462) $(4,206)
======= ======== =======
Weighted average common shares outstanding ................. 5,779 5,779 5,779
Dilutive stock options ..................................... 44 -- --
------- -------- -------
Shares used to calculate diluted earnings per common share 5,823 5,779 5,779
======= ======== =======
Earnings (loss) per common share:
Basic .................................................... $ .21 $ (1.98) $ (.73)
Diluted .................................................. .21 (1.98) (.73)
======= ======== =======
</TABLE>
=============================================================================
Potential common shares attributable to stock options or assumed conversion
of debentures are reported in the above table only if dilutive. Potential
shares represented by anti-dilutive stock options totalled 165,000, 232,000
and 218,000 in 1997, 1996 and 1995, respectively.
The Company's 6 3/4% Convertible Subordinated Debentures due 2011 represent
potential common shares for computation of diluted earnings per share, but
are anti-dilutive for 1997, 1996 and 1995. Assumed conversion of the
debentures would have added 972,000, 1,042,000 and 1,056,000 to shares used
to calculate diluted earnings per share in 1997, 1996 and 1995, respectively.
F-14
<PAGE>
CONDENSED BALANCE SHEETS
Condensed balance sheets of Jacobson Stores Realty Company, Jacobson Credit
Corp. and merchandising operations are shown below:
<TABLE>
<CAPTION>
January January January
(in thousands) 1998 1997 1996
- -------------- ---- ---- ----
JACOBSON STORES REALTY COMPANY
<S> <C> <C> <C>
Current assets.................................................... $ 182 $ 189 $ 269
Advances to Jacobson Stores Inc................................... 26,141 25,589 23,460
Property and equipment, net....................................... 46,933 51,458 55,196
Investments and other assets...................................... 2,461 2,633 2,760
------- -------- -------
Assets...................................................... $ 75,717 $ 79,869 $ 81,685
======= ======== =======
Current liabilities............................................... $ 3,929 $ 2,932 $ 3,186
Long-term debt.................................................... 38,571 45,746 47,500
Other liabilities................................................. 1,891 2,299 2,559
Equity of Jacobson Stores Inc..................................... 31,326 28,892 28,440
------- -------- -------
Liabilities and Equity...................................... $ 75,717 $ 79,869 $ 81,685
======= ======== =======
<CAPTION>
JACOBSON CREDIT CORP.
<S> <C> <C> <C>
Current assets.................................................... $ -- $ -- $ 4
Advances to Jacobson Stores Inc................................... 8,524 8,524 8,615
------- -------- -------
Assets...................................................... $ 8,524 $ 8,524 $ 8,619
======= ======== =======
Current liabilities............................................... $ -- $ -- $ 95
Equity of Jacobson Stores Inc..................................... 8,524 8,524 8,524
------- -------- -------
Liabilities and Equity...................................... $ 8,524 $ 8,524 $ 8,619
======= ======== =======
<CAPTION>
JACOBSON STORES INC. (merchandising operations)
<S> <C> <C> <C>
Current assets.................................................... $130,235 $149,950 $145,481
Property and equipment, net....................................... 36,774 38,344 41,402
Investments and other assets...................................... 21,278 22,094 21,785
------- -------- -------
Assets...................................................... $188,287 $210,388 $208,668
======== ======== ========
Current liabilities............................................... $ 47,673 $ 50,729 $ 47,381
Long-term debt.................................................... 65,567 84,401 72,227
Other liabilities................................................. 8,931 8,474 10,229
Advances from subsidiaries........................................ 34,665 34,113 32,075
Shareholders' equity.............................................. 31,451 32,671 46,756
------- -------- -------
Liabilities and Equity...................................... $188,287 $210,388 $208,668
======== ======== ========
</TABLE>
F-15
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING. Jacobson Stores Inc. operates specialty department
stores in 24 cities in Michigan, Indiana, Kansas, Kentucky, Ohio and
Florida. The consolidated financial statements include the accounts of the
Company and two wholly-owned subsidiaries, Jacobson Stores Realty Company
and Jacobson Credit Corp. All significant inter-company transactions and
balances have been eliminated.
FISCAL YEAR. The Company's fiscal year ends on the last Saturday in
January. Fiscal year 1997 consisted of 53 weeks and ended January 31,
1998. Fiscal years 1996 and 1995 consisted of 52 weeks and ended January
25, 1997 and January 27, 1996, respectively.
SALES. Sales are net of returns. Restaurant and alteration revenues are
reflected as a reduction of cost of merchandise sold. Finance charge
revenues are recorded as income when earned and are reflected as a
reduction of selling, general and administrative expenses.
RECEIVABLES FROM CUSTOMERS. An account is reviewed for write-off if
payment of 20% (one full monthly payment) has not been received during the
previous four month period or if it is otherwise determined that the
account is uncollectible.
MERCHANDISE INVENTORIES. All merchandise inventories are valued at cost,
which is lower than market, as determined by the retail last-in, first-out
(LIFO) method.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at cost. Major
replacements and improve-ments are charged to the property and equipment
accounts. Maintenance, repairs and minor replacements are charged to
expense as incurred. When assets are sold, retired, or fully depreciated,
their cost and related accumulated depreciation and amortization are
removed from the property and equipment accounts, and any gain or loss is
reflected in the consolidated statements of earnings.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization are provided
on the straight-line basis over the estimated useful lives of the property
and equipment, or over the respective lease terms, if such periods are
shorter. Buildings and improvements are depreciated over ten to forty
years. Furniture, fixtures and equipment are depreciated over five to ten
years.
CAPITALIZATION OF INTEREST. Interest expense incurred on properties under
development is capitalized to reflect properly the costs of properties up
to the time they are ready for their intended use. The amounts capitalized
are then amortized over the respective lives of the depreciable assets.
