<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
OCTOBER 16, 1995
----------------
Date of Report (Date of earliest event reported)
JAY JACOBS, INC.
----------------
(Exact name of registrant as specified in its charter)
WASHINGTON 0-15934 91-0698077
---------- ------- ----------
(State or other (Commission File No.) (I.R.S.
jurisdiction of I.D. No.)
incorporation or
organization)
1530 Fifth Avenue
Seattle, Washington 98101
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(206) 622-5400
--------------
(Registrant's telephone number including area code)
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
On October 16, 1995, the United States Bankruptcy Court for the Western
District of Washington at Seattle (the "Bankruptcy Court") approved the First
Amended Disclosure Statement (the "Disclosure Statement") of Jay Jacobs, Inc.
(the "Company"), regarding the Company's First Amended Chapter 11 Plan of
Reorganization dated October 16, 1995 (the "Plan"), as providing "adequate
information" under Section 1125 of the United States Bankruptcy Code in
connection with the solicitation of votes with respect to the Plan. Thereafter,
the Company began (a) distributing copies of the Disclosure Statement and all
exhibits and attachments thereto to all holders of claims against and interests
in the Company, and (b) soliciting votes with respect to the Plan. A copy of
the Disclosure Statement is attached as Exhibit 99.5 hereto and incorporated
herein by reference, and a copy of the Plan is attached as Exhibit 2 hereto and
incorporated herein by reference.
The Disclosure Statement includes and describes the Plan under which all
claims against and equity interests in the Company will be treated and/or
discharged and under which the Company will emerge from the protection of
Chapter 11 of the Bankruptcy Code. Moreover, the Plan has been endorsed by the
Official Committee of Unsecured Creditors appointed in the Company's Chapter 11
case.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2 Company's First Amended Chapter 11 Plan of Reorganization dated
October 16, 1995
Exhibit A Specimen 9.5% Per Annum Promissory Note of the
Company Due January 2, 2001
Exhibit B Leases To Be Assumed
Exhibit C Leases To Be Rejected
Exhibit D 1995 Stock Option Plan of the Company
99.1 Letter dated October 16, 1995, from Rex Loren Steffey to all creditors
and shareholders of the Company
2
<PAGE>
99.2 Letter dated October 16, 1995, from Siegel, Sommers & Schwartz,
L.L.P., to the unsecured creditors of the Company
99.3 Notice dated October 19, 1995, to the United States Trustee,
creditors, equity security holders, and other parties in interest of
(a) Approval of Debtor's Fist Amended Disclosure Statement; (b)
Hearing on Debtor's First Amended Chapter 11 Plan of Reorganization;
and (c) Deadline for filing (1) Ballots Accepting or Rejecting Plan,
and (2) Objections to Plan
99.4 Ballot
99.5 Company's First Amended Disclosure Statement Regarding Its Chapter 11
Plan of Reorganization dated October 16, 1995
Exhibit A-1* Forms 10-K and 10-K/A of the Company for the fiscal
year ended January 28, 1995
Exhibit A-2* Form 10-Q of the Company for the quarterly period ended
July 29, 1995
Exhibit B-1 Employment Agreement between Rex Loren Steffey and the
Company effective as of July 1, 1995
Exhibit B-2 Employment Agreement between William L. Lawrence, Jr.,
and the Company effective as of July 1, 1995
Exhibit C $10,000,000 Loan Commitment Letter dated September 28,
1995, of LaSalle National Bank to the Company
Exhibit D Summary of Scheduled and Filed Claims
Exhibit E-1 Projected Statement of Operations Financial Assumptions
of the Company for the Years Ending January 31, 1996,
through January 31, 2001
- --------------------------
*Previously filed with the Securities and Exchange Commission under
File No. 0-15934 and incorporated herein by reference.
3
<PAGE>
Exhibit E-2 Projected Statement of Operations of the Company for
the Years Ending January 31, 1995, through January 31,
2001 Including New Store Additions
Exhibit E-3 Balance Sheet of the Company for the Years Ending
January 31, 1995, through January 31, 2001
Exhibit E-4 Projected Statement of Cash Flows of the Company for
the Years Ending January 31, 1996, through January 31,
2001
Exhibit F Liquidation Analysis
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED this 9th day of November 1995.
JAY JACOBS, INC.
By /s/ Doris Williams
--------------------------
Doris Williams
Executive Vice President
<PAGE>
Mark Charles Paben THE HONORABLE THOMAS T. GLOVER
Lynne Brown Ellis
BOGLE & GATES P.L.L.C.
Two Union Square
601 Union Street
Seattle, WA 98101-2346
(206) 682-5151
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
In Re: )
) Chapter 11
) Case No. 94-03993
JAY JACOBS, INC., )
)
Debtor. )
- --------------------------------------
DEBTOR'S FIRST AMENDED CHAPTER 11 PLAN OF REORGANIZATION
-------------------------------------------------------
Jay Jacobs, Inc., the Debtor and Debtor-In-Possession, proposes the
following plan of reorganization pursuant to chapter 11 of the United States
Bankruptcy Code:
ARTICLE I. -- DISCLOSURE STATEMENT
The Debtor has filed a Disclosure Statement pursuant to 11 U.S.C. Section
1125 and Bankruptcy Rule 3016. The Disclosure Statement has been approved by
the Court before submission of this Plan to creditors. The Disclosure Statement
provides information to aid and assist the holders of claims in evaluating the
Plan. THE DISCLOSURE STATEMENT SHOULD BE READ IN EVALUATING THE IMPACT OF THE
PLAN UPON CLAIMS AND INTERESTS.
ARTICLE II. -- DEFINITION OF TERMS
The following terms, when used in this Plan, shall have the meaning
specified herein or, if not herein, the meaning set forth in the Bankruptcy
Code, unless the context requires otherwise:
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 1
<PAGE>
ADMINISTRATIVE EXPENSE CLAIM: An Allowed Claim entitled to priority under
Section 507(a)(1) of the Code, including (a) Claims incurred by the Debtor since
the Petition Date and allowed by the Court under Section 503(b) of the Code, (b)
professional fees and expenses approved by the Court pursuant to Section 331 of
the Code and Bankruptcy Rule 2016, and (c) fees and charges assessed against the
estate under 28 U.S.C. Section 1930 of the United States Code.
ALLOWED CLAIM: Any Claim (a) in the amount and the priority classification
set forth in the proof of such claim that has been timely filed with the Court
in this Case, or (b) in the absence of such proof, as set forth in the Debtor's
schedules of liabilities filed in this Case pursuant to Bankruptcy Rule 1007
unless: (i) such claim has been listed in the schedules as disputed, contingent,
or unliquidated, in which case such claim shall be allowed only in such amount
and such classification as is authorized by Final Order of the Bankruptcy Court;
(ii) an objection has been filed to such Claim within the deadline fixed by rule
or order of this Court, in which case such claim shall be allowed in such amount
and such classification as is authorized by Final Order of the Bankruptcy Court;
or (iii) such claim has been paid in full, withdrawn, or otherwise deemed
satisfied in full.
BANKRUPTCY CODE OR CODE: The Bankruptcy Code enacted November 6, 1978, as
set forth in title 11 of the United States Code, and as amended thereafter, but
not including the amendments that became effective on or after October 22, 1994.
BANKRUPTCY COURT OR COURT: The United States Bankruptcy Court for the
Western District of Washington, at Seattle, before which the Case is pending, or
if that Court ceases to exercise jurisdiction over the Bankruptcy Case, the
Court that does exercise jurisdiction.
BANKRUPTCY RULE(S): The Federal Rules of Bankruptcy Procedure.
BOARD OF DIRECTORS: The board of directors of Jay Jacobs, Inc., a
Washington corporation.
CASE: The chapter 11 case commenced by the Debtor on May 13, 1994, pending
in the United States Bankruptcy Court for the Western District of Washington,
designated as Case No. 94-03993.
CLAIM: A "claim" against the Debtor as defined in Section 101(5) in the
Code.
CLAIMANT: The holder of a Claim.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 2
<PAGE>
CLASS: A class of claims or interests as defined in Article III of this
Plan.
COMMITTEE: The Official Unsecured Creditors Committee appointed in the
Case. SEE Section III(C) of the Disclosure Statement.
COMMON STOCK: Common stock, par value $.01 per share, of Jay Jacobs, Inc.,
a Washington corporation.
COMPANY: Jay Jacobs, Inc., a Washington corporation.
CONFIRMATION ORDER: The order confirming the Plan pursuant to 11 U.S.C.
Section 1129 of the Bankruptcy Code.
DATE OF CONFIRMATION: The date on which the Court enters an order
confirming the Plan.
DEBTOR: Jay Jacobs, Inc., a Washington corporation.
DEBTOR-IN-POSSESSION: The Debtor, when exercising its rights, powers, and
duties under Section 1107(a) of the Bankruptcy Code in the Case.
DISBURSING AGENT: The disbursing agent as set forth in Article V(G)
herein.
DISCLOSURE STATEMENT: The Debtor's approved disclosure statement
referenced in Article I above.
DISPUTED CLAIM: A filed or scheduled Claim which is listed on the Debtor's
schedules as "disputed", or as to which an objection has been filed by a party-
in-interest and which has not been determined by Final Order.
EBITDA: Earnings before interest, taxes, depreciation, and amortization as
defined under generally accepted accounting principles.
EFFECTIVE DATE: The first business day that is eleven (11) days after the
Confirmation Order is entered on the Court's docket, unless the effect of the
Confirmation Order is stayed under Bankruptcy Rule 8005.
EQUITY SECURITY HOLDERS: The holders of Common Stock of the Debtor.
EQUITY SECURITY INTERESTS OR INTERESTS: Common Stock of the Debtor.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 3
<PAGE>
ESTATE: The estate created pursuant to Section 541 of the Bankruptcy Code.
EVENT OF DEFAULT: An event of default as described and defined in Article
XIII of the Plan.
EXCESS CASH FLOW: Excess Cash Flow as defined in Exhibit A hereto.
FINAL ORDER: An order or judgment of the Court as to which the time for
appeal has expired without a notice of appeal having been filed or as to which
any appeal therefrom has been resolved.
INSIDER: An "insider" as defined in Section 101(31) of the Code.
JACOBS FAMILY BUY/SELL AGREEMENT: The Jacobs Family Buy/Sell Agreement as
defined and described in Section V(E)(1)(a) of the Disclosure Statement.
1995 STOCK OPTION PLAN: The 1995 Stock Option Plan as (a) defined and
described in Section V(F) of the Disclosure Statement and Article VIII herein,
and (b) attached hereto as Exhibit D.
NOTE(S): The promissory note(s) to be issued to Class 3 Claimants
exercising rights of election as provided in Article IV(B)(Class 3)(c) herein,
the form of which is attached hereto as Exhibit A.
PCC: The Postconfirmation Creditors Committee described in Article V(D)
herein.
PETITION DATE: May 13, 1994, the date upon which the order for relief was
entered herein.
PLAN: This plan in its present form or as it may be amended or modified
from time to time pursuant to order of the Bankruptcy Court.
PRIORITY TAX CLAIM: An Allowed Claim of the kind described in Section
507(a)(7) of the Code.
PRIORITY WAGE CLAIM: An Allowed Claim of the kind and limited to the
amount described in Section 507(a)(3) of the Code.
PROFESSIONAL PERSONS: Persons to be compensated pursuant to Sections 326,
327, 328, 330, and/or 1103 of the Bankruptcy Code.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 4
<PAGE>
PRO RATA: Proportionally so that the ratio of the amount distributed on
account of a particular Allowed Claim to the amount of such Allowed Claim is the
same as the ratio of the amount distributed, on account of all Allowed Claims in
the Class of which such particular Allowed Claim is a member, to the total
amount of all Allowed Claims in such Class.
PRO RATA SHARE: Pro Rata Share as defined in Exhibit A hereto.
REORGANIZED DEBTOR: Following the Effective Date, the Debtor as
reorganized pursuant to the Plan.
SECURED CLAIM: An Allowed Claim that is a secured claim against the Debtor
in accordance with Section 506(a) of the Bankruptcy Code.
SECURED TAX CLAIM: An Allowed Secured Claim held by a governmental unit
for taxes.
TARGETED EBITDA: Targeted EBITDA as defined and described in Exhibit A
hereto.
UNCLASSIFIED CLAIM: An Allowed Claim of the kind described in Section
507(a)(1) or (7) of the Bankruptcy Code.
UNSECURED CLAIM: An Allowed Claim that is not an Unclassified Claim, a
Secured Claim, a Secured Tax Claim, a Class 1, or a Class 2 Claim.
ARTICLE III. -- CLASSIFICATION OF CLAIMS AND INTERESTS
CLASS 1: Priority Wage Claims.
CLASS 2: Secured Tax Claims.
CLASS 3: Unsecured Claims.
CLASS 4: Equity Security Interests.
Classes 2 and 3 are impaired; Classes 1 and 4 are unimpaired.
ARTICLE IV. -- TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN
A. UNCLASSIFIED CLAIMS.
1. ADMINISTRATIVE EXPENSE CLAIMS. Administrative Expense Claims
shall be paid in full in cash by the Debtor on or before the Effective Date or
upon entry of a Final Order allowing such Claim, whichever occurs later, unless
the holder of such a Claim agrees to different treatment.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 5
<PAGE>
2. TRADE/ORDINARY COURSE OF BUSINESS EXPENSE CLAIMS. All claims
entitled to priority under Section 507(a)(1) of the Code that have been, are, or
will be incurred by the Debtor or Reorganized Debtor after the Petition Date in
the ordinary course of business pursuant to Section 363(c)(1) of the Code shall
be paid when and as incurred, or upon such ordinary invoicing terms to which the
Reorganized Debtor and creditor may agree.
3. PRIORITY TAX CLAIMS. All Allowed Priority Tax Claims shall be
paid by the Debtor in four equal annual installments. The first such
installment shall be due on January 2, 1996, and the three remaining annual
payments shall be made on the second day of January in the three succeeding
years, with the final annual installment being payable on January 2, 1999. The
amount of the Allowed Priority Tax Claim shall include accrued interest at the
rate of 9.5% per annum from the Petition Date through the Date of Confirmation.
Thereafter, simple interest shall accrue postconfirmation on the unpaid balance
of each Allowed Priority Tax Claim at the rate of 9.5% per annum unless the
Court establishes, after notice and hearing, a different rate of interest. Any
holder of a claim entitled to priority under Section 507(a)(7) of the Code
shall, within the same deadline and in the same manner established for
objections to confirmation of the Plan, file any objection it has to the
proposed interest rate, identify a proposed alternative rate, and set forth the
facts and circumstances justifying such rate. FAILURE TO OBJECT TO THE PROPOSED
INTEREST RATE SHALL BE DEEMED A CONSENT THERETO.
Notwithstanding the foregoing, all Allowed Priority Tax Claims shall be
paid in full within six years of the date of the assessment of the tax upon
which such Claim is based.
B. CLASSIFIED CLAIMS.
CLASS 1. (Priority Wage Claims). Each holder of an Allowed Class 1
Claim shall receive cash on the Effective Date of the Plan equal to the allowed
amount of such Claim. Class 1 Claims are not impaired.
CLASS 2. (Secured Tax Claims). Each holder of an Allowed Class 2
Claim shall retain its lien against the collateral securing the Class 2 Claim
until such claim is paid in full by the Debtor in four equal annual
installments. The first such installment shall be due on January 2, 1996, and
the remaining three annual payments shall be made on the second day of January
in the three succeeding years, with the final annual installment being payable
on January 2, 1999. The amount of the Allowed Class 2 Claim shall include
accrued interest at the rate of 9.5% per annum from the Petition Date through
the Date of Confirmation. Thereafter, simple
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 6
<PAGE>
interest shall accrue postconfirmation on the unpaid balance of each Allowed
Class 2 Claim at the rate of 9.5% per annum unless the Court establishes, after
notice and hearing, a different rate of interest. The procedure for
establishing a different rate of interest shall be the same as that specified in
Article IV(A)(3) herein. FAILURE TO OBJECT TO THE PROPOSED INTEREST RATE SHALL
BE DEEMED A CONSENT THERETO.
Notwithstanding the foregoing, all Allowed Secured Tax Claims shall be paid
in full within six years of the date of the assessment of the tax upon which
such Claim is based. Further, if any property securing an Allowed Class 2 Claim
is abandoned or sold following the Date of Confirmation, either the new owner
shall take the property subject to the tax lien of the Class 2 Claimant or the
Class 2 Claimant shall be paid the proceeds of its collateral.
CLASS 3. (Unsecured Claims). Holders of Allowed Unsecured Claims
shall receive the following:
a. 1996 30% PAYMENT. On January 2, 1996, each holder of an
Allowed Class 3 Claim shall receive a payment from the Reorganized Debtor in the
amount of 30% of its Allowed Class 3 Claim, without interest. THIS 1996 30%
PAYMENT WILL BE PAID TO ALL HOLDERS OF ALLOWED CLASS 3 CLAIMS.
b. 1997 30% PAYMENT. Except for holders of Allowed Class 3
Claims electing for the treatment set forth in Article IV(B)(Class 3)(c)
immediately below, on January 2, 1997, each holder of an Allowed Class 3 Claim
shall receive one final payment from the Reorganized Debtor in the amount of 30%
of its Allowed Class 3 Claim, without interest. Upon satisfaction of this 1997
30% payment, the subject Class 3 Claim shall be deemed satisfied in full.
HOLDERS OF ALLOWED CLASS 3 CLAIMS ELECTING THE 1997 15% PAYMENT AND THE NOTE
DESCRIBED BELOW WILL NOT RECEIVE THIS 1997 30% PAYMENT.
c. RIGHT TO ELECTION OF 1997 15% PAYMENT AND NOTE. In lieu of
the payment specified in Article IV(B)(Class 3)(b) immediately above, holders of
Allowed Class 3 Claims shall have the right to elect the payments set forth in
this subsection (c). If a holder of an Allowed Class 3 Claim elects to exercise
the right to receive payment as set forth in this subsection (c), such holder
must notify the Reorganized Debtor in writing (as described below) on or before
July 15, 1996 of such exercise, and thereafter shall receive the following in
full satisfaction of its Allowed Class 3 Claim, in addition to the 1996 30%
payment set forth in Article IV(B)(Class 3)(a) above:
(1) 1997 15% PAYMENT. On January 2, 1997, such electing
holder of an Allowed Class 3 Claim shall receive a
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 7
<PAGE>
second payment under the Plan in the amount of 15% of its Allowed Class 3 Claim,
without interest. SUCH ELECTING HOLDERS WILL NOT RECEIVE THE 1997 30% PAYMENT
DESCRIBED IN ARTICLE III(B)(CLASS 3)(B) IMMEDIATELY ABOVE.
(2) NOTE(S). Additionally, upon exercise of such right of
election, each such electing holder of an Allowed Class 3 Claim shall receive a
promissory note (the "Note"), with a principal sum equal to the amount of 42% of
its Allowed Class 3 Claim. A copy of the Note is attached hereto as Exhibit A,
and the terms and conditions of the Note are incorporated herein by reference.
A summary of the key provisions of the Note follows:
PRINCIPAL AMOUNT: 42% of Allowed Class 3 Claim (the "Principal
Amount").
INTEREST RATE: 9.5% per annum, commencing February 1, 1997.
INTEREST PAYMENTS: Due when principal payments are due and
payable.
INTEREST ON LATE PAYMENTS: 11.5% per annum.
PRINCIPAL PAYMENTS: 26.2% of Principal Amount due January 2,
1998; 24.6% of Principal Amount due January 2, 1999; 24.6% of Principal Amount
due January 2, 2000; 24.6% of Principal Amount due January 2, 2001.
MATURITY: January 2, 2001.
EXCESS CASH FLOW PAYMENTS: Additionally, non-cumulative Excess
Cash Flow Payments (as therein defined), if any, shall be due and payable on the
15th of June in calendar years 1999, 2000, and 2001 based on such holder's Pro
Rata Share (as therein defined) of 30%, 40%, and 50% of Excess Cash Flow over
Targeted EBITDA (as therein defined) for the prior fiscal year ended January
1999, January 2000, and January 2001, respectively, as provided in the Note;
PROVIDED, HOWEVER, that amounts payable as Excess Cash Flow shall not exceed the
difference between 100% of the holder's Allowed Class 3 Claim, less the net
present value (using a 12% discount rate) of all cash paid or payable with
respect to such Allowed Class 3 Claim, whether under the Note or the Plan.
PREPAYMENT: Prepayment of principal and accrued interest is
permitted without penalty. The Note shall be deemed paid in full upon payment
of all principal and accrued interest, and if so prepaid, any obligation to make
payments of Excess Cash Flow with
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 8
<PAGE>
respect to any fiscal year ending after the date when such prepayment is made
shall cease.
CREDITORS SHOULD CAREFULLY READ AND REVIEW THE ATTACHED NOTE. IF ANY
INCONSISTENCY EXISTS BETWEEN THE FOREGOING SUMMARY AND THE NOTE, THE NOTE
SUPERSEDES THE SUMMARY, AND THE TERMS AND CONDITIONS OF THE NOTE ARE
CONTROLLING.
(3) NOTICE OF EXERCISE REQUIREMENTS. Written notice of the
election by a holder of an Allowed Class 3 Claim to exercise the right to
receive the 1997 15% payment and the Note shall either be made by (a) certified
letter, (b) hand delivery, or (c) next day delivery service, in all three cases,
to Jay Jacobs, Inc. (Attn: William L. Lawrence, Jr.), 1530 Fifth Avenue,
Seattle, WA 98101. If sent by certified mail, the election notice must be
postmarked no later than July 15, 1996. If hand-delivered or sent by next day
delivery service, the notice of election must be received by the Company during
regular business hours no later than July 15, 1996.
STRICT COMPLIANCE WITH THE FOREGOING NOTICE OF EXERCISE PROCEDURES IS
REQUIRED. FAILURE TO PROVIDE NOTICE OF EXERCISE OF THE RIGHT DESCRIBED ABOVE IN
A TIMELY FASHION WILL RESULT IN SATISFACTION OF A CLASS 3 CLAIMANT'S CLAIM IN
THE MANNER DESCRIBED IN ARTICLE IV(B)(CLASS 3)(B).
(4) REPORTING REQUIREMENTS. For the fiscal years ending
1997, 1998, 1999, 2000, and 2001, the Reorganized Debtor shall provide each
holder of a Note with audited consolidated financial statements certified by
independent public accountants. Additionally, for the fiscal years ending 1999,
2000, and 2001, the Reorganized Debtor shall furnish each holder of a Note with
a comprehensive analysis of Excess Cash Flow for that fiscal year.
d. SUBORDINATION PROVISIONS. The cash incentive compensation
payments due to Rex Loren Steffey and William L. Lawrence, Jr. under their
employment contracts (SEE Sections III(O)(1) and III(O)(2) of the Disclosure
Statement, respectively) shall (a) be subordinate to the payments due and
payable with respect to Allowed Class 3 Claims, and (b) not be paid until all
payments due to holders of Allowed Class 3 Claims in that calendar year have
been paid, so that, for example, the cash incentive payments due (i) after the
conclusion of fiscal year 1996 shall not be paid unless all Allowed Class 3
Claims payments due on January 2, 1996 have been made, (ii) after the conclusion
of fiscal year 1997 shall not be paid unless all Allowed Class 3 Claims payments
due on January 2, 1997 have been made, and (iii) after the conclusion of
remaining fiscal years shall not be paid unless all payments due that calendar
year under the Note(s) have been made.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 9
<PAGE>
CLASS 4. (Equity Security Interests). Holders of Class 4 Interests
shall retain their interests, and the rights of the holders of Company Common
Stock will not be altered upon confirmation of the Plan. No payments or
distributions will be made to Class 4 Interests under the Plan. Class 4
Interests are not impaired.
ARTICLE V. -- EXECUTION OF THE PLAN
A. VESTING OF PROPERTY OF THE ESTATE. All assets of the Estate shall be
vested in the Reorganized Debtor in accordance with Section 1141 of the
Bankruptcy Code, and no further order of the Court shall be necessary for the
Reorganized Debtor to perform such acts as are in the ordinary course of its
business and/or as are necessary to carry out the purposes and intent of this
Plan. Except as otherwise expressly provided herein, the Reorganized Debtor
shall be free to manage its affairs without further Court intervention.
B. FUNDING OF PLAN. The Company believes that revenues from future
business operations, as well as the new financing agreement with LaSalle
National Bank (which the Company anticipates will be approved before the Plan is
confirmed (SEE Section III(P) of the Disclosure Statement)), should enable the
Debtor to comply with the payment provisions of the Plan.
C. NO PAYMENTS PRIOR TO EFFECTIVE DATE. Although the Plan provides for
various payments to be made on January 2, 1996, such payments shall be due and
payable on the Effective Date if January 2, 1996 precedes the Effective Date.
D. POSTCONFIRMATION CREDITORS COMMITTEE ("PCC"). Upon confirmation, the
Committee shall remain in existence, but it shall thereafter be known and
redesignated as the Postconfirmation Creditors Committee (the "PCC"). The PCC
shall prescribe its own rules of procedure, subject to the following
requirements. The PCC's rights and duties are restricted and limited to those
described and provided for in Article V(G), Article V(K), Article VI, Article
XII, and Article XIII herein.
The PCC may continue to employ the current attorneys for the Committee as
counsel for the PCC to advise it with respect to such limited rights and duties,
and the PCC is entitled to recover its reasonable attorneys' fees and expenses
from the Reorganized Debtor. Absent Court approval with notice to the
Reorganized Debtor, the PCC may not employ other Professional Persons, the fees
and costs of which are to be borne by the Reorganized Debtor. Any dispute
concerning the fees and costs of Professional Persons of the PCC shall be heard
and determined by the Court.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 10
<PAGE>
Members of the PCC are entitled to receive reimbursement of their
reasonable expenses from the Reorganized Debtor, but they shall serve without
compensation. Any dispute concerning the reimbursement of expenses for PCC
members shall be heard and determined by the Court.
Any notices or information required herein to be sent to the PCC shall be
forwarded by facsimile transmission to the PCC (c/o Lawrence C. Gottlieb, Esq.,
Siegel, Sommers & Schwartz, L.L.P., 470 Park Avenue South, New York, NY 10016
(fax number: (212) 889-0688; confirmation number: (212) 889-7570)).
Upon the earlier of (a) the Reorganized Debtor's full satisfaction of all
payments on Allowed Claims due before and including January 2, 1997 under the
Plan, or (b) disbandment by unanimous consent of its members, the PCC shall
disband and cease to exist.
E. SECURITIES LAW EXEMPTION. Pursuant to Section 1145(a) of the Code,
the issuance of Note(s), if any, hereunder to Class 3 Claimants is exempt from
the requirements of Section 5 of the Securities Act of 1933 and any state or
local law requiring registration for offer or sale of a security.
F. IMPLEMENTATION. Following confirmation, the current Board of
Directors and shareholders of the Debtor, as well as the Board of Directors and
shareholders of the Reorganized Debtor, shall undertake whatever actions are
necessary under corporate law, the Articles of Incorporation, the Bylaws, or
otherwise to accomplish the foregoing and other provisions of the Plan. It is
not contemplated that the Articles of Incorporation or Bylaws will be amended to
accomplish and satisfy the provisions of the Plan.
G. ADMINISTRATION OF CLAIMS AND CAUSES OF ACTION.
1. GENERAL. Notwithstanding any provision to the contrary in this
Plan, all rights, claims, and causes of action, whether equitable or legal, of
the Debtor, Debtor-In-Possession, or the Reorganized Debtor against all persons
are reserved for the Reorganized Debtor during the first sixty (60) days
following the Effective Date. Without limiting the generality of the foregoing,
such rights, claims, and causes of action include, but are not limited to, those
arising under (a) Sections 544, 545, 547, 548, and 549 of the Bankruptcy Code,
and (b) state or other federal law for the recovery of avoidable transfers.
During the pendency of the Case, prior to or after the Date of
Confirmation, the Reorganized Debtor shall investigate, prosecute, and/or settle
such claims as the Reorganized Debtor deems
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 11
<PAGE>
appropriate, and may commence adversary proceedings against persons to realize
upon causes of action retained. After the first sixty (60) days following the
Effective Date, the PCC shall have an additional thirty (30) days to file any
such action. Additionally, the PCC may join any such action filed by the
Company. After ninety (90) days following the Effective Date, no additional
such actions may be filed by any party.
2. WAIVER OF PREFERENCE ACTIONS. Notwithstanding the foregoing, the
Reorganized Debtor waives the right to pursue preference actions against any
parties under (a) Section 547 of the Bankruptcy Code, or (b) similar state law
preference theories, PROVIDED, HOWEVER, that the Reorganized Debtor reserves the
right to raise such preference causes of action as an affirmative defense to any
action or counterclaim asserted by any party against the Company.
H. DISBURSING AGENT. The Reorganized Debtor shall be the Disbursing
Agent for the payments required to be made under the Plan. Additionally, the
Reorganized Debtor shall continue to have the sole authority to pay the
operating expenses of the Reorganized Debtor, the expenses of liquidation of any
asset of the Reorganized Debtor, including any tax liability resulting
therefrom, and the amounts necessary to cure any arrearages under any executory
contract or unexpired lease being assumed pursuant to this Plan.
I. DEADLINE FOR FILING CERTAIN ADMINISTRATIVE EXPENSE CLAIMS. Any party
holding a claim entitled to priority pursuant to Section 507(a)(1) of the
Bankruptcy Code incurred prior to the Date of Confirmation, other than the
claims for fees and costs of Professional Persons, shall file a proof of such
claim within thirty (30) days of the Date of Confirmation; provided, however,
that this deadline shall not apply to claims arising under Article IV(A)(2) of
this Plan. The failure of any party to timely file a proof of claim as required
hereunder will result in the disallowance of such claim.
J. NOTICE PROCEDURES GOVERNING DISTRIBUTIONS.
1. UNCLAIMED FUNDS. Pursuant to Section 347(b) of the Bankruptcy
Code, ninety (90) days after any distribution made pursuant to the provisions of
the Plan, including any payment on a Note obligation to a Class 3 Claimant, the
Reorganized Debtor shall send a certified letter to each claimant who has
received a check which remains unpaid, informing such claimant that it has
thirty (30) days in which to respond to the Company and cash the check. If the
Claimant fails to (a) respond to the certified letter and cash the check during
such period, or (b) the certified letter is returned as undeliverable, the
Reorganized Debtor shall stop payment on such check, and said funds shall be
returned to the Reorganized Debtor. From and after the date that the
Reorganized Debtor stops payment on
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 12
<PAGE>
any distribution check pursuant to the terms of this subparagraph (J), the
holder of the Claim on account of which such check was issued shall be entitled
to no further distributions on account of the Claim, and such holder's Allowed
Claim shall thereupon be deemed satisfied in full, including any and all Note
obligations with respect to such Claim.
2. CHANGE OF ADDRESS. All distributions to creditors under the Plan
shall be mailed to the address listed on the respective creditor's proof of
claim (or assignee's notice of transfer), or in the absence of a proof of claim
(or notice of transfer), at the address listed in the Debtor's schedules for
such creditor. Any changes of address must be forwarded to Jay Jacobs, Inc.
(Attn: William L. Lawrence, Jr.), 1530 Fifth Avenue, Seattle, WA 98101, by
certified mail; such change of address shall not take effect for the purposes of
this subparagraph (J) until fifteen (15) days after the Company receives such
certified letter advising of the address change.
K. POSTCONFIRMATION PROFESSIONAL FEES. Subsequent to the Date of
Confirmation, during the existence of the PCC, the Reorganized Debtor shall be
authorized to pay fees and expenses incurred by professionals. Monthly invoices
of said fees and expenses shall be delivered to the Reorganized Debtor, its
counsel, and counsel to the PCC. Unless a written objection is received within
ten (10) days after receipt of the monthly invoices, said fees and expenses
shall be paid by the Reorganized Debtor. If a written objection is received
within ten (10) days, the parties seeking payment shall apply to the Bankruptcy
Court for approval of said fees and expenses, if the objection cannot be
amicably resolved. Following disbandment of the PCC, the Reorganized Debtor
shall be authorized to pay fees and expenses of its professionals in the
ordinary course of its business.
L. EXCULPATION. The Debtor, Reorganized Debtor, the Committee, the PCC,
and their respective directors, shareholders, agents, officers, employees,
representatives, and attorneys, including Professional Persons (acting in such
capacity), shall neither have nor incur liability to any entity for any action
taken or omitted to be taken in connection with or related to the formulation,
preparation, dissemination, implementation, confirmation or consummation of the
Plan, the Disclosure Statement, earlier versions of same or any contract,
instrument, release or other agreement or document created or entered into, or
any other action taken or omitted to be taken in connection with the Plan;
PROVIDED, HOWEVER, that the foregoing provisions of this subparagraph (L) shall
have no effect on the liability of any entity that would otherwise result from
any such action or omission to the extent that such
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 13
<PAGE>
action or omission is determined in a Final Order to have constituted gross
negligence or willful misconduct.
ARTICLE VI -- CLAIMS OBJECTIONS AND TREATMENT OF DISPUTED CLAIMS
A. OBJECTIONS TO CLAIMS. Any objection to a claim by the Reorganized
Debtor must be filed on the later of (a) January 2, 1996, or (b) thirty (30)
days after the filing of a proof of claim pursuant to the provisions of Article
VII(B) below or other claims filed subsequent to confirmation, unless said time
period is extended by the Bankruptcy Court for cause shown. Thereafter, the PCC
shall have an additional thirty (30) days to file any other objections to
claims. Additionally, the PCC may join any objection filed by the Company.
Objections must be served in accordance with Bankruptcy Rule 3007.
B. TREATMENT OF DISPUTED CLAIMS. Notwithstanding any provision of the
Plan specifying the time for payment of distributions to holders of claims, no
distribution shall be made to, and no Note shall be issued to the holder of any
Disputed Claim until the time such Claim has been determined to be an Allowed
Claim. At the time of each distribution to holders of Claims in a class or
unclassified category which contains any Disputed Claim, the Disbursing Agent
shall reserve the amount which would have been distributed to holders of the
Disputed Claims had their claims been Allowed Claims so that the timing of
distributions to other creditors shall not be affected by any delay in the
resolution of the Disputed Claims. Upon the allowance of any Disputed Claim,
the holder shall be paid the amount which such holder would have received had
its claim been an Allowed Claim on the Effective Date.
Notwithstanding the foregoing, the Disbursing Agent shall timely pay all
undisputed portions, if any, of Disputed Claims pursuant to the relevant
provisions of the Plan. Upon the allowance of the disputed portion of a
Disputed Claim, the Disbursing Agent shall pay the amount of the allowed
portion, plus 4% per annum accruing from the date that the payment was otherwise
due to be paid under the Plan and accruing only on the amount past due under the
payment provisions of the Plan.
C. SETTLEMENT OF CLAIMS. Settlements of Disputed Claims shall be
approved on an ex parte basis if the subject settlement order is executed by
both the Reorganized Debtor and the PCC. In the absence of such a jointly
executed order regarding a particular settlement, approval of the subject
compromise agreement will require (a) notice to the Reorganized Debtor, the PCC,
and all parties entitled to special notice in the Case, and (b) a hearing.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 14
<PAGE>
ARTICLE VII -- EXECUTORY CONTRACTS AND UNEXPIRED LEASES
A. LEASES AND CONTRACTS TO BE ASSUMED OR REJECTED.
1. JACOBS FAMILY BUY/SELL AGREEMENT. The Jacobs Family Buy/Sell
Agreement shall be assumed by the Reorganized Debtor on the Effective Date.
2. ASSUMED REAL ESTATE LEASES. The unexpired real estate leases
under which the Company is the lessee listed on Exhibit B attached hereto shall
be assumed by the Reorganized Debtor on the Effective Date. THE DEBTOR RESERVES
THE RIGHT TO AMEND EXHIBIT B PRIOR TO CONFIRMATION OF THE PLAN.
3. REJECTED REAL ESTATE LEASES. The unexpired real estate leases
under which the Company is the lessee listed on Exhibit C attached hereto shall
be rejected by the Reorganized Debtor on or prior to the Effective Date. THE
DEBTOR RESERVES THE RIGHT TO AMEND EXHIBIT C PRIOR TO CONFIRMATION OF THE PLAN.
4. OTHER CONTRACTS/LEASES. Any executory contract or unexpired
lease of the Debtor not listed above, or not previously assumed pursuant to
court order, will be deemed rejected by the Reorganized Debtor on the Effective
Date.
B. FILING OF CLAIMS ARISING FROM REJECTION OF CONTRACT OR UNEXPIRED
LEASE. Any claim arising from the rejection of any executory contract or
unexpired lease is a Class 3 Claim to the extent it is an Allowed Claim. Any
party holding a claim arising from the rejection of a contract or unexpired
lease pursuant to Article VII(A)(3) or (4) of the Plan must file a proof of such
claim with the Court within thirty (30) days of the Date of Confirmation or by
such earlier deadline that the Court may impose. The failure of any party to
timely file a proof of claim required hereunder will result in the disallowance
of the claim.
C. CURE OF DEFAULTS. With regard to any executory contract or unexpired
lease to be assumed as set forth in Article VII(A)(1) and (2) above, the
Reorganized Debtor shall (a) assume such contract or lease on the Effective
Date, and (b) cure any arrearage under the contract or lease, upon assumption in
such amounts as may be determined by the Court at the hearing on confirmation or
thereafter. Any party to an executory contract or unexpired lease scheduled for
assumption in this Plan shall, within the same deadline and in the same manner
established for objecting to confirmation, file any claim for arrearage required
to be cured under Section 365(b)(1) of the Bankruptcy Code. FAILURE TO TIMELY
ASSERT A CLAIM FOR ARREARAGES SHALL CONSTITUTE AN ACKNOWLEDGMENT THAT NO
DEFAULTS OR CLAIMS EXIST UNDER SUCH CONTRACT OR LEASE WHICH REQUIRE A CURE.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 15
<PAGE>
D. AFFIRMATION OF MASTER LEASE FOR VEHICLES. Confirmation of the Plan
will (a) in no way alter or affect the Company's performance obligations under
its master lease for certain vehicles, dated May 30, 1995, entered into with
Glesby-Marks Leasing Corporation, and (b) shall constitute the Reorganized
Debtor's affirmation of said master lease.
ARTICLE VIII. -- 1995 STOCK OPTION PLAN
On the Effective Date, the 1995 Stock Option Plan shall become effective.
A copy of the 1995 Stock Option Plan is attached hereto as Exhibit D. ALSO SEE
Section V(F) of the Disclosure Statement.
THE PLAN AND THE DISCLOSURE STATEMENT SHALL BE DEEMED A SOLICITATION TO THE
HOLDERS OF COMMON STOCK FOR APPROVAL OF THE 1995 STOCK OPTION PLAN, AND APPROVAL
OF THE PLAN THEREBY AND THE CONFIRMATION ORDER SHALL CONSTITUTE APPROVAL OF THE
1995 STOCK OPTION PLAN FOR PURPOSES OF RULE 16b-3 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS AMENDED, AND SECTIONS 162(m) AND 422 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED.
ARTICLE IX. -- DISCHARGE OF CLAIMS
The distribution(s) made to the various Classes of creditors as provided
for in this Plan shall be in full and complete satisfaction of their Allowed
Claims. Except as otherwise provided in this Plan or the Confirmation Order,
entry of the Confirmation Order shall operate, upon the Effective Date, as a
discharge of any and all debts and claims as defined in Section 101(5) of the
Bankruptcy Code against the Debtor or Debtor-In-Possession that arose any time
prior to the Date of Confirmation.
The discharge of the Debtor and the discharge of claims against the Debtor
or the Debtor-In-Possession shall be effective to each such claim, regardless of
whether or not (a) the claim was scheduled by the Debtor, (b) a proof of claim
was filed, (c) the claim is an Allowed Claim, or (d) the holder thereof voted to
accept the Plan. Further, any negotiable instrument or other document
evidencing a debt obligation held by the holder of impaired Allowed Claims shall
be deemed exchanged, cancelled, or satisfied, as the case may be, on the
Effective Date.