PRE-OPENING EXPENSES. Expenditures of a non-capital nature associated with
opening a new store are charged to expense using the straight-line method
in the twelve months immediately following the opening.
INCOME TAXES. Deferred income taxes result from differences between the
tax basis of an asset or liability and its reported amount in the
consolidated financial statements (temporary differences) and are adjusted
for changes in tax laws and rates.
EARNINGS PER SHARE. Effective in 1997, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 128, Earnings Per
Share. Under SFAS No. 128, 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. If dilutive, the debentures would be converted to common
stock in the computation of diluted earnings per share with a
corresponding increase in net earnings to reflect reduction in related
interest expense, net of income taxes. The calculations of earnings per
share under the provisions of SFAS No. 128 did not change previously
reported annual earnings (loss) per share for prior years.
FINANCIAL INSTRUMENTS. With the exception of long-term debt and
shareholders' equity, the Company records all financial instruments,
including cash equivalents, receivables from customers and accounts
payable, at or in amounts approximating market value.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses for the fiscal year. Actual results could
differ from those estimates.
<PAGE>
RECLASSIFICATIONS. Certain amounts in prior year financial statements have
been reclassified to conform to the 1997 presentation. None of these
reclassifications affected net earnings.
F-16
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
QUARTERLY INFORMATION (unaudited)
OPERATING RESULTS
The unaudited quarterly operating results shown below were prepared using the
same accounting policies that are applied to the annual data.
<TABLE>
<CAPTION>
Quarter
--------------------------------------------
(in thousands, except per share data) First Second Third Fourth
- ------------------------------------- ----- ------ ----- ------
1997
- ----
<S> <C> <C> <C> <C>
Net sales .................................. $ 111,908 $ 95,938 $ 94,715 $ 144,910
Cost of merchandise sold, buying and
occupancy expenses ....................... 72,314 72,381 59,587 96,636
Selling, general and administrative expenses 33,800 30,561 34,421 40,015
Interest expense, net ...................... 2,448 2,289 2,148 2,293
Store closing costs (credit) ............... -- (340) -- --
Gain on sale of property ................... -- -- -- (2,987)
Earnings (loss) before income taxes ........ 3,346 (8,953) (1,441) 8,953
Net earnings (loss) ........................ 2,175 (5,819) (937) 5,795
Earnings (loss) per common share:
Basic .................................... $ .38 $ (1.00) $ (.16) $ 1.00
Diluted .................................. .38 (1.00) (.16) .98
1996
Net sales .................................. $ 106,525 $ 93,990 $ 90,778 $ 141,176
Cost of merchandise sold, buying and
occupancy expenses ....................... 68,260 69,258 59,410 96,898
Selling, general and administrative expenses 34,436 31,586 33,355 42,971
Interest expense, net ...................... 2,272 2,272 2,262 2,578
Store closing costs ........................ -- -- -- 4,200
Earnings (loss) before income taxes ........ 1,557 (9,126) (4,249) (5,471)
Net earnings (loss) ........................ 1,012 (5,931) (2,763) (3,780)
Earnings (loss) per common share:
Basic .................................... $ .18 $ (1.02) $ (.48) $ (.65)
Diluted .................................. .18 (1.02) (.48) (.65)
1995
Net sales .................................. $ 100,298 $ 93,099 $ 87,802 $ 133,068
Cost of merchandise sold, buying and
occupancy expenses ....................... 64,826 67,438 57,316 89,913
Selling, general and administrative expenses 33,000 31,665 32,884 36,023
Interest expense, net ...................... 2,208 2,182 2,136 2,282
Gain on sale of property ................... -- -- (1,065) --
Earnings (loss) before income taxes ........ 264 (8,186) (3,469) 4,850
Net earnings (loss) ........................ 172 (5,321) (2,255) 3,198
Earnings (loss) per common share:
Basic .................................... $ .03 $ (.92) $ (.39) $ .55
Diluted .................................. .03 (.92) (.39) .55
</TABLE>
=============================================================================
F-17
<PAGE>
The Company's business is seasonal in nature. Traditionally, a higher
proportion of sales and net earnings is generated in the fourth quarter
(which includes the Christmas season). The anticipated effective annual tax
rate is used to compute income taxes on a quarterly basis. The gross margins
used in calculating cost of goods sold for interim periods include an
allocation of the estimated annual LIFO provision, which cannot be determined
precisely until the year-end inventory value is known and the Bureau of Labor
Statistics Department Store Index is published in February.
The impact of LIFO on earnings per share as it was reported and as it would
have been had the actual charge (benefit) been known when the quarterly
allocations were made is shown below.
<TABLE>
<CAPTION>
As Reported As Reallocated
---------------------- -----------------------
Quarter 1997 1996 1995 1997 1996 1995
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1st $.04 $.06 $.06 $.04 $.01 $.04
2nd .03 .01 .05 .04 .01 .03
3rd .03 .03 .05 .04 - .03
4th .08 (.07) (.01) .06 .01 .05
---- ---- ---- ---- ---- ----
$.18 $.03 $.15 $.18 $.03 $.15
==== ==== ==== ==== ==== ====
</TABLE>
F-18
<PAGE>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Jacobson Stores Inc.:
We have audited the accompanying consolidated balance sheets of JACOBSON
STORES INC. (a Michigan corporation) and subsidiaries as of January 31,
1998, January 25, 1997 and January 27, 1996 and the related consolidated
statements of earnings, shareholders' equity and cash flows for each of
the three fiscal years in the period ended January 31, 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jacobson Stores Inc.