Postconfirmation debts of the Company, including tax obligations that
become due and owing postconfirmation, are in no way affected by the above-
referenced discharge. Such postconfirmation debts shall be subject to
collection if not timely paid, unaffected by the referenced discharge.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 16
<PAGE>
ARTICLE X. -- LIMIT ON COMPENSATION OF INSIDERS
For the fiscal years ending January 27, 1996 and January 25, 1997, annual
base compensation to executive officers and directors of the Company, excluding
bonuses, stock options, and other benefits authorized by the Company and
permissible under corporate law, shall be limited as follows:
NAME POSITION COMPENSATION COMMENTS
- ---- -------- ------------ --------
Jay Jacobs Chairman of the $225,000 SEE Section
Board II(C)(1) of
Disclosure
Statement
Rex Loren Steffey President and Chief $350,000 SEE Section
Executive Officer III(O)(1)
of
Disclosure
Statement
Doris L. Williams Executive Vice $127,000 SEE Section
President - Administration III(U)(3)
and Secretary of
Disclosure
Statement
William L. Lawrence Senior Vice President, $200,000 SEE Section
Chief Financial Officer, III(O)(2)
and Treasurer of
Disclosure
Statement
Shelley Swerland Director $5,000 annual SEE
retainer, plus Sections
$500 for each III(S)(4)
and $500 for each and
committee meeting III(T) of
chaired. Disclosure
Statement
Sam Rubinstein Director $5,000 annual SEE
retainer, plus Sections
$500 for each III(S)(5)
board meeting, and
and $500 for each III(T) of
committee meeting Disclosure
chaired. Statement
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 17
<PAGE>
NAME POSITION COMPENSATION COMMENTS
David J. Taylor Director $5,000 annual SEE
retainer, plus Sections
$500 for each III(S)(6)
board meeting, and
and $500 for each III(T) of
committee meeting Disclosure
chaired. Statement
Gilbert Scherer Director $5,000 annual SEE
retainer, plus Sections
$500 for each III(S)(7)
board meeting, and
and $500 for each III(T) of
committee meeting, Disclosure
chaired. Statement
ARTICLE XI. -- MODIFICATION OF THE PLAN
Pursuant to the provisions of Section 1127 of the Bankruptcy Code and
Bankruptcy Rule 3019, the Debtor reserves the right to modify or alter the
provisions of the Plan at any time prior or subsequent to confirmation,
including, but not limited to, modifications with respect to executory contracts
and unexpired leases as provided in Article VII herein.
ARTICLE XII. - COVENANTS
A. COVENANTS. During the existence of the PCC, the Reorganized
Debtor is subject to the following covenants:
1. The Reorganized Debtor shall not directly or indirectly
sell, lease, transfer, abandon, or otherwise dispose of all or any substantial
portion of its property or assets (other than (a) dispositions of tangible
personal property which is obsolete or being replaced by or leased back to the
Reorganized Debtor, and (b) sales in the ordinary course of its business) or
consolidate or merge with or into any other entity or permit any other entity to
consolidate or merge with or into it, PROVIDED, HOWEVER, that the Reorganized
Debtor may merge or consolidate with or into a corporation or other entity or
acquire substantially all the assets of another entity (collectively, a
"Permitted Acquisition") if the surviving entity assumes the obligations of the
Reorganized Debtor. The Reorganized Debtor shall at all times preserve, renew,
and keep in full force and effect its existence as a corporation and the rights
and franchises with respect thereto and continue to engage in business of the
same type as the Debtor is engaged in as of the Effective Date.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 18
<PAGE>
2. The Reorganized Debtor shall maintain its books, records, and
accounts in accordance with generally accepted accounting principles
consistently applied. The Reorganized Debtor shall furnish the PCC quarterly
with interim consolidated financial statements (including balance sheet,
statement of income and surplus account, and cash flow statements). The
Reorganized Debtor shall furnish the PCC with audited consolidated financial
statements on an annual basis certified by independent public accountants
selected by the Reorganized Debtor and reasonably acceptable to the PCC. All
such statements and information shall fairly present the Reorganized Debtor's
financial condition as of the dates, and the results of its operations for the
periods, for which the same are furnished.
3. The Reorganized Debtor shall make every reasonable effort to pay
and discharge all taxes, assessments, contributions, and governmental charges
upon or against it or its properties or assets prior to the date on which
penalties attach thereto, except for such taxes, assessments, contributions, and
governmental charges which are being contested in good faith and for which the
Reorganized Debtor has established on its books adequate reserves.
4. The Reorganized Debtor shall promptly notify the PCC in writing
of the details of any loss, damage, investigation, action, suit, proceeding, or
claim which would result in any material adverse change in the Reorganized
Debtor's business, properties, assets, goodwill, or financial condition.
5. The Reorganized Debtor shall not create, incur, assume, or suffer
to exist any lien on any of its property, except for (a) liens in favor of
C.I.T. Group/Business Credit, Inc. or any successor operating lender (the
"Operating Lender"), and/or any letter of credit issuer(s) ("LC Issuer(s)");
(b) the liens securing the payment of taxes, either not yet due and payable or
the validity of which is being contested in good faith by appropriate
proceedings, and as to which the Reorganized Debtor shall, if appropriate under
generally accepted accounting principles, have set aside on its books and
records adequate reserves; (c) deposits under workmen's compensation,
unemployment insurance, social security, and other similar laws; (d) non-
consensual liens of warehousemen, materialmen, mechanics, carriers, landlords,
and other similar entities which liens arise in the ordinary course of the
Reorganized Debtor's business which are not overdue for a period of more than
thirty (30) days; (e) purchase money liens (including financing leases)
attaching solely to property acquired or leased by the Reorganized Debtor for
use in the ordinary course of its business, including construction liens
(including materialmens' and mechanics' liens) attaching in the manner permitted
by applicable law; and (f) reservations, exceptions,
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 19
<PAGE>
encroachments, zoning restrictions, easements, irregularities of title, and
other restrictions which do not materially adversely impair the value of such
property to the Reorganized Debtor.
6. The Reorganized Debtor shall not make or permit to exist
investments or loans in or to any entity, except for (a) investments in short
term obligations of the United States of America; (b) investments in dollar-
denominated certificates of deposit in, and repurchase agreements with, a United
States commercial bank having shareholders' equity of at least $1,000,000, in
either case with maturities of one year or less from the date of issuance;
(c) investments in commercial paper rated A-1 or P-1; (d) existing loans to any
entity; and (e) loans to employees in an aggregate amount not to exceed $50,000.
7. The Reorganized Debtor shall not guarantee, endorse, or otherwise
in any way become or be responsible for the obligations of any other entity or
incur, create, assume, pay principal or interest on, become or be liable in any
manner with respect to, or permit to exist, any obligations or indebtedness,
other than (a) its obligations under the Plan, (b) obligations to the Operating
Lender or LC Issuer(s), (c) trade and ordinary course of business obligations,
(d) obligations related to capital expenditures, (e) the endorsement of checks
which are being collected and normal accruals in the ordinary course of business
not yet due and payable, (f) indemnification of officers and directors and the
provision of insurance to cover such indemnification, and (g) financing required
for Permitted Acquisitions.
8. The Reorganized Debtor shall not (a) redeem, purchase, or
otherwise retire any of its shares of capital stock, (b) declare or pay any
dividends to any class of stock or classes of stock, or (c) return capital of
the Reorganized Debtor to its shareholders.
9. Except as otherwise expressly provided in the Plan, the
Reorganized Debtor shall not enter into any transaction with any Affiliate,
including without limitation the purchase, lease, sale, or exchange of property
or the rendering of any service to or by any Affiliate, except in the ordinary
course of and pursuant to the reasonable requirements of the Reorganized
Debtor's business and upon fair and reasonable terms no less favorable to the
Reorganized Debtor than the Reorganized Debtor would obtain in a comparable
arms-length transaction with an entity which is not an Affiliate.
10. The Reorganized Debtor shall maintain, at its expense, public
liability and third party property insurance, in such amounts and with such
deductibles as are consistent with current practices, and with existing carriers
or other reputable carriers.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 20
<PAGE>
The PCC recognizes that the Reorganized Debtor currently self-insures against
most property risks, and intends no change to such practice.
11. The Reorganized Debtor shall, as soon as possible, and in any
event within five (5) business days after the Reorganized Debtor learns of the
following, give written notice to the PCC of (a) any proceeding or proceedings
being instituted or threatened to be instituted by or against the Reorganized
Debtor in any federal, state, local, or foreign court or before any commission
or other regulatory body in which money damages in excess of $250,000 are
claimed or any material non-monetary relief is requested, other than those set
forth herein or in the Disclosure Statement, and (b) any material adverse change
in the financial condition, operations, or properties of the Reorganized Debtor.
B. DEFINITIONS. For purposes of the foregoing covenants, the following
terms shall have these meanings:
1. "Affiliate" shall mean any entity (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with the Reorganized Debtor, (b) that directly or
beneficially owns or holds five percent (5%) or more of any class of the voting
stock of the Reorganized Debtor, or (c) five percent (5%) or more of whose
voting stock (or in the case of an entity which is not a corporation, five
percent (5%) or more of the equity interest) is owned directly or beneficially
or held by the Reorganized Debtor.
2. "Ordinary course of business" of the Reorganized Debtor shall
include the Reorganized Debtor's current apparel business practices, including,
but not limited to, markdowns, clearances, promotional events, and routine
liquidation sales.
THE PROVISIONS OF THIS ARTICLE XII IN NO WAY LIMIT OR RESTRICT THE RIGHTS
OF ANY INDIVIDUAL ALLOWED CLAIM HOLDER TO EXERCISE ANY RIGHTS TO ACCELERATE OR
ENFORCE PAYMENT OBLIGATIONS OR OTHER RIGHTS WITH RESPECT TO ITS CLAIM OR NOTE.
SEE ARTICLE XIV(J) HEREIN.
ARTICLE XIII - DEFAULTS
A. EVENTS OF DEFAULT. Absent a written waiver by the PCC, any one of the
following events which occurs and continues beyond the applicable cure period
during the existence of the PCC shall be an Event of Default of the Plan:
1. The failure of the Reorganized Debtor to make any payments on
Allowed Class 3 Claims when due under the Plan, and the
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 21
<PAGE>
continuation of such failure for a period of thirty (30) days after the due date
of such payment.
2. The failure of the Reorganized Debtor to perform or comply with
any material term or provision of this Plan, other than a payment due on an
Allowed Class 3 Claim, which failure remains uncured for a period of thirty (30)
days after written notice of such failure shall have been furnished to the
Reorganized Debtor by the PCC.
3. An order for relief under the Bankruptcy Code shall have been
granted to or against the Reorganized Debtor (except for the present
proceedings), or the Reorganized Debtor shall have made an assignment for the
benefit of creditors or the Reorganized Debtor shall have applied for or
consented to the appointment of any receiver, trustee, custodian, or similar
officer or any custodian for all or for any substantial part of its assets; or
such receiver, trustee, or similar officer shall have been appointed without the
application or consent of the Reorganized Debtor, and such an appointment shall
not have been stayed or vacated within a period of ninety (90) days after such
appointment; or the Reorganized Debtor shall institute any bankruptcy,
insolvency, liquidation, reorganization, readjustment, dissolution, or similar
proceedings relating to it under the laws of any jurisdiction; or any such
proceeding shall have been instituted against the Reorganized Debtor which is
not stayed or dismissed within a period of ninety (90) days.
4. The entry of a judgment or judgments against the Reorganized
Debtor in any amount which in the aggregate exceeds insurance coverage, if any,
maintained with respect thereto by more than $250,000 and which is not vacated
or otherwise satisfied within sixty (60) days thereafter or which is not the
subject of an appeal filed in good faith and as to which no surety company bond
has been filed by the Reorganized Debtor required by any court having
jurisdiction or is not otherwise stayed as to the enforcement of an execution.
5. The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain materially the
conduct by the Reorganized Debtor of its ordinary course of business.
6. The failure of any of Rex Loren Steffey and William L. Lawrence,
Jr., other than by death or disability, at any time to exercise that authority
and discharge those management responsibilities with respect to the Reorganized
Debtor as are exercised and discharged by each of them at the Date of
Confirmation.
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 22
<PAGE>
B. NOTICE OF ACCELERATION; HEARING. Upon an Event of Default, as set
forth immediately above, a majority in number of the members of the PCC, who
hold a majority of the dollar amounts of the Allowed Class 3 Claims held by all
members of the PCC, shall have the right to declare an Event of Default under
this Plan and to accelerate all payments due on Allowed Class 3 Claims pursuant
to the Plan or the Note, PROVIDED, HOWEVER, that the PCC shall provide the
Company with at least fourteen (14) days' written notice, by certified mail, of
a hearing to be conducted by the Bankruptcy Court to determine whether such
acceleration should be approved to Jay Jacobs, Inc. (Attn: William L. Lawrence,
Jr.), 1530 Fifth Avenue, Seattle, WA 98101, with a copy to Bogle & Gates
P.L.L.C. (Attn: Mark Charles Paben), Two Union Square, 601 Union Street,
Seattle, WA 98101. In any event, no such acceleration shall take effect until
the order approving the acceleration becomes a Final Order.
THE PROVISIONS OF THIS ARTICLE XIII IN NO WAY LIMIT OR RESTRICT THE RIGHTS
OF ANY INDIVIDUAL ALLOWED CLAIM HOLDER TO EXERCISE ANY RIGHTS TO ACCELERATE OR
ENFORCE PAYMENT OBLIGATIONS OR OTHER RIGHTS WITH RESPECT TO ITS CLAIM OR NOTE.
SEE ARTICLE XIV(J) HEREIN.
ARTICLE XIV -- RETENTION OF JURISDICTION
Notwithstanding confirmation, until the entry of a Final Decree closing the
Case, the Court shall retain jurisdiction to ensure that the purposes and intent
of this Plan are carried out. Without limiting the generality of the foregoing,
the Court shall retain jurisdiction for the following purposes:
A. The classification or allowability of the Claim of any creditor, the
reexamination of the Claims which have been allowed for the purposes of voting,
and the resolution of any objections to Claims filed by the Debtor;
B. The determination of the secured status of any claim holder pursuant
to the provisions of Section 506 of the Code;
C. The determination of any contested matters or adversary proceedings
pending prior to the Date of Confirmation, or initiated thereafter, including
but not limited to the enforcement and collection of judgments entered in favor
of the Estate;
D. The approval of any settlements of claims by the Reorganized Debtor
pursuant to the Plan;
E. The correction of any defect, the curing of any omission, the
reconciliation of any inconsistency in the Plan or
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 23
<PAGE>
the Confirmation Order as may be necessary to carry out the purpose of the Plan;
F. The determination of all disputes arising under the Plan (including,
but not limited to, defaults, if any) or regarding title to the property of the
Reorganized Debtor;
G. The issuance of any order necessary to implement the Plan or
Confirmation Order, including, without limitation, such declaratory and
injunctive orders as are appropriate to protect the Debtor, the Estate, and the
Reorganized Debtor from the actions of creditors or other parties-in-interest;
H. The modification of the Plan after confirmation pursuant to the Code
and Bankruptcy Rules;
I. The determination of requests for payment of claims entitled to
priority under Section 507(a)(1) of the Code, including compensation to
Professional Persons, and of requests for payment of claims for fees, costs, and
charges under Section 506(b) of the Code;
J. The enforcement of any terms of the Note(s) or payment obligations or
other provisions under the Plan;
K. The determination of whether all payments due on Allowed Class 3
Claims may be accelerated pursuant to Article XIII(B) of the Plan; and
L. The entry of a Final Decree closing the Case.
ARTICLE XV - ENTRY OF CLOSING ORDER BY THE BANKRUPTCY COURT
The Bankruptcy Court, subject to approval, shall enter an order concluding
and terminating the Case upon application of the Reorganized Debtor.
DATED this 16th day of October, 1995.
JAY JACOBS, INC.
By: /s/ Rex Loren Steffey
------------------------------
Rex Loren Steffey
Its President/Chief Executive
Officer
DEBTOR'S FIRST AMENDED CHAPTER 11
PLAN OF REORGANIZATION - 24
<PAGE>
PROMISSORY NOTE
$_________ July 15, 1996
Seattle, Washington
FOR VALUE RECEIVED, the undersigned, JAY JACOBS, INC., a Washington
corporation (the "Maker"), promises to pay to the order of [NAME OF PAYEE],
(with its successors and assigns, the "Payee"), the principal sum of [AMOUNT
SPELLED OUT IN WORDS] Dollars ($____________), together with interest at the
rate of 9.5% per annum on the unpaid principal amount hereof for each day from
February 1, 1997, until paid in full, all as set forth below. Interest shall be
calculated on the basis of a 365-day year for actual days elapsed (including the
first day of any period, but excluding the last day). In no event shall the
Maker be obligated to pay interest at a rate in excess of the highest rate
permitted by applicable law.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Seattle, Washington are authorized by law to close.
"EBITDA," (earnings before interest, taxes, depreciation and
amortization) is as defined under generally accepted accounting principles.
"Excess Cash Flow" means the excess, if any, of actual EBITDA of the
Maker and its subsidiaries on a consolidated basis (as reflected in the Maker's
audited consolidated statement of operations filed annually on Form 10-K with
the Securities and Exchange Commission), over "Targeted EBITDA" for the Maker
and its subsidiaries on a consolidated basis for the same period as set forth
below:
<TABLE>
<CAPTION>
FISCAL YEAR TARGETED EBITDA
<S> <C>
1999 $4,209,000
2000 $5,452,000
2001 $6,878,000
</TABLE>
"Maturity Date" means January 2, 2001.
Principal, interest and other amounts payable hereunder shall be
payable on the date when due at the Payee's office at [STREET ADDRESS OF PAYEE],
[CITY] , [STATE ] [ZIP] , or such other place as the Payee may
designate for such purpose, in lawful money of the United States of America and
in
-1-
EXHIBIT A
<PAGE>
immediately available funds. A payment shall be deemed made on the earlier of
the date on which it is received by Payee or deposited by the Maker in the
United States mail, as evidenced by the postmark, if mailed with first-class
postage, prepaid and addressed to Payee at the address specified under the
caption "Notices" in this Note.
SCHEDULED PRINCIPAL INSTALLMENTS. On January 2, 1998, (or if such day is
not a Business Day, on the succeeding Business Day), the Maker shall make an
installment payment of __________ and __/100 Dollars ($________.__), which sum
equals twenty-six and two-tenths percent (26.2%) of the original principal
amount of this Note. On January 2 of each of 1999, 2000 and 2001 (or if such
day is not a Business Day, on the succeeding Business Day), the Maker shall make
installment payments of ___________ and __/100 Dollars ($_________), which sum
in each instance equals twenty-four and six-tenths percent (24.6%) of the
original principal amount of this Note.
PERCENTAGE OF
ORIGINAL PRINCIPAL
PAYMENT DUE DATE DOLLAR AMOUNT AMOUNT OF NOTE
January 2, 1998 $___________ 26.2
January 2, 1999 $___________ 24.6
January 2, 2000 $___________ 24.6
January 2, 2001 $___________ 24.6
On the Maturity Date the Maker shall repay any unpaid principal amount of this
Note.
INTEREST PAYMENTS.
(i) On January 2 of each of the years 1998, 1999, 2000 and 2001 (or
if any such day is not a Business Day, on the succeeding Business Day), the
Maker shall pay the accrued interest to the Payee.
(ii) If an interest payment is not made to the Payee within fifteen
(15) Business Days of the due date, the principal amount payable pursuant
to the terms of this Note shall be increased retroactively as of the due
date by an amount equal to the accrued and unpaid interest, whereupon such
accrued and unpaid interest shall be deemed paid in full.
(iii) On the Maturity Date, the Maker shall pay the entire accrued
and unpaid interest hereunder.
-2-
<PAGE>
PAYMENTS OF EXCESS CASH FLOW.
(i) On each day set forth below (or if any such day is not a
Business Day, on the succeeding Business Day), the Maker shall pay to Payee the
Payee's pro rata share ("Pro Rata Share") of the portion set forth below of
Excess Cash Flow (if any) for the fiscal year most recently ended:
June 15, 1999 30%
June 15, 2000 40%
June 15, 2001 50%
The Payee's Pro Rata Share shall equal a fraction, the numerator of which shall
be the Payee's Allowed Class 3 Claim under the Maker's Plan of Reorganization as
confirmed on ____________, 1995, by the United States Bankruptcy Court for the
Western District of Washington (the "Plan") in Bankruptcy Case No. 94-03993
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Case")
and the denominator of which shall be the aggregate dollar amount of Allowed
Class 3 Claims as confirmed in the Bankruptcy Case.
(ii) Notwithstanding the foregoing, in no event shall actual Excess
Cash Flow payments under this Note exceed the difference between one hundred
percent (100%) of the Payee's Allowed Class 3 Claim and the sum of all cash
amounts paid or payable with respect to such Allowed Class 3 Claim under the
Plan or as principal or interest under the Note, discounted at the rate of
twelve percent (12%) per annum for each day from January 2, 1996, until the date
paid, or, as to amounts not yet paid, payable. The discount rate shall be
calculated on the basis of a 365-day year for actual days elapsed (including the
first day of any period, but excluding the last day).
(iii) Payments of Excess Cash Flow shall be non-cumulative, with no
rights to payments of Excess Cash Flow accruing to the benefit of the Payee with
respect to a particular fiscal year in which there is no Excess Cash Flow,
notwithstanding the performance of Maker or its subsidiaries in subsequent
years.
(iv) If a payment of Excess Cash Flow is due to the Payee on June 15,
1999 or 2000, but not paid within fifteen (15) Business Days of such date, the
principal amount of this Note shall be increased retroactively as of the due
date by an amount equal to such owing and unpaid amount of Excess Cash Flow,
whereupon such Excess Cash Flow payment shall be deemed paid in full. If a
payment of Excess Cash Flow is due to the Payee on June 15, 2001, but not paid
within fifteen (15) Business Days of such date, the owing and unpaid amount of
such Excess Cash Flow shall bear interest from the due date at the Default Rate
Of
-3-
<PAGE>
Interest, and such Excess Cash Flow plus interest shall be payable upon demand.
OPTIONAL PREPAYMENTS. The principal amount of this Note may be
prepaid in whole or in part at any time or from time to time without premium or
penalty upon at least one Business Day's prior notice to the Payee. Each such
prepayment shall be accompanied by a payment of all interest accrued on the
principal amount so prepaid. Each such prepayment shall be applied to remaining
installments of principal due hereunder in inverse order of maturity. If the
Maker prepays the whole principal amount of this Note and all interest accrued
thereon, this Note shall be deemed paid in full and the Maker shall have no
obligation to make payments of Excess Cash Flow hereunder in respect of any
fiscal year ending after the date on which such prepayment is made.
LATE PAYMENTS. If the Maker fails to pay any principal or interest
payable hereunder within fifteen (15) Business days of when due (whether at
stated maturity, by acceleration, after notice of prepayment or otherwise), each
overdue payment of principal or interest hereunder shall bear interest, payable
on demand, for each day from the date when due until paid in full at a rate per
annum (the "Default Rate of Interest") equal to the sum of two percent (2%) plus
the rate otherwise applicable to the principal amount hereof on such day. For
the sake of clarity, the amount of principal by which this Note retroactively
may be increased with respect to any Excess Cash Flow payment or any interest
with respect thereto that is owing and unpaid within fifteen (15) days of when
due shall bear interest from the due date at the Default Rate of Interest.
COVENANTS. While any amount of principal, interest or Excess Cash
Flow remains payable under this Note, the Maker shall not:
(i) directly or indirectly sell, lease, transfer, abandon, or
otherwise dispose of all or any substantial portion of its property or
assets (other than (a) dispositions of tangible personal property which is
obsolete or being replaced by or leased back to the Maker, and (b) sales in
the ordinary course of its business) or consolidate or merge with or into
any other entity or permit any other entity to consolidate or merge with or
into it, PROVIDED, HOWEVER, that the Maker may merge or consolidate with or
into a corporation or other entity or acquire substantially all the assets
of another entity if the surviving entity assumes the obligations of the
Maker under this Note. The Maker shall at all times preserve, renew, and
keep in full force and effect its existence as a corporation and the rights
and franchises with respect
-4-
<PAGE>
thereto and continue to engage in business of the same type as the Maker is
engaged in as of July 15, 1996; or
(ii) (a) redeem, purchase, or otherwise retire any of its shares of
capital stock, (b) declare or pay any dividends to any class of stock or
classes of stock, or (c) return capital of the Maker to its shareholders.
EVENTS OF NOTE DEFAULT. If any of the following events (each an
"Event of Note Default") shall occur and be continuing: (i) an "Event of
Default" as defined in the Plan; (ii) subject to the terms of this Note, the
Maker shall fail to make any payment required hereunder within fifteen (15)
Business Days of when due; (iii) the Maker shall fail to observe or perform any
other obligation or covenant set forth in this Note for fifteen (15) Business
Days after receipt of written notice from the Payee specifying in what manner
the Maker has failed so to observe or perform any such obligation or covenant;
or (iv) proceedings shall be instituted by or against the Maker under the United
States Bankruptcy Code or under any bankruptcy, reorganization or insolvency law
or other law for the relief of debtors and, if such proceedings are an
involuntary case instituted against the Maker, either such involuntary case
shall remain undismissed and unstayed for a period of sixty (60) days or an
order for relief shall be entered against the Maker or the Maker shall consent
to any relief in such involuntary case; then, in any such case the Payee may, by
written notice to the Maker, declare the outstanding principal amount of this
Note to be forthwith due and payable, together with accrued interest, and the
same shall become due and payable upon receipt of such notice by the Maker,
without demand, protest, presentment, notice of dishonor or any other notice or
demand whatsoever, all of which are hereby waived by the Maker. If an Event of
Note Default occurs and the Maker receives notice that the Note has been
accelerated by the Payee, the principal, interest or any other amount payable
under this Note shall bear interest at the Default Rate of Interest; PROVIDED
that in the case of an Event of Note Default specified in paragraph (iv) above
without any notice to the Maker or any other act of the Payee, the outstanding
principal amount of this Note shall become forthwith due and payable, together
with accrued interest, without demand, protest, presentment, notice of dishonor
or any other notice or demand whatsoever, all of which are hereby waived by the
Maker, and interest under this Note shall cease to accrue.
AMENDMENT AND WAIVERS. The provisions of this Note may not be waived,
modified or amended except by an instrument in writing signed by the Maker and
the Payee. No failure or delay on the part of the Payee in exercising any of
its powers or rights hereunder, nor any partial or single exercise thereof,
-5-
<PAGE>
shall constitute a waiver thereof or shall preclude any other or future exercise
of any other power or right.
EXPENSES. If suit is brought to interpret or enforce any term or
provision of this Note, the prevailing party or parties shall, in addition to
any other relief to which such party or parties may be entitled, be awarded
against the other parties such prevailing party or parties' attorneys fees and
costs reasonably and actually incurred.
GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. This Note, and the
rights and obligations of the parties hereunder, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of Washington, as applied to
contracts made, executed and to be fully performed in such state by citizens of
such state, without regard to its conflict of law rules. The parties hereunder
agree that the exclusive jurisdiction and venue for any action brought between
them under this Note shall be the state and federal courts sitting in King
County, Washington, and that each of the parties hereby agrees and submits to
the exclusive jurisdiction and venue of such courts for such purpose. The
parties each hereby irrevocably waive (i) any and all right to trial by jury and
(ii) any objection that it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in connection with
this Note brought in the aforesaid courts and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
SAVINGS CLAUSE. If any provision of this Note is held to be invalid
or unenforceable to any extent in any context, it shall nevertheless be enforced
to the fullest extent allowed by law in that and other contexts, and the
validity and force of the remainder of this Note shall not be affected thereby.
NOTICES. All notices and other communications called for or required
by this Note shall be in writing at the following addresses, or to such other
address as a party may subsequently specify:
-6-
<PAGE>
IF TO MAKER:
JAY JACOBS, INC.
1530 Fifth Avenue
Seattle, WA 98101-1677
Attention: Chief Financial Officer
Fax: (206) 621-9830
Confirmation Number: (206) 622-5400
IF TO PAYEE:
-----------
_____________________________
_____________________________
_____________________________
Attention:___________________
Fax:_________________________
Confirmation Number:_________
Such notices or other communications shall be deemed to have been received (i)
upon delivery in person, (ii) upon the passage of seventy-two (72) hours
following post by first class registered or certified mail, return receipt
requested, with postage prepaid, (iii) upon the passage of twenty-four (24)
hours following post by overnight receipted courier service, or (iv) upon
transmittal by confirmed telex or facsimile provided that if sent by facsimile a
copy of such notice shall be concurrently sent by U.S. certified mail, return
receipt requested and postage prepaid, with an indication that the original was
sent by facsimile and the date of its transmittal.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
JAY JACOBS, INC.
By________________________________
Title:
-7-
<PAGE>
LEASES TO BE ASSUMED
--------------------
1. The leases dated April 16, 1965, December 23, 1974, December 31, 1975,
and January 25, 1980, and the modifications and extensions thereto, with The
Bank of California, N.A., trustee under the will of James B. O'Shea, Jr., as
lessor, of premises located at 1530 Fifth Avenue, Seattle, Washington, commonly
called the O'Shea Building, consisting of retail and office space, including the
premises known as Stores Nos. 1 and 66, the term of which expires on February
28, 2001.
2. The lease dated October 7, 1992 with the Southcenter Joint Venture, as
lessor, of premises located at 707 Southcenter Mall, Tukwila, Washington, known
as Store No. 6, the term of which expires on January 31, 2003.
3. The lease dated July 31, 1981 with Bellevue Square Managers, Inc., as
lessor, of premises located at 163 Bellevue Square, Bellevue, Washington, known
as Store No. 7, the term of which expires on February 29, 1996.
4. The lease dated February 1, 1984 with Bellevue Square Managers, Inc.,
as lessor, of premises located at 190 Bellevue Square, Bellevue, Washington,
known as Store No. 9, the term of which expires on February 29, 1996.
5. The lease dated January 2, 1985 with Carr Gottstein Properties, an
Alaska general partnership, successor-in-interest to Anchorage Shopping Center,
as lessor of premises located at 600 East Northern Lights Blvd., Anchorage,
Alaska, known as Store No. 10 (the "Anchorage Shopping Center Women's Store
Lease"), which is a month-to-month tenancy. The Debtor's assumption of the
Anchorage Shopping Center Women's Store Lease is subject to the entry of an
order herein, on or before the Effective Date of the Plan, approving the First
Amendment to Retail Lease to be entered into by the Debtor and Carr Gottstein
Properties, which will extend the Lease until February 28, 1997.
6. The lease dated May 7, 1993 with Yakima Mall Shopping Center
Corporation, as lessor, of premises located at 2028 Yakima Mall, Yakima,
Washington, known as Store No. 11, the term of which expires on July 31, 2000.
7. The lease dated July 20, 1983, with Bentley Mall Associates, as
lessor, of premises located at Bentley Mall, Space 8/9, 32 College Road,
Fairbanks, Alaska, known as Store No. 12 (the "Bentley Mall Lease"), the term of
which expires on February 28, 2001. The Debtor's assumption of the Bentley Mall
Lease is subject to the entry of an order herein, on or before the Effective
Date of the Plan, approving the First Amendment to Lease dated July 25, 1995 by
and between the Debtor and Bentley Mall Associates.
8. The lease dated December 5, 1983, as amended by the First Amendment to
Lease Agreement dated November 11, 1994, approved by order entered herein on
July 28, 1995, with East Ridge Development Company, Ltd., as lessor, of premises
located at Eastridge Mall, 601 Wyoming Blvd., Casper, Wyoming, known as Store
No. 15, the term of which expires on January 31, 1995.
9. The lease dated July 27, 1991, as extended by the Lease Extension
Agreement dated December 7, 1992, with 4M2B, an Alaska general partnership, as
lessor, of premises located
<PAGE>
at Peninsula Mall, 44332 Sterling Highway, No. 42, Soldotna, Alaska, known as
Store No. 17, the term of which expires on January 31, 2001.
10. The lease dated January 9, 1984, as amended by the First Amendment to
Lease dated March 7, 1995, approved by order entered herein on May 2, 1995, with
Equiteton Associates, successor in-interest to Grand Teton Development Company,
as lessor, of premises located at Grand Teton Mall, 2300 East 17th Street, Idaho
Falls, Idaho, known as Store No. 18, the term of which expires on January 31,
1996.
11. The lease dated September 29, 1989, as amended by the First Amendment
to Lease dated March 8, 1995, approved by order entered herein on May 2, 1995,
with Winmar Cascade, Inc., as lessor, of premises located at Cascade Mall, Space
A9, 740 Cascade Mall Drive, Burlington, Washington, known as Store No. 20, the
term of which expires on January 31, 2001.
12. The lease dated November 8, 1975, with Daniel A. Duryee, Jr., Marjorie
A. Duryee and Clotilde D. Freeman, successors-in-interest to Clotilde R. Duryee,
a widow; Henry Charles Bartlett, individually and as trustee of the estate of
Belle B. Bartlett; Marion Virginia Harrington, co-trustee u/w of Eugene C.
Metzger and co-trustee u/w of Beatrice Metzger, and Everett Trust & Savings
Bank, co-trustee u/w of Eugene C. Metzger and co-trustee u/w of Beatrice
Metzger; M. Madeleine Metzger, a widow, Harry B. Metzger and Jeanne Metzger,
husband and wife, and Edward M. Nollmeyer and Pauline M. Nollmeyer, husband and
wife, as lessor, as extended by lease extension agreements dated November 20,
1979 and December 21, 1983, of premises located at 2814 Colby, Everett,
Washington, known as Store No. 23, which is a month-to-month tenancy.
13. The lease and Lease addendum dated April 27, 1976, with WVM Partners,
Ltd., successor-in-interest to Eastmont Enterprises, as lessor, of premises
located at Wenatchee Valley Mall, 511 Valley Mall Parkway, East Wenatchee,
Washington, known as Store No. 24, the term of which expires February 28, 1996.
14. The lease dated September 11, 1991, as amended by Addendum to Lease
Agreement dated February 6, 1995, approved by order entered on August 18, 1995,
with Hickel Investment Company, d/b/a University Center, as lessor, of premises
located at University Center, 3901 Old Seward Highway, No. 3, Anchorage, Alaska,
known as Store No. 25, the term of which expires January 31, 2002.
15. The lease dated June 13, 1978, as amended, including the Lease
Modification Agreement dated November 7, 1994, approved by order entered
December 16, 1994, with Titantic Associates, as lessor, of premises located at
1402 SE Everett Mall, Everett, Washington, known as Store No. 31, the term of
which expires September 30, 2003.
16. The lease dated May 22, 1990 with Palouse Empire Mall Associates, as
lessor, of premises located at Palouse Empire Mall, 2108 Pullman Road, Moscow,
Idaho, known as Store No. 32, the term of which expires January 31, 2000.
17. The lease dated October 26, 1993, as amended by First Amendment to
Lease dated January 10, 1995, approved by order entered herein on March 13,
1995, with Tristate Joint Venture, as lessor, of premises located at Salem
Centre, 480 Center Street NE, Salem Oregon, known as Store No. 37, the term of
which expires on April 30, 2003.
EXHIBIT B - PAGE 2
<PAGE>
18. The lease dated May 1, 1980 with Totem Shopping Center Associates, as
lessor, of premises located at Totem Lake Shopping Center, 12613 Totem Lake
Blvd., Kirkland, Washington, known as Store No. 39, the term of which expires
January 31, 1996.
19. The lease dated April 25, 1980 with Pony Village Properties Limited
Partnership of premises located at the Pony Village Shopping Center, 1601
Virginia Avenue, North Bend, Oregon, known as Store No. 40, the term of which
expires January 31, 1996.
20. The lease dated September 6, 1992, as amended by the First Amendment
to Lease Agreement dated December 31, 1993, with Clackamas Associates Limited
Partnership, as lessor, of premises located at Clackamas Town Center, 12000 S.E.
82nd Street, Suite 2193, Space E-9, Portland, Oregon, known as Store No. 42, the
term of which expires January 31, 2003.
21. The lease dated February 12, 1981 with Norcrest China Company, as
lessor, as renewed pursuant to letter dated August 21, 1995 from the Debtor to
H. Naito Properties exercising the Debtor's five year renewal option, of
premises located at the Galleria 921 S.W. Morrison Street, Portland, Oregon,
known as Store No. 43, the term of which expires on February 28, 2001, as a
result of the renewal.
22. The lease dated June 18, 1981 with Watercress Associates - Joint
Venture 315089, successor-in-interest to Pearl Ridge Mall - Joint Venture
315068, as lessor, of premises located at 213 Pearl Ridge Shopping Center, Aiea,
Oahu, Hawaii, known as Store No. 45, the term of which expires July 31, 1996.
23. The lease dated April 15, 1981 with South Shore Partners, successor-
in-interest to General Growth Development Corporation, as lessor, of premises
located at Southshore Mall, 1017 Boone, Aberdeen, Washington, known as Store
No. 46, the term of which expires January 31, 1997.
24. The lease dated September 21, 1981, as amended, including the Third
Amendment to Lease dated February 1, 1995, approved by order entered on February
6, 1995 with Anita McGill, as lessor, of premises located at Beaverton Town
Square, 11765 S.W. Beaverton-H Highway, Beaverton, Oregon, known as Store
No. 48, the term of which expires January 31, 1996.
25. The lease dated September 15, 1981, as amended, with Northway
Associates Limited Partnership, successor-in-interest to Glen Mall Associates,
as lessor, of premises located at Northway Mall, 3101 Penland Parkway,
Anchorage, Alaska, known as Store No. 49 (the "Northway Mall Lease"), the term
of which expires February 28, 1997. The Debtor's assumption of the Northway
Mall Lease is subject to the entry of an order herein, on or before the
Effective Date of the Plan, approving the Second Amendment to Lease dated July
26, 1995, by and between the Debtor and Northway Associates Limited Partnership.
26. The lease dated May 12, 1993 with Price Financing Partnership L.P.,
successor-in-interest to Pine Ridge Development Company Ltd., as lessor, as
amended, including the Second Amendment to Lease dated December 16, 1994,
approved by order entered March 13, 1995, of premises located at Pine Ridge
Mall, 4155 Yellowstone Highway, Chubbuck Idaho, known as Store No. 50, the term
of which expires January 31, 1996.
EXHIBIT B - PAGE 3
<PAGE>
27. The lease dated December 2, 1992 with Rodney K. Haynes, as lessor, of
premises located at Towne Square Mall, 504 Main Street, Lewiston, Idaho, known
as Store No. 51, the term of which expires January 31, 1998.
28. The lease dated February 9, 1982, with EMI Santa Rosa Limited
Partnership, successor-in-interest to Santa Rosa Associates, as lessor, as
amended by Modification of Lease dated January 27, 1995, approved by order dated
March 13, 1995, of premises located at Santa Rosa Plaza, No. B-165, Santa Rosa,
California, known as Store No. 52, the term of which expires January 31, 1996.
29. The lease dated February 25, 1987 with West Coast Freeholds,
successor-in-interest to Valley River Center, as lessor, as amended by Amendment
dated October 1, 1994, approved by order entered February 6, 1995, of premises
located at 480 Valley River Center, Eugene, Oregon, known as Store No. 53, the
term of which expires January 31, 1998.
30. The lease, and riders to lease, dated August 19, 1982, as amended,
with Dimond Center, Ltd., as lessor, of premises located at Dimond Center, 800
E. Dimond Blvd., No. 210, Anchorage, Alaska, known as Store No. 57, the term of
which expires September 30, 1997.
31. The lease dated September 16, 1982 with Gelsar, a California Limited
Partnership, successor-in-interest to Gelsar, Incorporated, as lessor, as
amended by Relocation Agreement dated April 18, 1995, approved by order entered
August 18, 1995, of premises located at Serramonte Center, Space D340, Daly
City, California, known as Store No. 59, the term of which expires January 31,
1996.
32. The lease dated May 7, 1993 with Yakima Mall Shopping Center
Corporation of premises located at 1075 Yakima Mall, Yakima, Washington, known
as Store No. 65, (the "Yakima Mall Lease") the term of which expires February
28, 1997. The Debtor's assumption of the Yakima Mall Lease is subject to the
entry of an order herein, on or before the Effective Date of the Plan, approving
the First Amendment to Lease Agreement dated July 26, 1995 by and between the
Debtor and Yakima Mall Shopping Center Corporation.
33. The lease dated June 7, 1983, as amended, with Gateway West Shopping
Center Associates, as lessor, of premises located at Gateway West Shopping
Center, 1203 Highway 2 West, No. 21, Kalispell, Montana, known as Store No. 69,
the term of which expires January 31, 2001.
34. The lease dated November 11, 1983, as amended, including the Lease
Modification Agreement dated November 14, 1994, approved by order entered
December 16, 1994, with C. E. Loveless and Barclay Tollefson, as lessor, of
premises located at Nugget Mall, 8745 Glacier Highway, No. 245, Juneau, Alaska,
known as Store No. 72, the term of which expires January 31, 1999.
35. The lease dated April 2, 1986, as amended, with Northern Trust Bank of
California, N.A., successor-in-interest to Manhattan Beach Commercial
Properties, as lessor, of premises located at Manhattan Village, 3200 Sepulveda
Blvd., C14, Manhattan Beach, California, known as Store No. 73 (the "Manhattan
Village Women's Store Lease"), the term of which expires January 31, 1997. The
Debtor's assumption of the Manhattan Village Women's Store Lease is subject to
entry of an order herein, on or before the Effective Date of the Plan, approving
the
EXHIBIT B- PAGE 4
<PAGE>
Third Amendment of Lease to be entered into by and between the Debtor and
Northern Trust Bank of California, N.A., in its capacity as special trustee
under trust no. 22-81962.
36. The lease dated February 25, 1986 with University City, Inc., as
lessor, of premises located at 349 University City, Spokane, Washington, known
as Store No. 83 (the "University City Lease"), the term of which expires May 31,
1996 and is being extended to January 31, 1997 pursuant to the Amendment. The
Debtor's assumption of the University City Lease is subject to entry of an order
herein, on or before the Effective Date of the Plan, approving the Amendment to
Lease to be entered into by and between the Debtor and University City, Inc.