and subsidiaries as of January 31, 1998, January 25, 1997 and January 27,
1996 and the results of their operations and their cash flows for each of
the three fiscal years in the period ended January 31, 1998, in conformity
with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
------------------------
Detroit, Michigan
March 6, 1998
F-19
<PAGE>
<TABLE>
<CAPTION>
JACOBSON STORES INC. AND CONSOLIDATED SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
JANUARY 31, 1998
----------------
(in thousands)
Column A Column B Column C Column D Column E
Amounts
Charged Deductions
Balance (Credited) For Balance
Beginning to Costs & Amounts End of
Description of Period Expenses Paid Period
----------- --------- -------- ---- ------
<S> <C> <C> <C> <C>
52 WEEKS ENDED JANUARY 25, 1997:
Store Closing Costs -
Severance and related benefits $ -- $ 900 $ -- $ 900
Reserve to state property and
equipment at estimated fair value -- 2,350 -- 2,350
Expense to hold closed facilities
pending disposition -- 950 -- 950
-------- ------- ------- -------
$ -- $ 4,200 $ -- $ 4,200
======== ======= ======= =======
53 WEEKS ENDED JANUARY 31, 1998:
Store Closing Costs -
Severance and related benefits $ 900 $ (200) $ (700) $ --
Reserve to state property and
equipment at estimated fair value 2,350 (140) -- 2,210
Expense to hold closed facilities
pending disposition 950 -- (537) 413
-------- ------- ------- -------
$ 4,200 $ (340) $(1,237) $ 2,623
======== ======= ======= =======
</TABLE>
S-1
<PAGE>
EXHIBITS
--------
EXHIBITS
--------
10(a)* Employment Agreement, dated as of April 15, 1998,
between Jacobson Stores Inc. and P. Gerald Mills.
10(b)* Employment Agreement, dated as of April 15, 1998,
between Jacobson Stores Inc. and Paul W. Gilbert.
10(c)* Employment Agreement, dated as of April 15, 1998,
between Jacobson Stores Inc. and James A. Rodefeld.
10(d)* Executive Employment Agreement, dated as of April 15,
1998, between Jacobson Stores Inc. and Herman J.
Heinle.
10(e)* Executive Employment Agreement, dated as of April 15,
1998, between Jacobson Stores Inc. and Theodore R.
Kolman.
10(f)* Jacobson Stores Inc. Deferred Compensation Plan, as
amended and restated March 26, 1998.
10(g)* Jacobson Stores Inc. Management Incentive Plan, dated
March 26, 1998.
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
In addition, the previously-filed exhibits listed below are
incorporated herein by reference. (All references are to Securities and
Exchange Commission File #0-6319 unless otherwise noted.)
<TABLE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
3(i)(a) Restated Articles of Incorporation, Exhibit 19(a) to Form 10-Q,
Jacobson Stores Inc., as amended and Quarter Ended April 29, 1989.
restated May 25, 1989.
3(i)(b) Certificate of Designation, Preferences Exhibit 3(a) to Form 10-Q,
and Rights of Preferred Stock of Quarter Ended October 29,
Jacobson Stores Inc. 1988.
3(ii) By-laws, Jacobson Stores Inc., as Exhibit 3(ii) to Form 10-Q,
amended November 20, 1997. Quarter Ended October 25, 1997.
E-1
<PAGE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
4(a) Revolving Credit Agreement, dated as of Exhibit 4(c) to Form 10-K,
March 24, 1997, between Jacobson Stores Year Ended January 25, 1997.
Inc. and The CIT Group/Business Credit,
as agent.
4(b) Election under Section 780, Michigan Exhibit 28 to Form 10-Q,
Business Corporation Act. Quarter Ended October 27, 1984.
4(c) Indenture dated as of December 15, 1986 File #33-10532:
between Jacobson Stores Inc. and Exhibit 4(a) to Form S-2
National Bank of Detroit, as Trustee. (Amendment No.1), filed
December 12, 1986.
4(d) Rights Agreement dated as of October 4, Exhibit I to Form 8-A and
1988 between Jacobson Stores Inc. and Exhibit 4 to Form 8-K,
Manufacturers National Bank of Detroit, October 7, 1988; Exhibit I to
as Rights Agent; Change of Rights Amendment No. 1 to Form 8-A,
Agent, Effective June 1, 1989; Change May 16, 1989; Exhibit 1 to
of Right Agent, Effective May 31, 1994. Amendment No. 2 to Form 8-A,
June 9, 1994.
10(h)* Release and Settlement Agreement effective Exhibit 10(a) to Form 10-Q,
May 25, 1997, between Jacobson Stores Inc. Quarter Ended July 26, 1997.
and Joseph H. Fisher.
10(i)* Release and Waiver Agreement dated Exhibit 10(a) to Form 10-Q,
October 7, 1997, between Jacobson Quarter Ended October 25, 1997.
Stores Inc. and Robert L. Moles.
10(j)* Split Dollar Agreement, dated January 31, Exhibit 10(k) to Form 10-K
1992, between Jacobson Stores Inc. and Year Ended January 27, 1996.
Paul W. Gilbert.
10(k)* Jacobson's Stock Option Plan of 1983, Exhibit 19 to Form 10-Q,
as amended and restated, effective Quarter Ended October 26, 1991.
May 28, 1987, and as further amended
May 24, 1990 and August 22, 1991.
10(l)* Jacobson Stock Option Plan of 1994. Exhibit A to Proxy Statement
in connection with the Annual
Meeting of Shareholders held
on May 26, 1994.
E-2
<PAGE>
<CAPTION>
Current Identification of
Exhibit Description of Exhibit Prior Filing
- ------- ---------------------- -----------------
<S> <C> <C>
10(m)* First Amendment to Jacobson Stock Exhibit 10(m) to Form 10-K,
Option Plan of 1994. Year Ended January 27, 1996.
10(n)* Second Amendment to Jacobson Stock Exhibit 10(b) to Form 10-Q,
Option Plan of 1994. Quarter Ended July 26, 1997.