37. The lease dated July 27, 1984, as amended by Amendment Number One
dated October 27, 1994, approved by order entered February 6, 1995, with Eagle
Properties Limited Partnership, as lessor, of premises located at Cottonwood
Creek Mall, 1800 Parks Highway, D-06, Wasilla, Alaska, known as Store No. 100,
the term of which expires December 31, 1996.
38. The lease dated March 8, 1985, as amended by the Lease Modification
Agreement dated December 15, 1994, approved by order entered February 6, 1995,
with Citizens Realty Company, as lessor, of premises located at River Park
Square, West 714 Main Avenue, Spokane, Washington, known as Store No. 102, the
term of which expires February 28, 1996.
39. The lease dated May 15, 1985, as amended, including by amendment dated
March 8, 1985, approved by order entered May 2, 1995, with Kitsap Associates
Limited Partnership, successor-in-interest to Winmar of Kitsap, Inc., of
premises located at Kitsap Mall, 10315 Silverdale way N.E., Silverdale,
Washington, known as Store No. 103, the term of which expires January 31, 1996.
40. The lease dated December 4, 1986, as amended, with Carr Gottstein
Properties, successor-in-interest to Anchorage Shopping Center, as lessor, of
premises located at Anchorage Mall, 600 East Northern Lights Blvd., Anchorage,
Alaska, known as Store No. 111 (the "Anchorage Mall Fashion Direction Lease"),
the term of which expires on July 31, 1996. The Debtor's assumption of the
Anchorage Mall Fashion Direction Lease is subject to entry of an order herein,
on or before the Effective Date of the Plan, approving the Second Amendment to
Retail Lease to be entered into by and between the Debtor and Carr Gottstein
Properties, extending the lease to February 28, 1997.
41. The lease dated June 9, 1986, as amended, with Dimond Center, Ltd., as
lessor, of premises located at Dimond Center, 800 East Dimond Center Blvd., No.
3140, Anchorage, Alaska, known as Store No. 112, the term of which expires on
September 30, 1996.
42. The lease dated August 14, 1986 with Kalispell Center Limited
Partnership, as lessor, of premises located at Kalispell Center Mall, North 20
Main, Kalispell, Montana, known as Store No. 113, the term of which expires
February 28, 1997.
43. The lease dated September 15, 1980 between Emporium West, as lessee,
and Harry M. Daum and Kathleen Mary Ellen Daum, as lessor, assigned to the
Debtor, as lessee, on October 10, 1986, as amended, including by Amendment to
Lease dated April 5, 1995 with Robert H. Copple, executor of the estate of Harry
M. Daum, approved by order entered May 2, 1995, of premises located at the Main
Mall, 2825 West Main, Bozeman, Montana, known as Store No. 115, the term of
which expires October 31, 2000.
EXHIBIT B - PAGE 5
<PAGE>
44. The lease dated March 17, 1986, as amended, with Fund A Rogue Valley,
Inc., successor-in-interest to Rogue Valley Mall Development Company, as lessor,
of premises located at the Rogue Valley Mall, 1600 North Riverside, Medford,
Oregon, known as Store No. 116, the term of which expires January 31, 2002.
45. The lease dated September 16, 1986, and Addendum thereto dated October
8, 1986, with The Hames Group, as lessor, of premises located at Plaza Port
West, 2417 Tongass Street, UL9, Ketchikan, Alaska, known as Store No. 118, the
term of which expires January 31, 1997.
46. The lease dated July 14, 1977 between Fred McCaulou and Jean McCaulou,
d/b/a Oak Bay Clothing Company, as lessee, and Norman Scheiner, successor-in-
interest to EFEM Company, as lessor, assigned to the Debtor, as lessee, on
February 1, 1987, as amended, of premises located at Gresham Village, 2424-26
East Burnside Drive, Gresham, Oregon, known as Store No. 120, which is a month-
to-month tenancy.
47. The lease dated September 15, 1986 with David L. Hyman, d/b/a Center
Properties, as lessor, of premises located at Butte Plaza, 3100 Harrison Avenue,
Butte, Montana, known as Store No. 122, the term of which expires January 31,
1997.
48. The lease dated February 27, 1987, as amended, with Price Financing
Partnership, L.P., successor-in-interest to Kelso Mall Development Company, as
lessor, of premises located at Three Rivers Mall, 351 Three Rivers Drive, Kelso,
Washington, known as Store No. 127, the term of which expires January 31, 2002.
49. The lease dated July 9, 1987, as amended, with Melvin Simon and
Associates/Anchorage, successor-in-interest to Anchorage Fifth Avenue
Associates, as lessor, of premises located at Anchorage Fifth Avenue, 320 West
Fifth Avenue, No. 254, Anchorage, Alaska, known as Store No. 129, the term of
which expires January 31, 1998.
50. The lease dated July 9, 1987, as amended, with Melvin Simon and
Associates/Anchorage, successor-in-interest to Anchorage Fifth Avenue
Associates, as lessor, of premises located at Anchorage Fifth Avenue, 320 West
Fifth Avenue, No. 208, Anchorage, Alaska, known as Store No. 130, the term of
which expires January 31, 1998.
51. The lease dated September 3, 1987, as amended, including by Amendment
No. 2 to Factoria Square Lease dated February 1, 1995, approved by order entered
July 28, 1995, with Factoria Square Limited Partnership, as lessor, of premises
located at Factoria Square, 4065 128th Avenue S.E., Bellevue, Washington, known
as Store No. 143, the term of which expires January 31, 1998.
52. The lease dated June 15, 1988 with Crossroads Plaza Associates, as
lessor, of premises located at Crossroads Plaza, 50 South Main, No. 2A15, Salt
Lake City, Utah, known as Store No. 145 (the "Crossroads Plaza Lease"), the term
of which expires January 31, 1999. The Debtor's assumption of the Crossroad
Plaza Lease is subject to entry of an order herein, on or before the Effective
Date of the Plan, approving the First Amendment to Lease to be entered into by
and between the Debtor and Crossroads Plaza Associates.
53. The lease dated February 26, 1988, as amended, including by Second
Amendment to Lease dated June 15, 1995, approved by order entered July 28, 1995,
with Cordano
EXHIBIT B - PAGE 6
<PAGE>
Associates and Sunrise Mall Associates, as lessor, of premises located at 5921
Sunrise Mall, Citrus Heights, California, known as Store No. 150, the term of
which expires January 31, 1999.
54. The lease dated November 25, 1987, as amended, with Bellis Fair
Partners, successor-in-interest to Bellis Fair Limited Partnership, as lessor,
of premises located at Bellis Fair, 1 Bellis Fair Parkway, No. 350, Bellingham,
Washington, known as Store No. 155, the term of which expires January 31, 1999.
55. The lease dated June 15, 1988, as amended by First Amendment to Lease
dated January 12, 1989, and Second Amendment to Lease dated June 15, 1995,
approved by order entered herein on July 20, 1995, with Chico Mall Associates,
as lessor, of premises located at the Chico Mall, 1950 East 20th Street, D-409,
Chico, California, known as Store No. 156, the term of which expires on January
31, 1999.
56. The lease dated June 15, 1988, as amended by First Amendment to Lease
dated January 12, 1989, and Second Amendment to Lease Dated June 15, 1995,
approved by order entered herein on July 20, 1995, with Chico Mall Associates,
as lessor, of premises located at Chico Mall, 1950 East 20th Street, D-407,
known as Store No. 157, the term of which expires on January 31, 1999.
57. The lease dated August 24, 1988, as amended, with Price Financing
Partnership L.P., successor-in-interest to Boise Mall Development Company, as
lessor, of premises located at Boise Towne Square, 350 North Milwaukee, No.
1101, Boise, Idaho, known as Store No. 162, the term of which expires January
31, 1999.
58. The lease dated November 2, 1988 with Capitola Mall Associates, as
lessor, of premises located at Capitola Mall, 1855 41st Avenue, Space H-4,
Capitola, California, known as Store No. 163, the term of which expires January
31, 1999.
59. The lease dated June 15, 1988, as amended, including by the Third
Amendment to lease dated June 15, 1995, approved by order entered July 28, 1995,
with Heritage Mall Associates, as lessor, of premises located at Heritage Mall,
2137 14th Ave. S.E., Albany, Oregon, known as Store No. 164, the term of which
expires January 31, 1999.
60. The lease dated July 22, 1988, as amended by Lease Modification
Agreement dated November 11, 1994, approved by order entered herein on March 13,
1995, with Frontier Mall Associates, L.P. of premises located at Frontier Mall,
1400 Del Range Blvd., No. 44, Cheyenne, Wyoming, known as Store No. 165, the
term of which expires on January 1, 1999.
61. The lease dated April 27, 1988 with Capital Hill Mall Partnership, as
lessor, of premises located at Capital Hill Mall, 1600 11th Avenue, No. 240,
Helena, Montana, known as Store No. 167 (the "Capital Hill Mall Women's Store
Lease"), the term of which expires January 31, 1999. The Debtor's assumption of
the Capital Hill Mall Women's Store Lease is subject to entry of an order
herein, on or before the Effective Date of the Plan, approving the Lease
Amendment to be entered into by and between the Debtor and Capital Hill Mall
Partnership.
62. The lease dated June 1, 1989, as amended by the First Amendment to
Lease dated June 15, 1995, approved by order entered July 28, 1995, with Silver
Lake Mall, Ltd., as lessor, of premises located at Silver Lake Mall, 200 West
Hanley Ave., D-409, Coeur d'Alene, Idaho, known as Store No. 170, the term of
which expires January 31, 2000.
EXHIBIT B - PAGE 7
<PAGE>
63. The lease dated May 4, 1989, and the Supplemental Utility/
Environmental Agreement dated October 30, 1989, with Corporate Property
Investors, as lessor, of premises located at 2055 Brea Mall, Brea,
California, known as Store No. 173 (the Brea Mall Men's Store Lease"), the
term of which expires February 28, 2000. The Debtor's assumption of the Brea
Mall Men's Store Lease is subject to the entry of an order herein, on or
before the Effective Date of the Plan, approving the First amendment to Lease
dated August 24, 1995 by and between the Debtor and Corporate Property
Investors.
64. The lease dated June 1, 1989, as subsequently amended pursuant to the
Lease Modification Agreement dated October 11, 1994, approved by order entered
December 16, 1994, with Walla Walla Shopping Center Associates, as lessor, of
premises located at Blue Mountain Mall, 1631 West Rose Street, No. 517, Walla
Walla, Washington, known as Store No. 174, the term of which expires January 31,
2000.
65. The lease dated December 15, 1989, as amended by First Amendment to
Lease dated December 27, 1994 with Arden Fair Associates, L.P., successor-in-
interest to Arden Fair Associates, of premises located at 1689 Arden Fair Mall,
Space No. 2116, Sacramento, California, known as Store No. 175, the term of
which expires January 31, 2000.
66. The lease dated November 7, 1989, as amended by First Amendment of
Lease dated April 27, 1990, with D/E Hawaii Joint Venture, as lessor, of
premises located at the Ala Moana Shopping Center, 1450 Ala Moana Blvd., No.
2015, Honolulu, Hawaii, known as Store No. 181, the term of which expires on
November 30, 1996.
67. The lease dated May 11, 1990 with Madison Joint Venture, as lessor, of
premises located at 207 West Towne Mall, Madison, Wisconsin, known as Store
No. 197 (the "West Towne Mall Women's Store Lease"), the term of which expires
January 31, 2001. The Debtor's assumption of the West Towne Mall Women's Store
Lease is subject to entry of an order herein, on or before the Effective Date of
the Plan, approving the First Amendment to Lease to be entered into by and
between the Debtor and Madison Joint Venture.
68. The lease dated July 16, 1990 with Madison Joint Venture, as lessor,
of premises located at 161 East Towne Mall, Madison, Wisconsin, known as Store
No. 200 (the East Towne Mall Women's Store Lease"), the term of which expires
January 31, 2001. The Debtor's assumption of the East Towne Mall Women's Store
Lease is subject to entry of an order herein, on or before the Effective Date of
the Plan, approving the First Amendment to Lease to be entered into by and
between the Debtor and Madison Joint Venture.
69. The lease dated August 10, 1990, and related Agreements dated April
18, 1991 and May 10, 1991, with S-I Lloyd Associates Limited Partnership, of
premises located at 968 Lloyd Center, Portland, Oregon, known as Store No. 203
(the Lloyd Center Women's Store Lease"), the term of which expires January 31,
2001. The Debtor's assumption of the Lloyd Center Women's Store Lease is
subject to entry of an order herein, on or before the Effective Date of the
Plan, approving the Amendment to Lease to be entered into by and between the
Debtor and SI-Lloyd Associates Limited Partnership.
70. The lease dated August 28, 1990, as amended, including by the
Supplemental Lease Agreement dated March 15, 1995, approved by order dated May
2, 1995, with Simon Property Group L.P., successor-in-interest to Lincolnwood
Associates, as lessor, of premises located
EXHIBIT B - PAGE 8
<PAGE>
at Lincolnwood Towne Center, 3333 West Touhy Avenue, D8, Lincolnwood, Illinois,
known as Store No. 205, the term of which expires January 31, 2001.
71. The lease dated August 28, 1990, as amended, including by the
Supplemental Lease Agreement dated March 15, 1995, approved by order entered May
2, 1995, with Simon Property Group L.P., as lessor, of premises located at
Lincolnwood Towne Center, 3333 West Touhy Ave., H9, Lincolnwood, Illinois, known
as Store No. 206, the term of which expires January 31, 2001.
72. The lease dated August 21, 1990, as amended by Amendment to Lease
dated December 7, 1993, with Charles A. Ratner, Trustee ("Ratner") and Richard
B. Buchholzer, Trustee ("Buchholzer"), as lessor, as amended by Lease Amendment
dated March 24, 1995, approved by order entered herein on May 2, 1995, with
Chapel Hill Properties Co., successor-in-interest to Ratner and Buchholzer, as
lessor, of premises located at Chapel Hill Mall, 2000 Brittain Road, Suite 950,
Akron, Ohio, known as Store No. 214, the term of which expires on January 31,
2001.
73. The lease dated October 24, 1990, as amended by Lease Amendment dated
March 15, 1995, approved by order entered June 20, 1995, with Rolling Acres
Properties Co. Limited Partnership, successor-in-interest to Charles A. Ratner,
Trustee, as lessor, of premises located at Rolling Acres Mall, 2400 Romig Road,
Akron, Ohio, known as Store No. 215, the term of which expires on January 31,
2002.
74. The lease dated October 9, 1991 with the Dimond Center, Ltd., as
lessor, of premises located at Dimond Center, 800 East Dimond Center Blvd., No.
213, Anchorage, Alaska, known as Store No. 219, the term of which expires
September 10, 1995.
75. The lease dated June 19, 1990, as amended by the Lease Modification
Agreement dated October 14, 1994, approved by order entered December 16, 1994,
with Center Developments Oregon, Ltd., as lessor, of premises located at
Beaverton Mall, No. 8, 3275 S.W. Cedar Hills Blvd., Beaverton, Oregon, known as
Store No. 224, the term of which expires January 31, 2001.
76. The lease dated February 5, 1991, as amended by Addendum to Lease
Agreement dated February 6, 1995, approved by order entered August 18, 1995,
with Hickel Investment Company, as lessor, of premises located at Valley River
Center, 12001 Business Blvd., Eagle River, Alaska, known as Store No. 225, the
term of which expires January 31, 1996.
77. The lease dated January 7, 1991, as amended by Amendment to Lease
dated April 1, 1995, approved by order entered July 20, 1995, with The Hames
Group, as lessor, of premises located at Plaza Port West, 2417 Tongass Street,
LL119A, Ketchikan, Alaska, known as Store No. 233, the term of which expires
January 31, 2002.
78. The lease dated January 24, 1991, as amended, with Atlantic Freeholds
II, as lessor, of premises located at 2146 Town East Mall, Mesquite, Texas,
known as Store No. 236, the term of which expires January 31, 2001.
79. The lease dated November 16, 1988, between Maurices Incorporated, as
lessee, and Dakota Square Limited Partnership, as lessor, assigned to the
Debtor, as lessee, on June 9, 1992, of premises located at Dakota Square, 2400 -
10th Street SW, No. 600, Minot, North Dakota, known as Store No. 238, the term
of which expires on January 31, 2000 (the "Dakota
EXHIBIT B - PAGE 9
<PAGE>
Square Women's Store Lease"). The Debtor's assumption of the Dakota Square
Women's Store Lease is subject to the entry of an order herein, on or before the
Effective date of the Plan, approving the amendment to such Lease to be entered
into by and between the Debtor and the Dakota Square Limited Partnership.
80. The lease dated September 25, 1991, and Addendum thereto dated
December 12, 1991 with Bentley Mall Associates, as lessor, of premises located
at Bentley Mall, 32 College Road, Space 12, Fairbanks, Alaska, known as Store
No. 240, the term of which expires February 28, 2002.
81. The lease dated June 4, 1991, as amended by Supplemental Lease
Agreement dated March 15, 1995, approved by order entered May 8, 1995, with
Northwestern Simon, Inc., successor-in-interest to Anchorage Fifth Avenue
Associates, as lessor, of premises located at Anchorage Mall, 320 West Fifth
Avenue, No. 260, Anchorage, Alaska, known as Store No. 241, the term of which
expires January 31, 2002.
82. The lease dated July 26, 1991 with Vancouver Mall, as lessor, of
premises located at the Vancouver Mall, 5001 N.E. Thurston Way, No. 131,
Vancouver, Washington, known as Store No. 243 (the "Vancouver Mall Lease"), the
term of which expires January 31, 2001. The Debtor's assumption of the
Vancouver Mall Lease is subject to entry of an order herein, on or before the
Effective Date of the Plan, approving the First amendment to Lease Agreement
entered into by and between the Debtor and Vancouver Mall.
83. The lease dated January 23, 1992 with HO Retail Properties I Limited
Partnership of premises located at 520 Prince Kuhio Plaza, 111 East Puainako,
Hilo, Hawaii, known as Store No. 245, the term of which expires January 31,
2002.
84. The lease dated January 12, 1987 between Bruce T. and Marie E. Guyer,
as lessee, and Watercress Associates-Joint Venture 315089, successor-in-interest
to Watercress Associates, as lessor, assigned to the Debtor, as lessee, on
January 31, 1992 of premises located at Pearl Ridge Shopping Center, Phase II,
No. 24-06, Aiea, Oahu, Hawaii, known as Store No. 247 (the "Pearl Ridge Shopping
Center Fashion Direction Lease"), the term of which expires January 31, 1998.
The Debtor's assumption of the Pearl Ridge Shopping Center Fashion Direction
Lease is subject to entry of an order herein, on or before the Effective Date of
the Plan, approving the Amendment to Lease Agreement dated May 19, 1995 by and
between the Debtor and Watercress Associates-Joint Venture 315089.
85. The lease dated January 27, 1987 with Metropolitan Life Insurance
Company, as lessor, of premises located at the Columbia Mall, 2800 South
Columbia Road, No. 314, Grand Forks, North Dakota, known as Store No. 249, the
term of which expires December 31, 1996.
86. The lease dated January 21, 1985, between the United States Shoe
Corporation, as lessee, and Flagstaff Mall Associates Limited Partnership,
successor-in-interest to Flagstaff Mall Associates, as lessor, assigned to the
Debtor, as lessee, on July 10, 1991, of premises located at North Highway 89,
4650-F18, Flagstaff, Arizona, known as Store No. 250, the term of which expires
December 31, 1995.
87. The lease dated July 15, 1986 between The United States Shoe
Corporation, as lessee, and Westminster Mall Company, as lessor, assigned to the
Debtor, as lessee, on July 2,
EXHIBIT B - PAGE 10
<PAGE>
1991 of premises located at Westminster Mall, 5491 West 88th Street, No. 115,
Westminster, Colorado, known as Store No. 254, the term of which expires October
31, 1996.
88. The lease dated December 13, 1983, between the United States Shoe
Corporation, as lessee, and Aetna Life Insurance Company, as lessor, assigned to
the Debtor, as lessee, on June, 26, 1991, as amended by Amendment to Lease dated
August 12, 1994, and Second Amendment to Lease, dated April 20, 1995, approved
by order entered herein on July 21, 1995, with Tristate Joint Venture,
successor-in-interest to the Aetna Life Insurance Company, of premises located
at The Citadel, 750 Citadel Drive East, No. 1132, Colorado Springs, Colorado,
known as Store No. 257, the term of which expires on December 31, 1995.
89. The lease dated September 20, 1985 between the United States Shoe
Corporation, as lessee, and Santa Rosa Venture, as lessor, assigned to the
Debtor, as lessee, on July 12, 1991, with the State of California Public
Employees' Retirement System, successor-in-interest to Santa Rosa Venture, of
premises located at Santa Rosa Mall, 300 Mary Esther Cutoff, Mary Esther,
Florida, known as Store No. 264, the term of which expires on December 31, 1998.
90. The lease dated July 8, 1986 between The United States Shoe
Corporation, as lessee, and Pensacola Associates, as lessor, assigned to the
Debtor, as lessee, on July 3, 1991, of premises located at Cordova Mall, 5100
North Ninth Avenue, Pensacola, Florida, known as Store No. 275, the term of
which expires December 31, 1998.
91. The lease dated July 3, 1986 between the United States Shoe
Corporation, as lessee, and Sarasota Mall Corporation, successor-in-interest to
Provident Life and Accident Insurance Company, as lessor, of premises located at
Sarasota Square Mall, 8201 South Tamiami Trail, Sarasota, Florida, known as
Store No. 278 (the "Sarasota Mall Women's Store Lease"), the term of which
expires September 30, 1996. The Debtor's assumption of the Sarasota Mall
Women's Store Lease is subject to entry of an order herein, on or before the
Effective Date of the plan, approving the amendment to Lease to be entered into
by and between the Debtor and Sarasota Mall Corporation.
92. The lease dated November 12, 1985 between The United States Shoe
Corporation, as lessee, and University Square Associates, as lessor, assigned to
the Debtor, as lessee, on May 13, 1991, of premises located at University Square
Mall, 2255 East Fowler Avenue, Tampa, Florida, known as Store No. 283, the term
of which expires June 30, 1996.
93. The lease dated April 2, 1986 between The United States Shoe
Corporation, as lessee, and Corporate Property Investors, as lessor, assigned to
the Debtor, as lessee, on July 1, 1991 of premises located at Lenox Square, 3393
Peachtree Road N.E., B34, Atlanta, Georgia, known as Store No. 286, the term of
which expires April 30, 1996.
94. The lease dated October 31, 1986 between The United States Shoe
Corporation, as lessee, and Bellwether Properties of Georgia Limited
Partnership, assigned to the Debtor, as lessee, on July 1, 1991, as amended by
Modification of Lease dated February, 1995, approved by order entered July 20,
1995, of premises located at Northlake Mall, No. 2044, 1501 Northlake Mall,
Atlanta, Georgia, known as Store No. 288, the term of which expires May 31,
1997.
95. The lease dated June 10, 1986 between The United States Shoe
Corporation, as lessee, and Southlake Retail Venture, as lessor, assigned to the
Debtor, as lessee, on July 11,
EXHIBIT B - PAGE 11
<PAGE>
1991, of premises located at Southlake Mall, No. 213, 1217 Southlake Mall Drive,
No. 1218, Morrow, Georgia, known as Store No. 291, the term of which expires
June 30, 1996.
96. The lease dated December 21, 1984 between The United States Shoe
Corporation, as lessee, and Marathon U.S. Realties, Inc., successor-in-interest
to Mesilla Valley Mall Company, as lessor, of premises located at Mesilla Valley
Mall, 700 South Tellshore, No. 1174, Las Cruces, New Mexico, known as Store
No. 298, the term of which expires January 1, 1998.
97. The lease dated June 28, 1985 between The United States Shoe
Corporation, as lessee, and Villa Linda Mall, Ltd., as lessor, assigned to the
Debtor, as lessee, on July 22, 1991, of premises located at 1144 Villa Linda
Mall, Santa Fe, New Mexico, known as Store No. 299, the term of which expires
December 31, 1997.
98. The lease dated March 1, 1983 between The United States Shoe
Corporation, successor-in-interest to Ups 'N Down Stores, Inc., as lessee, and
O'Connor Realty Investors, L.P., successor-in-interest to the Mall of Abilene
Company, as lessor, assigned to the Debtor, as lessee, of premises located at
the Mall of Abilene, 4310 Buffalo Gap Road, Abilene, Texas, known as Store
No. 300 (the Mall of Abilene Women's Store Lease"), the term of which expires
December 31, 1995. The Debtor's assumption of the Mall of Abilene Women's Store
Lease is subject to entry of an order herein, on or before the Effective Date of
the Plan, approving the Modification and Five Year Extension of Lease to be
entered into by and between the Debtor and O'Connor Realty Investors, L.P.
extending the Mall of Abilene Women's Store Lease until December 31, 2000.
99. The lease dated December 3, 1985 between The United States Shoe
Corporation, as lessee, and Golden Triangle Mall Associates, as lessor, assigned
to the Debtor, as lessee, on June 7, 1991, as amended by the Supplemental Lease
Agreement dated March 15, 1995, approved by order entered May 2, 1995, of
premises located at Golden Triangle Mall, 2201 Interstate 35 East, Denton,
Texas, known as Store No. 307, the term of which expires January 31, 1997.
100. The lease dated January 20, 1986 between The United States Shoe
Corporation, as lessee, and Simon Property Group, the successor-in-interest to
Celina Development Company, as lessor, assigned to the Debtor, as lessee, on
July 7, 1991, of the premises located at Cielo Vista Mall, 8401 Gateway Blvd.
West, El Paso, Texas, known as Store No. 308, the term of which expires January
31, 1997.
101. The lease dated February 17, 1983 between The United States Shoe
Corporation, successor-in-interest to Ups N' Downs Stores, Inc., as lessee, and
Central Mall Joint Venture, as lessor, assigned to the Debtor, as lessee, on
June 10, 1991, as amended by the Lease Extension and Modification Agreement #1
dated June 13, 1995, approved by order entered July 28, 1995, of premises
located at 59 Central Mall, Port Arthur, Texas, known as Store No. 320, the term
of which expires December 31, 1995.
102. The lease dated October 13, 1987 between The United States Shoe
Corporation, as lessee, and Keystone-Texas Property Holding Corp., successor-in-
interest to Rivercenter Associates, as lessor, assigned to the Debtor, as
lessee, on May 13, 1991 of premises located at Rivercenter Mall, 849, East
Commerce Street, San Antonio, Texas, known as Store No. 321, the term of which
expires July 31, 1998.
EXHIBIT B - PAGE 12
<PAGE>
103. The lease dated December 15, 1987 between The United States Shoe
Corporation, as lessee, and Sherman Mall Associates, as lessor, assigned to the
Debtor, as lessee, on June 7, 1991, as amended by the Supplemental Lease
Agreement dated March 15, 1995, approved by order entered May 2, 1995, of
premises located at Midway Mall, 4800 North Texoma Parkway, Sherman, Texas,
known as Store No. 322, the term of which expires January 31, 1998.
104. The lease dated December 11, 1992 with Fund A Rogue Valley, Inc., as
lessor, of premises located at Rogue Valley Mall-2099, 1600 North Riverside,
Medford, Oregon, known as Store No. 325, the term of which expires January 31,
2003.
105. The lease dated July 15, 1993 with Grove Farm Land Corp., as lessor,
of premises located at Kukui Grove Center, 3-2600 Kaumualii Highway, No. 2032,
Lihue, Hawaii, known as Store No. 327 (the Kukui Grove Center Women's Store
Lease"), the term of which expires November 30, 1998. The Debtor's assumption
of the Kukui Grove Center Women's Store Lease is subject to entry of an order
herein, on or before the Effective Date of the Plan, approving the Letter
Agreement dated August 8, 1995 between the Debtor and Grove Farm Land Corp.
106. The lease dated January 15, 1993, as amended by the Modification
Agreement dated February 28, 1995, approved by order entered May 2, 1995, with
RBO Mall Associates, as lessor, of premises located at Roseburg Valley Mall,
1444 N.W. Garden Valley Blvd. 420, Roseburg, Oregon, known as Store No. 329, the
term of which expires February 28, 2003.
107. The lease dated July 15, 1993 and Letter Agreement dated December 20,
1996 with Alscott Real Estate, LLC, successor-in-interest to Alscott, Inc., as
lessor, of premises located at West Park Plaza, 1431 S.W. Fourth Avenue,
Ontario, Oregon, known as Store No. 333, the term of which expires April 13,
1993.
<PAGE>
LEASES TO BE REJECTED
---------------------
1. The lease and Addendum #1 thereto dated April 7, 1986 between the
Debtor, as lessee, and Franklin Park Mall Limited Partnership, as lessor, of
premises located at Franklin Park Mall, North 5628 Division Street, Spokane,
Washington, known as store no. 35, the term of which expires April 30, 1996.
2. The lease dated August 8, 1989, as amended, including the Second
Amendment to Lease, dated July 13, 1995, approved by order entered herein on
September 8, 1995, with Bay Fair L.L.C., successor-in-interest to Westland Bay
Fair Mall, L.P., as lessor, of premises located at Bay Fair Mall, 116 Bay Fair
Drive, San Leandro, California, known as Store No. 63 (the "Bay Fair Mall
Women's Store Lease"), the term of which expires January 31, 2000.
3. The lease dated April 9, 1986, as amended, between the Debtor, as
lessee, and Coast Federal Bank, successor-in-interest to Northern Lights
Partners, Ltd., as lessor, of premises located at Boniface Mall, 5530 East
Northern Lights Blvd., Anchorage, Alaska, known as store no. 110, the term of
which expires June 19, 1996.
4. The lease dated August 21, 1989, as amended, including the Second
Amendment to Lease dated July 13, 1995, approved by order entered herein on
September 8, 1995, with Vallco L.L.C., successor-in-interest to Westland
Shopping Center L.P., as lessor, of premises located at Vallco Fashion Park,
10123 North Wolfe Road, #2112, Cupertino, California, known as Store No. 184,
the term of which expires on January 31, 1999.
5. The lease dated August 21, 1989, as amended, including the Second
Amendment to Lease dated July 13, 1995, approved by order entered herein on
September 8, 1995, with Vallco L.L.C., successor-in-interest to Westland
Shopping Center L.P., as lessor, of premises located at Vallco Fashion Park,
10123 North Wolfe Road, #2027, Cupertino, California, known as Store No. 185,
the term of which expires on January 31, 1999.
6. The lease dated September 11, 1991 with Hickel Investment Company, as
lessor, as amended by Addendum to Lease Agreement dated February 6, 1995,
approved by order entered herein on August 18, 1995, of premises located at
University Center, 3901 Old Seward Highway, 15E, Anchorage, Alaska, known as
Store No. 218, the term of which expires January 31, 1997.
7. The lease dated October 1, 1990, as amended by the Lease Amendment
dated September 1, 1994, approved by order entered herein February 6, 1995,
between the Debtor, as lessee, and Cafaro Northwest Partnership, f/k/a South
Hill Company, as lessor, of premises located at South Hill Mall, 3500 South
Meridian Avenue, no. 330, Puyallup, Washington, known as store no. 227, the term
of which expires January 31, 2001.
8. The lease dated March 11, 1991 with C.E. Loveless and Barclay
Tollefson, as lessor, as amended by Lease Amendment #1 Agreement dated September
27, 1994, approved by order entered herein on December 16, 1994, of premises
located at Nugget Mall, 8745 Glacier Highway, #109, Juneau, Alaska, known as
Store No. 234, the term of which expires January 31, 2002.
EXHIBIT C - PAGE 1
<PAGE>
9. The lease dated November 6, 1991 with University City, Inc., as
lessor, of premises located at 370 University City, Spokane, Washington, known
as Store No. 246, the term of which expires January 31, 1997.
10. The lease dated April 9, 1985, between the United States Shoe
Corporation, as lessee, and The Equitable Life Assurance Society of the United
States, as lessor, assigned to the Debtor, as lessee, on July 24, 1991, as
amended by the First Amendment to Lease dated August 22, 1995, approved by order
entered herein October 10, 1995, of premises located at Villa Italia, 7200 West
Alameda Avenue, D-5, Lakewood, Colorado, known as store no. 259, the term of
which expires September 30, 1997.
11. The lease dated August 25, 1988, as amended by Lease Amendment dated
September 1, 1994, approved by order entered herein on February 6, 1995, between
the Debtor, as lessee, and Cafaro Northwest Partnership, f/k/a South Hill
Company, as lessor, of premises located at South Hill Mall, 3500 South Meridian,
no. 320, Puyallup, Washington, known as store no. 169, the term of which expires
January 31, 1999.
12. The lease dated December 30, 1992, as amended by Lease Amendment #1
dated December 7, 1994, approved by order entered herein on March 13, 1995,
between the Debtor, as lessor, and U. S. Trust Company of the Pacific Northwest,
as trustee for the Payless Northwest Master Retirement Trust, successor-in-
interest to Capital Trust Company, as lessor, of premises located at Lancaster
Mall, 831 Lancaster Drive NE, no. 141, Salem, Oregon, known as store no. 328,
the term of which expires January 31, 2003.
<PAGE>
JAY JACOBS, INC.
1995 STOCK OPTION PLAN
This 1995 Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of common stock, $.01 par value (the "Common Stock"), of Jay
Jacobs, Inc., a Washington corporation (the "Company"). Stock options granted
under this Plan that qualify under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), are referred to in this Plan as "Incentive Stock
Options." Incentive Stock Options and stock options that do not qualify under
Section 422 of the Code ("Non-Qualified Stock Options") granted under this Plan
are referred to as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key
employees and consultants of the Company and such other persons as the Plan
Administrator shall select in accordance with Section 3 below, to encourage
such persons to acquire a greater proprietary interest in the Company,
thereby strengthening their incentive to achieve the objectives of the
shareholders of the Company, and to serve as an aid and inducement in the
hiring of new employees and to provide an equity incentive to consultants and
other persons selected by the Plan Administrator.
2. ADMINISTRATION.
This Plan shall be administered by the Board of Directors of the Company
(the "Board") if each director is a "disinterested person" (as defined below)
and, after the first meeting of shareholders at which directors are to be
elected after January 1, 1996, an "outside director" (as defined below). If all
directors are not disinterested persons and, as applicable, outside
directors, the Plan shall be administered by a committee designated by the
Board and composed of two (2) or more members of the Board that are
disinterested persons and, as applicable, outside directors, which committee
(the "Committee") may be an executive, compensation or other committee,
including a separate committee especially created for this purpose. The term
"disinterested person" shall have the meaning assigned to it under Rule 16b-3
(as amended from time to time) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any successor rule or regulatory
requirement. The term "outside director" shall have the meaning assigned
under Section 162(m) of the Code (as amended from time to time) and the
regulations (or any successor regulations) promulgated thereunder ("Section
162(m) of the Code"). The Committee shall have the powers and authority
vested in the Board hereunder (including the power and authority to interpret
any provision of this Plan or of any Option). The members of any such
Committee shall serve at the pleasure of the Board. A majority of the members
of the Committee shall constitute a quorum, and all actions of the Committee
shall be taken by a majority of the members present. Any action may be taken
by a written instrument signed by all of the members of the Committee and any
action so taken shall be fully effective as if it had been taken at a
meeting. The Board, or any committee thereof appointed to administer the
Plan, is referred to herein as the "Plan Administrator."
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (a) construe and interpret this Plan; (b) define the terms used
in this Plan; (c) prescribe, amend and rescind rules and regulations relating to
this Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) grant Options under this Plan; (f) determine the
individuals to whom Options shall be granted under this Plan and whether the
Option is an Incentive Stock Option or a Non-Qualified Stock Option; (g)
determine the time or times at which Options shall be granted under this Plan;
(h) determine the number of shares of Common Stock subject to each Option, the
exercise price of each Option, the duration of each Option and the times at
which each Option shall become exercisable; (i) determine all other terms and
conditions of Options; and (j) make all other determinations necessary or
advisable for the administration of this
EXHIBIT D - PAGE 1
<PAGE>
Plan. All decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants in this Plan
and on their legal representatives, heirs and beneficiaries.
The Board or the Committee may delegate to one or more executive
officers of the Company the authority to grant Options under this Plan to
employees of the Company who, on the Date of Grant, are not subjected to
Section 16(b) of the Exchange Act with respect to the Common Stock
("Non-Insiders"), and are not "covered employees" as such term is defined for
purposes of Section 162(m) of the Code ("Non-Covered Employees"), and in
connection therewith the authority to determine: (a) the number of shares of
Common Stock subject to such Option; (b) the duration of the Option; (c) the
vesting schedule for determining the times at which such Option shall become
exercisable; and (d) all other terms and conditions of such Options. The
exercise price for any Option granted by action of an executive officer or
officers pursuant to such delegation of authority shall not be less than the
fair market value per share of the Common Stock on the Date of Grant. Unless
expressly approved in advance by the Board or the Committee, such delegation
of authority shall not include the authority to accelerate the vesting,
extend the period for exercise or otherwise alter the terms of outstanding
Options. The term "Plan Administrator" when used in any provision of this
Plan other than Sections 2, 5(m), 5(n) and 11 shall be deemed to refer to the
Board or the Committee, as the case may be, and an executive officer who has
been authorized to grant Options pursuant thereto, insofar as such provisions
may be applied to persons that are Non-Insiders and Non-Covered Employees and
Options granted to such persons.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time
the Option is granted, is an employee of the Company or any Related Corporation
(as defined below), including employees who are directors of the Company
("Employees"). Non-Qualified Stock Options may be granted to Employees and to
such other persons other than directors who are not Employees as the Plan
Administrator shall select. Options may be granted in substitution for
outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Company or any subsidiary of the Company. Options
also may be granted in exchange for outstanding Options. No person shall be
eligible to receive in any fiscal year Options to purchase more than 100,000
shares of Common Stock (subject to adjustment as set forth in Section 5(m)
hereof). Any person to whom an Option is granted under this Plan is referred to
as an "Optionee." Any person who is the owner of an Option is referred to as a
"Holder."
As used in this Plan, the term "Related Corporation," shall mean any
corporation (other than the Company) that is a "Parent Corporation" of the
Company or "Subsidiary Corporation" of the Company, as those terms are defined
in Sections 424(e) and 424(f) respectively, of the Code (or any successor
provisions), and the regulations thereunder (as amended from time to time).
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a
total of 500,000 shares of the Company's authorized but unissued, or reacquired,
Common Stock. The number of shares with respect to which Options may be granted
hereunder is subject to adjustment as set forth in Section 5(m) hereof. In the
event that any outstanding Option expires or is terminated for any reason, the
shares of Common Stock allocable to the unexercised portion of such Option may
again be subject to an Option to the same Optionee or to a different person
eligible under Section 3 of this Plan; provided however, that any canceled
Options will be counted against the maximum number of shares with respect to
which Options may be granted to any particular person as set forth in Section 3
hereof.
EXHIBIT D - PAGE 2
<PAGE>
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Plan Administrator (the "Agreement"). Agreements may
contain such provisions, not inconsistent with this Plan, as the Plan Adminis-
trator in its discretion may deem advisable. All Options also shall comply with
the following requirements:
(a) NUMBER OF SHARES AND TYPE OF OPTION.
Each Agreement shall state the number of shares of Common Stock to which it
pertains and whether the Option is intended to be an Incentive Stock Option or a
Non-Qualified Stock Option. In the absence of action to the contrary by the Plan
Administrator in connection with the grant of an Option, all Options shall be
Non-Qualified Stock Options. The aggregate fair market value (determined at the
Date of Grant, as defined below) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by the Optionee during any
calendar year (granted under this Plan and all other Incentive Stock Option
plans of the Company, a Related Corporation or a predecessor corporation) shall
not exceed $100,000, or such other limit as may be prescribed by the Code as it
may be amended from time to time. Any portion of an Option which exceeds the
annual limit shall not be void but rather shall be a Non-Qualified Stock Option.
(b) DATE OF GRANT.
Each Agreement shall state the date the Plan Administrator has deemed to be
the effective date of the Option for purposes of this Plan (the "Date of
Grant").
(c) OPTION PRICE.
Each Agreement shall state the price per share of Common Stock at which
it is exercisable. The exercise price shall be fixed by the Plan
Administrator at whatever price the Plan Administrator may determine in the
exercise of its sole discretion; PROVIDED that the per share exercise price
for an Incentive Stock Option or any Option granted to a "covered employee"
as such term is defined for purposes of Section 162(m) ("Covered Employee")
shall not be less than the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good faith;
PROVIDED FURTHER, that with respect to Incentive Stock Options granted to
greater-than-10 percent (> 10%) shareholders of the Company (as determined
with reference to Section 424(d) of the Code), the exercise price per share
shall not be less than 110 percent (110%) of the fair market value per share
of the Common Stock at the Date of Grant as determined by the Plan
Administrator in good faith; and, PROVIDED FURTHER, that Options granted in
substitution for outstanding options of another corporation in connection
with the merger, consolidation, acquisition of property or stock or other
reorganization involving such other corporation and the Company or any
subsidiary of the Company may be granted with an exercise price equal to the
exercise price for the substituted option of the other corporation, subject
to any adjustment consistent with the terms of the transaction pursuant to
which the substitution is to occur.