10(o)* Third Amendment to Jacobson Stock Exhibit A to Proxy Statement
Option Plan of 1994 dated April 10, 1998 for 1998
Annual Meeting.
10(p)* 1997 Management Incentive Plan Exhibit 10(c) to Form 10-Q,
Quarter Ended July 26, 1997.
10(q)* Severance Agreement dated as of Exhibit 10(b) to Form 10-K,
October 31, 1996, between Jacobson Year Ended January 25, 1997.
Stores Inc. and Mark K. Rosenfeld
10(r)* Amendment to Severance Agreement dated Exhibit 10(c) to Form 10-K,
as of December 12, 1996, between Jacobson Year Ended January 25, 1997.
Stores Inc. and Mark K. Rosenfeld
21 Schedule of Subsidiaries Exhibit 21 to Form 10-K, Year
Ended January 27, 1996.
</TABLE>
E-3
Exhibit 10(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of April 15, 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 March 19, 1997 is restated, effective April 15, 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 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.
<PAGE>
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 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. 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
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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 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
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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;
(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.
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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, officer or beneficial owner of at least 10% of
the Company's outstanding Common Stock 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, 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.
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(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) 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.
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(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) 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.
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(b) 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.
(c) Equitable Remedies. Paragraphs 7.(a) and 7.(b) are
intended, among other things, to protect the confidential information
described in paragraph 7.(a) 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 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
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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.
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.
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IN THE PRESENCE OF: JACOBSON STORES INC.
By: /s/ Paul W. Gilbert
- --------------------------- ----------------------------------
Paul W. Gilbert,
Vice Chairman of the Board
By: /s/ Richard Z. Rosenfeld
- --------------------------- ----------------------------------
Richard Z. Rosenfeld,
Secretary
/s/ P. Gerald Mills
- --------------------------- ----------------------------------
P. Gerald Mills
Exhibit 10(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of April 15, 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 February 1, 1996, as amended effective August 1, 1996, and the Change
in Control Severance Agreement between them dated as of December 18, 1995,
are restated, effective April 15, 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
such termination is given on or after the occurrence of "Cause" (as defined
below) for termination of
<PAGE>
his employment under this Agreement, (iv) immediately when notice of such
termination is given to Gilbert by the Company or 30 days after notice of
such termination is given to the Company by Gilbert, 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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<PAGE>
(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 actual number of days Gilbert was
employed
3
<PAGE>
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
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<PAGE>
(4) a continuation during the Time of (1)
the medical, dental, life, disability, hospitalization,
optical and prescription drug benefits Gilbert and
Gilbert'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,
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
5
<PAGE>
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;
(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
6
<PAGE>
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, officer or beneficial owner of at
least 10% of the Company's outstanding Common Stock as of the date
of this Agreement. For 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.
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<PAGE>
(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 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.
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<PAGE>
(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 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.
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<PAGE>
(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.
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,
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<PAGE>
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 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.
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IN THE PRESENCE OF: JACOBSON STORES INC.
By: /s/ P. Gerald Mills
- --------------------- ---------------------------------
P. Gerald Mills,
Chairman of the Board and
Chief Executive Officer
By: /s/ Richard Z. Rosenfeld
- --------------------- ---------------------------------
Richard Z. Rosenfeld,
Secretary
/s/ Paul W. Gilbert
- --------------------- -------------------------------------
Paul W. Gilbert
12
Exhibit 10(c)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of April 15, 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 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 "Disability" (as
defined below), (iii) at the Company's option, immediately when notice to
<PAGE>
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) immediately when notice of such termination is given to Rodefeld by the
Company or 30 days after notice of such termination is given to the Company
by Rodefeld, 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
3
<PAGE>
the date of termination. 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
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<PAGE>
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 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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<PAGE>
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, officer or beneficial owner of at
least 10% of the Company's outstanding Common Stock 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 otherwise affiliated
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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
7
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duties or responsibilities from Rodefeld's duties and
responsibilities immediately before such Change in Control, (5) any
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.
10
<PAGE>
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: /s/ P. Gerald Mills
- ------------------------- ---------------------------------
P. Gerald Mills,
Chairman of the Board and
Chief Executive Officer
By: /s/ Richard Z. Rosenfeld
- ------------------------- ---------------------------------
Richard Z. Rosenfeld,
Secretary
/s/ James A. Rodefeld
- ------------------------- -------------------------------------
James A. Rodefeld
11
Exhibit 10(d)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into April 12 , 1998, between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the "Company"),
and Herman J. Heinle the "Employee").
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Term. The Company employs Employee as Senior Vice
President-General Merchandise Manager , and Employee agrees to serve in that
capacity and/or in such other capacity or capacities as the Chief Executive
Officer of the Company deems advisable, commencing April 12, 1998, and
continuing through April 15, 1999, unless terminated sooner pursuant to the
provisions of paragraph 4, for the salary and on the terms set forth herein.
2. Compensation. Subject to the provisions of paragraph 4, the
Company agrees to pay Employee salary at an annual rate of $ 150,000 , in
bi-weekly or other regular periodic installments no less frequent than
monthly.
3. Duties. Employee agrees, as long as employment by the Company
continues, to devote Employee's entire time and best efforts to furthering
the interests of the Company; to comply with all regulations and policies of
the Company; and to perform the duties requested by any officers and
executives of the Company to whom the Employee is directed to report.
4. Termination. Employee's employment under this Agreement shall
terminate on the earliest to occur of the following: (1) immediately upon
Employee's death, (2) at the Company's option, immediately when notice to
Employee of such termination is given after Employee's permanent incapacity
(established to the reasonable satisfaction of the Chief Executive Officer of
the Company), (3) at the Company's option, immediately when notice to
Employee of such termination is given (for any reason or for no reason and
regardless of whether there is good cause for such termination), (4) 30 days
after notice of such termination is given to the Company by Employee, and (5)
April 15, 1999. Notice will be deemed to be given on the earliest of (1) when
delivered, or (2) three business days after mailed by certified or registered
mail, postage prepaid, return receipt requested, or (3) one business day
after sent by recognized overnight courier, if to Employee, to Employee'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) If employment is terminated due to Employee's death or
permanent incapacity, 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 employees of the
Company and that are maintained by the Company at that time.
<PAGE>
(b) Except as otherwise provided in paragraph 4(c), if
employment is terminated by the Company (for any reason or for no reason and
regardless of whether there is good cause for such termination), or if
Employee resigns or retires before or at the expiration of the term, 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 severance program, wage continuation program, insurance, or other
employee benefit plans that are generally applicable to all employees of the
Company and that are maintained by the Company at that time.
(c) If (1) a "Change in Control" (as defined below) occurs
during the term of Employee's employment under this Agreement, and (2) either
Employee terminates Employee's employment with the "Entity" (as defined
below) for "Good Reason" (as defined below) or the "Entity" terminates
Employee's employment without "Cause" (as defined below), both within one
year after the Change in Control, Employee will receive an amount equal to
Employee's annual salary at the rate set forth in paragraph 2 for the period
from the date of such termination through the date that is 24 months after
the date such Change in Control occurs. Such payments shall be made at the
times provided in paragraph 2. 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. The Company's obligation to pay
the salary continuation payments provided in this paragraph 4(c) shall
survive the expiration of the term.
(i) For purposes of this Agreement, a "Change in
Control" occurs on the first day any one or more of the following
occurs:
(A) 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 4(c)(ii)), 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;
(B) 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;
(C) 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
4(c)(i)(A); or
- 2 -
<PAGE>
(D) the "Continuing Directors" (as defined in
paragraph 4(c)(iii)) 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.
(ii) For purposes of this Agreement, the "Excluded
Persons" are (1) Employee, (2) any "group" (as that term is used
in Section 13(d) of the Exchange Act and the rules thereunder)
that includes Employee or in which Employee is, or has agreed to
become, an equity participant, (3) any entity in which Employee
is, or has agreed to become, an equity participant, (4) the
Company, (5) any subsidiary of the Company, (6) any employee
benefit plan of the Company or any subsidiary of the Company or
the related trust, (7) 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 (8) any director, officer or beneficial owner of at
least 10% of the Company's outstanding Common Stock as of the date
of this Agreement. For purposes of this Agreement, Employee shall
not be deemed an "equity participant" in any group or entity (1)
in which Employee 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 Employee is not otherwise affiliated with such
group or entity, or (2) if Employee's participation is
fully-disclosed to, and approved by, the Company's Chief Executive
Officer before the Change in Control occurs.
(iii) 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.
(iv) Termination of Employee's employment for "Good
Reason" means Employee's voluntary termination of employment with
the Entity after a Change in Control as a result of (1) any
decrease by the Entity (without Employee's consent) in Employee's
salary from Employee's salary immediately before such Change in
Control; provided, that no such decrease shall constitute "Good
Reason" if such decrease is applied in the same manner to all
officers or employees at the same employment level as Employee
(such as all officers or all store managers, as the case may be),
(2) a substantial change by the Entity (without Employee's
consent) in Employee's duties or responsibilities from Employee's
duties and responsibilities immediately before such Change in
Control, or (3) any requirement by the Entity (to which Employee
does not consent) that Employee change Employee's primary place of
business. "Good Reason" will not include Employee's death,
permanent incapacity or Retirement (as defined below), or
Employee's resignation other than as provided in the preceding
sentence. For purposes of this Agreement, "Retirement" means
Employee's retirement from the Entity in accordance with the
Entity's normal policies.
(v) The Entity's termination of Employee's employment
without "Cause" means a termination other than for (1) Employee's
continued failure either to (A) devote substantially full time to
Employee's employment duties (except because of Employee's illness
or disability) or (B) make a good faith effort to perform
Employee's employment duties; (2) any other willful act or
omission which Employee knew, or had reason to know, would
materially injure the Entity; or (3) Employee's conviction of a
felony involving dishonesty or fraud.
- 3 -
<PAGE>
(vi) 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 4(c)(i)(B) or paragraph
4(c)(i)(C), 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 Employee on such terms that
would not constitute "Good Reason" for termination of Employee's
employment if imposed by the Company. Therefore, for purposes of
this paragraph 4(c), Employee shall not be deemed to have
terminated Employee's employment with the Entity for "Good Reason"
and the "Entity" shall not be deemed to have terminated Employee'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 4(c), Employee shall not be deemed
to have terminated Employee's employment with the Entity for "Good
Reason" and the "Entity" shall not be deemed to have terminated
Employee'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 Employee on such terms that
would not constitute "Good Reason" for termination of Employee's
employment if imposed by the Company, (2) Employee refuses such
employment, and (3) the Company terminates Employee's employment
for any reason or for no reason.
(d) The severance benefits provided in this paragraph 4 are
exclusive and in lieu of any other severance benefits to which Employee may
be entitled, except for any benefits under the terms of any stock options or
restricted stock agreements Employee may have.
(e) There is not, nor will there be unless in writing signed
by both Employee and the Company, any express or implied agreement as to
Employee's continued employment by the Company after the end of the term of
Employee's employment under this Agreement. Employee's subsequent employment
with the Company, if any, will be employment "at will", and the provisions of
this Agreement will not apply to any such employment.
5. Previous Agreements Superseded. This Agreement supersedes all
previous employment agreements between the parties.
6. Miscellaneous Provisions. This Agreement may be amended only by
written agreement signed by either the Chairman or Vice Chairman of the
Company. It shall be construed according to the laws of Michigan, and shall
be binding on and enforceable by the parties and their successors in
interest.