(d) DURATION OF OPTIONS.
At the time of the grant of the Option, the Plan Administrator shall
designate, subject to paragraph 5(g) below, the expiration date of the
Option, which date shall not be later than ten (10) years from the Date of
Grant in the case of Incentive Stock Options; PROVIDED, that the expiration
date of any Incentive Stock Option granted to a greater-than-10 percent ( >
10%) shareholder of the Company (as determined with reference to Section
424(d) of the Code) shall not be later than five (5) years from the Date of
Grant. In the absence of action to the contrary by the Plan Administrator in
connection with the grant of a particular Option, and except in the case of
Incentive Stock Options as described above, all Options granted under this
Section 5 shall expire ten (10) years from the Date of Grant.
EXHIBIT D - PAGE 3
<PAGE>
(e) VESTING SCHEDULE.
No Option shall be exercisable until it has vested. The vesting schedule
for each Option shall be specified by the Plan Administrator at the time of
grant of the Option prior to the provision of services with respect to which
such Option is granted; PROVIDED, that if no vesting schedule is specified at
the time of grant, the Option shall vest according to the following schedule:
NUMBER OF YEARS PERCENTAGE OF TOTAL
FOLLOWING DATE OF GRANT OPTION VESTED
------------------------- ---------------------
One 25%
Two 50%
Three 75%
Four 100%
The Plan Administrator may specify a vesting schedule for all or any
portion of an Option based on the achievement of performance objectives
established in advance of the commencement by the Optionee of services
related to the achievement of the performance objectives. Performance
objectives shall be expressed in terms of one or more of the following:
return on equity, return on assets, share price, market share, sales,
earnings per share, costs, net earnings, net worth, inventories, cash and
cash equivalents, gross margin or the Company's performance relative to its
internal business plan. Performance objectives may be in respect of the
performance of the Company as a whole (whether on a consolidated or
unconsolidated basis), a Related Corporation, or a subdivision, operating
unit, product or product line of either of the foregoing. Performance
objectives may be absolute or relative and may be expressed in terms of a
progression or a range. An Option that is exercisable (in full or in part)
upon the achievement of one or more performance objectives may be exercised
only following written notice to the Optionee and the Company by the Plan
Administrator that the performance objective has been achieved.
(f) ACCELERATION OF VESTING.
The vesting of one or more outstanding Options may be accelerated by the
Plan Administrator at such times and in such amounts as it shall determine in
its sole discretion. The vesting of Options also shall be accelerated under the
circumstances described in Sections 5(m) and 5(n) below.
(g) TERM OF OPTION.
Vested Options shall terminate, to the extent not previously exercised,
upon the occurrence of the first of the following events: (i) the expiration
of the Option, as designated by the Plan Administrator in accordance with
Section 5(d) above; (ii) the date of an Optionee's termination of employment
or contractual relationship with the Company or any Related Corporation for
cause (as determined in the sole discretion of the Plan Administrator); (iii)
the expiration of three (3) months from the date of an Optionee's termination
of employment or contractual relationship with the Company or any Related
Corporation for any reason whatsoever other than cause, death or Disability
(as defined below) unless, in the case of a Non-Qualified Stock Option, the
exercise period is extended by the Plan Administrator until a date not later
than the expiration date of the Option; or (iv) the expiration of one year
from (A) the date of death of the Optionee or (B) cessation of an Optionee's
employment or contractual relationship by reason of Disability (as defined
below) unless, in the case of a Non-Qualified Stock Option, the exercise
period is extended by the Plan Administrator until a date not later than the
expiration date of the Option. If an Optionee's employment or contractual
relationship is terminated by death, any Option held by the Optionee shall be
exercisable only by the person or persons to whom such Optionee's rights
under such Option shall pass by the Optionee's will or by the laws of descent
and distribution of the state or county of the Optionee's domicile at the
time of death. For purposes of the Plan, unless otherwise defined in the
Agreement, "Disability" shall mean any physical, mental or other health
condition which substantially impairs the Optionee's ability to perform his
or her assigned duties for
EXHIBIT D - PAGE 4
<PAGE>
one hundred twenty (120) days or more in any two hundred forty (240) day period
or that can be expected to result in death. The Plan Administrator shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a determination of
Disability, the Plan Administrator shall, for purposes of the Plan, determine
the date of an Optionee's termination of employment or contractual relationship.
Unless accelerated in accordance with Section 5(f) above, unvested Options
shall terminate immediately upon termination of employment of the Optionee by
the Company for any reason whatsoever, including death or Disability. For
purposes of this Plan, transfer of employment between or among the Company
and/or any Related Corporation shall not be deemed to constitute a termination
of employment with the Company or any Related Corporation. For purposes of this
subsection with respect to Incentive Stock Options, employment shall be deemed
to continue while the Optionee is on military leave, sick leave or other bona
fide leave of absence (as determined by the Plan Administrator). The foregoing
notwithstanding, employment shall not be deemed to continue beyond the first
ninety (90) days of such leave, unless the Optionee's re-employment rights are
guaranteed by statute or by contract.
(h) EXERCISE OF OPTIONS.
Options shall be exercisable, in full or in part, at any time after
vesting, until termination; PROVIDED, HOWEVER, that any Optionee who is
subject to the reporting and liability provisions of Section 16 of the
Exchange Act with respect to the Common Stock ("Insider") shall be precluded
from selling or transferring any Common Stock or other security underlying an
Option during the six (6) months immediately following the grant of that
Option. If less than all of the shares included in the vested portion of any
Option are purchased, the remainder may be purchased at any subsequent time
prior to the expiration of the Option term. No portion of any Option for less
than one hundred (100) shares (as adjusted pursuant to Section 5(m) below)
may be exercised; PROVIDED, that if the vested portion of any Option is less
than one hundred (100) shares, it may be exercised with respect to all shares
for which it is vested. Only whole shares may be issued pursuant to an
Option, and to the extent that an Option covers less than one (1) share, it
is unexercisable.
Options or portions thereof may be exercised by giving written notice to
the Company, which notice shall specify the number of shares to be purchased,
and be accompanied by payment in the amount of the aggregate exercise price for
the Common Stock so purchased, which payment shall be in the form specified in
Section 5(i) below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to the Holder of any Option, until
provision has been made by the Holder, to the satisfaction of the Company, for
the payment of the aggregate exercise price for all shares for which the Option
shall have been exercised and for satisfaction of any tax withholding obliga-
tions associated with such exercise. During the lifetime of an Optionee, Options
are exercisable only by the Optionee or a transferee who takes title to the
Option in the manner permitted by Subsection 5(k) hereof.
(i) PAYMENT UPON EXERCISE OF OPTION.
Upon the exercise of any Option, the aggregate exercise price shall be paid
to the Company in cash or by certified or cashier's check. In addition, the
Holder may pay for all or any portion of the aggregate exercise price by
complying with one or more of the following alternatives:
(1) by delivering to the Company shares of Common Stock previously
held by such Holder, or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to exercise of the Option, which shares of
Common Stock received or withheld shall have a fair market value at the
date of exercise (as determined by the Plan Administrator) equal to the
aggregate exercise price to be paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice together with
irrevocable instructions to a broker promptly to sell or margin a
sufficient portion of the shares and deliver directly to the Company the
amount of sale or margin loan proceeds to pay the exercise price; or
EXHIBIT D - PAGE 5
<PAGE>
(3) by complying with any other payment mechanism approved by the
Plan Administrator at the time of exercise.
(j) RIGHTS AS A SHAREHOLDER.
A Holder shall have no rights as a shareholder with respect to any shares
covered by an Option until such Holder becomes a record holder of such shares,
irrespective of whether such Holder has given notice of exercise. Subject to the
provisions of Sections 5(m) and 5(n) hereof, no rights shall accrue to a Holder
and no adjustments shall be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights declared on, or created in, the Common Stock for which the
record date is prior to the date the Holder becomes a record holder of the
shares of Common Stock covered by the Option, irrespective of whether such
Holder has given notice of exercise.
(k) TRANSFER OF OPTION.
Options granted under this Plan and the rights and privileges conferred by
this Plan may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or (except in the case of an
Incentive Stock Option) pursuant to a qualified domestic relations order, and
shall not be subject to execution, attachment or similar process; PROVIDED
HOWEVER, that any Agreement may provide or be amended to provide that a Non-
Qualified Stock Option to which it relates is transferable without payment of
consideration to immediate family members of the Optionee or to trusts or
partnerships established exclusively for the benefit of the Optionee and the
Optionee's immediate family members. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any Option or of any right or
privilege conferred by this Plan contrary to the provisions hereof, or upon the
sale, levy or any attachment or similar process upon the rights and privileges
conferred by this Plan, such Option shall thereupon terminate and become null
and void.
(l) SECURITIES REGULATION AND TAX WITHHOLDING.
(1) Shares shall not be issued with respect to an Option unless
the exercise of such Option and the issuance and delivery of such shares
shall comply with all relevant provisions of law, including, without
limitation, Section 162(m) of the Code, any applicable state securities laws,
the Securities Exchange Act of 1933, as amended, the Exchange Act, the rules
and regulations thereunder and the requirements of any stock exchange or
automated inter-dealer quotation system of a registered national securities
association upon which such shares may then be listed, and such issuance
shall be further subject to the approval of counsel for the Company with
respect to such compliance, including the availability of an exemption from
registration for the issuance and sale of such shares. The inability of the
Company to obtain from any regulatory body the authority deemed by the
Company to be necessary for the lawful issuance and sale of any shares under
this Plan, or the unavailability of an exemption from registration for the
issuance and sale of any shares under this Plan, shall relieve the Company of
any liability with respect to the non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan Administrator may
require the Holder to represent and warrant in writing at the time of such
exercise that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The Plan
Administrator also may require such other documentation as may from time to time
be necessary to comply with federal and state securities laws. THE COMPANY HAS
NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS.
EXHIBIT D - PAGE 6
<PAGE>
(2) The Holder shall pay to the Company by certified or cashier's
check, promptly upon exercise of an Option or, if later, the date that the
amount of such obligations becomes determinable, all applicable federal, state,
local and foreign withholding taxes that the Plan Administrator, in its
discretion, determines to result upon exercise of an Option or from a transfer
or other disposition of shares of Common Stock acquired upon exercise of an
Option or otherwise related to an Option or shares of Common Stock acquired in
connection with an Option. Upon approval of the Plan Administrator, a Holder may
satisfy such obligation by complying with one or more of the following
alternatives selected by the Plan Administrator:
(A) by delivering to the Company shares of Common Stock previously
held by such Holder or by the Company withholding shares of Common Stock
otherwise deliverable pursuant to the exercise of the Option, which shares
of Common Stock received or withheld shall have a fair market value at the
date of exercise (as determined by the Plan Administrator) equal to the tax
obligation to be paid by the Optionee upon such exercise; PROVIDED that if
the Holder is an Insider or if beneficial ownership of the shares issuable
upon exercise of the Option is attributable to an Insider pursuant to the
regulations under Section 16 of the Exchange Act, the Holder will have
executed, by a date not later than six (6) months prior to the date of
exercise, an irrevocable election to satisfy its obligations under this
Paragraph 2 through the Company withholding shares of Common Stock
otherwise deliverable pursuant to the exercise of the Option;
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Holder borrows funds from the Company to pay the
withholding taxes due under this Paragraph 2, with such repayment terms as
the Plan Administrator shall select; or
(C) by complying with any other payment mechanism approved by the
Plan Administrator from time to time.
(3) The issuance, transfer or delivery of certificates of Common
Stock pursuant to the exercise of Options may be delayed, at the discretion of
the Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met.
(m) STOCK DIVIDEND OR REORGANIZATION.
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor
provision) or any "corporate transaction" described in the regulations
thereunder; (ii) the Company shall declare a dividend payable in, or shall
subdivide or combine, its Common Stock or (iii) any other event with
substantially the same effect shall occur, the Plan Administrator shall,
subject to applicable law, with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock subject to such
Option and/or the exercise price per share so as to preserve the rights of
the Holder substantially proportionate to the rights of the Holder prior to
such event, and to the extent that such action shall include an increase or
decrease in the number of shares of Common Stock subject to outstanding
Options, the number of shares available under Section 4 of this Plan shall
automatically be increased or decreased, as the case may be, proportionately,
without further action on the part of the Plan Administrator, the Company,
the Company's shareholders, or any Holder.
(2) In the event that the presently authorized capital stock of
the Company is changed into the same number of shares with a different par
value, or without par value, the stock resulting from any such change shall
be deemed to be Common Stock within the meaning of the Plan, and each Option
shall apply to the same number of shares of such new stock as it applied to
old shares immediately prior to such change.
(3) If the Company shall at any time declare an extraordinary
dividend with respect to the Common Stock, whether payable in cash or other
property, the Plan Administrator may, subject to applicable law, in the
exercise of its sole discretion and with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock subject to such
Option and/or adjust the exercise price per share so as to preserve the
EXHIBIT D - PAGE 7
<PAGE>
rights of the Holder substantially proportionate to the rights of the Holder
prior to such event, and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock subject to
outstanding Options, the number of shares available under Section 4 of this Plan
shall automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Plan Administrator,
the Company, the Company's shareholders, or any Holder.
(4) The foregoing adjustments in the shares subject to Options shall
be made by the Plan Administrator, or by any successor administrator of this
Plan, or by the applicable terms of any assumption or substitution document.
(5) The grant of an Option shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge, consolidate or dissolve,
to liquidate or to sell or transfer all or any part of its business or assets.
(n) CHANGE IN CONTROL.
(1) Upon approval by the shareholders of the Company (or, if
later, approval by the shareholders of a third party) of any merger,
consolidation, reorganization or other transaction providing for the
conversion or exchange of more than fifty percent (50%) of the outstanding
shares of the Common Stock into securities of a third party, cash, property,
or a combination of any of the foregoing (an "Approved Exchange"), or of a
sale of substantially all the assets of the Company or of a liquidation, the
Plan Administrator shall, subject to applicable law, accelerate any invested
Option granted on or before a date preceding by six (6) months such approval
(an "Eligible Option"), and such Eligible Option shall become fully vested
and immediately exercisable. Within ten (10) days of the approval of an
Approved Exchange, sale of assets or liquidation, the Company shall provide
notice of such approval to each Holder, and, for a period of fifteen (15)
days after receipt of such notice (the "Acceleration Window"), a Holder shall
be entitled to exercise any Option that such person holds.
(2) Except as provided in this Paragraph 5, no Optionee or Holder
shall have rights by reason of any subdivision or consolidation of shares of
stock of any class including Common Stock or the payment of any stock dividend
on shares of Common Stock, or any other increase or decrease in the number of
shares of Common Stock, or by reason of any liquidation, dissolution, corporate
combination or division; and any issuance by the Company of shares of stock of
any class including Common Stock, or securities convertible into shares of stock
of any class including Common Stock, or securities convertible into shares of
any claass including Common Stock, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or price of shares of
Common Stock subject to any Option.
(3) The exercisability of any Eligible Option that remains
unexercised following expiration of an Acceleration Window shall be governed
by the vesting schedule and other terms of the Agreement representing such
Option.
6. EFFECTIVE DATE; TERM.
The date on which this Plan is adopted (the "Effective Date") shall be
the "effective date" of, and as that term is defined in, a plan of
reorganization for the Company under Chapter 11 of the United States
Bankruptcy Code (the "Plan of Reorganization") that is confirmed by the entry
of an order of the United States Bankruptcy Court (the "Confirmation Order").
If the term "effective date" is not defined in the Plan of Reorganization,
the Effective Date of this Plan shall be the date on which the Confirmation
Order becomes a final, non-appealable order. Incentive Stock Options may be
granted by the Plan Administrator from time to time on or after the Effective
Date through the day immediately preceding the tenth anniversary of the
Effective Date. Non-Qualilfied Stock Options may be granted by the Plan
Administrator on or after the Effective Date and until this Plan is
terminated by the Board in its sole discretion. Termination of this Plan
shall not terminate any Option granted prior to such termination. Any
Incentive Stock Options granted by the Plan Administrator prior to the
approval of this Plan by the shareholders of the Company in accordance with
Section 422 of the Code shall be granted subject to ratification of this Plan
by the shareholders of the Company within twelve (12) months before or after
the Effective Date. Any
EXHIBIT D - PAGE 8
<PAGE>
Option granted by the Plan Administrator to any Covered Employee prior to the
approval of this Plan by the shareholders of the Company in accordance with
such Code provision shall be granted subject to ratification of this Plan by
the shareholders of the Company within twelve (12) months before or after the
Effective Date. If such shareholder ratification is sought and not obtained,
all Options granted prior thereto and thereafter shall be considered.
Non-Qualified Stock Options and any Options granted to Covered Employees
shall not be eligible for the exclusion set forth in Section 162(m) of the
Code with respect to the deductibility by the Company of certain compensation.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Company or any Related
Company, express or implied, that the Company or any Related Company will employ
or contract with an Optionee for any length of time, nor shall it interfere in
any way with the Company's or, where applicable, a Related Company's right to
terminate Optionee's employment at any time, which right is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock issued
upon the exercise of Options shall be used for general corporate purposes,
unless otherwise directed by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members
of the Board, members of the Plan Administrator shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Plan Administrator member is liable for willful misconduct; provided, that
within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing,
notify the Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate this
Plan or modify or amend Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; PROVIDED HOWEVER, no
amendment with respect to an outstanding Option which has the effect of reducing
the benefits afforded to the Holder thereof shall be made over the objection of
such Holder; FURTHER PROVIDED, that the events triggering acceleration of
vesting of outstanding Options may be modified, expanded or eliminated without
the consent of Holders. The Plan Administrator may condition the effectiveness
of any such amendment on the receipt of shareholder approval at such time and in
such
EXHIBIT D - PAGE 9
<PAGE>
manner as the Plan Administrator may consider necessary for the Company to
comply with or to avail the Company and/or the Optionees of the benefits of any
securities, tax, market listing or other administrative or regulatory
requirement. Without limiting the generality of the foregoing, the Plan
Administrator may modify grants to persons who are eligible to receive Options
under this Plan who are foreign nationals or employed outside the United States
to recognize differences in local law, tax policy or custom.
Effective Date: _____________________
EXHIBIT D - PAGE 10
<PAGE>
[Jay Jacobs Letterhead]
October 16, 1995
To all Creditors and Shareholders of Jay Jacobs, Inc.
We are all pleased to send you our proposed Chapter 11 Reorganization Plan,
together with the Court-approved Disclosure Statement , that outlines the
treatment of your claim or stock interest. As you can see, the Plan provides for
a significant return to creditors, and stock interests are unimpaired.
This plan has the full support of your Unsecured Creditors' Committee as
evidenced by the attached letter and is equally supported by the Company.
The progress that we have made in resolving the issues of reorganization
and improving our business have been important steps in providing for a sound
future for the Company.
We look forward to receiving your affirmative vote on our Plan and ask that
you return the ballot in the enclosed stamped self-addressed envelope as soon as
possible. BALLOTS MUST BE RECEIVED BY OUR BANKRUPTCY COUNSEL, MARK CHARLES
PABEN OF BOGLE & GATES P.L.L.C., TWO UNION SQUARE, 601 UNION STREET, SEATTLE, WA
98101-2322, NO LATER THAN WEDNESDAY, NOVEMBER 8, 1995.
It is important that all creditors and shareholders cast affirmative votes
to ensure confirmation of the Plan which will result in a first distribution to
creditors by January 2, 1996.
Thank you,
/s/ Rex Loren Steffey
Rex Loren Steffey
President and Chief
Executive Officer
<PAGE>
[SIEGEL, SOMMERS & SCHWARTZ L.L.P.
LETTERHEAD]
October 16, 1995
To the Unsecured Creditors of
Jay Jacobs, Inc.
Seattle, WA
Re: Recommendation of Committee of Creditors in favor of Plan of
Reorganization
Dear Creditor:
The undersigned represents the Official Committee of Unsecured Creditors (the
"Committee") of Jay Jacobs, Inc. (the "Debtor"). This letter is being sent to
each of you to inform you of the Committee's support for the Debtor's First
Amended Chapter 11 Plan of Reorganization (the "Plan") and to urge you to cast
your vote in favor of the Plan. On May 13, 1994, the Debtor filed a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code. The Committee was appointed by the Office of the United States Trustee on
May 24, 1994 to represent the interests of all unsecured creditors of this
estate. The Committee chose to retain the following professionals to assist it
in its deliberations: Siegel, Sommers & Schwartz, LLP as lead counsel; Stoel
Rives Boley Jones & Gray as local counsel; and BDO Seidman, as accountants and
financial advisors. The Committee has investigated the Debtor's financial
history, has closely monitored the Debtor during its Chapter 11 proceedings and
otherwise has been extremely active. During the last several months, the
Committee was involved in exhaustive discussions on all aspects of the Plan.
Finally, these negotiations resulted in the enclosed Plan which has the full
support of the Committee.
The Committee believes that the Plan is in the best interests of unsecured
creditors. It provides an alternative of payment plans, both of which provide
for a very significant distribution to creditors. The Committee believes that
each of the payment plans represents a good return to unsecured creditors which
is far in excess of what they could hope to recover in the event of a
liquidation of the Debtor's assets. If the Plan is confirmed in accordance with
the current schedule, the initial payment to creditors will take place on
January 2, 1996.
<PAGE>
SIEGEL, SOMMERS & SCHWARTZ L.L.P.
Page 2
October 16, 1995
To the Unsecured Creditors of
Jay Jacobs, Inc.
- -----------------------------
The Committee strongly recommends that creditors vote in favor of the Plan by so
indicating on the enclosed ballot, which should be returned to Mark Charles
Paben, Esq., Bogle & Gates, P.L.L.C., Two Union Square, 601 Union Street,
Seattle, WA 98101-2346 so that it is received on or before November 8, 1995.
THE COMMITTEE URGES YOU TO REVIEW THE ENCLOSED PLAN AND ACCOMPANYING DISCLOSURE
STATEMENT IN THEIR ENTIRETY BEFORE YOU CAST YOUR BALLOT.
If you have any questions, please contact the undersigned or any of those
persons below-named.
Very truly yours,
SIEGEL, SOMMERS & SCHWARTZ, L.L.P.
Lead Counsel to the Official Committee
of Unsecured Creditors
/s/ Lawrence C. Gottlieb
LCG:da LAWRENCE C. GOTTLIEB
ERIC J. HABER
Enclosure
LOCAL COUNSEL:
Bradford Anderson, Esq.
Stoel Rives
36th Floor
One Union Square
600 University Street
Seattle, WA 98101-3197
<PAGE>
SIEGEL, SOMMERS & SCHWARTZ L.L.P.
Page 3
October 16, 1995
To the Unsecured Creditors of
Jay Jacobs, Inc.
- -----------------------------
FINANCIAL ADVISORS:
William Lenhart
BDO Seidman
330 Madison Avenue
New York, NY 10017
Bob Breen
BDO Seidman
600 University, Suite 2400
1 Union Square
Seattle, WA 98101
CREDITORS COMMITTEE:
Eugene M. Schwartz rep. Heller Financial Inc.
Robert P. Noto " Republic Factors Corp.
George F. Dazet " BNY Financial Corp.
James W. Wold " Oxford Industries Inc.
William F. Kernochan " Congress Talcott Corp.
Kevin M. Sullivan " NationsBank Commercial Corp.
Steven Namm " Bee Darlin'-Be Smart
Jim Colson Star of India
William Spencer " Seattle-First National Bank
<PAGE>
Mark Charles Paben THE HONORABLE THOMAS T. GLOVER
BOGLE & GATES P.L.L.C. Thursday, November 16, 1995
Two Union Square at 9:30 a.m.
601 Union Street
Seattle, WA 98101-2346
(206) 682-5151
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
In Re: ) Chapter 11
) Case No. 94-03993
JAY JACOBS, INC., )
)
Debtor. )
)
- ----------------------------------------
NOTICE OF (A) APPROVAL OF DEBTOR'S FIRST AMENDED
DISCLOSURE STATEMENT; (B) HEARING ON DEBTOR'S FIRST AMENDED
CHAPTER 11 PLAN OF REORGANIZATION; AND (C) DEADLINE FOR FILING
(1) BALLOTS ACCEPTING OR REJECTING PLAN, AND (2) OBJECTIONS TO PLAN
TO: THE UNITED STATES TRUSTEE, CREDITORS, EQUITY SECURITY HOLDERS, AND
OTHER PARTIES IN INTEREST
YOU ARE HEREBY NOTIFIED that the Court entered an order on October 16,
1995, (a) approving the Debtor's First Amended Disclosure Statement, and
(b) scheduling the hearing on confirmation on the Debtor's First Amended Chapter
11 Plan of Reorganization (the "Plan") for THURSDAY, NOVEMBER 16, 1995 at
9:30 A.M. before the Honorable Thomas T. Glover, in the United States Bankruptcy
Court, Room 416, Park Place Building, 1200 Sixth Avenue, Seattle, WA 98101.
YOU ARE FURTHER NOTIFIED that the Court has entered an order setting
WEDNESDAY, NOVEMBER 8, 1995 as the DEADLINE by which creditors and equity
security holders must serve BALLOTS accepting or rejecting the Plan on the
undersigned attorneys for the Debtor.
[BOGLE & GATES P.L.L.C.
Stamp]
NOTICE OF (A) APPROVAL OF DEBTOR'S FIRST
AMENDED DISCLOSURE STATEMENT; (B) HEARING
ON DEBTOR'S FIRST AMENDED CHAPTER 11 PLAN
OF REORGANIZATION; AND (C) DEADLINE FOR
FILING (1) BALLOTS ACCEPTING OR REJECTING
PLAN, AND (2) OBJECTIONS TO PLAN - 1.
<PAGE>
YOU ARE FURTHER NOTIFIED that the Court has ordered that any party
wishing to OBJECT to CONFIRMATION of the Plan must (a) file a WRITTEN OBJECTION
with the Court, and (b) serve a copy thereof on (i) Mark Charles Paben, Esq.,
Bogle & Gates P.L.L.C., Two Union Square, 601 Union Street, Seattle, WA 98101
(counsel for the Debtor), and (ii) Lawrence C. Gottlieb, Esq., Siegel, Sommers &
Schwartz, L.L.P., 470 Park Avenue South, New York, NY 10016 (counsel for the
Unsecured Creditors Committee), no later than WEDNESDAY, NOVEMBER 8, 1995.
COPIES OF (A) THE DEBTOR'S FIRST AMENDED DISCLOSURE STATEMENT, (B) THE
PLAN, (C) THE BALLOT, AND (D) SEPARATE LETTERS FROM THE DEBTOR AND COUNSEL FOR
THE UNSECURED CREDITORS COMMITTEE RECOMMENDING ACCEPTANCE OF THE PLAN, ARE
SERVED HEREWITH.
THE DEBTOR AND THE UNSECURED CREDITORS COMMITTEE BELIEVE THAT THE PLAN
IS IN THE BEST INTERESTS OF CREDITORS AND SHAREHOLDERS AND RECOMMEND A VOTE IN
FAVOR OF THE PLAN.
DATED this 19TH day of October, 1995.
BOGLE & GATES P.L.L.C.
/s/ Mark Charles Paben
-----------------------------------
Mark Charles Paben
WSBA #17710
Attorneys for Jay Jacobs, Inc.
[BOGLE & GATES P.L.L.C.
Stamp]
NOTICE OF (A) APPROVAL OF DEBTOR'S FIRST
AMENDED DISCLOSURE STATEMENT; (B) HEARING
ON DEBTOR'S FIRST AMENDED CHAPTER 11 PLAN
OF REORGANIZATION; AND (C) DEADLINE FOR
FILING (1) BALLOTS ACCEPTING OR REJECTING
PLAN, AND (2) OBJECTIONS TO PLAN - 2.
<PAGE>
THE HONORABLE THOMAS T. GLOVER
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
In Re: ) Chapter 11
) Case No. 94-03993
JAY JACOBS, INC., )
) BALLOT
Debtor. )
- ----------------------------------------
The Debtor's First Amended Chapter 11 Plan of Reorganization (the "Plan")
referred to in this ballot can be confirmed by the Court and thereby made
binding on you if it is accepted by the holders of two-thirds in amount and more
than one-half in number of claims in each impaired class and the holders of two-
thirds in amount of equity security interests in each impaired class voting on
the Plan. In the event that the requisite acceptances are not obtained, the
Court may nevertheless confirm the Plan if the Court finds that the Plan accords
fair and equitable treatment to the class rejecting it and otherwise satisfies
the requirements of Section 1129(b) of the Bankruptcy Code.
TO HAVE YOUR VOTE COUNT, YOU MUST COMPLETE AND RETURN THIS BALLOT NO
LATER THAN WEDNESDAY, NOVEMBER 8, 1995 TO THE FOLLOWING:
MARK CHARLES PABEN, ESQ.
BOGLE & GATES
TWO UNION SQUARE
601 UNION STREET
SEATTLE, WA 98101-2346
CREDITORS AND SHAREHOLDERS SHOULD RETURN THEIR BALLOTS IN THE STAMPED, ADDRESSED
ENVELOPE PROVIDED. PLEASE NOTE THAT THE BALLOT MUST BE RECEIVED BY BOGLE &
GATES ON OR BEFORE WEDNESDAY, NOVEMBER 8, 1995. ACCORDINGLY, ADEQUATE TIME FOR
MAILING SHOULD BE ALLOWED.
ANY BALLOT WHICH IS SIGNED BUT DOES NOT INDICATE AN ACCEPTANCE OR REJECTION
OF THE PLAN WILL BE DEEMED AN ACCEPTANCE OF THE PLAN. ANY BALLOT WHICH IS NOT
SIGNED OR OTHERWISE EXECUTED WILL NOT BE COUNTED. IF A BALLOT IS DAMAGED OR
LOST, OR IF YOU HAVE ANY QUESTIONS CONCERNING THE VOTING PROCEDURES, YOU MAY
CALL LYNNE BROWN ELLIS OR MARK CHARLES PABEN, BOGLE & GATES P.L.L.C., TWO UNION
SQUARE, 601 UNION STREET, SEATTLE, WA 98101, (206) 682-5151.
[BOGLE & GATES P.L.L.C.
Stamp]
BALLOT - 1 of 2
<PAGE>
The undersigned is the holder of a claim/interest in the following class
(classification of claims and interests is set forth in Article III of the
Plan):
[CHECK BOX(ES) AS APPROPRIATE AND COMPLETE CLAIM/STOCK INFORMATION]
CLASS DESIGNATION CLAIM AMOUNT
[ ] Class 1 (Priority Wage Claims) $____________
[ ] Class 2 (Secured Tax Claims) $____________
[ ] Class 3 (Unsecured Claims) $____________
CLASS DESIGNATION NUMBER OF SHARES
[ ] Class 4 (Equity Security _____________
Interests; Common Stock
Holders)
[CHECK ONE]
[ ] ACCEPTS the Plan proposed by the Debtor.
[ ] REJECTS the Plan proposed by the Debtor.
Signed: _____________________________________________
Title: _____________________________________________
Print or Type
Name of Creditor/
Shareholder: _____________________________________________
Address: _____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
[BOGLE & GATES P.L.L.C.
Stamp]
BALLOT - 2 of 2
<PAGE>
Mark Charles Paben THE HONORABLE THOMAS T. GLOVER
Lynne Brown Ellis
BOGLE & GATES P.L.L.C.
Two Union Square
601 Union Street
Seattle, WA 98101-2346
(206) 682-5151
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
In Re: )
) Chapter 11
JAY JACOBS, INC., ) Case No. 94-03993
)
Debtor. )
- ---------------------------------------)
DEBTOR'S FIRST AMENDED DISCLOSURE STATEMENT REGARDING
ITS CHAPTER 11 PLAN OF REORGANIZATION
11 U.S.C. Section 1125(b) PROHIBITS SOLICITATION OF AN ACCEPTANCE OR
REJECTION OF A PLAN OF REORGANIZATION UNLESS A COPY OF THE PLAN OF
REORGANIZATION OR A SUMMARY THEREOF IS ACCOMPANIED OR PRECEDED BY A
COPY OF A DISCLOSURE STATEMENT APPROVED BY THE BANKRUPTCY COURT.
TABLE OF CONTENTS
I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. General. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
B. Chapter 11 Plan Confirmation Process . . . . . . . . . . . . 8
1. Confirmation Requirements And
Conditions Precedent. . . . . . . . . . . . . . . . . . 8
2. Modification Of The Plan. . . . . . . . . . . . . . . . 9
3. Revocation Of The Plan. . . . . . . . . . . . . . . . . 10
II. BACKGROUND INFORMATION REGARDING THE DEBTOR . . . . . . . . . . . 10
A. Business Of The Debtor . . . . . . . . . . . . . . . . . . . 10
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 1
<PAGE>
B. Factors Leading To Chapter 11. . . . . . . . . . . . . . . . 10
C. Description Of Insider Claims. . . . . . . . . . . . . . . . 10
1. Jay Jacobs. . . . . . . . . . . . . . . . . . . . . . . 10
2. Cornwall Associates Limited Partnership . . . . . . . . 11
3. Douglas A. Swerland . . . . . . . . . . . . . . . . . . 11
4. Debtor's Position Regarding Insider Claims. . . . . . . 12
III. HISTORY OF THE CHAPTER 11 CASE. . . . . . . . . . . . . . . . . . 12
A. Debtor As Debtor-In-Possession . . . . . . . . . . . . . . . 12
B. Employment Of Professionals. . . . . . . . . . . . . . . . . 12
C. Unsecured Creditors Committee. . . . . . . . . . . . . . . . 12
D. Claims Bar Date. . . . . . . . . . . . . . . . . . . . . . . 13
E. Debtor-In-Possession Financing . . . . . . . . . . . . . . . 13
F. Liquidation Of 39 Stores . . . . . . . . . . . . . . . . . . 14
G. Payment Of Reclamation Claims. . . . . . . . . . . . . . . . 14
H. Payment Of Claims Of $500 And Less . . . . . . . . . . . . . 14
I. Settlement Of Lease Rejection Claims . . . . . . . . . . . . 14
J. Rent Reductions. . . . . . . . . . . . . . . . . . . . . . . 14
K. Claims Objections/Settlements. . . . . . . . . . . . . . . . 15
L. New Management/Merchandising Team. . . . . . . . . . . . . . 15
1. Rex Loren Steffey . . . . . . . . . . . . . . . . . . . 15
2. William L. Lawrence, Jr . . . . . . . . . . . . . . . . 15
3. Brian McNamara. . . . . . . . . . . . . . . . . . . . . 16
4. Anne Samenfink. . . . . . . . . . . . . . . . . . . . . 16
5. Julie Stodolak. . . . . . . . . . . . . . . . . . . . . 16
6. James F. Wortsman . . . . . . . . . . . . . . . . . . . 16
M. New Merchandising/Business Strategies. . . . . . . . . . . . 16
N. Executive Officer Stock Options/
Restricted Stock Grants. . . . . . . . . . . . . . . . . . . 18
1. Rex Loren Steffey . . . . . . . . . . . . . . . . . . . 18
2. William L. Lawrence, Jr . . . . . . . . . . . . . . . . 18
3. Jay Jacobs. . . . . . . . . . . . . . . . . . . . . . . 19
O. Employment Contracts For Messrs.
Steffey And Lawrence . . . . . . . . . . . . . . . . . . . . 19
1. Steffey Contract. . . . . . . . . . . . . . . . . . . . 19
2. Lawrence Contract . . . . . . . . . . . . . . . . . . . 20
P. LaSalle National Bank Financing. . . . . . . . . . . . . . . 21
Q. Other Activity In The Case . . . . . . . . . . . . . . . . . 22
R. J.J. Distribution Company. . . . . . . . . . . . . . . . . . 24
S. Board Of Directors . . . . . . . . . . . . . . . . . . . . . 24
1. Jay Jacobs. . . . . . . . . . . . . . . . . . . . . . . 25
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 2
<PAGE>
2. Rex Loren Steffey . . . . . . . . . . . . . . . . . . . 25
3. William L. Lawrence, Jr . . . . . . . . . . . . . . . . 25
4. Shelley Swerland. . . . . . . . . . . . . . . . . . . . 25
5. Sam Rubinstein. . . . . . . . . . . . . . . . . . . . . 25
6. David J. Taylor . . . . . . . . . . . . . . . . . . . . 25
7. Gilbert Scherer . . . . . . . . . . . . . . . . . . . . 25
T. Directors' Fees. . . . . . . . . . . . . . . . . . . . . . . 26
U. Executive/Nonexecutive Officers. . . . . . . . . . . . . . . 26
1. Jay Jacobs. . . . . . . . . . . . . . . . . . . . . . . 26
2. Rex Loren Steffey . . . . . . . . . . . . . . . . . . . 26
3. Doris Williams. . . . . . . . . . . . . . . . . . . . . 26
4. William L. Lawrence, Jr . . . . . . . . . . . . . . . . 27
5. Rebecca M. Friesen. . . . . . . . . . . . . . . . . . . 27
6. Brian McNamara. . . . . . . . . . . . . . . . . . . . . 27
7. Yeanna Woo. . . . . . . . . . . . . . . . . . . . . . . 27
IV. ASSETS AND LIABILITIES OF THE DEBTOR. . . . . . . . . . . . . . . 27
A. Summary Of Claims. . . . . . . . . . . . . . . . . . . . . . 28
B. Professional Fees And Costs. . . . . . . . . . . . . . . . . 28
C. Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . 28
D. Preference Action Analysis . . . . . . . . . . . . . . . . . 28
E. Litigation/Other Actions Against The Debtor. . . . . . . . . 29
1. Argentine Claim . . . . . . . . . . . . . . . . . . . . 29
2. Overton Claim . . . . . . . . . . . . . . . . . . . . . 29
V. SUMMARY OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . 30
A. Classification Of Claims And
Interests Under Plan . . . . . . . . . . . . . . . . . . . . 30
1. Unclassified Claims . . . . . . . . . . . . . . . . . . 30
2. Classified Claims/Interests . . . . . . . . . . . . . . 30
a. Class 1: Priority Wage Claims . . . . . . . . . . 30
b. Class 2: Secured Tax Claims . . . . . . . . . . . 30
c. Class 3: Unsecured Claims . . . . . . . . . . . . 30
d. Class 4: Equity Security Interests. . . . . . . . 30
B. Treatment Of Claims And Interests
Under The Plan . . . . . . . . . . . . . . . . . . . . . . . 31
1. Unclassified Claims . . . . . . . . . . . . . . . . . . 31
a. Administrative Expense Claims. . . . . . . . . . . 31
b. Trade/Ordinary Course Of
Business Expense Claims. . . . . . . . . . . . . . 31
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 3
<PAGE>
c. Priority Tax Claims. . . . . . . . . . . . . . . . 31
2. Classified Claims/Interests . . . . . . . . . . . . . . 32
a. Class 1 (Priority Wage Claims) . . . . . . . . . . 32
b. Class 2 (Secured Tax Claims) . . . . . . . . . . . 32
c. Class 3 (Unsecured Claims) . . . . . . . . . . . . 32
(1) 1996 30% Payment. . . . . . . . . . . . . . . 33
(2) 1997 30% Payment. . . . . . . . . . . . . . . 33
(3) Right To Election Of 1997
15% Payment And Note. . . . . . . . . . . . . 33
(a) 1997 15% Payment . . . . . . . . . . . . 33
(b) Note(s). . . . . . . . . . . . . . . . . 33
(c) Notice Of Exercise
Requirements . . . . . . . . . . . . . . 34
(d) Reporting Requirements . . . . . . . . . 35
(4) Subordination Provisions. . . . . . . . . . . 35
(5) Trust Indenture Requirements. . . . . . . . . 35
d. Class 4 (Equity Security Interests). . . . . . . . 36
C. Means For Execution Of The Plan. . . . . . . . . . . . . . . 36
1. Vesting Of Property Of The Estate . . . . . . . . . . . 36
2. Funding Of The Plan . . . . . . . . . . . . . . . . . . 36
3. No Payments Prior To Effective Date . . . . . . . . . . 36
4. Postconfirmation Creditors
Committee (the "PCC") . . . . . . . . . . . . . . . . . 36
5. Securities Law Exemption;
Availability Of SEC Rule 144
For Affiliate Resales . . . . . . . . . . . . . . . . . 37
6. Administration Of Claims And
Causes Of Action. . . . . . . . . . . . . . . . . . . . 39
a. General . . . . . . . . . . . . . . . . . . . 39
b. Waiver Of Preference Actions. . . . . . . . . 39
7. Disbursing Agent. . . . . . . . . . . . . . . . . . . . 40
8. Deadline For Filing Certain
Administrative Expense Claims . . . . . . . . . . . . . 40
9. Notice Procedures Governing
Distributions . . . . . . . . . . . . . . . . . . . . . 40
10. Postconfirmation Professional Fees. . . . . . . . . . . 40
11. Exculpation . . . . . . . . . . . . . . . . . . . . . . 40
D. Claims Objections And Treatment
of Disputed Claims . . . . . . . . . . . . . . . . . . . . . 41
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 4
<PAGE>
1. Objections To Claims. . . . . . . . . . . . . . . . . . 41
2. Treatment Of Disputed Claims. . . . . . . . . . . . . . 41
3. Settlement Of Claims. . . . . . . . . . . . . . . . . . 42
E. Executory Contracts And Unexpired Leases . . . . . . . . . . 42
1. Leases And Contracts To Be
Assumed Or Rejected . . . . . . . . . . . . . . . . . . 42
a. Assumption Of Jacobs Family
Buy/Sell Agreement . . . . . . . . . . . . . . . . 42
b. Assumption Of Leases For 107 Stores. . . . . . . . 43
c. Rejection Of Leases For 12 Stores. . . . . . . . . 43
d. Other Contracts/Leases . . . . . . . . . . . . . . 43
2. Filing Of Claims Arising From
Rejection Of Contract Or Lease. . . . . . . . . . . . . 43
3. Cure Of Defaults. . . . . . . . . . . . . . . . . . . . 43
4. Affirmation Of Master Lease For Vehicles. . . . . . . . 44
F. Stock Option Plan. . . . . . . . . . . . . . . . . . . . . . 44
1. Approval Of The 1995 Stock Option Plan. . . . . . . . . 44
a. General; Eligibility . . . . . . . . . . . . . . . 44
b. Administration . . . . . . . . . . . . . . . . . . 45
c. Exercise Price . . . . . . . . . . . . . . . . . . 45
d. Duration . . . . . . . . . . . . . . . . . . . . . 46
e. Exercise Of Options. . . . . . . . . . . . . . . . 46
f. Change In Control Provision. . . . . . . . . . . . 47
2. Other Stock Options/Plans/
Restricted Stock Grants . . . . . . . . . . . . . . . . 47
a. NonQualified Plan. . . . . . . . . . . . . . . . . 47
b. Directors' Plan. . . . . . . . . . . . . . . . . . 47
c. Employee Stock Purchase Plan . . . . . . . . . . . 48
d. Retention Plan . . . . . . . . . . . . . . . . . . 48
e. Executive/Management Options . . . . . . . . . . . 49
G. Limit On Compensation Of Insiders . . . . . . . . . . . 49
H. Covenants . . . . . . . . . . . . . . . . . . . . . . . 49
I. Events Of Default . . . . . . . . . . . . . . . . . . . 49
J. Retention Of Jurisdiction . . . . . . . . . . . . . . . 50
VI. FEASIBILITY/FINANCIAL PROJECTIONS . . . . . . . . . . . . . . . . 50
A. Payments Required At Confirmation . . . . . . . . . . . 50
B. Payments Required Following Confirmation. . . . . . . . 50
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 5
<PAGE>
VII. LIQUIDATION ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . 50
VIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN. . . . . 52
A. General Disclaimer. . . . . . . . . . . . . . . . . . . 52
B. Net Operating Loss Carryovers . . . . . . . . . . . . . 52
1. Limitations Due To Ownership Change. . . . . . . . . . . . . 53
C. Cancellation Of Debt Income ("CODI"). . . . . . . . . . 55
D. Federal Income Tax Consequences To Claim
Holders And Company Common Stock Holders. . . . . . . . 55
IX. RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
X. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
EXHIBITS
--------
Exhibit A-1: Annual 10-K Report For Fiscal Year Ended
January 28, 1995, As Amended (Without Exhibits)
Exhibit A-2: Quarterly 10-Q Report For The Period Ended
July 29, 1995
Exhibit B-1: Steffey Employment Contract
Exhibit B-2: Lawrence Employment Contract
Exhibit C: LaSalle National Bank Commitment Letter
Exhibit D: Summary Of Claims
Exhibit E-1: Financial Assumptions For Statement Of
Operations
Exhibit E-2: Projected Statement Of Operations
Exhibit E-3: Balance Sheet
Exhibit E-4: Projected Statement Of Cash Flows
Exhibit F: Liquidation Analysis
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 6
<PAGE>
I. INTRODUCTION
A. General. Jay Jacobs, Inc. (the "Company" or the
"Debtor"), the debtor and debtor-in-possession, has filed a chapter
11 plan (the "Plan") and prepared this Disclosure Statement in
conjunction with its formulation of the Plan. Section 1125 of the
Bankruptcy Code enacted November 6, 1978, as set forth in title 11 of
the United States Code, and as amended thereafter, but not including
the amendments that became effective on or after October 22, 1994
(the "Code" or "Bankruptcy Code"), requires certain disclosures in
connection with the solicitation of acceptance of a plan.