IN THE PRESENCE OF: JACOBSON STORES INC.
By: /s/ P. Gerald Mills
- -------------------------- --------------------------------
Its Chairman of the Board
---------------------------
COMPANY
-------
/s/ Herman J. Heinle
- -------------------------- --------------------------------
EMPLOYEE
--------
- 4 -
Exhibit 10(e)
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into April 12 , 1998, between JACOBSON
STORES INC., a Michigan corporation, of Jackson, Michigan (the "Company"),
and Theodore R. Kolman the "Employee").
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Term. The Company employs Employee as Senior
Vice President-General Merchandise Manager , and Employee agrees to serve in
that capacity and/or in such other capacity or capacities as the Chief
Executive Officer of the Company deems advisable, commencing April 12, 1998,
and continuing through April 15, 1999, unless terminated sooner pursuant to
the provisions of paragraph 4, for the salary and on the terms set forth
herein.
2. Compensation. Subject to the provisions of paragraph 4, the
Company agrees to pay Employee salary at an annual rate of $ 150,000 , in
bi-weekly or other regular periodic installments no less frequent than
monthly.
3. Duties. Employee agrees, as long as employment by the Company
continues, to devote Employee's entire time and best efforts to furthering
the interests of the Company; to comply with all regulations and policies of
the Company; and to perform the duties requested by any officers and
executives of the Company to whom the Employee is directed to report.
4. Termination. Employee's employment under this Agreement shall
terminate on the earliest to occur of the following: (1) immediately upon
Employee's death, (2) at the Company's option, immediately when notice to
Employee of such termination is given after Employee's permanent incapacity
(established to the reasonable satisfaction of the Chief Executive Officer of
the Company), (3) at the Company's option, immediately when notice to
Employee of such termination is given (for any reason or for no reason and
regardless of whether there is good cause for such termination), (4) 30 days
after notice of such termination is given to the Company by Employee, and (5)
April 15, 1999. Notice will be deemed to be given on the earliest of (1) when
delivered, or (2) three business days after mailed by certified or registered
mail, postage prepaid, return receipt requested, or (3) one business day
after sent by recognized overnight courier, if to Employee, to Employee'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) If employment is terminated due to Employee's death or
permanent incapacity, 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 employees of the
Company and that are maintained by the Company at that time.
<PAGE>
(b) Except as otherwise provided in paragraph 4(c), if
employment is terminated by the Company (for any reason or for no reason and
regardless of whether there is good cause for such termination), or if
Employee resigns or retires before or at the expiration of the term, 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 severance program, wage continuation program, insurance, or other
employee benefit plans that are generally applicable to all employees of the
Company and that are maintained by the Company at that time.
(c) If (1) a "Change in Control" (as defined below) occurs
during the term of Employee's employment under this Agreement, and (2) either
Employee terminates Employee's employment with the "Entity" (as defined
below) for "Good Reason" (as defined below) or the "Entity" terminates
Employee's employment without "Cause" (as defined below), both within one
year after the Change in Control, Employee will receive an amount equal to
Employee's annual salary at the rate set forth in paragraph 2 for the period
from the date of such termination through the date that is 24 months after
the date such Change in Control occurs. Such payments shall be made at the
times provided in paragraph 2. 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. The Company's obligation to pay
the salary continuation payments provided in this paragraph 4(c) shall
survive the expiration of the term.
(i) For purposes of this Agreement, a "Change in
Control" occurs on the first day any one or more of the following
occurs:
(A) 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 4(c)(ii)),
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;
(B) 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;
(C) 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 4(c)(i)(A); or
- 2 -
<PAGE>
(D) the "Continuing Directors" (as defined
in paragraph 4(c)(iii)) 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.
(ii) For purposes of this Agreement, the "Excluded
Persons" are (1) Employee, (2) any "group" (as that term is used
in Section 13(d) of the Exchange Act and the rules thereunder)
that includes Employee or in which Employee is, or has agreed to
become, an equity participant, (3) any entity in which Employee
is, or has agreed to become, an equity participant, (4) the
Company, (5) any subsidiary of the Company, (6) any employee
benefit plan of the Company or any subsidiary of the Company or
the related trust, (7) 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 (8) any director, officer or beneficial owner of at
least 10% of the Company's outstanding Common Stock as of the date
of this Agreement. For purposes of this Agreement, Employee shall
not be deemed an "equity participant" in any group or entity (1)
in which Employee 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 Employee is not otherwise affiliated with such
group or entity, or (2) if Employee's participation is
fully-disclosed to, and approved by, the Company's Chief Executive
Officer before the Change in Control occurs.
(iii) 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.
(iv) Termination of Employee's employment for "Good
Reason" means Employee's voluntary termination of employment with
the Entity after a Change in Control as a result of (1) any
decrease by the Entity (without Employee's consent) in Employee's
salary from Employee's salary immediately before such Change in
Control; provided, that no such decrease shall constitute "Good
Reason" if such decrease is applied in the same manner to all
officers or employees at the same employment level as Employee
(such as all officers or all store managers, as the case may be),
(2) a substantial change by the Entity (without Employee's
consent) in Employee's duties or responsibilities from Employee's
duties and responsibilities immediately before such Change in
Control, or (3) any requirement by the Entity (to which Employee
does not consent) that Employee change Employee's primary place of
business. "Good Reason" will not include Employee's death,
permanent incapacity or Retirement (as defined below), or
Employee's resignation other than as provided in the preceding
sentence. For purposes of this Agreement, "Retirement" means
Employee's retirement from the Entity in accordance with the
Entity's normal policies.
(v) The Entity's termination of Employee's
employment without "Cause" means a termination other than for (1)
Employee's continued failure either to (A) devote substantially
full time to Employee's employment duties (except because of
Employee's illness or disability) or (B) make a good faith effort
to perform Employee's employment duties; (2) any other willful act
or omission which Employee knew, or had reason to know, would
materially injure the Entity; or (3) Employee's conviction of a
felony involving dishonesty or fraud.
- 3 -
<PAGE>
(vi) 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 4(c)(i)(B) or paragraph
4(c)(i)(C), 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 Employee on such terms that
would not constitute "Good Reason" for termination of Employee's
employment if imposed by the Company. Therefore, for purposes of
this paragraph 4(c), Employee shall not be deemed to have
terminated Employee's employment with the Entity for "Good Reason"
and the "Entity" shall not be deemed to have terminated Employee'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 4(c), Employee shall not be deemed
to have terminated Employee's employment with the Entity for "Good
Reason" and the "Entity" shall not be deemed to have terminated
Employee'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 Employee on such terms that
would not constitute "Good Reason" for termination of Employee's
employment if imposed by the Company, (2) Employee refuses such
employment, and (3) the Company terminates Employee's employment
for any reason or for no reason.
(d) The severance benefits provided in this paragraph 4 are
exclusive and in lieu of any other severance benefits to which Employee may
be entitled, except for any benefits under the terms of any stock options or
restricted stock agreements Employee may have.
(e) There is not, nor will there be unless in writing signed
by both Employee and the Company, any express or implied agreement as to
Employee's continued employment by the Company after the end of the term of
Employee's employment under this Agreement. Employee's subsequent employment
with the Company, if any, will be employment "at will", and the provisions of
this Agreement will not apply to any such employment.
5. Previous Agreements Superseded. This Agreement supersedes all
previous employment agreements between the parties.
6. Miscellaneous Provisions. This Agreement may be amended only
by written agreement signed by either the Chairman or Vice Chairman of the
Company. It shall be construed according to the laws of Michigan, and shall
be binding on and enforceable by the parties and their successors in
interest.
IN THE PRESENCE OF: JACOBSON STORES INC.
/s/ Katherine Tharp By: /s/ James K. Delaney
- ----------------------------- ---------------------------------------
Its Vice President-Human Resources
------------------------------
COMPANY
-------
/s/ Amy Annis /s/ Theodore R. Kolman
- ----------------------------- ---------------------------------------
EMPLOYEE
--------
- 4 -
Exhibit 10(f)
JACOBSON STORES INC.
DEFERRED COMPENSATION PLAN
--------------------------
(Amended and Restated effective March 26, 1998)
ARTICLE I
- ---------
Purpose
- -------
1.1 The purpose of this Deferred Compensation Plan is to extend to key
executives of Jacobson Stores Inc. a vehicle under which they may
elect in advance to defer and invest future earnings in order to
provide a source of funds at retirement.
ARTICLE II
- ----------
Definitions
- -----------
Unless the context otherwise requires, the following terms shall have the
meanings listed below:
2.1 Account - The separate deferred compensation account established and
maintained for each Participant.
2.2 Aggregate Value of the Account - Determined by the amount of
compensation that the Participant elects to defer plus the value
added from interest as more fully set forth in Article III hereof.
2.3 Allocation of Deferred Income - Deferred compensation will be
credited to the Participant's Account as of the date such
compensation would otherwise have been payable.
2.4 Board of Directors - The Board of Directors of the Corporation.
2.5 Corporation - Jacobson Stores Inc., a Michigan corporation.
2.6 Deferred Income - That portion of a Participant's income payable as
a monthly base salary or any merit bonus awarded or any fees earned
with respect to any Earning Period, the payment of which Participant
has elected to defer under the Plan.
2.7 Earning Period - Each twelve (12) month period commencing May 1.
2.8 Eligible Participant - Any Director, Officer or other Employee
designated by the Board of Directors as being eligible to be a
Participant in the Plan.
2.9 Employee - Any person who is receiving remuneration for personal
services rendered to the Corporation or a subsidiary as an employee
hereof.
- 1 -
(3/26/98)
<PAGE>
2.10 Effective Date - The effective date of the Plan is September 1, 1990.
2.11 Merit Bonus - Additional compensation awarded, with respect to an
Earning Period, to an Eligible Participant in the form of an
executive bonus which is declared by the Board of Directors to be a
Merit Bonus for the purposes of the Plan.
2.12 Participant - Any Eligible Participant who elects to participate in
the Plan in respect of any Earning Period and receives compensation
eligible to be Deferred Income with respect to such Earning Period.
2.13 Plan - Jacobson Stores Inc. Deferred Compensation Plan, as amended
from time to time.
2.14 Subsidiary - Any corporation or association in which 50% or more of
the outstanding voting stock of such corporation or association is
owned, either directly or indirectly, by Jacobson Stores Inc.
ARTICLE III
- -----------
Account Growth
- --------------
3.1 Interest Bearing Account - The deferred compensation for a
particular year will be treated as a cash Account with interest
compounded annually and accrued at a rate to be determined from time
to time by the Compensation Committee of the Board of Directors.
ARTICLE IV
- ----------
Distribution of Account
- -----------------------
4.1 Time of Distribution - The Aggregate Value shall be distributed to a
Participant within ninety (90) days after the earliest of the
following events:
1. resignation or termination of employment with or service to the
Corporation or any Subsidiary;
2. permanent incapacity, established to the reasonable satisfaction
of the Committee referred to in Article VI hereof;
3. death; or
4. retirement.
4.2 Resignation or Termination for Reasons Other Than Death, Permanent
Incapacity or Retirement - Participants who resign or terminate
employment or service for reasons other than death, permanent
incapacity or retirement will receive payment of the Aggregate Value
of the Account in the form of a lump-sum payment.