Specifically, the Code requires:
Information of a kind and in sufficient detail as far as is reasonably
practicable in light of the nature and the history of the debtor and
the condition of the debtor's books and records that would enable a
hypothetical, reasonable investor typical of holders of claims or
interests of the relevant class to make an informed judgment about the
plan.
THE PLAN SUPERSEDES THIS DISCLOSURE STATEMENT TO THE EXTENT
OF ANY INCONSISTENCIES BETWEEN THE TWO DOCUMENTS. ALL PARTIES IN
INTEREST ARE ENCOURAGED TO READ THE PLAN IN ORDER TO DETERMINE THE
MANNER IN WHICH THEY ARE TO BE TREATED UNDER THE PLAN. (1)
PLEASE READ THE DISCLOSURE STATEMENT AND ALL OF THE
EXHIBITS HERETO, AS WELL AS THE PLAN, IN THEIR ENTIRETY. FOR THE
CONVENIENCE OF PARTIES-IN-INTEREST, THIS DISCLOSURE STATEMENT
SUMMARIZES THE TERMS OF THE PLAN AND CERTAIN OTHER DOCUMENTS.
ALTHOUGH THE DEBTOR BELIEVES THAT SUCH SUMMARIES ARE FAIR AND
ACCURATE, THE PLAN ITSELF (INCLUDING ALL INCORPORATED EXHIBITS) AND
SUCH OTHER DOCUMENTS SUPERSEDE ALL SUMMARIES. IF ANY INCONSISTENCY
EXISTS BETWEEN THE PLAN OR SUCH OTHER DOCUMENTS AND THIS DISCLOSURE
STATEMENT, THE TERMS OF THE PLAN OR SUCH OTHER DOCUMENTS ARE
CONTROLLING.
CERTAIN OF THE FINANCIAL INFORMATION CONTAINED HEREIN AND
IN THE EXHIBITS HERETO HAS NOT BEEN THE SUBJECT OF A CERTIFIED AUDIT,
AND HAS NOT BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES. NO INDEPENDENT VERIFICATION OF THE CONTENTS
OF THIS DISCLOSURE STATEMENT AND THE EXHIBITS HERETO HAS BEEN MADE BY
THE FIRM OF BOGLE & GATES P.L.L.C., CORPORATE AND BANKRUPTCY COUNSEL
TO THE DEBTOR. ALL CREDITORS AND OTHER PARTIES AFFECTED BY THE PLAN
- -------------------
(1) Defined terms used in the Plan have the same definition herein.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 7
<PAGE>
ARE URGED TO CONSULT THEIR OWN COUNSEL AND FINANCIAL ADVISORS AS TO
THE PROVISIONS AND EFFECT OF THE PLAN.
NO PARTY IS AUTHORIZED TO GIVE ANY INFORMATION WITH RESPECT
TO THE PLAN, THE DEBTOR, OR ANY OF THE DOCUMENTS ATTACHED HERETO OR
THERETO AS EXHIBITS, OTHER THAN THAT CONTAINED IN THIS DISCLOSURE
STATEMENT. NO REPRESENTATIONS CONCERNING ANY OF THE FOREGOING OR THE
FUTURE BUSINESS OPERATIONS OF THE DEBTOR HAVE BEEN AUTHORIZED BY THE
DEBTOR OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. ANY
INFORMATION, REPRESENTATIONS, OR INDUCEMENTS MADE TO OBTAIN YOUR
ACCEPTANCE WHICH ARE OTHER THAN OR INCONSISTENT WITH THE INFORMATION
CONTAINED HEREIN AND IN THE EXHIBITS HERETO, AS WELL AS THE PLAN,
SHOULD NOT BE RELIED UPON BY ANY CREDITOR OR SHAREHOLDER IN VOTING ON
THE PLAN.
The following documents filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), are
incorporated herein by reference: (a) Annual Report on Form 10-K, as
amended, for the fiscal year ended January 28, 1995, and
(b) Quarterly Report on Form 10-Q for the period ended July 29, 1995.
Copies of the Company's latest Forms 10-K and 10-Q are attached
hereto as Exhibits A-1 and A-2.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS
CONTAINED HEREIN.
B. CHAPTER 11 PLAN CONFIRMATION PROCESS. The
Bankruptcy Code is a remedial statute designed to effect the
reorganization of financially distressed entities and individuals or
the orderly liquidation of their assets. Formulation and
confirmation of a Plan is a principal function of a chapter 11 case.
The Plan may affect the claims and interests of all parties, provide
for the assumption or rejection of executory contracts and unexpired
leases, and provide for the prosecution or settlement of claims
belonging to the bankruptcy estate.
1. CONFIRMATION REQUIREMENTS AND CONDITIONS
PRECEDENT. The Plan can be confirmed by the United States Bankruptcy
Court (the "Court" or "Bankruptcy Court") and made binding on an
impaired class of creditors if it is accepted by the holders of at
least two-thirds in amount and one-half in number of the claim
holders who have voted on the Plan. The Plan can be confirmed by the
Court, and made binding on an impaired class of interests if it is
accepted by the holders of at least two-thirds in amount of the
interest holders who have voted on the Plan.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 8
<PAGE>
In the event that the requisite number of acceptances of a
particular class which is impaired under the Plan is not obtained,
the Court may nonetheless confirm the Plan if the Court finds under
Section 1129(b) of the Code that the Plan accords fair and equitable
treatment of any such class rejecting the Plan. Additionally, the
Debtor may ask the Court to find that certain of the classes are
unimpaired; creditors and interest holders whose claims are
unimpaired are deemed to have accepted the Plan.
The Bankruptcy Code requires that if a class of claims is
impaired under the Plan, at least one class of claims that is
impaired must vote to accept the Plan in order for the Plan to be
confirmed.
Further, in order for the Plan to be confirmed, the
Bankruptcy Code requires, among other things, that (a) the Plan be
proposed in good faith, (b) the Debtor disclose specified information
concerning payments made or promised to insiders, and (c) the Plan
comply with the applicable provisions of chapter 11 of the Bankruptcy
Code. Section 1129(a) of the Bankruptcy Code also imposes
requirements that (a) confirmation of the Plan is not likely to be
followed by the need for further financial reorganization, and
(b) the Plan be fair and equitable with respect to each class of
claims or equity security (stock) interests which is impaired under
the Plan.
Before the Plan may be confirmed, the Bankruptcy Court must
find (with certain exceptions) that the Plan provides, with respect
to each class, that each holder of a claim or equity security
interest of such class either (a) has accepted the Plan, or (b) will
receive or retain under the Plan on account of such claim or equity
security interest, property of a value, as of the Effective Date (as
defined in the Plan), that is not less than the amount that such
persons would receive or retain if the Debtor were, on the Effective
Date, liquidated under chapter 7 of the Bankruptcy Code.
2. MODIFICATION OF THE PLAN. The Debtor may propose
amendments to or modifications of the Plan under Section 1127 of the
Bankruptcy Code at any time prior to the date on which the Court
enters an order confirming the Plan (the "Date of Confirmation").
After the Date of Confirmation, the Debtor may remedy any defects or
omissions or reconcile any inconsistencies in the Plan or in the
order confirming the Plan pursuant to Section 1129 of the Bankruptcy
Code (the "Confirmation Order") in such manner as may be necessary to
carry out the purposes and intent of the Plan so long as the holders
of Claims and Equity Security Interests are not materially and
adversely affected.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 9
<PAGE>
3. REVOCATION OF THE PLAN. The Debtor reserves the
right to revoke and withdraw the Plan at any time prior to the Date
of Confirmation. In the event of such withdrawal or revocation, or
if confirmation does not occur, the Plan shall be deemed null and
void. In such event, nothing contained herein shall be deemed to
constitute a waiver or release of any Claims by or against the Debtor
or to prejudice in any manner the rights of the Debtor.
II. BACKGROUND INFORMATION REGARDING THE DEBTOR
A. BUSINESS OF THE DEBTOR. The Company operates a retail
chain of stores selling men's and women's clothing; its founder is
Mr. Jay Jacobs. After several years of retail experience as owner of
a successful fur/costume jewelry business started in 1941, Mr. Jacobs
turned exclusively to the retail apparel business in 1947; the
Company was incorporated in 1959. At all times, the business bore
Mr. Jacobs' name. Over the years, the business had been very
successful, and had expanded from one downtown store in Seattle to
287 locations in 21 states at its peak. The expansion was aided, in
part, by a public offering of 1,500,000 shares of the Company's
Common Stock in 1987.
B. FACTORS LEADING TO CHAPTER 11. Until fiscal year
ended February 28, 1994(2), the Company always recorded a profit.
During fiscal year 1994, however, the Company incurred losses of
$14,300,000. These first-time losses, which precipitated the
chapter 11 filing, were caused primarily by (a) the sudden,
unexpected downturn in the economy in California, especially Southern
California, where 52 stores were located as of the date of chapter 11
filing, (b) expansion into other locations where occupancy costs
exceeded acceptable levels, and (c) decisions by two successive
merchandise managers, employed within a 21-month period, to gear
merchandise purchases to a different customer base.
The Company entered chapter 11 directly as a result of
constraints placed on the Company's trade credit by the factoring
community which caused delays in the receipt of merchandise and
limitations on the quantity of merchandise which vendors would ship
to the Company.
C. Description Of Insider Claims. The following
describes those Insiders holding Claims in this case:
1. Jay Jacobs. Mr. Jacobs is the founder of the
Company, and has been a director of the Company since its inception.
- -------------------
(2) Commencing with fiscal year ended January 28, 1995, the Company now ends
its fiscal years on the last Saturday of January.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 10
<PAGE>
He served as President of the Company until 1978, when he became
Chairman of the Board of Directors. He served as Interim President
and Chief Executive Officer from July until September 1994, when he
was succeeded by Rex Loren Steffey. He continues to serve as
Chairman of the Board. Mr. Jacobs owns approximately 4.5% of the
Company's Common Stock, and he owns additionally approximately 57.6%
of the Company's Common Stock as trustee of the Rose Jacobs
Testamentary Trust (the "Jacobs Trust") for the ultimate benefit of
his two daughters, Shelley Swerland and Judy Friedt.
Until May 1994, Mr. Jacobs' annual base salary had been
$352,000. Upon the chapter 11 filing, his annual salary was reduced
to $200,000, and has not been increased during the pendency of the
Case.
Mr. Jacobs holds a general unsecured claim against the
Company in the amount of $19,296.97. This claim arose because the
Company incorrectly credited a payment from the Washington Public
Power Supply System to the Company's account when it should have been
credited to Mr. Jacobs personally. This error was discovered after
the chapter 11 filing.
2. CORNWALL ASSOCIATES LIMITED PARTNERSHIP.
Cornwall Associates Limited Partnership, a family limited partnership
("Cornwall Associates"), was the landlord under a lease with the
Company dated March 5, 1987 of premises located at 1315 Cornwall
Avenue, Bellingham, Washington. Mr. Jacobs is the general partner of
Cornwall Associates.
The lease was rejected by the Company, effective June 1,
1994. Cornwall Associates holds a general unsecured claim in the
amount of $57,000 against the Company arising from the rejection of
the lease.
3. DOUGLAS A. SWERLAND. Mr. Swerland is Mr. Jacobs'
son-in-law. He served as President of the Company from 1978 to
November 1993, when he resigned. He also served as Chief Operating
Officer from August 1993 until his resignation. From 1969 to 1978,
Mr. Swerland was employed by the Company in various capacities,
including Secretary and Executive Vice President. He was a director
of the Company from 1972 until November 1993. Mr. Swerland is
married to Shelley Swerland, who is (a) Mr. Jacobs' daughter, and
(b) a Company director. SEE Section III(S)(4) herein.
Mr. Swerland holds a general unsecured claim against the
Company in the amount of $313,921 for severance pay. The claim
arises under the Settlement Agreement regarding Mr. Swerland's
separation from the Company entered into by and between Mr. Swerland
and the Company effective February 4, 1994.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 11
<PAGE>
4. DEBTOR'S POSITION REGARDING INSIDER CLAIMS. The
Company supports the mathematical accuracy of the dollar amounts of
the above-described Claims; however, inasmuch as they are Insider
Claims, the Company takes no position as to whether any portion of
such Claims could be disallowed under avoidance or other legal
theories.
III. HISTORY OF THE CHAPTER 11 CASE
A. DEBTOR AS DEBTOR-IN-POSSESSION. Since the filing of
its chapter 11 petition, the Company has continued in possession of
its property and in control of its business operations pursuant to
Sections 1107 and 1108 of the Bankruptcy Code. The Company has filed the
requisite schedules of assets and liabilities and statements required
pursuant to Section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, as
well as the monthly financial statements required pursuant to Section 1106
of the Code, Local Bankruptcy Rule 2015, and the guidelines of the
Office of the United States Trustee. Amended schedules were filed in
July 1995.
To date, the Debtor has paid three quarterly fees in the
amount of $5,000 each to the Office of the United States Trustee. By
confirmation, it is anticipated that two additional quarterly fees in
the same amount will be paid, aggregating $10,000.
B. EMPLOYMENT OF PROFESSIONALS. Shortly after filing
its chapter 11 petition, the Debtor obtained an order from the Court
authorizing it to employ the law firm of Bogle & Gates P.L.L.C. as
its primary attorneys herein. The Debtor has also been authorized to
employ (a) the law firm of Davis Wright Tremaine as special counsel
for real estate issues, (b) the law firm of Davis Grimm & Payne as
special counsel for employment law issues, (c) the accounting firm of
Price Waterhouse to provide accounting services related to the
chapter 11 filing and the proposed Plan, and (d) the firm of Smith
Bunday Berman Britton, as tax accountants for the Company.
Further, the Court has approved the employment of (a) the
law firms of (i) Siegel, Sommers & Schwartz, L.L.P., and (ii) Stoel
Rives Boley Jones & Grey, as counsel for the Official Unsecured
Creditors Committee (the "Committee"); and (b) BDO Seidman as
accountants for the Committee.
C. UNSECURED CREDITORS COMMITTEE. On May 24, 1994, the
Office of the United States Trustee appointed the Committee,
- -------------------
(3) These exclude other consultants for the Company whose compensation is
contingent upon performance.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 12
<PAGE>
comprised of the following seven members: BNY Financial Group,
Congress Talcott Corporation, Nationsbank Commercial Corp., Republic
Factors Corporation, C.I.T. Group, Heller Financial, Inc., and Oxford
Industries, Inc. Subsequently, Seafirst Bank, Bee Darlin', and Star
of India were added to the Committee, and C.I.T. Group resigned from
the Committee. Accordingly, the Committee is currently comprised of
nine members.
D. CLAIMS BAR DATE. The Company obtained an order
establishing December 1, 1994 as the deadline by which any creditor
holding a claim which arose (a) prior to the filing of the bankruptcy
petition and which was listed by the Debtor on its schedules as
disputed, contingent, or in an unliquidated amount, or (b) from the
Debtor's rejection of a nonresidential real property lease on or
before September 30, 1994, was required to file a proof of claim with
the Bankruptcy Court.
E. DEBTOR-IN-POSSESSION FINANCING. Initially,
$10,000,000 in debtor-in-possession ("DIP") financing was arranged
with Seafirst Bank on a secured basis; this line of credit financing
was preliminarily disapproved by the Court. The Court, however,
authorized the Company to proceed with DIP financing efforts after
the Company determined that other lenders might be willing to provide
financing on an unsecured, superpriority basis. Negotiations then
ensued with C.I.T. Group/Business Credit, Inc. ("CIT"). The
negotiations were later dropped when GE Capital/Commercial Finance
("GECC") appeared and presented a more attractive cost package.
Unfortunately, after substantial preliminary negotiations, GECC
insisted on security and elected not to proceed with the financing.
The Company resumed negotiations with CIT, and a
$10,000,000 DIP credit facility ultimately was approved by the Court
on September 27, 1994 (the "CIT DIP Facility"). The CIT DIP Facility
provides for cash borrowing and/or the issuance of letters of credit
which in the aggregate cannot exceed the lower of a "borrowing base"
or $10,000,000. Letters of credit are limited to a maximum of
$5,000,000.
The CIT DIP Facility also grants a security interest in
certain of the Company's cash accounts. In addition, the obligations
outstanding under the CIT DIP Facility are deemed administrative
expense obligations. Advances under the facility bear interest at
the applicable prime rate plus 1 1/2%. The CIT DIP Facility calls for a
- -------------------
(4) By settlement approved by order dated April 13, 1995, GECC returned
$25,000 to the estate, one-half of the good faith deposit paid by the Debtor.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 13
<PAGE>
facility fee of $150,000, an annual agent fee of $50,000, an unused
line fee of 0.5% per annum, and a letter of credit fee of 1.75% per
annum.
The Company has not used the direct borrowing capacity on
the CIT DIP Facility. There are $157,000 of letters of credit
currently outstanding. The CIT DIP Facility will terminate on the
earlier of September 1996 or the date of consummation of the Plan.
F. LIQUIDATION OF 39 STORES. On August 12, 1994, the
Court approved the inventory liquidation by The Hilco/Great American
Group ("Hilco") and related closure of 39 stores. Hilco was chosen
after the Company negotiated with two other inventory liquidation
specialists, with Hilco offering the most favorable terms. Various
landlords objected to the Hilco liquidation proposal, but the
liquidation eventually was approved following an extended contested
hearing.
G. PAYMENT OF RECLAMATION CLAIMS. In the early stages of
the Case, it was also imperative that the Company negotiate an
acceptable reclamation payment proposal. Over $1,000,000 in
reclamation demands had been made, and the factors were refusing to
provide credit to the Debtor's vendors until the reclamation claims
were resolved. By agreeing to a reclamation payment program without
engaging in expensive and protracted litigation, the Company was able
to open up the flow of merchandise in time for the important "Back to
School" season. The Court approved the payment of reclamation claims
by an order dated August 26, 1994. Reclamation payments totalling
approximately $900,000 have been made.
H. PAYMENT OF CLAIMS OF $500 AND LESS. On May 26, 1995,
the Court entered an order approving the preconfirmation payment of
Claims of $500 or less (including those Claims voluntarily reduced to
$500). As a result, approximately 684 creditors have been paid a
total of approximately $109,000, eliminating Claims totalling roughly
$159,000.
I. SETTLEMENT OF LEASE REJECTION CLAIMS. On April 13,
1995, the Court entered an order approving the ex parte presentation
of lease rejection claim compromise agreements, providing for
monetary settlement payments to the former landlords. To date, total
settlement payments of approximately $1,167,000 have been negotiated,
which will eliminate total rejection claims of approximately
$3,679,000.
J. RENT REDUCTIONS. The Company has negotiated
approximately 70 rent reduction agreements, resulting in a total
savings of approximately $3,200,000.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATIONM - 14
<PAGE>
K. CLAIMS OBJECTIONS/SETTLEMENTS. To date, the Debtor
has filed objections to approximately 325 Claims. As a result of
these objections and settlements with various creditors (other than
lease rejection claimants), approximately $8,384,000 of Claims have
been eliminated.
L. NEW MANAGEMENT/MERCHANDISING TEAM. Critical to the
Company's reorganization prospects is the new management/
merchandising team that has been phased in since September 1994. A
brief description of these key individuals follows:
1. REX LOREN STEFFEY. Mr. Steffey has been the
President and Chief Executive Officer of the Company since September
1994. He has 20 years of experience in the retail industry,
including employment for approximately 14 years in various positions
with Paul Harris Stores, Inc. ("Paul Harris"), an Indiana-based
fashion retail enterprise similar to that of the Company.
Following employment there from 1975 until 1986, Mr.
Steffey rejoined Paul Harris as Vice-President of Merchandising in
June 1991, shortly after it filed for chapter 11 protection, to
revamp its merchandising strategy and control. He directed Paul
Harris' merchandise planning, distribution, marketing, and management
information services ("MIS") during and through its successful
chapter 11 reorganization. From 1989 to 1991, Mr. Steffey was
director of merchandise planning and control for Montgomery Ward and
Company.
Paul Harris filed its bankruptcy case in February 1991, and
emerged from chapter 11 in September 1992. Mr. Steffey was the
Senior Vice-President of Paul Harris from March 1993 until August
1993. Thereafter, he served as its President and Chief Operating
Officer until he was hired by the Company.
Mr. Steffey hired the individuals identified below, many of
them previously employed by Paul Harris, to be part of the new
management team at the Company.
2. WILLIAM L. LAWRENCE, JR. Mr. Lawrence was named
Senior Vice-President and Chief Financial Officer of the Company in
January 1995. He has over 20 years of retail experience. Prior to
joining the Company, Mr. Lawrence was Senior Vice President and Chief
Financial Officer for Paul Harris from March 1994 until January 1995.
From March 1993 to March 1994, he was Senior Vice President - Finance
of Paul Harris. From 1990 until March 1993, Mr. Lawrence also served
as Paul Harris' Vice President - Controller, Corporate Secretary, and
Assistant Treasurer.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 15
<PAGE>
3. BRIAN MCNAMARA. Mr. McNamara has been employed
as Senior Vice-President of General Merchandising/Manager of Women's
Apparel at the Company since January 1995. Prior to this position,
he worked for Paul Harris from 1990 to 1994, the last two years as
its divisional manager of knits and sweaters. Previously, he had
been a divisional merchandising manager for Garfinckel's in
Washington, D.C. and buyer of menswear at Neiman Marcus in Dallas.
At one time, Mr. McNamara served as divisional merchandising manager
for Frederick & Nelson, living in Seattle for 12 years.
Mr. McNamara also has substantial overseas merchandising
experience, including more than 40 trips to Asia and Europe. He is
familiar with the private label and product development concepts
which will be pivotal to the Company's new merchandising strategy.
SEE Section III(M) herein.
4. ANNE SAMENFINK. Ms. Samenfink has been employed
as the buyer of woven bottoms and coats for the Company since January
1995. Prior to that time, she served as the buyer for woven tops and
bottoms, suits, and coats for Paul Harris, as well as the director of
planning and distribution. She has over 17 years of merchandising
experience with Paul Harris.
5. JULIE STODOLAK. Ms. Stodolak was named Director
of Stores in July 1995. Prior to joining the Company, she was the
Director of Sales Support for Canadians, a women's retailer with 105
stores. Canadians emerged from chapter 11 in August 1994. At
Canadians, Ms. Stodolak coordinated the acquisition of 34 Ormond
stores. Before joining Canadians, she worked for the United Retail
Group, another 100+ retail store chain, for nine years, serving in
numerous capacities from Store Manager to Regional Director.
6. JAMES F. WORTSMAN. Mr. Wortsman was named
Director of MIS in July 1995. Prior to joining the Company, he owned
his own retail consulting company from July 1994 to July 1995. From
December 1992 to July 1995, Mr. Wortsman was Vice President of MIS
for Garden Ridge Stores in Houston, Texas. From January 1990 to
December 1992, he was MIS Director for Garden Ridge Stores.
M. NEW MERCHANDISING/BUSINESS STRATEGIES. The Company
sells contemporary fashions consisting of women's and men's
sportswear and outerwear, including fashion denim, dress and casual
pants and tops, dresses, coats and jackets, and related accessories.
The Company has developed a new merchandise strategy that is based on
key items that the Company believes will appeal to its customers.
The Company works with established sources of fashion
apparel, and seeks suppliers and manufacturers that will assist the
Company in implementing its key item strategy. The Company will
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 16
<PAGE>
assist its suppliers in the design of garments to incorporate ideas
perceived by the Company's merchandising staff to be part of its new
merchandise strategy. The Company develops basic fashion merchandise
in cooperation with suppliers for sale under its private labels of
"D.D. Sloane," "Jay Jacobs," and "American Sportswear Exchange."
The new merchandising strategy emphasizes depth of certain
key items which can be coordinated via a seasonal color assortment,
complemented by novelty items and accessories that enable customers
to purchase complete outfits. These assortments will be developed by
the new merchandising team to enhance the quality, value, and style
exclusivity of the Company's merchandise.
The marketing strategy will focus on increasing the
Company's market share through additional use of timely promotions,
improved visual merchandise presentations, establishment of target
customer research, and a store modernization program. These changes
began to affect the business favorably in the spring of 1995, and are
planned to enhance performance on an accelerated basis into the fall
and Christmas seasons of 1995.
Targeted growth is expected in the Chicago, Denver, and
Atlanta markets in the immediate future. It is anticipated that some
of the new stores will be opened in strip malls, as opposed to
traditional shopping centers/malls, at more favorable rental rates.
Efforts also will be made to take over existing fashion retail spaces
in order to reduce opening expenses and related capital expenditures.
Currently, the Company expects to open 10 new stores before the close
of 1995.
The Company currently operates 74 women's only stores, 11
men's only stores, and 47 combined men's and women's fashion stores.
The Company also operates 25 budget stores in secondary markets where
occupancy costs have been low and the demographics of the area have
warranted lower price merchandise. (5)
In October 1995, after careful evaluation, the Company's
management made the decision to discontinue its budget merchandise
strategy. The decision was made as a result of management's view
that the strategic focus should be on the Company's Jay Jacobs
Division in order to maximize its performance. This decision will
result in closing 19 budget stores, and converting 6 budget stores to
the Jay Jacobs strategy. This process should be completed by
January 31, 1996.
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(5) Additionally, leases for 2 women's only stores and 6 budget stores are
expected to be rejected as of October 23, 1995 pursuant to a motion pending
as of this date.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 17
<PAGE>
N. EXECUTIVE OFFICER STOCK OPTIONS/RESTRICTED STOCK
GRANTS.
1. REX LOREN STEFFEY. In connection with his
employment, Mr. Steffey was granted 100,000 shares of restricted
stock. Pursuant to the terms of the grant, the restricted shares
will be forfeited to the Company if Mr. Steffey ceases to be a full-
time employee of the Company for any reason (except to the extent
vested). Restricted stock vests as follows: (i) one-third upon the
Date of Confirmation, and (ii) one-third on each of the first and
second anniversaries of the Date of Confirmation. In the event of
the death or disability of Mr. Jacobs, the restricted shares shall
become fully vested and all transfer restrictions removed.
In addition, Mr. Steffey was granted a non-qualified stock
option to acquire 100,000 shares of Common Stock at an exercise price
per share equal to $0.5625. Pursuant to the terms thereof, options
vest and become exercisable one-third upon each of the Date of
Confirmation and the first and second anniversaries thereof, upon
continuous full-time employment; provided, however, that all
remaining unvested options shall fully vest upon the death or
disability of Mr. Jacobs.
All options granted at least six months prior to any sale
of the Company automatically accelerate and become fully vested and
immediately exercisable upon such event. Options terminate upon the
earliest of: (i) ten years from the date of grant, (ii) termination
as an officer or director for cause, or (iii) the expiration of six
months from termination of employment due to death or disability.
Mr. Steffey also received upon hire an additional non-
qualified option to acquire 100,000 shares of Common Stock,
exercisable at a price per share equal to the fair market value of
such stock at the Date of Confirmation. Pursuant to the terms
thereof, options vest and become exercisable one-third upon each of
the first, second, and third anniversaries of the Date of
Confirmation upon continuous full-time employment, with acceleration
and termination provisions identical to those set forth above. SEE
Section V(F)(2)(e) herein.
2. WILLIAM L. LAWRENCE, JR. In connection with his
employment, Mr. Lawrence was granted a non-qualified stock option to
acquire 45,000 shares of Common Stock at an exercise price per share
equal to $1.125. Pursuant to the terms thereof, options vest and
become exercisable one-third upon each of the Date of Confirmation
and the first and second anniversaries thereof, upon continuous full-
time employment.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 18
<PAGE>
All options granted at least six months prior to any sale
of the Company automatically accelerate and become fully vested and
immediately exercisable upon such event. Options terminate upon the
earliest of: (i) ten years from the date of grant, (ii) termination
of employment for any reason other than death or disability, or
(iii) the expiration of six months from termination due to death or
disability.
Mr. Lawrence also received upon hire an additional non-
qualified stock option to acquire 45,000 shares of Common Stock
exercisable at a price per share equal to the fair market value of
such stock at the Date of Confirmation. Pursuant to the terms
thereof, options vest and become exercisable one third upon each of
the first, second and third anniversaries of the Date of Confirmation
upon continuous full-time employment, with acceleration and
termination provisions identical to those set forth above. SEE
Section V(F)(2)(e) herein.
3. JAY JACOBS. During fiscal year 1995, Mr. Jacobs
was granted a non-qualified stock option to acquire 100,000 shares of
Common Stock at an exercise price per share of $1.00. Pursuant to
the terms thereof, options vest immediately and terminate upon the
earliest of (i) expiration of ten years from date of grant,
(ii) termination as an officer or director for cause, or
(iii) expiration of two years from termination as an executive
officer or director other than for cause. Options are exercisable
beginning on the Date of Confirmation. All options granted at least
six months prior to any sale of the Company automatically accelerate
and become immediately exercisable upon such event. SEE Section
V(F)(2)(e) herein.
O. EMPLOYMENT CONTRACTS FOR MESSRS. STEFFEY AND
LAWRENCE. On September 8, 1995, the Court approved employment
contracts for Messrs. Steffey and Lawrence. Set forth below is a
summary of the key terms thereof:
1. STEFFEY CONTRACT. The Company signed an
employment agreement with Rex Loren Steffey, President and Chief
Executive Officer of the Company, effective July 1, 1995. The
contract calls for Mr. Steffey to devote his full time and energies
to serving as President and Chief Executive Officer of the Company
and provides for (a) a base salary starting at $325,000 per year
through January 27, 1996 (prorated), increasing to $350,000 for the
next fiscal year, ultimately increasing to $375,000 in the sixth and
final year of the contract ending in the Company's fiscal year 2001,
(b) cash incentive compensation payments of (i) $150,000 upon
confirmation of the Plan, and (ii) additional amounts based on pretax
profit percentages from 10% (fourth quarter, first year, fiscal year
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 19
<PAGE>
1996) to 5% (final year, fiscal year 2001),(6) and (c) the grant of
options on February 1, 1996 and 1997 to acquire an aggregate of
100,000 additional shares of Company Common Stock.
The contract allows the Company to terminate Mr. Steffey's
employment with cause, as defined in the contract, at any time
without payment of any additional salary beyond that earned to date.
The contract also allows the Company to terminate Mr. Steffey's
employment without cause at any time, in which event Mr. Steffey is
entitled to receive (a) payment of 50% of his base salary through
fiscal year 2001, with a maximum payment of twelve months base pay,
and (b) a one-time payment equal to the pro rata cash incentive
payment for the year of termination. To the extent Mr. Steffey is
terminated without cause at a time when Mr. Jacobs does not hold the
title of Chairman, in addition to the pro rata incentive payment
described in the preceding sentence, Mr. Steffey will be entitled to
receive 50% of his base salary through fiscal year 2001.
The contract contains a confidentiality obligation and a
binding arbitration provision. In addition, the agreement provides
that during the term thereof, the Board of Directors will nominate
and recommend Mr. Steffey for a board seat. A copy of such
employment agreement is attached hereto as Exhibit B-1.
2. LAWRENCE CONTRACT. The Company signed an
employment agreement with William L. Lawrence, Jr., Senior Vice
President and Chief Financial Officer, effective July 1, 1995. The
contract calls for Mr. Lawrence to devote his full time and energies
to serving as Chief Financial Officer and Senior Vice President of
the Company, and provides for (a) a base salary starting at $185,000
per year through January 27, 1996 (prorated), increasing to $200,000
per year for the next fiscal year, ultimately increasing to $225,000
in the sixth and final year of the contract ending in the Company's
fiscal year 2001, (b) cash incentive compensation payments of
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(6) The 10% payment for the fourth quarter of fiscal year 1996 may not exceed
$150,000. The other pretax profit percentages (a) will be applied against
annual pretax profits, and (b) have no maximums. Further, the Plan provides
that in the event of a default in payment to the class of general,
nonpriority unsecured creditors, the cash incentive compensation payments to
Mr. Steffey shall be subordinate to the payments due to such unsecured
creditors under the Plan. SEE Section V(B) (2) (c) (4) herein. The order
approving the employment agreement also provides that the contract shall be
null and void, unless otherwise agreed by the Committee and the Debtor, in
the event that an order confirming a chapter 11 plan is not entered on or
before March 1, 1996.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 20
<PAGE>
(i) $50,000 upon confirmation of the Plan, and (ii) additional
amounts based on pretax profit percentages from 3% (fourth quarter,
first year, fiscal year 1996) to 2% (final year, fiscal year 2001),(7)
and (c) the grant of options in February 1, 1996 and 1997 to acquire
an aggregate of 40,000 additional shares of Company Common Stock.
The contract allows the Company to terminate Mr. Lawrence's
employment with cause, as defined in the contract, at any time
without payment of any additional salary beyond that earned to date.
The contract also allows the Company to terminate Mr. Lawrence's
employment without cause at any time, in which event Mr. Lawrence is
entitled to receive (a) payment of 50% of his base salary for the
remainder of the contract term through fiscal year 2001, with a
maximum payment of 12 months base pay, and (b) a one-time payment
equal to the pro rata cash incentive payment for the year of
termination.
The contract contains a confidentiality obligation and a
binding arbitration provision. In addition, the contract provides
that during the term thereof, the Board of Directors will nominate
and recommend Mr. Lawrence for a board seat. A copy of such
employment agreement is attached hereto as Exhibit B-2.
P. LASALLE NATIONAL BANK FINANCING. Following its
recently completed due diligence and investigations, as indicated by
the letter attached hereto as Exhibit C, LaSalle National Bank
("LaSalle") has entered into a commitment, subject to terms and
conditions specified therein, to provide a $10,000,000 secured line
of credit to commence upon expiration of the CIT DIP Facility. By
order dated July 28, 1995, the Court approved the Debtor's payment of
the $50,000 good faith deposit to LaSalle as set forth in Exhibit C
and the preliminary commitment letter dated July 25, 1995.
The proposed LaSalle facility provides for cash borrowing
and/or the issuance of letters of credit which in the aggregate
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(7) The 10% payment for the fourth quarter of fiscal year 1996 may not exceed
$50,000. The other pretax profit percentages (a) will be applied against
annual pretax profits, and (b) have no maximums. Further, the Plan provides
that in the event of a default in payment to the class of general,
nonpriority unsecured creditors, the cash incentive compensation payments to
Mr. Lawrence shall be subordinate to the payments due to such unsecured
creditors under the plan. SEE Section V(B) (2) (c) (4) herein. The order
approving the employment agreement also provides that the contract shall be
null and void, unless otherwise agreed by the Committee and the Debtor, in
the event that an order confirming a chapter 11 plan is not entered on or
before March 1, 1996.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 21
<PAGE>
cannot exceed the lower of a "borrowing base" or $10,000,000.
Letters of credit are limited to a maximum of $5,000,000. Under the
proposed LaSalle facility, a first and only lien would be granted on
all of the Company's assets (excluding capitalized leases and
permitted liens).
Advances under the proposed facility will bear interest at
LaSalle's publicly announced prime rate. The proposed LaSalle
facility calls for an annual facility fee of 1% of the aggregate loan
limit, normal audit fees, reimbursement of customary out-of-pocket
expenses, and a letter of credit fee of 1 1/4% per annum. The original
term of the LaSalle loan will be 3 years.
The referenced order dated July 28, 1995 also provides that
(a) the Debtor is not required to initiate a preliminary hearing to
obtain approval of the proposed LaSalle financing pursuant to Section
364 of the Code and Bankruptcy Rule 4001, and (b) at such time that
the Debtor and the Committee have approved the final loan documents
relating to the proposed financing, the Debtor is authorized to
provide the requisite parties-in-interest 15 days' notice of a final
hearing on the motion to obtain approval of such financing.
The Company and LaSalle are in the process of negotiating
the loan documentation required to evidence the proposed financing.
The Company reasonably expects that a final hearing on the motion to
approve the LaSalle financing will be conducted on or before the
confirmation hearing on the Plan.
Q. OTHER ACTIVITY IN THE CASE. The Case was filed on
May 13, 1994. On June 13, 1994, a meeting was conducted pursuant to
Section 341 of the Bankruptcy Code with Steven Kingma, then Chief Financial
Officer of the Company, appearing on behalf of the Debtor.