- 2 -
(3/26/98)
<PAGE>
4.3 Distribution in the Event of Retirement - Participants who retire
while employed by or in service to Jacobson Stores Inc. or any
Subsidiary shall receive payment of their Aggregate Value of the
Account in the form of a lump-sum payment or, at the option of the
Corporation, in equal monthly or other regular intervals over a
period of time, not to exceed ten (10) years, commencing ninety (90)
days following the Participant's termination of employment.
4.4 Distribution in the Event of Permanent Incapacity or Death - In the
event of a Participant's permanent incapacity or death before the
Participant has received any or all of the deferred payments to
which the Participant is entitled, the remaining Aggregate Value of
the Recipient's Account will be paid in the form of a lump-sum
payment.
4.5 All such payments will be made to Participant while living and, in
the event of Participant's death, in accordance with Participant's
written election.
ARTICLE V
- ---------
Election to Defer Compensation
- ------------------------------
5.1 Number of Elections - There may be only one election for each
Earning Period.
5.2 Revocability of Election - Once an election is made in writing for a
particular Earning Period, the election cannot be revoked or
changed.
5.3 Time of Election - The election for each Earning Period must be made
on or before May 1 of the applicable Earning Period.
5.4 Manner of Election - A Participant may elect to defer compensation
by giving written notice to the Plan administrator on a form
provided by the Corporation. The Participant will be required to
provide the following information:
1. amount to be deferred; and
2. the beneficiary or beneficiaries in the event of the
Participant's death.
ARTICLE VI
- ----------
Administration and Amendment of Plan
- ------------------------------------
6.1 Administration - The Plan shall be administered by the Compensation
Committee of the Board of Directors or other committee designated or
administrator appointed for such purpose by the Board of Directors
(the "Committee"). The Committee shall have plenary authority to
interpret the Plan, to decide all questions of fact arising under
the Plan, to formulate rules and regulations covering the operation
of the Plan, and to make all other determinations necessary or
desirable in the administration of the Plan. The decision of the
Committee on any questions concerning or involved in the
interpretation or administration of the Plan shall be final and
conclusive.
- 3 -
(3/26/98)
<PAGE>
6.2 Maintenance of Account - The maintenance of each Account will be the
responsibility of the Chief Financial Officer. A statement will be
sent to each Participant advising them of the Aggregate Value as of
the end of each fiscal year.
6.3 Amendment of Plan - The Plan may at any time be amended, modified or
terminated by the Committee. No amendment, modification or
termination shall, without the consent of the Participant, adversely
affect the accruals in the Participant's account.
ARTICLE VII
- -----------
Miscellaneous
- -------------
7.1 Assignability - Neither Participant, Participant's estate, nor any
beneficiary shall have any power to assign or encumber the right to
receive payments under the Plan, and any attempted assignment or
encumbrance thereof shall be null and void.
7.2 Participant's Interest in Undistributed Aggregate Value - The right
of any Participant to receive future installments under the
provisions of the Plan will be an unsecured claim against the
general assets of the Corporation. The Corporation's promise to pay
the Aggregate Value of the Account will be a contractual obligation
that is not evidenced by notes or secured in any way.
- 4 -
(3/26/98)
Exhibit 10(g)
JACOBSON STORES INC.
Management Incentive Plan
-------------------------
Senior management incentives are based on accomplishing the key goals of our
business plan. Incentives are structured to strive for excellence.
The management incentive plan is designed to:
o foster an awareness of the Company's objective of consistent, profitable
operation.
o motivate senior management to meet the shorter term needs of shareholders
without sacrificing long-term profitability.
o encourage senior management to "stretch" for higher levels of performance
in the future.
o establish target incentives for each participant so that each person is
aware of what payout percentages can be expected with various levels of
accomplishment.
o encourage retention of key employees.
The principal features of the plan include:
o participation limited to salaried officers of the Company.
o specific performance criteria and weightings established at the beginning
of the year for each participant. (at the most senior level, primary
emphasis placed on corporate goal achievement; at the VP-Staff level,
primary emphasis placed on individual goal achievement).
o potential payout as a percent of the base salary of each participant as
follows:
<TABLE>
<CAPTION>
Threshold Target Maximum
% of target award 0% 100% 150%
---------------------------------------------------------------------
<S> <C> <C> <C>
Chairman/CEO/President 0% 35% 52.2%
Vice Chairman 0 30 45
EVP - Marketing & Stores 0 30 45
SVPs 0 25 37.5
VP - Regional Director of Stores 0 20 30
VP - DMM 0 20 30
VP - Operations 0 20 30
VP - Staff Positions 0 15 22.5
</TABLE>
o Threshold corporate performance criteria (announced at the beginning of
the year) to be achieved before any payout is made under the plan.
(3/26/98)
EXHIBIT 23
ARTHUR ANDERSEN LLP
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Form S-8 Registration Statements File Nos. 2-88295, 033-53469 and 333-31989
and Form S-2 File No. 33-10532.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
Detroit, Michigan
April 8, 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
FOR THE YEAR ENDED JANUARY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> JAN-26-1997
<PERIOD-END> JAN-31-1998
<PERIOD-TYPE> YEAR
<CASH> 3,883
<SECURITIES> 0
<RECEIVABLES> 34,761
<ALLOWANCES> 637
<INVENTORY> 86,075
<CURRENT-ASSETS> 129,111
<PP&E> 171,808
<DEPRECIATION> 88,101
<TOTAL-ASSETS> 233,279
<CURRENT-LIABILITIES> 50,296
<BONDS> 104,138
<COMMON> 5,966
0
0
<OTHER-SE> 63,235
<TOTAL-LIABILITY-AND-EQUITY> 233,279
<SALES> 447,471
<TOTAL-REVENUES> 447,471
<CGS> 300,918
<TOTAL-COSTS> 300,918
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 993
<INTEREST-EXPENSE> 9,178
<INCOME-PRETAX> 1,905
<INCOME-TAX> 691
<INCOME-CONTINUING> 1,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,214
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