This is a large retail case. The Company is a publicly
traded company which had over 2,400 creditors and over 700
shareholders when the Case was filed. Currently, the Company
operates 157 stores in 20 states. When the Case was filed, the
Company had 256 stores in 21 states. Since the chapter 11 filing,
the Debtor has (a) closed 103 stores through lease rejections,
assignments, agreements with landlords, and/or normal lease
expirations, (b) re-opened 2 stores, (c) opened 2 new stores,
(d) assumed the leases for 29 stores, and (e) received approval from
the Bankruptcy Court to open 4 other new stores.(8) Other than the 39
store liquidation conducted by Hilco, all store closures have been
conducted by the Company. SEE Section III(F) herein.
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(8) ALSO SEE footnote 5 above.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 22
<PAGE>
The Company has been assisted in its reorganization efforts
by its special real estate consultants, Keen Realty Consultants, Inc.
("Keen") and R.C.S., Inc. ("RCS"). Keen was employed by court order
to negotiate (a) termination or assignment of real estate leases, and
(b) settlement of real estate lease rejection claims. RCS was
employed, as authorized by the Court, to negotiate rent reductions
for the Company's real estate leases. In all cases, compensation for
the services rendered by Keen and RCS has been and continues to be
contingent upon results obtained.
In August 1994, the Court approved the employment of
Financo, Inc. ("Financo") as investment banker to assist the Company
with the potential sale of the Company as an on-going entity.
Payment for Financo's services was to be contingent upon negotiating
an acceptable sale. After the parties concluded that reorganization
prospects were promising, the Company terminated Financo's engagement
effective July 6, 1995 with the approval of the Committee.
The Company has obtained three extensions of the plan-
filing exclusivity periods pursuant to Section 1121(d) of the Bankruptcy
Code, all with the support of the Committee. The original plan-
filing exclusivity deadline fell on September 12, 1994, which the
Court by order dated September 8, 1994 extended to February 28, 1995.
On February 24, 1995, the Court granted a further extension of such
period through June 30, 1995. On June 23, 1995, the Court approved a
third extension of the exclusivity period through September 29, 1995.
The latter two extensions were subject to certain minimum financial
performance standards being achieved by the Company. The Plan has
been filed within the exclusivity period.
The extensions of the exclusivity periods were required to
ensure that (a) the business operations could stabilize, and (b) the
Company and the Committee would have adequate time to negotiate a
consensual reorganization plan. Business operations, in fact,
started to show improvement after the arrival of the new management
team. Profit margins have increased, cash balances are substantial,
there have been no draws on the CIT DIP Facility, and vendor
confidence and support have been restored in large part.
These improved conditions led the Company and the Committee
to commence serious plan negotiations in May 1995. By mid-June 1995,
the basic contours of a consensual plan had been negotiated. The
final details of the consensual plan were negotiated up to the date
of filing of the Plan.
In light of (a) the large number of the holders of Company
Common Stock, (b) public trades of Company Common Stock, and (c) Mr.
Jacobs' ownership or control of approximately 62% of the Company's
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 23
<PAGE>
Common Stock, the Court, by order dated April 27, 1995, directed that
notice of the disclosure statement hearing is not required to be sent
to the Company's shareholders pursuant to Bankruptcy Rule 2002(d).
Notice of the hearing on confirmation of the Plan will be sent to all
shareholders of record as of the date that the Disclosure Statement
is approved as provided in Bankruptcy Rule 3018(a).
By order dated October 16, 1995, the Court approved the
procedures for transmitting the documents and information required by
Bankruptcy Rule 3017(d) to any beneficial owners of Company Common
Stock pursuant to Bankruptcy Rule 3017(e).
R. J.J. DISTRIBUTION COMPANY. J.J. Distribution Company,
Inc. ("JJDC"), a wholly-owned subsidiary of the Company, filed a
voluntary chapter 11 petition on March 21, 1995, Case No. 95-02408.
The case was administratively consolidated with the chapter 11 case
of the Company by order of March 24, 1995. The Court also directed
that orders entered in Case No. 94-03993 (a) authorizing the
employment of (i) Bogle & Gates P.L.L.C. and R.C.S., Inc. as
attorneys and real estate consultants, respectively, for the Debtor,
and (ii) Siegel, Sommers & Schwartz, L.L.P. as attorneys for the
Committee; and (b) governing notice or any other administrative
matters in Case No. 94-03993, were applicable in the administratively
consolidated cases.
JJDC has a single asset, a lease with Pacific Northwest
Group A (the "Landlord") originally for 84,000 square feet of
warehouse space located at 19817 89th Avenue South, Kent, Washington,
which is used as a distribution center by the Company (the
"Distribution Center Lease"). At the time of the filing of the JJDC
bankruptcy petition, the Landlord was the only creditor of the
estate. The JJDC bankruptcy petition was filed to enable JJDC to
restructure the Distribution Center Lease.
On April 21, 1995, the Court entered an order (a) approving
a lease amendment executed by JJDC and the Landlord amending the
Distribution Center Lease to terminate 24,000 square feet under the
Lease and to provide for (i) a corresponding rent reduction, and
(ii) the payment of $30,780 to the Landlord in consideration for the
early termination and expense of the space reduction; and
(b) authorizing JJDC to assume the Distribution Center Lease, as
amended.
The Court granted JJDC's motion to dismiss its chapter 11
bankruptcy case by order dated September 22, 1995.
S. BOARD OF DIRECTORS. The Debtor's Board of Directors
currently consists of the following seven members:
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 24
<PAGE>
1. JAY JACOBS. SEE Sections II(C)(1) and III(N)(3)
herein. Mr. Jacobs, 83, has been a director since 1959.
2. REX LOREN STEFFEY. SEE Sections III(L)(1),
III(N)(1), and III(O)(1) herein. Mr. Steffey, 46, has been a
director since 1994.
3. WILLIAM L. LAWRENCE, JR. SEE Sections III(L)(2),
III(N)(2), and III(O)(2) herein. Mr. Lawrence, 44, has been a
director since August 1995.
4. SHELLEY SWERLAND. Ms. Swerland, 51, was
appointed as a director in August 1995. She is the daughter of Jay
Jacobs and the wife of Douglas A. Swerland. SEE Sections II(C)(1)
and II(C)(3) herein. She is the co-founder of Swerland Apparel
Ventures, dba SAVI, an off-price apparel superstore. Previously, Ms.
Swerland worked for Joseph Magnin, an apparel specialty retailer in
San Francisco, participating in its executive training program for
sales and buying. Prior to July 1994, she worked for the Company in
various capacities in sales, store management, and as Director of
Human Resources. She is the record owner of approximately 92,750
shares of Common Stock of the Company.
5. SAM RUBINSTEIN. Mr. Rubinstein, 78, was
appointed as a director in June 1994. Since 1987, he has served on a
variety of corporate and charitable boards. Mr. Rubinstein was
Chairman and Chief Executive Officer of Bonanza Stores. He was also
Chairman and Chief Executive Officer of Whitney Fidalgo Seafoods,
Inc. and Farwest Fisheries, Inc., both of which are fish processing
firms. He currently serves on the Board of Directors of Seattle
FilmWorks, Inc., a film processing company. Mr. Rubinstein is the
brother of Rose Jacobs, the deceased first wife of Mr. Jay Jacobs.
6. DAVID J. TAYLOR. Mr. Taylor, 44, was appointed
as a director in June 1994. He is the co-owner of The Boxmaker,
Inc., which manufactures and sells corrugated shipping containers.
In addition, he is President of Frederick's Fine Chocolates, which
manufactures chocolate candy. Previously, he was Chief Operating
Officer for Frederick and Nelson, a Pacific Northwest department
store chain, from August 1990 through June 1993.
7. GILBERT SCHERER. Mr. Scherer, 44, was appointed
as a director in August 1995. He is Chairman and Chief Executive
Officer of American Passage Corporation, a niche marketing and media
services firm. He is also Chairman of CVP, Inc. a mail-order
consumer products venture. Previously, he founded and served as
Chairman and Chief Executive Officer of Seattle FilmWorks, Inc., a
publicly traded mail-order photo finishing operation.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 25
<PAGE>
T. DIRECTORS' FEES. Currently, directors who are not
employees of the Company are granted stock options, and are paid an
annual retainer of $5,000, plus $500 for each Board of Directors
meeting attended and $500 for each Committee meeting chaired. Each
director who is not an employee of the Company is automatically
granted an option to purchase 4,000 shares of the Company's stock
upon election to the Board of Directors and 4,000 shares upon each
three-year anniversary thereafter. The option price is determined
based on the fair market value at the date granted. The options vest
over three years, and expire ten years from the date of grant. SEE
Section V(N)(2)(b) herein.
After the Date of Confirmation, it is contemplated that
regular meetings of the Board of Directors will be conducted on a
quarterly basis. Through fiscal year ending January 25, 1997,
directors' fees will not be increased.
U. EXECUTIVE/NONEXECUTIVE OFFICERS. The current
executive officers of the Company are as follows:
Name Age Position
---- --- --------
Jay Jacobs(9) 83 Chairman of the Board.
Rex Loren Steffey(10) 46 President and Chief Financial
Officer.
Doris Williams(11) 50 Executive Vice President -
Administration and Secretary.
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(9) SEE Sections II(C) (1), III(N) (3), and III(S) (1) herein.
(10) SEE Sections III(L) (1), III(N) (1), III(O) (1), and III(S) (2) herein.
(11) Doris Williams was the Company's Vice President - Administration from
November 1979 to February 1987, when she became Senior Vice President. Ms.
Williams was appointed Executive Vice President and Corporation Secretary in
June 1994. Ms. Williams has been employed by the Company in various
administrative management capacities since 1968, and served as a director
from November 1979 until August 1995.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 26
<PAGE>
Name Age Position
---- --- --------
William L. Lawrence, Jr.(12) 44 Senior Vice President, Chief
Financial Officer, and
Treasurer.
Other nonexecutive officers of the Company currently are as
follows:
Name Age Position
---- --- --------
Rebecca M. Friesen(13) 34 Vice President - Real Estate
and Store Planning
Brian McNamara(14) 49 Sr. Vice President/GMM Women's
Yeanna Woo(15) 38 Sr. Vice President/GMM Men's
Fashion Direction & Marketing
IV. ASSETS AND LIABILITIES OF THE DEBTOR
The Company filed detailed schedules of assets and
liabilities with the Court in connection with the commencement of
this case which were prepared from the Company's internal accounting
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(12) SEE Sections III(L) (2), III(N) (2), III(O) (2), and III(S) (3) herein.
(13) After several years as a legal secretary, Rebecca M. Friesen joined the
Company in June 1985 as Executive Secretary. In October 1990, she became the
Real Estate Coordinator, working very closely with the Director of Real
Estate. In March 1994, Ms. Friesen was promoted to Vice President of Real
Estate and Store Planning. She is responsible for new store site research and
selection, new store construction, store remodels, and store maintenance.
(14) SEE Section III(L) (3) herein.
(15) Yeanna Woo has been in the retail business for 20+ years. Before joining
the Company in June 1993 as Divisional Merchandise Manager of Women's, she
was a Divisional Merchandise Manager of Sportswear at Lamonts. In May 1994,
she was promoted to General Merchandise Manager of Men's, Women's, and
Fashion Direction. In January 1995, when Brian McNamara joined the
merchandising team, Ms. Woo became the General Merchandising Manager for Just
Men's and Fashion Direction. In June 1995, she accepted additional
responsibilities as the Director of Marketing for the Company.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 27
<PAGE>
records. Amended schedules were filed on July 21, 1995. The
schedules, as amended, are available for inspection at the Bankruptcy
Court during its regular business hours. To the Company's best
knowledge, information, and belief, the schedules, subject to any
disclosures herein, contain an accurate itemization of assets and
liabilities of the Company prior to filing.
In addition, certain assets and liabilities are described
below:
A. SUMMARY OF CLAIMS. Attached hereto as Exhibit D is a
summary of claims and their status as of the date hereof. The
Company reserves the right to object to any claim filed or scheduled
herein within the time permitted under the Plan.
B. PROFESSIONAL FEES AND COSTS. In addition to the
claims listed on the schedules and any other claims subsequently
allowed, the estate is liable for the administrative expense claims
for fees and costs of the professionals employed by the Debtor and
the Committee. Applications covering the fees and costs of such
professionals, as well as Committee members' expenses, for the period
ended June 30, 1995 were heard and approved on September 22, 1995.
Remaining fees and costs through confirmation are estimated
to be as follows:
1. Bogle & Gates P.L.L.C., attorneys for the Debtor:
$350,000 - $500,000.
2. Price Waterhouse, accountants for the Debtor:
$150,000.
3. Siegel, Sommers & Schwartz, L.L.P., counsel for
the Committee: $60,000.
4. Stoel Rives Boley Jones & Grey, local counsel for
the Committee: $12,000.
5. BDO Seidman, accountants for the Committee:
$30,000.
6. Smith Bunday Berman Britton, tax accountants for
the Debtor: $13,000.
C. APPRAISALS. The Debtor has no current appraisals of
Jay Jacobs' assets in its possession.
D. PREFERENCE ACTION ANALYSIS. The Company has conducted
an analysis of each check payment in the amount of $25,000 or more
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 28
<PAGE>
made by the Company to any party during the 90 days prior to the
chapter 11 filing. These payments total approximately $16,540,000.
Based on that analysis, it appears that all such payments were made
in the ordinary course of business and/or are not otherwise subject
to avoidance as preferential transfers under 11 U.S.C. Section 547.
The Company has waived the right to pursue preference
actions against parties as set forth in Section V(C)(6)(b) herein.
E. LITIGATION/OTHER ACTIONS AGAINST THE DEBTOR.(16)
1. ARGENTINE CLAIM. Michelle R. Argentine, a former
employee of the Company, filed a prepetition charge of discrimination
against the Company with the California Department of Fair Employment
& Housing and the Equal Employment Opportunity Commission (the
"EEOC"). The EEOC was notified of the chapter 11 filing in response
to its Notice of Charge of Discrimination and Request for Information
in MICHELLE R. ARGENTINE V. JAY JACOBS, INC., EEOC CHARGE NO. 377-
94-0314 (the "Argentine Charge").
On February 10, 1995, the Bankruptcy Court entered an order
approving the stipulation between the Company and the EEOC to lift
the automatic stay for the sole purpose of enabling the EEOC to
conduct its investigation in the Argentine Charge, including the
Company's responding to the EEOC's Request for Information therein.
The Company was represented by its special counsel, the firm of
Davis, Grimm & Payne, with respect to the Argentine Charge. On
May 10, 1995, the EEOC issued a Determination in the Argentine
Charge, finding that the Company did not violate federal law with
respect to Ms. Argentine.
Ms. Argentine now has the right to file an individual
lawsuit in U.S. Federal District Court. Ordinarily, absent the
operation of the automatic stay, such a lawsuit would have to be
filed within ninety (90) days of her receipt of the Determination (or
by mid-August 1995). No such suit has been filed.
2. OVERTON CLAIM. Aneka Overton worked for the
Company as an Assistant Manager at Store No. 50 (Pineridge Mall,
Chubbuck, Idaho) for approximately one year. After quitting her
employment in May 1995, she filed a claim with the Idaho Human Rights
Commission, alleging pregnancy discrimination. The Company conducted
its own investigation and has determined that there is no merit to
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(16) This summary does not include a description of pending litigation
against the Debtor for various tort claims, wherein the recovery, if any, is
covered entirely by insurance, and will not be assessable against the Debtor
directly.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 29
<PAGE>
the claim. The Company has filed with the Idaho Human Rights
Commission a detailed response to the allegations and is cooperating
with the agency in its investigation. The Company expects a finding
of No Reasonable Cause to believe discrimination occurred, although
an agency decision may not be issued until 1996.
V. SUMMARY OF THE PLAN
A complete copy of the Company's Plan accompanies this
Disclosure Statement. The discussion of the Plan which follows
constitutes a summary only. You are urged to read the Plan itself
with care before deciding to accept or reject it.
The Plan provides for payments with respect to secured
claims, unsecured claims, administrative expense claims, and other
priority claims from the Company's revenues and the proceeds of
liquidation of assets of the Debtor as reorganized pursuant to the
Plan (the "Reorganized Company"). The Effective Date of the Plan is
defined as the first business day that is eleven (11) days after the
Confirmation Order is entered on the Court's docket, unless the
effect of the Confirmation Order is stayed under Bankruptcy Rule
8005.
A brief summary of the key provisions of the Plan follows:
A. CLASSIFICATION OF CLAIMS AND INTERESTS UNDER PLAN.
There are three classes of Claims, one class of interests, and three
categories of unclassified Claims under the Plan. If the Plan is
confirmed by the Court and becomes effective, the class into which a
Claim fits will determine the manner in which such Claim will be
treated. The categories and classes defined in the Plan are
summarized below:
1. UNCLASSIFIED CLAIMS. Pursuant to Section 1123(a) of the
Bankruptcy Code, claims of a kind specified in Section 507(a)(1) and (7) are
not classified under the Plan. These Claims include unsecured
priority administrative expense Claims, ordinary course of business
tax Claims, and unsecured priority prepetition tax Claims.
2. CLASSIFIED CLAIMS/INTERESTS.
a. CLASS 1: Priority Wage Claims.
b. CLASS 2: Secured Tax Claims.
c. CLASS 3: Unsecured Claims.
d. CLASS 4: Equity Security Interests.
Classes 2 and 3 are impaired; Classes 1 and 4 are
unimpaired.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 30
<PAGE>
B. TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN.
1. UNCLASSIFIED CLAIMS.
a. ADMINISTRATIVE EXPENSE CLAIMS.
Administrative Expense Claims shall be paid in full in cash by the
Debtor on or before the Effective Date or upon entry of a Final Order
allowing such Claim, whichever occurs later, unless the holder of
such a Claim agrees to different treatment.
b. TRADE/ORDINARY COURSE OF BUSINESS EXPENSE
CLAIMS. All claims entitled to priority under Section 07(a)(1) of the Code
that have been, are, or will be incurred by the Debtor or Reorganized
Debtor after the Petition Date in the ordinary course of business
pursuant to Section 363(c)(1) of the Code shall be paid when and as
incurred, or upon such ordinary invoicing terms to which the
Reorganized Debtor and creditor may agree.
c. PRIORITY TAX CLAIMS. All Allowed Priority
Tax Claims shall be paid by the Debtor in four equal annual
installments. The first such installment shall be due on January 2,
1996, and the three remaining annual payments shall be made on the
second day of January in the three succeeding years, with the final
annual installment being payable on January 2, 1999. The amount of
the Allowed Priority Tax Claims shall include accrued interest at the
rate of 9.5% per annum from the Petition Date through the Date of
Confirmation. Thereafter, simple interest shall accrue
postconfirmation on the unpaid balance of each Allowed Priority Tax
Claim at the rate of 9.5% per annum unless the Court establishes,
after notice and hearing, a different rate of interest. Any holder
of a claim entitled to priority under Section 507(a)(7) of the Code shall,
within the same deadline and in the same manner established for
objections to confirmation of the Plan, file any objection it has to
the proposed interest rate, identify a proposed alternative rate, and
set forth the facts and circumstances justifying such rate. FAILURE
TO OBJECT TO THE PROPOSED INTEREST RATE SHALL BE DEEMED A CONSENT
THERETO.
Notwithstanding the foregoing, all Allowed Priority Tax
Claims shall be paid in full within six years of the date of the
assessment of the tax upon which such Claim is based.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 31
<PAGE>
The Company believes that the total amount of Allowed
Priority Tax Claims and Allowed Secured Tax Claims (Class 2) will be
approximately $ 700,000.(17)
2. CLASSIFIED CLAIMS/INTERESTS.
a. CLASS 1. (Priority Wage Claims). Each
holder of an Allowed Class 1 Claim shall receive cash on the
Effective Date of the Plan equal to the allowed amount of such Claim.
Class 1 Claims are not impaired.
The Company believes that there will be no allowed Class 1
Claims.
b. CLASS 2. (Secured Tax Claims). Each holder
of an Allowed Class 2 Claim shall retain its lien against the
collateral securing the Class 2 Claim until such claim is paid in
full by the Debtor in four equal annual installments. The first such
installment shall be due on January 2, 1996, and the remaining three
annual payments shall be made on the second day of January in the
three succeeding years, with the final annual installment being
payable on January 2, 1999. The amount of the Allowed Class 2 Claims
shall include accrued interest at the rate of 9.5% per annum from the
Petition Date through the Date of Confirmation. Thereafter, simple
interest shall accrue postconfirmation on the unpaid balance of each
Allowed Class 2 Claim hereunder at the rate of 9.5% per annum unless
the Court establishes, after notice and hearing, a different rate of
interest. The procedure for establishing a different rate of
interest shall be the same as that specified in Article IV(A)(3) of
the Plan. FAILURE TO OBJECT TO THE PROPOSED INTEREST RATE SHALL BE
DEEMED A CONSENT THERETO.
Notwithstanding the foregoing, all Allowed Secured Tax
Claims shall be paid in full within six years of the date of the
assessment of the tax upon which such Claim is based.
The Company believes that the total amount of Allowed
Class 2 Claims and Allowed Priority Tax Claims will be approximately
$700,000.(18)
c. CLASS 3. (Unsecured Claims). Holders of
Allowed Unsecured Claims shall receive the following:
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(17) Under the Plan, the payment provisions with respect to Allowed Priority
Tax Claims and Allowed Class 2 Claims are identical.
(18) Under the Plan, the payment provisions with respect to Allowed Class 2
Claims and Allowed Priority Tax Claims are identical.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 32
<PAGE>
(1) 1996 30% PAYMENT. On January 2, 1996,
each holder of an Allowed Class 3 Claim shall receive a payment from
the Reorganized Debtor in the amount of 30% of its Allowed Class 3
Claim, without interest. THIS 1996 30% PAYMENT WILL BE PAID TO ALL
HOLDERS OF ALLOWED CLASS 3 CLAIMS.
(2) 1997 30% PAYMENT. Except for holders
of Allowed Class 3 Claims who elect to exercise their right to
receive the treatment set forth in Article IV(B)(Class 3)(c) of the
Plan, on January 2, 1997, each holder of an Allowed Class 3 Claim
shall receive one final payment from the Reorganized Debtor in the
amount of 30% of its Allowed Class 3 Claim, without interest. Upon
satisfaction of this 1997 30% payment, the subject Class 3 Claim
shall be deemed satisfied in full. HOLDERS OF ALLOWED CLASS 3 CLAIMS
ELECTING THE 1997 15% PAYMENT AND THE NOTE DESCRIBED BELOW WILL NOT
RECEIVE THIS 1997 30% PAYMENT.
(3) RIGHT TO ELECTION OF 1997 15% PAYMENT
AND NOTE. In lieu of the payment specified in Article
IV(B)(Class 3)(b) of the Plan, holders of Allowed Class 3 Claims
shall have the right to elect the payments set forth in Article
IV(B)(Class 3)(c) of the Plan. If a holder of an Allowed Class 3
Claim elects to exercise the right to receive payment as set forth in
subsection (c) thereof, such holder must notify the Reorganized
Debtor in writing (as described below) on or before July 15, 1996 of
such exercise, and thereafter shall receive the following in full
satisfaction of its Allowed Class 3 Claim, in addition to the 1996
30% payment set forth in Article IV(B)(Class 3)(a) of the Plan:
(a) 1997 15% PAYMENT. On January 2,
1997, such electing holder of Allowed Class 3 Claim shall receive a
second payment under the Plan in the amount of 15% of its Allowed
Class 3 Claim, without interest. SUCH ELECTING HOLDERS WILL NOT
RECEIVE THE 1997 30% PAYMENT DESCRIBED IN SECTION V(B)(2)(c)(2)
IMMEDIATELY ABOVE.
(b) NOTE(S). Additionally, upon
exercise of such right of election, each such electing holder of an
Allowed Class 3 Claim shall receive a promissory note (the "Note"),
with a principal sum in the amount equal to 42% of its Allowed Class
3 Claim. A copy of the Note is attached to the Plan as Exhibit A,
and the terms and conditions of the Note are incorporated herein by
reference. A summary of the key provisions of the Note follows:
PRINCIPAL AMOUNT: 42% of Allowed Class 3 Claim
(the "Principal Amount").
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 33
<PAGE>
INTEREST RATE: 9.5% per annum, commencing
February 1, 1997.
INTEREST PAYMENTS: Due when principal payments
are due and payable.
INTEREST ON LATE PAYMENTS: 11.5% per annum.
PRINCIPAL PAYMENTS: 26.2% of Principal Amount
due January 2, 1998; 24.6% of Principal Amount due January 2, 1999;
24.6% of Principal Amount due January 2, 2000; 24.6% of Principal
Amount due January 2, 2001.
MATURITY: January 2, 2001.
EXCESS CASH FLOW PAYMENTS: Additionally,
non-cumulative Excess Cash Flow Payments (as therein defined), if
any, shall be due and payable on the 15th of June in calendar years
1999, 2000, and 2001 based on such holder's Pro Rata Share (as
therein defined) of 30%, 40%, and 50% of Excess Cash Flow over
Targeted EBITDA (as therein defined) for the fiscal years ended 1999,
2000, and 2001, respectively, as provided in the Note; PROVIDED,
HOWEVER, that amounts payable as Excess Cash Flow shall not exceed
the difference between 100% of the holder's Allowed Class 3 Claim,
less the net present value (using a 12% discount rate) of all cash
paid or payable with respect to such Allowed Class 3 Claim, whether
under the Note or the Plan.
PREPAYMENT: Prepayment of principal and accrued
interest is permitted without penalty. The Note shall be deemed paid
in full upon payment of all principal and accrued interest, and if so
prepaid, any obligation to make payments of Excess Cash Flow with
respect to any fiscal year ending after the date when such prepayment
is made shall cease.
CREDITORS SHOULD CAREFULLY READ AND REVIEW THE NOTE
ATTACHED TO THE PLAN. IF ANY INCONSISTENCY EXISTS BETWEEN THE
FOREGOING SUMMARY AND THE NOTE, THE NOTE SUPERSEDES THE SUMMARY, AND
THE TERMS AND CONDITIONS OF THE NOTE ARE CONTROLLING.
(c) NOTICE OF EXERCISE REQUIREMENTS.
Written notice of the election by a holder of an Allowed Class 3
Claim to exercise the right to receive the 1997 15% payment and the
Note shall either be made by (a) certified letter, (b) hand delivery,
or (c) next day delivery service, in all three cases, to Jay Jacobs,
Inc. (Attn: William L. Lawrence, Jr.), 1530 Fifth Avenue, Seattle, WA
98101. If sent by certified mail, the election notice must be
postmarked no later than July 15, 1996. If hand-delivered or sent by
next day delivery service, the notice of election must be received by
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 34
<PAGE>
the Company during regular business hours no later than July 15,
1996.
STRICT COMPLIANCE WITH THE FOREGOING NOTICE OF ELECTION
PROCEDURES IS REQUIRED. FAILURE TO PROVIDE NOTICE OF EXERCISE OF THE
RIGHT DESCRIBED ABOVE IN A TIMELY FASHION WILL RESULT IN SATISFACTION
OF A CLASS 3 CLAIMANT'S CLAIM IN THE MANNER DESCRIBED IN ARTICLE
IV(B)(CLASS 3)(b) OF THE PLAN.
(d) REPORTING REQUIREMENTS. For the
fiscal years ending 1997, 1998, 1999, 2000, and 2001, the Reorganized
Debtor shall provide each holder of a Note with audited consolidated
financial statements certified by independent public accountants.
Additionally, for the fiscal years ending 1999, 2000, and 2001, the
Reorganized Debtor shall furnish each holder of a Note with a
comprehensive analysis of Excess Cash Flow for that fiscal year.
(4) SUBORDINATION PROVISIONS. The cash
incentive compensation payments due to Rex Loren Steffey and William
L. Lawrence, Jr. under their employment contracts (SEE Sections
III(O)(1) and III(O)(2) herein, respectively) shall (a) be
subordinate to the payments due and payable with respect to Allowed
Class 3 Claims, and (b) not be paid until all payments due to holders
of Allowed Class 3 Claims in that calendar year have been paid, so
that, for example, the cash incentive payments due (i) after the
conclusion of fiscal year 1996 shall not be paid unless all Allowed
Class 3 Claims payments due on January 2, 1996 have been made,
(ii) after the conclusion of fiscal year 1997 shall not be paid
unless all Allowed Class 3 Claims payments due on January 2, 1997
have been made, and (iii) after the conclusion of remaining fiscal
years shall not be paid unless all payments due that calendar year
under the Note(s) have been made.
(5) TRUST INDENTURE REQUIREMENTS. The
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"),
generally provides that non-exempt debt securities shall be issued
pursuant to a trust indenture that has been qualified with the
Commission. Section 304(a)(8) of the Trust Indenture Act and
Rule 4a-1 thereunder exempt from the purview of such Act any debt
securities issued or to be issued otherwise than under an indenture;
provided, however, that no more than $5,000,000 principal amount of
non-exempt debt securities may be issued in any period of 12
consecutive months in reliance thereon.
The Company believes that should all rights offered under
the Plan in exchange for Allowed Class 3 Claims be exercised for
Notes, the principal amount of such Notes (including any Excess Cash
Flow Payments that may be added to the principal of the Notes) and
any non-exempt debt securities issued or to be issued by the Company
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 35
<PAGE>
within the applicable period will be under the $5,000,000 ceiling set
forth in Rule 4a-1. Therefore, the Notes will not be issued pursuant
to an indenture.
If, in the unlikely event rights are exercised by Class 3
Claimants for Notes with an aggregate principal amount (including any
Excess Cash Flow Payments that may be added to the principal of the
Notes) exceeding $5,000,000, the Company will modify the Plan to
provide for an indenture that meets the applicable requirements of
the Trust Indenture Act.
The Company believes that the total amount of Allowed Class
3 Claims will be approximately $8,400,000.
d. CLASS 4. (Equity Security Interests).
Holders of Class 4 Interests shall retain their interests, and all
the rights of the holders of Company Common Stock will not be altered
upon confirmation of the Plan. No payments or distributions will be
made to Class 4 Interests under the Plan. Class 4 Interests are not
impaired.
C. MEANS FOR EXECUTION OF THE PLAN. The means for
execution of the Plan are set forth in Article V of the Plan.
1. VESTING OF PROPERTY OF THE ESTATE. All assets of
the Estate shall be vested in the Reorganized Debtor in accordance
with Section 1141 of the Bankruptcy Code, and no further order of the Court
shall be necessary for the Reorganized Debtor to perform such acts as
are in the ordinary course of its business and/or as are necessary to
carry out the purposes and intent of the Plan.
2. FUNDING OF THE PLAN. The Company believes that
revenues from future business operations, as well as the new
financing agreement with LaSalle (which the Company anticipates will
be approved before the Plan is confirmed), should enable the Debtor
to comply with the payment provisions of the Plan. See Sections
III(P), VI, and IX herein.
3. NO PAYMENTS PRIOR TO EFFECTIVE DATE. Although
the Plan provides for various payments to be made on January 2, 1996,
such payments shall be due and payable on the Effective Date if
January 2, 1996 precedes the Effective Date.
4. POSTCONFIRMATION CREDITORS COMMITTEE (THE "PCC").
Upon confirmation, the Committee shall remain in existence, but it
shall thereafter be known and redesignated as the Postconfirmation
Creditors Committee (the "PCC"). The PCC shall prescribe its own
rules of procedure, subject to the following requirements. The PCC's
rights and duties are restricted and limited to those described and
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 36
<PAGE>
provided for in Article V(G), Article V(K), Article VI, Article XII,
and Article XIII of the Plan.
The PCC may continue to employ the current attorneys for
the Committee as counsel for the PCC to advise it with respect to
such limited rights and duties, and the PCC is entitled to recover
its reasonable attorneys' fees and expenses from the Reorganized
Debtor. Absent Court approval with notice to the Reorganized Debtor,
the PCC may not employ other Professional Persons, the fees and costs
of which are to be borne by the Reorganized Debtor. Any dispute
concerning the fees and costs of Professional Persons of the PCC
shall be heard and determined by the Court.
Members of the PCC are entitled to receive reimbursement of
their reasonable expenses from the Reorganized Debtor, but they shall
serve without compensation. Any dispute concerning the reimbursement
of expenses for PCC members shall be heard and determined by the
Court.
Any notices or information required to be sent to the PCC
under the Plan shall be forwarded by facsimile transmission to the
PCC (c/o Lawrence C. Gottlieb, Esq., Siegel, Sommers & Schwartz,
L.L.P., 470 Park Avenue South, New York, NY 10016 (fax number:
(212) 889-0688; confirmation number: (212) 889-7570)).
Upon the earlier of (a) the Reorganized Debtor's full
satisfaction of all payments on Allowed Claims due before and
including January 2, 1997 under the Plan, or (b) disbandment by
unanimous consent of its members, the PCC shall disband and cease to
exist.
5. SECURITIES LAW EXEMPTION; AVAILABILITY OF SEC
RULE 144 FOR AFFILIATE RESALES. The issuance of the Notes under
the Plan is exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), and state securities laws
pursuant to Section 1145(a)(1) of the Bankruptcy Code.
Section 1145(a)(1) of the Bankruptcy Code, however, does
not apply to subsequent sales by persons who are "underwriters," as
that term is defined in Section 1145(b)(1) of the Bankruptcy Code.
Section 1145(b)(1) provides that, for purposes of section 2(11) of
the Securities Act, the term "underwriter" means, in addition to
those persons who perform traditional underwriting activities, any
affiliate of the issuer.
An "affiliate" of an issuer means a person that directly or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the issuer. By
defining the term "underwriter" to include affiliates of the issuer,
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 37
<PAGE>
subsequent sales by such affiliates of securities issued under a plan
of reorganization are subject to the registration requirements of the
Securities Act, unless another exemption from registration is
available.
The Commission has promulgated Rules 144 and 144A to permit
resales under certain specified conditions and, by complying with
such conditions, affiliates may avoid being deemed statutory
underwriters under the Securities Act. In general, Rule 144A permits
a person other than the issuer to sell without registration under the
Securities Act securities that are not of the same class as
securities that are listed on a United States stock exchange or
quoted in a United States automated dealer quotation system such as
Nasdaq; provided, however, that the seller and anyone acting on the
seller's behalf reasonably must believe that the purchaser (a) is a
"qualified institutional buyer," as that term is defined in the rule,
and (b) understands that the seller is relying on a Rule 144A
exemption for the transaction. By virtue of its status as a
reporting issuer under the Exchange Act, an issuer such as the Debtor
need not comply with Rule 144A's information requirements.
In general, under Rule 144 as currently in effect, an
affiliate would be entitled to sell, within any three-month period,
one percent of the aggregate principal amount of the Notes then
outstanding as shown by the most recent report or statement published
by the issuer; provided, however, that certain manner-of-sale
provisions, notice requirements and current public information
standards concerning the issuer are satisfied. The Commission
repeatedly has taken the position that affiliates that would be
deemed underwriters solely by virtue of their status as affiliates
lawfully may resell securities received pursuant to an exemption
under Section 1145(a)(1) of the Bankruptcy Code in compliance with
Rule 144, without regard to the traditional two-year holding period.
The Company neither anticipates the creation of, nor
undertakes to facilitate, any market for the Notes. In particular,
the Company does not intend to register the Notes under the Exchange
Act, or cause the Notes to be listed for trading on a national
securities exchange or over-the-counter market. As a result,
affiliates may not be able to make resales in brokers' transactions
or directly with a market maker in compliance with Rule 144's manner-
of-sale requirement. Accordingly, there can be no assurance that
Rule 144 will be available for resales of the Notes by affiliates.
An affiliate also may be able to resell Notes in exempt
private transactions to sophisticated purchasers who are not (and who
are able to represent that they are not) purchasing with a view to
distribution of the Notes, provided that such purchasers have both
the financial wherewithal to bear the risk of the investment and the
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 38
<PAGE>
experience and knowledge to be able to assess the risk of an
investment therein.
WHETHER OR NOT ANY PARTICULAR PERSON WOULD BE DEEMED TO BE
AN "UNDERWRITER" WITH RESPECT TO ANY SECURITY TO BE ISSUED PURSUANT
TO THE PLAN DEPENDS UPON VARIOUS FACTS AND CIRCUMSTANCES APPLICABLE
TO THAT PERSON. ACCORDINGLY, THE COMPANY EXPRESSES NO VIEW AS TO
WHETHER ANY PERSON WOULD BE AN "UNDERWRITER" WITH RESPECT TO ANY
SECURITY TO BE ISSUED PURSUANT TO THE PLAN, AND MAKES NO
REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE
NOTES TO BE DISTRIBUTED PURSUANT TO THE PLAN. THE COMPANY RECOMMENDS
THAT POTENTIAL RECIPIENTS OF THE NOTES CONSULT THEIR OWN COUNSEL
CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES.
6. ADMINISTRATION OF CLAIMS AND CAUSES OF ACTION.
a. GENERAL. Except as otherwise provided in
the Plan, all rights, claims, and causes of action, whether equitable
or legal, of the Debtor, Debtor-in-Possession, or the Reorganized
Debtor against all persons are reserved for the Reorganized Debtor
during the first sixty (60) days following the Effective Date.
Without limiting the generality of the foregoing, such rights,
claims, and causes of action include, but are not limited to, those
arising under (a) Sections 544, 545, 547, 548, and 549 of the Bankruptcy
Code with respect to "strong arm" and other avoidance actions
available to the "trustee" as lien creditor and as successor to
certain creditors and purchasers, avoidance of statutory liens,
preferential transfers, fraudulent transfers, and avoidable
postpetition transfers, and (b) state or other federal law for the
recovery of avoidable transfers.
During the pendency of the Case, prior to or after the Date
of Confirmation, the Reorganized Debtor shall investigate, prosecute,
and/or settle such claims as the Reorganized Debtor deems
appropriate, and may commence adversary proceedings against persons
to realize upon causes of action retained. After the first sixty
(60) days following the Effective Date, the PCC shall have an
additional thirty (30) days to file any such action. Additionally,
the PCC may join any such action filed by the Company. After ninety
(90) days following the Effective Date, no additional such actions
may be filed by any party.
b. WAIVER OF PREFERENCE ACTIONS. Not-
withstanding the foregoing, the Reorganized Debtor waives the right
to pursue preference actions against any parties under (a) Section 547 of
the Bankruptcy Code, or (b) similar state law preference theories,
PROVIDED, HOWEVER, that the Reorganized Debtor reserves the right to
raise such preference causes of action as an affirmative defense to
any action or counterclaim asserted by any party against the Company.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 39
<PAGE>
7. DISBURSING AGENT. The Reorganized Debtor shall
be the Disbursing Agent for the payments required to be made under
the Plan. Additionally, the Reorganized Debtor shall continue to
have the sole authority to pay the operating expenses of the
Reorganized Debtor, the expenses of liquidation of any asset of the
Reorganized Debtor, including any tax liability resulting therefrom,
and the amounts necessary to cure any arrearages under any executory
contract or unexpired lease being assumed pursuant to the Plan.
8. DEADLINE FOR FILING CERTAIN ADMINISTRATIVE
EXPENSE CLAIMS. Any party holding a claim entitled to priority
pursuant to Section 507(a)(1) of the Bankruptcy Code incurred prior to the
Date of Confirmation, other than the claims for fees and costs of
Professional Persons and Committee member expenses, shall file a
proof of such claim within thirty (30) days of the Date of
Confirmation; provided, however, that this deadline shall not apply
to claims arising under Article IV(A)(2) of the Plan relating to
postpetition trade/ordinary course of business expense claims. The
failure of any party to timely file a proof of claim as required
hereunder will result in the disallowance of such claim.
9. NOTICE PROCEDURES GOVERNING DISTRIBUTIONS.
Article V(J) of the Plan contains relatively standard notice
procedures governing distributions.
10. POSTCONFIRMATION PROFESSIONAL FEES. Subsequent
to the Date of Confirmation, during the existence of the PCC, the
Reorganized Debtor shall be authorized to pay fees and expenses
incurred by professionals. Monthly invoices of said fees and
expenses shall be delivered to the Reorganized Debtor, its counsel,
and counsel to the PCC. Unless a written objection is received
within ten (10) days after receipt of the monthly invoices, said fees
and expenses shall be paid by the Reorganized Debtor. If a written
objection is received within ten (10) days, the parties seeking
payment shall apply to the Bankruptcy Court for approval of said fees
and expenses, if the objection cannot be amicably resolved.
Following disbandment of the PCC, the Reorganized Debtor shall be
authorized to pay fees and expenses of its professionals in the
ordinary course of its business.
11. EXCULPATION. The Debtor, Reorganized Debtor, the
Committee, the PCC, and their respective directors, shareholders,
agents, officers, employees, representatives, and attorneys,
including Professional Persons (acting in such capacity), shall
neither have nor incur liability to any entity for any action taken
or omitted to be taken in connection with or related to the
formulation, preparation, dissemination, implementation, confirmation
or consummation of the Plan, the Disclosure Statement, earlier
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 40
<PAGE>
versions of same or any contract, instrument, release or other
agreement or document created or entered into, or any other action
taken or omitted to be taken in connection with the Plan; PROVIDED,
HOWEVER, that the foregoing provisions of this subparagraph (L) shall
have no effect on the liability of any entity that would otherwise
result from any such action or omission to the extent that such
action or omission is determined in a Final Order to have constituted
gross negligence or willful misconduct.
D. CLAIMS OBJECTIONS AND TREATMENT OF DISPUTED CLAIMS.
Article VI of the Plan sets forth the following with respect to
claims objections and treatment of disputed claims:
1. OBJECTIONS TO CLAIMS. Any objection to a claim
by the Reorganized Debtor must be filed on the later of (a) January
2, 1996, or (b) thirty (30) days after the filing of a proof of claim
pursuant to the provisions of Article VII(B) below or other claims
filed subsequent to confirmation, unless said time period is extended
by the Bankruptcy Court for cause shown. Thereafter, the PCC shall
have an additional thirty (30) days to file any other objections to
claims. Additionally, the PCC may join any objection filed by the
Company. Objections must be served in accordance with Bankruptcy
Rule 3007.
2. TREATMENT OF DISPUTED CLAIMS. Notwithstanding
any provision of the Plan specifying the time for payment of
distributions to holders of claims, no distribution shall be made to,
and no Note shall be issued to the holder of any Disputed Claim until
the time such Claim has been determined to be an Allowed Claim. At
the time of each distribution to holders of Claims in a class or
unclassified category which contains any Disputed Claim, the
Disbursing Agent shall reserve the amount which would have been
distributed to holders of the Disputed Claims had their claims been
Allowed Claims so that the timing of distributions to other creditors
shall not be affected by any delay in the resolution of the Disputed
Claims. Upon the allowance of any Disputed Claim, the holder shall
be paid the amount which such holder would have received had its
claim been an Allowed Claim on the Effective Date.
Notwithstanding the foregoing, the Disbursing Agent shall
timely pay all undisputed portions, if any, of Disputed Claims
pursuant to the relevant provisions of the Plan. Upon the allowance
of the disputed portion of a Disputed Claim, the Disbursing Agent
shall pay the amount of the allowed portion, plus 4% per annum
accruing from the date that the payment was otherwise due to be paid
under the Plan and accruing only on the amount past due under the
payment provisions of the Plan.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 41
<PAGE>
3. SETTLEMENT OF CLAIMS. Settlements of Disputed
Claims shall be approved on an ex parte basis if the subject
settlement order is executed by both the Reorganized Debtor and the
PCC. In the absence of such a jointly executed order regarding a
particular settlement, approval of the subject compromise agreement
will require (a) notice to the Reorganized Debtor, the PCC, and all
parties entitled to special notice in the Case, and (b) a hearing.
E. EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Article VII
of the Plan specifies those executory contracts and unexpired leases
of the Debtor which are being assumed or rejected under the Plan on
the Effective Date. Any executory contract or unexpired lease of the
Debtor not specifically listed and not assumed or rejected prior to
the Effective Date, will be deemed rejected by the Reorganized Debtor
on the Effective Date.
1. LEASES AND CONTRACTS TO BE ASSUMED OR REJECTED.
a. ASSUMPTION OF JACOBS FAMILY BUY/SELL
AGREEMENT. Upon confirmation, the Jacobs Family Buy/Sell Agreement
hereinafter described shall be assumed:
In March 1987, the Company entered into a Buy/Sell
Agreement (the "Jacobs Family Buy/Sell Agreement") with Jay Jacobs in
his individual capacity and as trustee for the Jacobs Trust, his
daughters Shelley Swerland and Judy Friedt in their individual
capacities and as trustees of trusts for each of their children, and
Marjorie Jacobs, Mr. Jacobs' wife ("Shareholders"). Subject to
certain exceptions, transfers of shares of Company Common Stock (or
securities exercisable for, or convertible into, Common Stock),
whenever acquired, trigger rights of first refusal by the Company or
its assigns and by the other parties after the Company's right
expires or is exercised or waived.
The purpose of the Jacobs Family Buy/Sell Agreement is to
limit the manner in which shares held by founding members can be
transferred to third parties without the consent of the Company and
the other parties subject thereto. The Company believes that the
assumption of the Jacobs Family Buy/Sell Agreement will assist the
Company in its efforts to preserve the Company's net operating loss
carryovers. SEE Section VIII(B)(1) herein.
Transfers of Common Stock within the volume and other
restrictions of Rule 144 under the Securities Act, except Rule
144(k), are not subject to the Jacobs Family Buy/Sell Agreement.
SEE Section V(O) herein. Shares transferred as aforesaid are not,
thereafter, subject to the terms of the Jacobs Family Buy/Sell
Agreement. Transfers by gift, bequest or devise to, or to a trust
for the benefit of, a party's spouse, children, grandchildren or
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 42
<PAGE>
parents ("Successors") do not trigger rights of first refusal, but
the Successor in such case must sign and abide by the terms of the
Jacobs Family Buy/Sell Agreement as if the Successor were an original
party to it. Transfers at death otherwise than to a Successor are
subject to the Jacobs Family Buy/Sell Agreement.
Pursuant to the terms of the Jacobs Family Buy/Sell
Agreement, such Agreement shall remain in force until any one of the
following occurs: (i) the Company is adjudicated bankrupt, executes
a general assignment for the benefit of creditors, is voluntarily or
involuntarily dissolved, or has a receiver appointed on its behalf,
or (ii) the Agreement is terminated in writing by all of the
Shareholders.
b. ASSUMPTION OF LEASES FOR 107 STORES. Upon
the Effective Date, the leases for the 107 stores under which the
Company is the lessee listed in Exhibit B to the Plan shall be
assumed. It is the Company's opinion that assumption of these leases
is critical to the future success of its business operations. THE
DEBTOR RESERVES THE RIGHT TO AMEND EXHIBIT B TO THE PLAN PRIOR TO
CONFIRMATION OF THE PLAN.
c. REJECTION OF LEASES FOR 12 STORES. Upon or
prior to the Effective Date, the leases for the 12 stores under which
the Company is the lessee listed in Exhibit C to the Plan shall be
rejected. It is the Company's opinion that these leases should be
rejected in the best interests of future business operations. THE
DEBTOR RESERVES THE RIGHT TO AMEND EXHIBIT C TO THE PLAN PRIOR TO
CONFIRMATION OF THE PLAN.
d. OTHER CONTRACTS/LEASES. Any executory
contract or unexpired lease of the Debtor not listed above, or not
previously assumed pursuant to court order, will be deemed rejected
by the Reorganized Debtor on the Effective Date.
2. FILING OF CLAIMS ARISING FROM REJECTION OF
CONTRACT OR LEASE. The Plan provides that any claim arising from the
rejection of any executory contract or lease is a Class 3 Claim to
the extent it is an allowed claim. Any party holding a claim arising
from the rejection of a contract or unexpired lease pursuant to
Article VII(A)(3) or (4) of the Plan must file a proof of such claim
with the Court within thirty (30) days of the Date of Confirmation.
3. CURE OF DEFAULTS. With regard to any executory
contract or unexpired lease listed in Article VII(A)(1) and (2) of
the Plan, the Plan provides that the Reorganized Debtor shall
(a) assume such contract or lease on the Effective Date, and (b) cure
any arrearage under the contract or lease, upon assumption in such
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 43
<PAGE>
amounts as may be determined by the Court at the hearing on
confirmation or thereafter.
4. AFFIRMATION OF MASTER LEASE FOR VEHICLES.
Confirmation of the Plan will (a) in no way alter or affect the
Company's performance obligations under its master lease for certain
vehicles, dated May 30, 1995, entered into with Glesby-Marks Leasing
Corporation, and (b) shall constitute the Reorganized Debtor's
affirmation of said master lease.
F. STOCK OPTION PLAN. Article VIII of the Plan provides
for the approval of a stock option plan as follows:
1. APPROVAL OF THE 1995 STOCK OPTION PLAN. As part
of the implementation of the Plan, the Court will be asked to approve
the Jay Jacobs, Inc. 1995 Stock Option Plan (the "1995 Stock Option
Plan"), to take effect on the Effective Date. The 1995 Stock Option
Plan was approved by the Compensation Committee and Board of
Directors in August, 1995.
THE PLAN OF REORGANIZATION AND THE DISCLOSURE STATEMENT
SHALL BE DEEMED A SOLICITATION TO THE HOLDERS OF COMMON STOCK FOR
APPROVAL OF THE 1995 STOCK OPTION PLAN, AND APPROVAL OF THE PLAN
THEREBY AND THE CONFIRMATION ORDER SHALL CONSTITUTE APPROVAL OF THE
1995 STOCK OPTION PLAN FOR PURPOSES OF RULE 16b-3 OF THE EXCHANGE ACT
AND SECTIONS 162(m) AND 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (the "IRC").
The following description of the 1995 Stock Option Plan is
qualified in its entirety by reference to the full text of the 1995
Stock Option Plan, a copy of which is attached to the Plan as
Exhibit D.
a. GENERAL; ELIGIBILITY. The 1995 Stock Option
Plan provides for the discretionary grant of incentive stock options
("ISOs") within the meaning of IRC Section 422 to employees and the
discretionary grant of non-qualified stock options ("NQSOs") to
employees, consultants, and such other persons as the Plan
Administrator (as defined below) may select.
If approved, the 1995 Stock Option Plan will provide for
the grant from time to time of ISOs and NQSOs until the 1995 Stock
Option Plan is terminated by the Board of Directors in its
discretion. Options granted under the 1995 Stock Option Plan may
extend beyond the 1995 Stock Option Plan's termination date and the
terms and conditions of the 1995 Stock Option Plan will continue to
apply to such options. Any options granted under the 1995 Stock
Option Plan prior to the Effective Date are granted subject to
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 44
<PAGE>
approval by the Court of the 1995 Stock Option Plan as part of the
confirmation of the Company's Plan.
The 1995 Stock Option Plan provides for the grant of
options to purchase an aggregate of 500,000 shares of Common Stock.
No person is eligible to receive in any fiscal year options to
purchase more than 100,000 shares of Common Stock. The number of
shares available under the 1995 Stock Option Plan, the foregoing
individual limit, and the amount of shares underlying outstanding
options are all subject to adjustment in the event of a share
dividend, stock split, or other change in the Company's capital
structure.
As of the date of this Disclosure Statement, no specific
awards or options have been authorized under the 1995 Stock Option
Plan, although the Company is contractually obligated to issue
options to acquire an aggregate of 140,000 shares of Common Stock to
Rex Loren Steffey and William L. Lawrence, Jr. pursuant to the terms
of their respective employment agreements. SEE Sections III(N)(1)
and III(O)(1), and III(N)(2) and III(O)(2) herein, respectively.
b. ADMINISTRATION. The 1995 Stock Option Plan
will be administered by the Compensation Committee (the "Plan
Administrator") of the Company's Board of Directors. Under the terms
of the 1995 Stock Option Plan, the Compensation Committee shall
consist of two or more members of the Board who qualify as
"disinterested persons" under Rule 16b-3 of the Exchange Act and, as
"outside directors" under IRC Section 162(m). The Plan Administrator
will determine the officers, key employees and other persons to whom
options will be granted, the exercise prices, the number of shares
covered by each grant, and all other terms and conditions of the
grants.
Under the terms of the 1995 Stock Option Plan, the
Compensation Committee may delegate to one or more executive officers
the authority to grant options to employees who are not subject to
Section 16 of the Exchange Act with respect to the Common Stock. The
1995 Stock Option Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and is not qualified under IRC section 401(a).
c. EXERCISE PRICE. The exercise price of ISOs
or grants to a "covered employee" as such term is defined for
purposes of IRC Section 162(m), must be equal to or greater than the
fair market value of the Common Stock on the date of grant (110% of
the fair market value in the case of employees who hold 10% or more
of the voting power of the Common Stock). The option price of NQSOs
may be less than the fair market value of the Common Stock on the
date of grant.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 45
<PAGE>
d. DURATION. Options may be granted for
varying periods not to exceed ten years from the date of grant (five
years in the case of ISOs granted to employees who hold more than 10%
of the voting power of the Common Stock). Typically, options granted
under the 1995 Stock Option Plan will expire ten years from the date
of grant.
e. EXERCISE OF OPTIONS. Options may be
exercised only while the holder is in the employ of the Company or a
subsidiary, within 90 days after the date of termination of
employment (other than for cause, death or disability), or within one
year after termination of employment due to the death or disability
of the optionee. Options lapse concurrently with the termination of
the optionee's employment for cause. Subject to certain exceptions,
options are not transferable except upon the death of the optionee.
Terminated or expired options become available for future
grants (provided, however, that cancelled options will be counted
against the maximum number of shares with respect to which options
may be granted to a "covered employee").
Unless otherwise specified at the time of grant, options
granted under the 1995 Stock Option Plan become exercisable with
respect to 25%, 50%, 75%, and 100% of the shares covered by the
option on the first, second, third, and fourth anniversaries of the
date of grant, respectively. The 1995 Stock Option Plan authorizes
the Plan Administrator to accelerate the vesting of any option at any
time.
The Plan Administrator may condition the exercisability of
any option upon the achievement of one or more performance
objectives. Performance objectives may be expressed in terms of one
or more of the following: return on equity, return on assets, share
price, market share, sales, earnings per share, costs, net earnings,
net worth, inventories, cash and cash equivalents, gross margin, or
the Company's performance relative to its internal business plan.
Performance objectives may be in respect of the performance of the
Company as a whole (whether on a consolidated or unconsolidated
basis), a related corporation, or a subdivision, operating unit,
product, or product line of either of the foregoing. Performance
objectives may be absolute or relative and may be expressed in terms
of a progression or a range.
At the date of exercise, the holder may pay the full option
price in cash or, may satisfy the purchase price by complying with
one of the following mechanisms: (i) by surrendering shares of Common
Stock previously held by the option holder; (ii) by having the
Company withhold shares of Common Stock otherwise issuable upon
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 46
<PAGE>
exercise of the option; (iii) by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds
to pay the exercise price; or (iv) by complying with any other
payment mechanism approved by the Plan Administrator. Any shares of
Common Stock surrendered or withheld will be valued at their fair
market value on the date of exercise.
f. CHANGE IN CONTROL PROVISION. The 1995 Stock
Option Plan provides that outstanding options will vest immediately
and become fully exercisable upon approval by the shareholders of the
Company (or, if later, approval by the shareholders of a third party)
of any merger, consolidation, reorganization, or other transaction
providing for the conversion or exchange of more than 50% of the
outstanding Common Stock into securities of a third party, cash,
property, or a combination of any of the foregoing, or of a sale of
substantially all the assets of the Company, or a liquidation.
2. OTHER STOCK OPTIONS/PLANS/RESTRICTED STOCK
GRANTS. Details concerning other stock plans, options, and
restricted stock grants of or by the Company are described below:
a. NONQUALIFIED PLAN. The Company has an
Amended and Restated NonQualified Stock Option Plan (the
"NonQualified Plan") which provides for the issuance of up to 400,000
shares of Common Stock. The NonQualified Plan was originally adopted
in 1986 and has been amended several times since such date. As of
October 1995, there remained only 29,634 shares available for grant.
In September 1994, in connection with the repricing of
same, all options granted pursuant to the NonQualified Plan were
cancelled with a regrant of a like number of options exercisable at a
price per share of $1.00. Pursuant to the terms thereof, such
options vest and become exercisable one-third each upon the Date of
Confirmation and the first and second anniversaries thereof. The
repriced options terminate upon the earliest of: (i) ten years from
the date of grant, (ii) termination of employment for any reason
other than death or disability, or (iii) the expiration of six months
from the date of termination of employment due to death or
disability. All options granted at least six months prior to any
sale of the Company automatically accelerate and become fully vested
and immediately exercisable upon such event.
b. DIRECTORS' PLAN. The Company also maintains
an Amended and Restated Directors' Non-Qualified Stock Option Plan
(the "Directors' Plan") pursuant to which non-employee directors of
the Company are automatically issued options to acquire 4,000 shares
of Common Stock on the date the individual becomes a director, and
options to acquire 4,000 additional shares of Common Stock on each
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 47
<PAGE>
three-year anniversary thereof, so long as such individual remains a
director, up to a maximum of 20,000 shares per director. The option
exercise price for options granted under the Directors' Plan is
determined based on the fair market value on the date granted. The
Directors' Plan was originally adopted in 1986 and has been amended
several times since such date. Options to purchase a maximum of
80,000 shares of Common Stock are reserved under the Directors' Plan,
with options to acquire 16,000 shares outstanding as of October 1995.
SEE Section III(T) herein.
c. EMPLOYEE STOCK PURCHASE PLAN. The Company
also maintains an Amended and Restated Employee Stock Purchase Plan
(the "Purchase Plan") pursuant to which eligible employees may deduct
from their wages not less than $10 nor more than 25% of their base
pay on each payday for the purchase of shares of Common Stock. The
Purchase Plan was adopted in 1990.
Under the terms of the Purchase Plan, deductions are
accumulated over two six-month periods per fiscal year (a "Plan
Period"), one beginning on March 1, and the other beginning on
September 1. On each of such dates, the Company grants to each
participant an option to purchase on the last day of the Plan Period
the number of full shares of Common Stock equal to the participant's
payroll deductions accumulated during the Plan Period divided by the
lesser of 90% of the fair market value of the Common Stock on the
first or last date of the plan period. 100,000 shares of Common
Stock have been reserved for issuance thereunder.
Following the chapter 11 filing, the Company suspended
further enrollment under the Purchase Plan, and all funds were
returned to participants. At such time, the Company made the
decision to suspend further participation in the Purchase Plan until
the Date of Confirmation. As of October 1995, 30,955 shares remained
available for purchase under the Purchase Plan.
d. RETENTION PLAN. In July 1994 the Board of
Directors created the Corporate Office Key Employee Retention Plan
(the "Retention Plan") and authorized the issuance of additional
stock options as an incentive to encourage key employees to stay with
the Company during the reorganization. The Retention Plan provides
for the grant of options exercisable only upon confirmation of the
Plan or upon the sale of the Company. The Retention Plan was created
separately from the NonQualified Plan as an insufficient number of
authorized shares remained available under the NonQualified Plan at
the time the Board of Directors authorized the grants.
The Retention Plan, which was approved by the Committee,
was approved by the Bankruptcy Court on August 25, 1994. As of
October 1995, options to acquire 144,539 shares of Common Stock at an
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 48
<PAGE>
exercise price of $1.00 per share remained outstanding under the
Retention Plan.
e. EXECUTIVE/MANAGEMENT OPTIONS. In the fall
and winter of fiscal 1995, and in connection with the attraction and
retention of management personnel (and in one case, the termination
of an interim officer), the Board of Directors authorized the grant
of stock options and awards of restricted stock in the aggregate
totaling 590,000 shares to several key individuals. The Company
granted such options and awards to executive and management personnel
outside of the existing NonQualified Plan as an insufficient number
of shares were available under said plan at the time. The bulk of
the stock options vest and become exercisable beginning with or
following confirmation by the Court of the Plan.
The option grants and awards of restricted stock were made
subject to the approval of the Bankruptcy Court. On May 17, 1995,
the Bankruptcy Court approved such options and awards. For the
details of certain stock options and awards of restricted stock
granted to the Company's Chairman, Jay Jacobs; the President and
Chief Executive Officer, Rex Loren Steffey; and the Company's Senior
Vice President and Chief Financial Officer, William L. Lawrence, Jr.,
SEE Sections III(N)(3), III(N)(1) and III(O)(1), and III(N)(2) and
III(O)(2) herein, respectively.
G. LIMIT ON COMPENSATION OF INSIDERS. Article X of the
Plan sets forth certain limitations on the compensation of insiders
through fiscal years ending January 27, 1996 and January 25, 1997.
H. COVENANTS. Article XII of the Plan sets forth certain
covenants that the Reorganized Debtor is subject to during the
existence of the PCC.
THE PROVISIONS OF ARTICLE XII OF THE PLAN IN NO WAY LIMIT
OR RESTRICT THE RIGHTS OF ANY INDIVIDUAL ALLOWED CLAIM HOLDER TO
EXERCISE ANY RIGHTS TO ACCELERATE OR ENFORCE PAYMENT OBLIGATIONS OR
OTHER RIGHTS WITH RESPECT TO ITS CLAIM OR NOTE. SEE ARTICLE XIV(J)
OF THE PLAN.
I. EVENTS OF DEFAULT. Article XIII of the Plan sets
forth Events of Default that may entitle the PCC to accelerate all
payments due on Allowed Class 3 Claims upon notice to the Company and
a hearing.
THE PROVISIONS OF ARTICLE XIII OF THE PLAN IN NO WAY LIMIT
OR RESTRICT THE RIGHTS OF ANY INDIVIDUAL ALLOWED CLAIM HOLDER TO
EXERCISE ANY RIGHTS TO ACCELERATE OR ENFORCE PAYMENT OBLIGATIONS OR
OTHER RIGHTS WITH RESPECT TO ITS CLAIM OR NOTE. SEE ARTICLE XIV(J)
OF THE PLAN.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 49
<PAGE>
J. RETENTION OF JURISDICTION. Article XIV of the Plan
sets forth standard purposes for which the Court shall retain
jurisdiction to ensure that the purpose and intent of the Plan are
carried out. In particular, Article XIV(J) provides that the Court
shall retain jurisdiction for the enforcement of any terms of the
Note(s) or payment obligations or other provisions under the Plan.
Further, Article XIV(K) provides that jurisdiction is retained to
determine whether all payments due on Allowed Class 3 Claims may be
accelerated pursuant to Article XIII(B) of the Plan.
VI. FEASIBILITY/FINANCIAL PROJECTIONS
A. PAYMENTS REQUIRED AT CONFIRMATION. The Company
believes that sufficient cash should be available to make required
Plan payments upon or shortly after confirmation as indicated by the
attached projections. SEE Section IX herein. Although it is
impossible to determine the precise amount that will be due and
payable upon or shortly after confirmation, it is estimated that such
amounts will not exceed the following:
Professional Fees/Costs $670,000
U.S. Trustee Quarterly Fees $ 10,000
Assumed Lease Cure Amounts $152,500
--------
TOTAL $832,500
B. PAYMENTS REQUIRED FOLLOWING CONFIRMATION. Further,
the Company should be able to satisfy the additional cash payments
required under the Plan and the Note(s) as indicated by the
projections attached hereto as Exhibits E-1, E-2, E-3, and E-4. SEE
Section IX herein. All projections extend through fiscal year ending
January 2001. Exhibit E-1 details financial assumptions for the
statement of operations; Exhibit E-2 is the projected statement of
operations; Exhibit E-3 is a balance sheet; and Exhibit E-4 is a
projected statement of cash flows.
For the purpose of these projections, the Company has
assumed that (a) 50% of the estimated dollar pool of Allowed Class 3
Claims will elect the 1996 30% payment and the 1997 30% payment, and
(b) 50% will elect the 1996 30% payment, the 1997 15% payment, and
the Note.
VII. LIQUIDATION ANALYSIS
Pursuant to Section 1129(a)(7)(ii) of the Bankruptcy Code, the
Court must decide whether creditors and interest holders will receive
distributions under the Plan at least equal to the amount they would
receive if the Company's assets were liquidated and the proceeds were
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 50
<PAGE>
distributed under chapter 7 of the Bankruptcy Code. This inquiry is
commonly referred to as the "best interest of creditors" test.
In a chapter 7 case, the Debtor would cease operations and
its assets would be liquidated by a court-appointed trustee to pay
the claims of creditors. The unsecured creditors are paid only after
secured creditors have been paid the full value of their collateral
and priority creditors have received the full payment of their
claims. Additionally, the trustee's fee is included among the
administrative expenses of a chapter 7 case. This fee is a statutory
maximum of three percent (3%) of any amount in excess of $3,000 which
is disbursed to parties-in-interest other than a debtor.
The Company has proposed a Plan which the Company believes
has the reasonable prospect of paying unsecured creditors over time
from future revenues if the Company has financially successful future
operations. The Company, of course, cannot guarantee the amounts
that will ultimately be recovered by the unsecured creditors.
SEE Section IX herein.
In a liquidation scenario, it is reasonably anticipated
that no funds would be available for distribution to unsecured
creditors. The Company's liquidation analysis is attached hereto as
Exhibit F.
As indicated, no liquidation return to unsecured creditors
appears to be likely, especially in light of (a) approximately
$9,424,000 of priority obligations that would be due and payable with
respect to leases that heretofore have been assumed in the chapter 11
proceeding, (b) approximately $2,700,000 in priority obligations with
respect to the leases for the ten new stores that are expected to be
opened prior to confirmation, and (c) the addition of approximately
$10,361,000 to the unsecured pool as a result of lease rejection
claims that would arise upon conversion to chapter 7.(19)
Accordingly, the Company firmly believes that a forced
liquidation of its assets by a chapter 7 trustee clearly will not
yield the value that would otherwise be obtainable by reorganizing
the Company pursuant to the Plan.
- -------------------
(19) Even if (a) such leases had not been assumed, and (b) leases for such
new stores had not been executed, it is estimated that the return on
unsecured claims in a liquidation would not exceed 28%. The eliminatiaon of
the assumed lease obligations would add approximately $2,614,000 in rejection
claims to the unsecured pool.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 51
<PAGE>
VIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
A. GENERAL DISCLAIMER. THE FOLLOWING DESCRIPTION OF
FEDERAL TAX CONSEQUENCES IS INTENDED MERELY AS AN AID FOR CREDITORS,
AND NEITHER THE DEBTOR NOR ITS COUNSEL AND/OR ACCOUNTANTS ASSUME ANY
RESPONSIBILITY IN CONNECTION WITH THE INCOME TAX LIABILITY OF ANY
SUCH CREDITORS. CREDITORS ARE URGED TO OBTAIN ADVICE FROM THEIR OWN
ACCOUNTANTS OR ATTORNEYS REGARDING THE TAX CONSEQUENCES OF THE PLAN.
The following is a discussion of certain of the more
significant federal income tax consequences of the Plan to the
Company, holders of claims, and holders of Company Common Stock. The
discussion does not set forth all aspects of federal income taxation
that may be relevant with respect to the Company, holders of claims,
or holders of Company Common Stock, nor does it address consequences
under state, local, or foreign tax laws.
The analysis and conclusions in the discussion are based
upon the Company's interpretation of provisions of the IRC, Treasury
regulations, proposed Treasury regulations, and rulings and judicial
decisions in effect as of the date hereof, all of which are subject
to change (possibly with retroactive effect). It should be noted
that, in the case of proposed Treasury regulations, final Treasury
regulations may differ from the proposed Treasury regulations, and
may retroactively affect tax consequences of the Plan.
Also, the interpretations of the Company are not binding on
the Internal Revenue Service (the "IRS"). Thus, there can be no
assurance that the IRS will not take a different position concerning
the consequences of the Plan or that any such position would not be
sustained. The Company has not obtained and does not intend to seek
any rulings from the IRS with respect to any federal tax matter.
THE DISCUSSION SET FORTH BELOW IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY. ACCORDINGLY, EACH CLAIM HOLDER AND COMPANY
COMMON STOCK HOLDER SHOULD CONSULT WITH SUCH HOLDER'S TAX ADVISER AS
TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE PLAN,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN
INCOME, AND OTHER TAX LAWS.
B. NET OPERATING LOSS CARRYOVERS. The Company has
approximately $4,305,000 of net operating loss carryovers ("NOLs")
from its fiscal year ended February 26, 1994 ("1994 Fiscal Year"),
and approximately $9,087,000 of additional NOLs from its fiscal year
ended January 28, 1995. The Company anticipates that its NOLs should
increase once the Company is able to calculate the amount of expenses
not yet deductible but against which reserves have been established
in connection with the Case. The amount of deductible expenses will
not be calculable until the Company has filed its federal income tax
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 52
<PAGE>
return for the fiscal year in which the Plan is approved and deemed
effective.
NOLs from a given year may be deducted from income
generated in subsequent years for a period of 15 years, subject to
the limitation described below. The Company has minor amounts of
jobs tax credit carryovers and alternative minimum tax credit
carryovers, aggregating less than $300,000. The following discussion
of NOLs is also applicable to these credit carryovers.
1. LIMITATIONS DUE TO OWNERSHIP CHANGE. Under IRC
Section 382 and treasury regulations promulgated thereunder
(collectively, "Section 382"), the Company's utilization of its NOLs
may be restricted or lost entirely if the Company undergoes an
"ownership change." The Company will experience an ownership change
if, during any three-year period (a "testing period"), the percentage
of Company Common Stock held by one or more 5% shareholders (I.E.,
persons who each hold at least 5% of the Company's Common Stock at
any time during testing periods) increases by more than fifty
percentage points over the lowest percentage of Company Common Stock
held by such persons at any time during such testing period.
Such increase may result from, among other things,
transfers of Company Common Stock, issuances of Company Common Stock
and retirements of Company Common Stock, but, generally, will not
result from the grant of options to acquire Company Common Stock or
the issuance or transfers of the Company's authorized preferred stock
(so long as the terms of such preferred stock do not change so as to
cause such preferred stock to be treated as common stock for purposes
of Section 382).
A testing period for determining an ownership change with
respect to the Company cannot begin before the beginning of the
Company's 1994 Fiscal Year, which was March 1, 1993, because a
testing period cannot precede the beginning of the tax year in which
given NOLs arise, and, as noted above the subject NOLs were first
generated in the Company's 1994 Fiscal Year.
If the Company experiences an ownership change, then it
must determine its Section 382 limitation; i.e., the maximum amount
of taxable income, for each tax year following the ownership change,
from which it may deduct NOLs generated prior to such ownership
change. The maximum amount of such taxable income each year will be
the product of the value of the Company's equity prior to the
ownership change multiplied by the federal long term tax-exempt
interest rate in effect as of the ownership change (for August 1995
such rate was 5.88%).
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 53
<PAGE>
In addition, if following any ownership change, the Company
does not either continue to conduct at least one significant line of
business it conducted prior to the ownership change, or continue to
use a significant portion of the assets it used prior to the
ownership change, then, for each tax year following the ownership
change, the Section 382 limitation amount of taxable income from
which pre-ownership change NOLs may be deducted is zero. The Company
expects to continue to operate in its historical line of business,
using a significant portion of its historic assets, so, even assuming
an ownership change, this 100% limitation on use of NOLs should not
be applicable.
The limitations described in the two preceding paragraphs
may be mitigated if, and to the extent that, the Company has built-
in gain or IRC Section 338 gain. The Company does not expect to have
such gains.
The Company does not expect to experience an ownership
change solely as a result of the Plan because the Plan does not
directly or indirectly call for any changes in ownership of Company
Common Stock.
The Jacobs Family Buy/Sell Agreement provides that any of
the founding shareholders, including its principal shareholder, Jay
Jacobs, can transfer shares by gift, bequest or devise to, or to a
trust for the benefit of, a party's spouse, children, grandchildren
or parents, without first obtaining the consent of, or granting a
right of first refusal to, the Company or the other parties thereto.
SEE Section V(E)(1)(a) herein.
Transfers by Mr. Jacobs of shares held in his individual
capacity or in his capacity as Trustee of the Jacobs Trust to the
persons or entities enumerated in the preceding paragraph, subject to
certain exceptions, generally would be disregarded for purposes of
Section 382, given that Section 382 generally treats family members
as a single shareholder and, under IRC Section 318, beneficiaries of
a trust are generally deemed to directly own the property held in
such trust.
The Company believes that the assumption of the Jacobs
Family Buy/Sell Agreement will assist the Company in monitoring
proposed significant transfers of shares and, given the Company's
right of refusal, will permit the Company to assist in the structure
of transfers in a manner designed to reduce the risk of an ownership
change.
There can be no assurance that (a) the restrictions
contained in the Jacobs Family Buy/Sell Agreement will prevent or
diminish the likelihood that the Company will experience an ownership
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 54
<PAGE>
change, or (b) Mr. Jacobs or the persons to whom he may transfer
shares will not thereafter engage in transactions that may impact the
calculation of an ownership change.
C. CANCELLATION OF DEBT INCOME ("CODI"). In general,
IRC Section 61 provides that a debtor whose indebtedness is cancelled
must include the amount of cancelled indebtedness in gross income to
the extent the indebtedness cancelled exceeds any consideration given
for the cancellation. IRC Section 108 provides, however, that if a
taxpayer, such as the Company, is the subject of a bankruptcy case,
and the cancellation of indebtedness is pursuant to a plan approved
by the Court, the amount cancelled is not required to be included in
gross income. Instead, any amounts excluded from gross income reduce
prescribed tax attributes of the taxpayer, including NOLs, capital
losses, and credit carryovers.
The Plan does not contemplate issuance of Company Common
Stock or Company preferred stock, so the special tax rules involving
CODI and issuance of debtor stock are not discussed herein.
The Plan offers holders of Allowed Class 3 Claims the right
to elect between two alternative payment methods in partial
satisfaction of their claims under the Plan. SEE Section
V(B)(2)(c)(2) and (3) herein. In order to receive the Note(s)
described elsewhere in this Disclosure Statement, holders of Allowed
Class 3 Claims must exercise their right of election by written
notice in the manner set forth in Article IV(B)(Class 3)(c)(3) of the
Plan.
The Plan will result in some level of debt cancellation to
the Company with respect to holders of Allowed Class 3 Claims, but
the amount of debt cancellation will not be finally determinable
until after the above elections are made by such Claim holders. The
maximum amount of debt cancellation, however, would be 40% of the
estimated $8,400,000 of Allowed Class 3 Claims, if all holders of
such claims elect payment as provided in Article IV(B)(Class 3)(c)(3)
of the Plan. Therefore, the maximum amount of CODI would be
$3,360,000 (40% x $8,400,000).
This CODI (or such lesser amount as determined by the
exercise of rights) will not be included in the Company's gross
income, for tax purposes, because of the exclusion for CODI generated
in a bankruptcy proceeding. The Company's NOLs will be reduced,
however, by any CODI arising from the Plan. Thus, the Company's NOLs
could be reduced by up to approximately $3,360,000.
D. FEDERAL INCOME TAX CONSEQUENCES TO CLAIM HOLDERS AND
COMPANY COMMON STOCK HOLDERS. Holders of Allowed Class 3 Claims
will not receive the full amount of their Claims under the Plan and
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 55
<PAGE>
will generally be entitled to a tax deduction for the difference
between (a) the adjusted basis of their Claim (generally, the face
amount for an accrual method taxpayer), and (b) the amount they elect
to receive under the Plan.
IRC Sections 165, 166, and 461 all influence the timing of
when the allowable deduction should be taken by such Claim holders in
various circumstances. Some holders may have already properly
claimed a deduction for partial loss in value of their Allowed Class
3 Claims. As currently enacted, the above IRC Sections allow the
full deduction when the Plan is approved and the holders of Allowed
Class 3 Claims have filed properly (if at all) their notice of
exercise of rights to receive cash and Notes, as permitted under the
Plan.
The Plan does not directly affect holders of Company Common
Stock. No new stock is to be issued under the Plan, and no existing
shareholders' rights are cancelled or modified by the Plan.
Therefore, the terms, approval, and implementation of the Plan have
no direct income tax consequences to the holders of Company Common
Stock, in their capacity as shareholders.
The market value of Company Common Stock may have declined
before and during this bankruptcy proceeding, but such market value
fluctuations generally have no income tax consequences to a holder of
Company Common Stock, unless such holder is required by special tax
rules to mark-to-market the value of its stock holdings on a periodic
basis.
IX. RISK FACTORS
Distributions to creditors contemplated under the Plan are
contingent upon many assumptions, some or all of which could fail to
meet expectations and preclude the Plan from becoming effective.(20)
The ability of the Reorganized Debtor to make all required payments
under the Plan will hinge entirely on the ultimate success of the
Company's future operations and the fashion retail industry overall.(21)
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(20) Additionally, holders of Notes will only receive Excess Cash Flow
Payments if the Company performs better than expected.
(21) Reference is made to the Company's Annual Report on Form 10-K, as
amended, for the fiscal year ended January 28, 1995, and its Quarterly Report
on Form 10-Q for the period ended July 29, 1995, which documents are
incorporated herein by reference, for a discussion of the Company's financial
condition and results of operations.
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 56
<PAGE>
Certain financial projections prepared by the Company are
included as Exhibits E-1 through E-4 of this Disclosure Statement.
Although the Company believes that the assumptions upon which such
projections (including sales forecasts) are reasonable, there can be
no assurance that such projections ultimately will prove to be
correct or attainable. If any or all of such assumptions prove to be
incorrect, actual revenues may be substantially lower than those
projected or realized later than forecast. In addition, operating
expenses may be substantially higher than the amounts assumed in the
projections.
Additionally, it should be noted that the Plan is subject
to approval by the various classes of creditors entitled to vote
under the Bankruptcy Code and to confirmation of the Plan by the
Bankruptcy Court. No assurance can be given that the Plan will be
accepted by the requisite number and amount of creditors or confirmed
by the Court.
If the Plan is not approved, due to the costs and
uncertainties inherent in a modified Plan or a conversion and
liquidation under chapter 7, all creditors of the estate face
substantial risk that their recovery under such alternative
circumstances may be substantially less favorable than their recovery
provided for under the Plan. Further, if the Plan is not confirmed,
no assurance can be given as to the date of distribution(s) under a
different Plan.
X. CONCLUSION
The Plan has been filed simultaneously with the filing of
this Disclosure Statement. No solicitation of votes for the Plan
will be made until the Court approves the Disclosure Statement. Any
discussion of the terms and conditions of the Plan is only for
purposes of information, and is not intended by the Company or its
counsel to constitute the solicitation of acceptance of the Plan.
DATED this 16th day of October, 1995.
JAY JACOBS, INC.
By: /s/ Rex Loren Steffey
------------------------
Rex Loren Steffey
Its President/Chief Executive
Officer
DEBTOR'S FIRST AMENDED DISCLOSURE
STATEMENT REGARDING ITS CHAPTER 11
PLAN OF REORGANIZATION - 57
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
Rex Loren Steffey ("Steffey") and Jay Jacobs, Inc., a Washington
corporation ("Jay Jacobs"), are entering into the Employment Agreement set
out in this document as of July 1, 1995. Steffey and Jay Jacobs acknowledge
that the existence and terms of this Employment Agreement are subject to
approval by the U.S. Bankruptcy Court for the Western District of Washington.
1. DURATION OF AGREEMENT AND OF EMPLOYMENT. This Employment Agreement
is being signed by Steffey and Jay Jacobs in August 1995. The Agreement is
effective as of July 1, 1995. This Agreement, other than the Confidentiality
Obligation of Section 11, will remain in effect until January 31, 2001,
unless it is terminated under one of its Sections prior to that time. The
Confidentiality Obligation of Section 11 remains in effect regardless of
termination of the other portions of this Agreement.
2. PRESIDENT AND CEO OF JAY JACOBS; DUTIES. Steffey is employed as,
and accepts employment as, President and Chief Executive Officer of Jay
Jacobs. Steffey will perform those duties which are customarily performed by
a President and a Chief Executive Officer of a company of the size of Jay
Jacobs. Steffey reports to the Board of Directors of Jay Jacobs.
3. EXCLUSIVE SERVICE AND BEST EFFORTS. Steffey agrees that he will
devote his full working time and attention to performing the duties of
President and CEO of Jay Jacobs. While serving as President and CEO of Jay
Jacobs, Steffey will not, without the written consent of the Board of
Directors, directly or indirectly render services to any entity which
competes with the interests of Jay Jacobs. Steffey agrees that at all times
during this Agreement he will use his best efforts to further Jay Jacobs'
interests.
4. BASE SALARY. Steffey's annual base salary will be as follows: first
year (which runs less than a full year, from July 1, 1995 through January 27,
1996) $325,000.00 (prorated); second year, which is fiscal 1997 for Jay
Jacobs (January 28, 1996 through January 25, 1997) $350,000.00; third year,
which is fiscal 1998 for Jay Jacobs (January 26, 1997 through January 31,
1998) $350,000.00; fourth year, which is fiscal 1999 for Jay Jacobs (February
1, 1998 through January 30, 1999); fifth year, which is fiscal 2000 for Jay
Jacobs (January 31, 1999 through January 29, 2000), and sixth year, which is
fiscal 2001 (January 30, 2000 through January 27, 2001) $375,000.00. This
base salary will cover all hours Steffey works. Steffey will be paid in
accordance with the regular cycle of Jay Jacobs' pay, with appropriate
deductions for state and federal taxes and withholding.
EXHIBIT B-1
<PAGE>
5. CASH INCENTIVE COMPENSATION. A) Within 15 days after release of
the annual audited financial report of Jay Jacobs for fiscal year 1996,
Steffey will be paid 10% of any Pretax Income, as defined below, of Jay
Jacobs generated during the fourth fiscal quarter of 1996, ending January 27,
1996, if and only if the Chapter 11 Plan filed by Jay Jacobs is confirmed by
the U.S. Bankruptcy Court by January 27, 1996, and provided further that the
maximum amount to be paid to Steffey under this incentive compensation is
$150,000. "Pretax Income" for purposes of this Agreement shall mean the amount
reflected in Jay Jacobs' annual financial statements prepared in accordance
with Generally Accepted Accounting Principles, with the exceptions of (a) the
amount of the Cash Incentive Compensation set out in Section 5 of this
Agreement, and (b) any gain arising from the reorganization under Chapter 11.
B) Within 30 days of the Effective Date of the Plan as defined
under the Confirmed Chapter 11 Plan filed by Jay Jacobs, Steffey will be paid
$150,000.00, in recognition of the savings realized under the Plan of
Reorganization negotiated by Steffey.
C) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 1997, Steffey will be paid 10% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 1997, as defined in Section
5A.
D) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 1998, Steffey will be paid 10% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 1998, as defined in Section
5A.
E) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 1999, Steffey will be paid 5% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 1999, as defined in Section
5A.
F) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 2000, Steffey will be paid 5% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 2000, as defined in Section
5A.
G) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 2001, Steffey will be paid 5% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 2001, as defined in Section
5A.
6. ADDITIONAL STOCK OPTIONS. In addition to any stock options offered
or granted to Steffey under separate written agreements, including those
dated as of September 9, 1994 as amended, October 20, 1994 as amended, and
January 30, 1995 as amended, Steffey will be granted on February 1, 1996 an
option
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<PAGE>
for an additional 50,000 shares of common stock of Jay Jacobs, Inc.,
and will be granted on February 1, 1997 an option for another 50,000 shares
of common stock of Jay Jacobs, Inc., on the same terms and under the same
conditions and vesting schedule as specified in the October 20, 1994
Executive Stock Option Agreement, as amended, except that the exercise price
shall be the fair market value of the stock at the date of the grant. Such
grant shall be authorized pursuant to the Jay Jacobs, Inc. 1995 Stock Option
Plan (assuming approval of such plan by the U.S. Bankruptcy Court), or such
other plan or method by which shares will be made available to Steffey.
7. BENEFITS. Steffey is eligible to participate in the benefits
package which Jay Jacobs provides generally to its employees, subject to
eligibility and conditions under the particular benefit plan. Any of these
Benefits which are provided now or in the future may be changed or deleted in
part or in full upon notice.
8. RETIREMENT PLAN. Steffey will be eligible to participate in the
Jay Jacobs' retirement plans, subject to the specific terms of the plans.
The existence and details of the plans are subject to change upon notice from
Jay Jacobs; a written description of the current plan is available from Jay
Jacobs.
9. BOARD OF DIRECTORS' REVIEW OF PERFORMANCE. The Board of
Directors of Jay Jacobs will review periodically Steffey's performance as
President. The Board may, but is not required to, provide Steffey a written
report on its impressions of his performance. Steffey is encouraged to bring
to the Board's attention any questions or concerns he has about his
performance.
10. TERMINATION OF AGREEMENT AND OF EMPLOYMENT.
A) TERMINATION BY JAY JACOBS FOR CAUSE. In the event that the Board
of Directors of Jay Jacobs in a Board Resolution in good faith determines
that there is cause for terminating the employment of Steffey: it will
communicate that finding to Steffey; Steffey's employment with Jay Jacobs
shall cease; Steffey will not be entitled to receive any additional
compensation or benefits or vesting beyond those which have fully accrued and
vested as of the date of the Board's Resolution; and this Agreement shall be
considered terminated (other than the Confidentiality Obligation of Section
11). "Cause" as defined in this Agreement shall mean the Board of Directors
in good faith finds that Steffey has: a) wilfully and continually failed to
substantially perform his duties as President; b) engaged in a dishonest or
otherwise illegal activity which relates in some way to his duties as
President; c) been found guilty, whether by trial or plea, of a crime,
excluding minor traffic violations; d)
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<PAGE>
engaged in activity which is inconsistent with the best interests of Jay
Jacobs, Inc.; or e) died. In the event that the Board determines that there
is "cause" under subsections a. or d. immediately above, Steffey will be
given a reasonable notice period prior to termination. This definition of
"cause" differs from the definition of cause or just cause which often
appears in collectively bargained or individual contracts; it is this
contractual definition of cause which controls in this Agreement.
B) TERMINATION BY JAY JACOBS FOR DISABILITY. In the event that
the Board of Directors of Jay Jacobs in a Board Resolution in good faith
determines that Steffey has become physically and/or mentally unable to
perform the essential functions of the President's job, even after
identifying any reasonable accommodations, it will communicate that finding
to Steffey, Steffey's employment with Jay Jacobs shall cease, this Agreement
shall be considered terminated (other than the Confidentiality Obligation of
Section 11), and Steffey will not be entitled to receive any additional
compensation or benefits or vesting beyond those which have fully accrued and
vested as of the date of the Board's Resolution, except as set out in the
next sentence. In such event, Steffey shall receive payment of 60% of his
regular base salary for the remaining term of the Agreement. This Section
10B is agreed to with both Steffey and Jay Jacobs having considered what the
federal Americans with Disabilities Act or the Washington State Law Against
Discrimination might otherwise require in the event of a "disability" as
defined under those statutes.
C) TERMINATION BY JAY JACOBS WITHOUT CAUSE. In the event that
during the time Mr. Jay Jacobs holds the title of Chairperson of the Board of
Directors of Jay Jacobs, the Board of Directors of Jay Jacobs decides in a
Board Resolution that it wants to terminate Steffey's employment without
demonstrating "cause" or "disability" as defined in this Agreement: it will
communicate that finding to Steffey; Steffey's employment with Jay Jacobs
shall cease; within 15 days of Steffey's employment ceasing, Steffey will be
entitled to receive 50% of the applicable base salary for the time from the
termination date through the end of fiscal 2001 (January 27, 2001), provided
that the maximum total payment under this 50% provision will be an amount
equal to one year's base salary; and this Agreement shall be considered
terminated (other than the Confidentiality Obligation of Section 11).
In the event that at some time when Mr. Jay Jacobs does not
hold the title of Chairperson of the Board of Directors, the Board of
Directors of Jay Jacobs decides in a Board Resolution that it wants to
terminate Steffey's employment without demonstrating "cause" or "disability"
as defined in this Agreement: it will communicate that finding to Steffey;
Steffey's employment with Jay Jacobs shall cease; within 15 days of
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<PAGE>
Steffey's employment ceasing, Steffey will be entitled to receive 50% of the
applicable base salary for the time from the termination date through the end
of fiscal 2001 (January 27, 2001); and this Agreement shall be considered
terminated (other than the Confidentiality Obligation of Section 11).
If Steffey's employment is terminated without cause under this Section
10C, in addition to the base salary amount described in the previous two
paragraphs, Steffey would be entitled to receive a one-time payment of the
prorated amount of Cash Incentive Compensation which Steffey would have
received for the fiscal year in which Steffey's employment ceases. Steffey
would not be entitled to receive any other payments or future benefits or
future vesting other than that described in this Section 10C in the event of
a Termination Without Cause.
D) TERMINATION BY STEFFEY. In the event that Steffey desires to
terminate his employment with Jay Jacobs: he shall communicate that desire to
the Board of Directors at least six months prior to the planned effective
date of the termination by Steffey; and his employment and this Agreement
(other than the Confidentiality Obligation of Section 11) shall cease on the
effective date of his termination of his employment, so long as that date is
in fact at least six months after he communicates that desire. In the event
that Steffey does not provide at least six months notice, then this Section
10D of the Agreement does not terminate, and he agrees that he shall be
prohibited for a six month period after he ceases employment with Jay Jacobs
from engaging, directly or indirectly, in any employment with any entity
which the Board of Directors in good faith finds is competitive with Jay
Jacobs. Steffey agrees that this six month notice period, and the six month
no competition period, is fully reasonable and enforceable, and serves Jay
Jacobs' legitimate interest of ensuring that Steffey gives at least six
months notice of any plans by him to end his employment at Jay Jacobs during
this Agreement.
11. CONFIDENTIALITY OBLIGATION. In his position as President of
Jay Jacobs, Steffey will have access to the very most sensitive confidential
and proprietary information of Jay Jacobs, including but not limited to
business plans, marketing ideas, pricing, profitability, details of leases,
details of suppliers, research materials, employee records, and related
items. Steffey agrees that during his employment with Jay Jacobs, and at all
times after his employment with Jay Jacobs ends for whatever reasons, he will
use this information only in the interest of Jay Jacobs, and he will not
directly or indirectly in any way disclose this confidential information to
anyone except when it is in the interest of Jay Jacobs.
12. NOMINATION TO THE BOARD OF DIRECTORS. Steffey is currently a
member of the Board of Directors of Jay Jacobs. Jay
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<PAGE>
Jacobs agrees that during the term of this Agreement, it will nominate and
recommend Steffey for, but will not guarantee him election to, the position
of member of the Board of Directors. Steffey is not entitled to any
additional compensation for serving on the Board of Directors, in the event
that he is elected to the Board of Directors.
13. DIRECTORS AND OFFICERS INSURANCE COVERAGE. Jay Jacobs did
not have Directors and Officers insurance coverage as of the date this
Agreement was signed. Jay Jacobs at that time was looking into the
possibility of obtaining some level of such coverage. In the event that,
after the signing of this Agreement, Jay Jacobs obtains some level of
Directors and Officers insurance coverage, Steffey will be covered to the
extent that the President and a Director is covered per the terms of the
policy.
14. BINDING ARBITRATION OF ANY DISPUTE OR DISAGREEMENT. In the
event that Steffey and Jay Jacobs have any dispute or disagreement over any
aspect of his employment or pay or benefits or cessation of employment
(including but not limited to the amount of pay or incentives he receives, or
the basis for Jay Jacobs terminating his employment, or the basis for his
quitting employment, or the enforceability of the confidentiality or the
non-competition-if-no-six-months-notice provisions of this Agreement), the
sole recourse is to submit the issue to binding arbitration pursuant to this
Agreement. Steffey should inform the Board of Directors about the dispute or
disagreement as soon as he knows or should know about the issue; the Board
will attempt to respond promptly in an effort to resolve the issue short of
arbitration. If Steffey for whatever reason is less than fully satisfied
with the Board's response, or in the event the Board for some reason does not
respond, Steffey is contractually allowed, and required, to submit that issue
to binding arbitration pursuant to this Agreement, and as supplemented but
not contradicted by the Commercial Rules of the American Arbitration
Association.
The arbitration would occur in Seattle, to be held as soon as reasonably
possible after the dispute is submitted, and the arbitrator will issue his or
her decision promptly after the arbitration hearing. Steffey and Jay Jacobs
will have the right to reasonable discovery prior to the arbitration hearing.
The arbitrator shall decide all issues based on and consistent with this
Agreement. The Arbitrator is authorized to apply, but not add to or delete
from or change, the terms of this Agreement, and the Arbitrator shall have
the authority to order any remedy which a court of law would have the power
to order if the case were being heard in court, including issuing an
injunction. The Arbitrator shall award to the substantially prevailing party
at the arbitration its costs and reasonable attorneys fees. The
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<PAGE>
decision of the arbitrator shall be final and binding, and may be
enforced in the King County Superior Court.
15. ENTIRE AGREEMENT; MEMORIALIZES DISCUSSIONS; CANNOT BE ALTERED
ORALLY. Steffey has been working for Jay Jacobs prior to the signing of this
Employment Agreement; Steffey has not had an individualized written
Employment Agreement with Jay Jacobs prior to the signing of this Employment
Agreement. This written Agreement sets out the entire agreement and
understanding between Steffey and Jay Jacobs concerning his employment, his
compensation, and any bases for ending his employment at Jay Jacobs. Any and
all prior discussions, negotiations, commitments, and understanding about
employment of Steffey at Jay Jacobs are merged into and memorialized into
this written Agreement. This Agreement cannot be added to or changed orally,
and can only be added to or changed via a written document attached to this
Agreement and signed and dated by Steffey and an authorized representative of
the Board of Directors of Jay Jacobs.
16. STEFFEY REPRESENTED BY LEGAL COUNSEL AND HAS HAD OPPORTUNITY
TO NEGOTIATE TERMS OF THIS AGREEMENT. Steffey has been represented by legal
counsel of his choice for purposes of negotiating the existence and terms of
this Employment Agreement. Jay Jacobs has agreed to pay $4,000.00 towards
Steffey's legal fees for counsel of his choice in negotiating this Agreement.
Steffey and his counsel have had the opportunity to negotiate with Jay
Jacobs and its counsel the terms of this Agreement. Steffey is entering this
Agreement voluntarily.
17. ASSIGNMENT. The services and employment that Steffey is to
provide to Jay Jacobs under this Agreement are personal, and Steffey is not
permitted to assign any of his rights, nor delegate any of his duties, under
this Employment Agreement. Jay Jacobs may assign its rights or delegate its
duties under this Agreement.
18. WAIVER. No waiver of any provision of this Agreement is
valid unless it is in writing and signed by Steffey and an authorized
representative of the Board of Directors of Jay Jacobs. No failure to
enforce any right under this Agreement, and no failure to follow any
provision of this Agreement, shall be construed to be a waiver of the right
or the provision, and will not affect the remainder of the Agreement.
19. CHOICE OF LAW AND JURISDICTION. This agreement will be
governed by and enforced under the laws of the State of Washington. As noted
in Section 14 of this Agreement, any dispute or question of interpretation
relating to this Agreement is to be resolved under the Arbitration provision
of the Agreement.
-7-
<PAGE>
20. SAVINGS CLAUSE. If any provision of this Agreement is held
to be invalid or unenforceable to any extent in any context, it nevertheless
shall be enforced to the fullest extent allowed by law in that and other
contexts, and the validity and force of the remainder of this Agreement shall
not be affected.
AGREED TO AND ACCEPTED: AGREED TO AND ACCEPTED:
JAY JACOBS, INC.
By /s/ Jay Jacobs /s/ Rex Loren Steffey
------------------------------- ----------------------------
Chairperson, Board of Directors Rex Loren Steffey
of Jay Jacobs, Inc.
Date: 9/7/1995 Date: September 7, 1995
---------------------------- -----------------------
<PAGE>
JAY JACOBS, INC. , DEBTOR-IN-POSESSION
Summary Of Scheduled And Filed Claims As Of September 14, 1995
The attached summary indicates the status of all remaining claims against Jay
Jacobs, Inc. The summary does not include duplicate claims or claims which have
been (a) paid pursuant to order of the Court or as administrative expenses, (b)
disallowed by order of the Court, or (c) superseded by amendment. Assigned
claims laims are listed alphabetically by the name of the original claimant.
Creditors which hold claims of more than one type, such as a priority tax claim
and a general unsecured claim, appear on the summary for each type of claim.
Each claim of a creditor which holds claims relating to more than one lease
under which it is the landlord is listed separately on the summary.
Jay Jacobs, Inc. reserves the right to object to any claim filed or listed
herein within the time permitted under the Plan.
Footnotes concerning some of the claims appear at the end of the summary.
<PAGE>
ADMINISTRATIVE CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- ------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE PROPERTY INVESTOR $ 2,276.26 N
KIVEL REVOCABLE TRUST, THE 27,472.01 D
C/O UNITED STATES SHOE CORPORATION
OAKRIDGE ASSOCIATES 9,621.63 D
PONY VILLAGE PROPERTIES 5,678.58 N
PRUDENTIAL INSURANCE COMPANY OF AM. 6,770.00 N
SOUTH END JEWELRY, INC. 11,029.60 D
C/O JULIE V. VEAZY, C/O WIGGINS &
NOURIE, P.A.
STIGER, TOM M. 1,797.48 N
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
PRIORITY WAGE CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- ------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINE, MICHELLE R. $ 1,920.00 N
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
SECURED AND PRIORITY TAX CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
ALDINE INDEPENDENT SCHOOL DISTRICT $ 913.75 A
ALIEF ISD TAX OFFICE 1,342.61 A
AMARILLO, CITY OF 1,158.19 A
ARIZONA DEPT OF REVENUE 13,824.38 D
BENTON COUNTY TREASURER 1,225.70 A
BEXAR CO. TAX COLLECTOR 2,856.47 A
BOULDER, CITY OF 2,150.28 A
BRAZOS COUNTY 1,917.14 A
BUTTE-SILVER-BOW COUNTY TREASURER 1,546.54 A
CANYON CO. TAX COLLECTOR 671.77 A
CASCADE COUNTY TREASURER 4,454.93 A
CLARKE CO. TAX COMMISSIONR 841.98 A
CLAYTON CO. TAX COMMISSIO 2,117.35 A
COBB COUNTY, GA, TAX COMMISSIONER 1,795.43 A
COLORADO DEPT OF REVENUE 9,829.04 A
CUYAHOGA CO. TREASURER 5,289.41 A
DALLAS, CITY OF, DISD 5,826.43 A
DALLAS, COUNTY OF 1,800.57 A
DEKALB COUNTY TAX COMMISSION 2,244.73 A
DENTON, COUNTY & CITY OF 604.20 A
EL PASO, CITY OF 2,023.39 A
FL, STATE OF, DEPT LABOR & SECURITY 814.93 A
FLATHEAD COUNTY TREASURER 1,897.19 A
FLORIDA DEPT. OF REVENUE 28,241.34 A
FLOYD COUNTY TAX OFFICE 554.87 A
FORT COLLINS, CITY OF 1,809.52 A
FRANCHISE TAX BOARD 27,547.34 A
FULTON CO. TAX COMMISSION 2,671.45 A
GALLATIN CO. TREASURER 1,110.43 A
GEORGIA, STATE OF, DEPT OF REVENUE 20,294.52 A
GRAYS HARBOR COUNTY TREASURER 630.33 A
GRAYSON COUNTY TAX COLLECTOR 1,638.54 A
GREELEY, CITY OF 1,132.97 A
HAWAII, STATE OF, DEPT OF TAXATION 24,425.21 A
HOUSTON I. S. D. 4,470.46 A
HOUSTON, CITY OF 3,527.08 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
SECURED AND PRIORITY TAX CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
ILLINOIS DEPARTMENT OF REVENUE $ 8,614.00 A
JEFFERSON COUNTY 5,119.03 A
JUNEAU, CITY AND BOROUGH OF 4,352.03 A
KENAI PENINSULA BOROUGH 3,313.79 A
KETCHIKAN GATEWAY BOROUGH 7,903.76 A
KING COUNTY FINANCE DIVISION 15,941.08 A
KITSAP COUNTY TREASURER 227.70 A
KOOTENAI COUNTY TREASURER 546.61 A
LA CROSSE CITY TREASURER 3,189.57 A
LAKEWOOD, CITY OF 782.39 A
LATAH COUNTY TREASURER 966.67 A
LEWIS & CLARK CO. TREASUR 1,031.37 A
LUBBOCK APPRAISAL DIST. 1,494.69 A
MACON-BIBB CO. TAX COMMISSIONER 1,072.94 A
MARICOPA COUNTY TREASURER 7,450.45 A
MARTIN, ROBERT E. 2,682.96 A
MATANUSKA-SUSITNA BOROUGH 1,585.11 A
MESA, CITY OF 574.92 A
MESQUITE, CITY OF 2,283.40 A
MILWAUKEE, CITY OF 3,491.44 A
MISSOULA COUNTY TREASURER 7,333.89 A
MUNICIPALITY OF ANCHORAGE 26,637.79 A
MUSCOGEE COUNTY 2,247.17 A
ND STATE TAX COMMISSIONER 4,818.78 A
NEVADA DEPT OF TAXATION 12,727.32 A
NEW MEXICO, STATE OF 7,355.56 A
NUECES CO. TAX COLLECTOR 1,860.33 A
OHIO DEPARTMENT OF TAXATION 13,022.21 D
OHIO DEPARTMENT OF TAXATION 4,648.90 D
OREGON DEPT OF REVENUE 5,337.09 A
PASADENA INDEPENDENT SCHOOL DISTRICT 1,129.97 A
PHOENIX, CITY OF 1,060.85 A
PIERCE COUNTY 1,094.33 A
ROME, CITY OF 1,368.36 A
SAN ANTONIO, CITY OF 727.73 A
SEATTLE, CITY OF 1,440.00 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
SECURED AND PRIORITY TAX CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
SEATTLE, CITY OF $ 887.96 A
SNOHOMISH COUNTY TREASURER 887.12 A
SPOKANE CO. TREASURER 1,785.35 A
SPRING BRANCH INDEPENDENT SCH DIST 1,504.64 A
STATE BOARD OF EQUALIZATION 233,266.00 A
SUMMIT COUNTY TREASURER 4,439.06 A
TARRANT COUNTY 603.50 A
TAYLOR, COUNTY OF, ABILENE, CITY OF 1,522.63 A
TEXAS STATE TREASURER 19,256.18 A
UTAH STATE TAX COMMISSION 6,189.22 A
VOLUSIA COUNTY 4,337.55 A
WALLA WALLA CO. TREASURER 695.18 A
WASILLA, CITY OF 1,161.63 A
WESTMINSTER, CITY OF 2,301.47 A
WHATCOM COUNTY TREASURER 970.30 A
WISCONSIN DEPT OF REVENUE 15,771.87 A
WYOMING DEPT OF REVENUE 7,708.52 A
YAKIMA CO. TREASURER 932.03 A
YELLOWSTONE CO. TREASURER 6,924.22 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
A J MORGAN ENT $ 4,860.00 D
A-1 ALTERATIONS 564.60 A
ACCENTS INTERNATIONAL 17,050.83 A
C/O ARGO PARTNERS
ACCESS CAPITAL INC-ANTHONY RICHARDS 12,867.25 A
C/O ACCESS CAPITAL INC
ACCESSORY DESIGN GROUP 2,700.00 A
ACKO 669.02 A
ACME 2,182.92 A
C/O DEBT ACQUISITION CO. OF AMERICA
ADORN FASHIONS 2,220.12 A
ADVENTURA MALL VENTURE 1,977.86 N
AETNA LIFE INSURANCE 123,356.33 D
AGENT 17/GAS WEST 14,058.50 A
AIRBORNE FREIGHT CORP. 13,275.09 A
ALBERT'S CLEANERS 986.80 A
ALBERTSON, KATHRYN 1,431.85 A
ALERT SERVICE 1,109.28 D
ALLIED PRINTERS 9,332.25 A
ALLISON TRACY, INC 3,705.00 D
ALSCOTT INC 541.46 N
ALTERATIONS TO GO 1,035.57 A
AMBASSADOR FACTORS CORPORATION 3,498.28 A
AMBIANCE NECKWEAR, INC. 42,907.57 A
AMEND MANAGEMENT SERVICES, INC. 3,075.60 A
AMERICAN SPEEDY PRINTING 1,144.59 A
AMERITECH 1,005.58 D
ANXIETY 2,782.25 A
APEX DESIGNS LTD 2,866.52 D
AQUARIUS 4,400.00 A
ARGENS SAFE & LOCK 749.71 A
ARGENTINE, MICHELLE R. UNDETERMINED N
(SEE FOOTNOTE #1)
ARGENTUM 906.72 A
ARIZONA DEPT OF REVENUE 1,207.44 A
ARLINGTON HAT CO. 22,303.32 A
ASH 19,147.09 A
C/O ARGO PARTNERS
ASHI COLLECTION 586.53 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSOCIATED AIR FREIGHT $ 17,925.68 N
ASSOCIATED PETROLEUM PRODUCTS 3944.91 A
AT&T COMMUNICATIONS 1,343.92 D
ATLANTIC FREEHOLDS II 6,370.03 N
AVERY DENNISON CORP 1,030.65 A
AZ3 INC, DBA B C B G 1,792.77 A
B.H.D.C., INC 4,728.70 D
BALLET 9,113.76 A
BARCLAYS AMER-CABARET 2,278.01 A
C/O BARCLAYS AMERICAN
BARCLAYS AMER-PAUL LAVITT MILLS 5,021.32 D
BARCODES WEST 1,226.06 A
BARGANZA 3,855.00 D
BEE DARLIN' 99,748.23 A
BELLIS FAIR PARTNERS 115,011.32 D
BEND RIVER MALL MERCHNTS 615.35 N
BENDIGO INTERNATIONAL, INC. 2,540.00 D
BENTLEY MALL ASSOC. 1,581.00 N
BENTLEY MALL ASSOC. 694.00 N
BERRY JEWELRY 26,226.42 A
C/O BANKRUPTCY CLAIMS ASSISTANCE
BEST ALTERATIONS 1,535.95 A
BIG SMITH BRANDS, INC. 700.00 A
BLONDIE & ME 26,195.00 A
BNY FINANCIAL CORPORATION 594,261.70 N
BOHANNON DEVELOPMENT CO 4,357.11 N
BOMAC INTERNATIONAL CORP 1,340.50 A
BOWS-ARTS 8,038.43 A
BRADFORD PAINTING AND CONSTRUCTION 750.00 A
BREA MALL PROMOTIONS INC 1,167.46 N
BRIEF ENCOUNTER 825.10 A
BYER CALIFORNIA 35,960.90 A
CAPITAL FACTORS-ACCENT MERCANTILE 10,003.44 A
CAPITAL FACTORS-B M Y INT 11,355.71 A
CAPITAL FACTORS-DECKED OUT INC 68,412.99 A
CAPITAL FACTORS-KOLTOV INC 12,796.75 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
CAPITAL HILL MALL PARTNER $ 1,368.05 N
CAPITAL LIGHTING 19,290.03 A
CARISLE PLASTICS 7,585.00 A
CARLOS OF VEGAS 799.00 A
CARLYLE REAL ESTATE, LP 85,376.92 N
CAROL FOR EVA GRAHAM, INC. 12,050.99 A
CAROLE INC 7,642.60 N
C/O BANKRUPTCY CLAIMS ASSISTANCE
CAROLINA HOSIERY MILLS 5,581.88 A
CARR-GOTTSTEIN PROPERTIES 45,836.56 N
(SEE FOOTNOTE #2)
CASTLE NECKWEAR 32,327.04 A
C/O ARGO PARTNERS
CENTERMARK PROPERTIES 3,252.39 N
CENTER RIDGE CO #50 5,422.48 N
CENTURY FACTORS-JUMP APPAREL 684.00 A
CHANGES 1,019.82 N
CHATEAU INT'L 4,999.28 A
CHEVRON U.S.A. PRODUCTS INC. 744.63 N
CHINA TRADE & RESEARCH 3,858.00 N
CINDY COLLINS 9,840.71 A
CIRCLE V MGMT 2,139.42 N
CIT GROUP-E D LEE 5,863.58 N
CIT GROUP-EPIC VISION INC 770.00 N
CIT GROUP-T J MANALO 848.97 N
CIT GROUP-URBAN ISSUE 14,550.42 N
CIT GROUP/BCC, INC. 163,992.85 N
C/O ARGO PARTNERS
CIT GROUP/BCC, INC. 12,883.60 D
CIT GROUP/COMMERCIAL SERVICES 369,335.88 N
C/O ARGO PARTNERS
CIT GROUP/COMMERCIAL SERVICES 136,385.40 N
C/O ARGO PARTNERS
CITIZENS REALTY 789.99 A
C/O BANKRUPTCY CLAIMS ASSISTANCE
CITY CENTER PARKING 834.52 N
CK GRAPHICS 727.72 A
CLACKAMAS TOWNE CENTER 676.73 N
CLUB JESS FORMAL WEAR 531.10 N
</TABLE>
Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
COBB COUNTY, GA, TAX COMMISSIONER $ 89.77 A
COBB PLACE ASSOCIATES, L.P. 60,284.93 N
COLOMBINO HEADWEAR 2,257.92 A
C/O PHOENIX FACTORS
COLORADO TEMP CONTROL 1,512.83 A
COLUMBIA MALL PTSP 672.00 N
COMMONWEALTH EDISON 665.78 A
COMPLIMENTS ACCESSORIES 13,287.20 N
C/O MARKHAM CASH FUND, INC.
CONGEN PROPERTIES INC 4,251.50 A
CONGRESS TALCOTT CORPORATION 329,466.89 N
CONSUMERS UTILITIES SERV 1,542.47 A
CORBER, ANGELA A 901.00 A
C/O DEBT ACQUISITION OF AMERICA
CORNELL OF CALIFORNIA 7,790.57 A
CORPORATE EXPRESS OF WA 1,161.23 A
C/O PHOENIX FACTORS, INC.
CORPORATE MOVING SYSTEMS 11,649.00 A
CROFT, RHONDA 570.00 A
CRYSTAL CREATIONS 5,512.50 A
CUYAHOGA CO. TREASURER 528.94 A
D.A.S.H. AD, INC 6,211.30 N
C/O PHOENIX FACTORS
D.B.A.L.A./STEPPIN OUT 21,089.61 A
D/E HAWAII JOINT VENTURE 952.77 N
DANEL ACCESSORIES 4,236.75 A
DANZAS CORP 27,643.70 N
DAVIS WRIGHT TREMAINE 1,630.89 A
DAWN JOY FASHIONS, INC 542.42 N
DAXTON INDUSTRIES 22,897.50 A
DI MODA INC 1,380.00 A
DIMOND CENTER, LTD. 2,102.28 N
DISCOVERY PLASTICS, INC. 3,216.58 A
D K FISH 3,502.80 A
DON PATRICK CREATIVE COMMUNICATION 2,686.50 A
DORBY FROCKS LTD 3,600.00 A
DOUBLE FAULT 3,091.45 A
C/O MARKHAM CASH FUND, INC.
DVM CO., A JOINT VENTURE 102,255.48 N
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
DVM CO., A JOINT VENTURE $ 62,276.06 N
E J ENTERPRISES 2,090.71 N
E J ENTERPRISES 705.60 N
EAST MESA ASSOCIATES 109,279.44 N
EAST MESA ASSOCIATES 106,424.77 N
EASTMAN INC 2,036.57 A
EASTPORT PLAZA S.C. 43,804.02 D
EDDIE HAGGER 15,911.46 N
EDIE LEE, INC 5,863.58 A
ELECTRONIC TRANSACTION 2,438.72 A
ELESCO FACTORS DIV. OF LEVI STRAUSS 2,500.70 A
EMPIRE NECKWEAR CO., INC 2,040.00 A
EXPEDITORS INT'L 1,850.00 A
F HAGHANI 610.00 N
FACTOR ONE FUNDING-TARI'S STARS 1,640.86 A
FANTAS EYES 14,374.11 A
FANTASIA ACCESSORIES LTD 4,420.63 A
FARMEN, SHOALEH 786.00 A
FASHION BELLA 8,712.00 N
C/O BANKRUPTCY CLAIMS ASSISTANCE
FASHIONIQUE II INC 5,472.74 A
FAUX LTD 9,191.42 A
FIDELITY SPORTSWEAR CO 2,388.00 D
FIESTA JEWELRY 27,437.01 A
FILM STOP 637.02 A
FIRST NATIONAL BANK OF ANCHORAGE 5,903.00 A
FITTING IMAGE, THE 1,526.80 N
FLORENCIA FIUME 4,910.26 A
FLORIDA MALL ASSOC. 1,932.88 N
FOREST CITY MANAGEMENT 45,196.37 N
FRANK POTTER & ASSOC 4,990.18 A
FRENCH CRAFT 8,515.71 A
FRESNO FASHION FAIR 2,182.27 N
FTS AIR DIVISION 624.12 A
GALLERIA JOINT VENTURE 13,511.43 N
GATEWAY MALL PARTNER 7,187.32 D
GATEWAY MALL PARTNER 79,626.69 D
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
GATEWAY WEST SHOP CENTER $ 1,479.79 N
GEORGIA POWER COMPANY 3,165.61 N
GEORGIA, STATE OF, DEPT OF REVENUE 274.99 A
GIRBAUD, MARITHE & FRANCOIS 3,796.59 N
GLOBAL EQUITY MGMT LTD 2,334.29 N
GRAHAM, EVA 12,050.99 A
GREMAR CITY CENTER PARKING 832.81 A
GTE HAWAIIAN TEL 590.84 N
GTE NORTHWEST INC 658.42 N
GTE SOUTH / ANDERSON FIN. NETWK 681.26 N
GTE SOUTH / ANDERSON FIN. NETWK 2,421.62 N
GUARDIAN SECURITY 687.70 N
H AND H-EL CAJON 107,044.97 D
H AND H-EL CAJON 98,008.65 D
H&R MANAGEMENT 1,825.29 N
H-CHH ASSOCIATES 138,037.92 D
HAHN-PUENTE ASSOCIATES 43,326.46 D
HAMES GROUP, THE 3,791.74 N
HAMES GROUP, THE 5,063.77 N
HEIMLER, WALTER 3,605.16 N
HELLER FINANCIAL NETWORK 280,197.37 N
HERSHEY COMMUNICATIONS 4,750.00 D
HICKEL INVESTMENT CO 3,611.30 N
HICKEL INVESTMENT CO 3,450.52 N
HICKEL INVESTMENT CO 3,594.35 N
HICKEL INVESTMENT CO 2,989.90 N
HILL, VAN 1,505.24 A
HOMART DEVELOPMENT CO. 3,327.00 N
HOMART DEVELOPMENT CO. 16,844.17 N
HOMART DEVELOPMENT COMPANY 61,101.00 N
(SEE FOOTNOTE #3)
HOMART DEVELOPMENT COMPANY 90,066.00 N
(SEE FOOTNOTE #3)
HONEYWELL PROTECTION 785.75 D
HORTON PLAZA 742.61 N
HORTON PLAZA MERCHANTS 650.00 N
HUGHES RIVERSIDE, LTD. 120,766.00 D
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
HUSTRULID, ANN $ 793.00 A
HUTSPAH SHIRTS 10,721.51 A
IDEA NUOVA 21,848.68 A
C\O AMERICAN CREDIT INDEMITY COMPANY
IDOLS 2,174.26 A
C/O DEBT ACQUISITION CO OF AMERICA
ILLINOIS DEPARTMENT OF REVENUE 4,132.00 A
IN PRIVATE, INC 6,472.75 N
INDUSTRIAL AIR CONDITION 641.75 A
INFINITEE 1,395.00 A
INTERKNIT 69,996.40 D
ISLAND DESIGN ACCESSORY GROUP INC. 24,719.76 A
IVEY SERIGHT INT'L, INC 12,045.65 D
J A S CAPITAL-ACCESSORIES DU JOUR 3,769.17 A
J A S CAPITAL-DU JOUR TWO INC 2,819.68 A
JACKSON CORP 884.56 A
JACOBS, JAY 19,296.97 A
JACOBS, JAY 57,000.00 A
AS TRUSTEE FOR CORNWALL ASSOC.
JANTZEN,INC. 7,138.01 A
JAZZMAN SPORTSWEAR 702.58 A
JILLARY INC 13,167.76 A
JMB INCOME PROP. LTD. 39,520.45 N
JUNEAU, CITY AND BOROUGH OF 1,726.56 A
K & K CREATIVE MARKETING 4,833.20 N
C/O PHOENIX FACTORS, INC.
K ALBERTSON ENT 1,182.92 N
KANGAROO INDUSTRIES INC 17,445.35 A
KELLWOOD COMPANY/EN CHANTE DIVISION 11,878.22 A
KENAI PENINSULA BOROUGH 640.00 A
KIKI HAWAII 3,072.02 A
KITSAP MALL 1,873.63 N
KNDD THE END 107.7 3,655.00 A
KNITWORKS 58,959.64 N
KORN & KORN 2,517.63 N
KRANTI 638.56 A
KUBE 93 JAMS 3,332.00 A
KVI/570 KPLZ/101.5 3,162.00 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
LA SALLE NATIONAL TRUST $ 128,100.84 N
LA SALLE NATIONAL TRUST 2,354.83 N
LA SALLE NATIONAL TRUST, N. A. 94,922.60 N
LA SALLE NATIONAL TRUST, N. A. 788.80 N
LA SALLE NATIONAL TRUST, N. A. 99,882.23 N
LA SALLE PARTNERS 1,372.17 N
LA SALLE PARTNERS 972.90 N
LA TREASURES 2,642.80 N
LAKEWOOD MALL BUSINSS CO 1,227.91 N
LAKEWOOD MALL BUSINSS CO 1,222.68 N
LAKEWOOD MALL II 992.15 N
LAKEWOOD MALL II LP 1,418.10 N
LAKEWOOD, CITY OF 77.46 A
LENA'S ALT 770.00 A
C/O DEBT ACQUISITION OF AMERICA
LIFSCHULT FAST FREIGHT 600.00 N
LINCOLNWOOD ASSOC. 52,906.75 D
LINCOLNWOOD TOWN CENTER 4,274.74 A
LISTEFF/WINLET 9,349.56 N
LOS CERRITOS MERCH ASSOC 1,136.36 N
LYNDEN AIR FREIGHT 22,405.10 A
MACERICH PARTNERSHIP, L.P. 111,247.57 N
(SEE FOOTNOTE #3)
MACERICH PARTNERSHIP, L.P. 584.78 A
MACERICH PARTNERSHIP, L.P. 147,960.29 N
(SEE FOOTNOTE #3)
MACON-BIBB CO. TAX COMMISSIONER 1,072.94 A
MADISON NEWSPAPERS, INC. 1,490.00 A
MALL MARKETING MEDIA 895.00 A
C/O BANNKRUPTCY CLAIMS ASSISTANCE
MARATHON U.S. REALITIES, INC. 21,721.56 N
(SEE FOOTNOTE #4)
MAYVEUS OF CALIFORNIA 1,884.00 D
MBP NECKWEAR CORP 2,611.90 D
MCA FRESNO ASSOCIATES, LP 4,437.42 N
MM'S TAILOR SHOP 983.00 N
ME TOO ACCESSORIES 3,491.95 N
MELVIN SIMON & ASSOC INC 1,439.42 N
MENDY'S 1,493.00 N
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
MEPOTEX INTERNATIONAL, INC. $ 39,173.93 A
MESA, CITY OF 76.96 A
METRO NATIONAL CORPORATION 58,862.85 D
METROPOLITAN LIFE INSURANCE COMPANY 35,273.00 D
MILBERG FACTORS, INC 27,434.71 A
MILBERG FACTORS-MOTTO/ONLY STUFF 821.67 A
MIRROR 910.00 A
MONA LISA FASHIONS, INC. 2,723.29 N
MONARCH MARKETING SYSTEMS INC 3,232.25 N
MONIQUE ACCESSORIES 10,763.95 A
MONTANA STREET WEAR INC. 2,932.50 A
MOTOR CARGO 28,934.26 N
MUNICIPALITY OF ANCHORAGE 2,609.81 A
MUZAK LIMITED PARTNERSHIP 4,360.25 A
N/S ASSOCIATES 4,752.97 N
N/S ASSOCIATES 1,337.88 N
N/S ASSOCIATES 197,493.57 N
N/S ASSOCIATES 160,790.31 N
NATIONAL SANITARY SUPPLY 822.97 A
NATIONSBANC COMMERCIAL CORP 49,456.24 A
NBA DIMOND CENTER 1,354.34 N
NEO SPORT/HUBRIS 30,991.09 A
NEVADA POWER CO 1,234.82 N
NEW MEXICO, STATE OF 692.30 A
NEW ORIGINS 10,133.07 A
NEWCASTLE LTD 5,428.67 A
NEWPRO DESIGNS 7,652.19 A
C/O ARGO PARTNERS
NOBU CREATIONS 9,883.94 A
NORTHERN TRUST OF CA 4,845.56 A
NORTHGATE MALL PRTN 2,399.07 N
NW TRANSPORT SERVICE 23,103.88 A
C\O ARGO PARTNERS
O'DORSAY INC 2,412.00 A
O.D.Y. ACCESSORIES INC. 15,922.50 A
OGDEN CITY MALL COMPANY 2,201.39 D
OHIO DEPARTMENT OF TAXATION 6,511.11 N
OHIO DEPARTMENT OF TAXATION 2,324.45 N
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
OHIO STATE TREASURER $ 7,905.00 N
OMT FASHIONS, INC. 25,304.94 A
ORION FASHIONS INC. 28,971.80 D
ORLANDO REGIONAL CENTER 911.61 N
OVERHEAD SERVICES 1,030.28 A
C/O PHOENIX FACTORS, INC.
OXFORD INDUSTRIES 230,033.42 A
P.J. HENRY INC 5,066.11 A
PAC NATIONAL GROUP 8,482.84 A
PARK MALL MERCHANTS ASSOCIATION 915.78 N
PARKDALE MALL ASSOCIATES 47,754.36 D
PATRIOT FUNDING 3,094.04 N
PAUGAL CORP 6,551.98 A
PAXAR CORP/WARNER WOVEN 6,242.36 A
PCL PACKAGING SOUTHWEST 18,151.12 A
PEARLRIDGE MALL 1,325.27 N
PERFIT ALTERATIONS 1,213.30 N
PHILADELPHIA RAPID TRANS 698.06 A
PHOENIX FACTORS, INC. 1,640.08 A
PIER CONNECTION 17,483.91 A
PINACLE SYSTEMS CORP 814.30 A
C/O MARKHAM CASH FUND, INC.
PLAZA MANAGEMENT 2,652.97 N
PLAZA PLASTICS CORP 4,955.04 A
P O P JEANS 4,336.00 A
PORTLAND TAILORING SERVICE 3,278.00 A
C/O DEBT ACQUISITION CO. OF AMERICA
PRICE FINANCING PTSP 821.73 N
PROVIDENCE IMPORTS 7,260.20 A
C/O ARGO PARTNERS
PRUDENTIAL INSURANCE COMPANY 51,266.84 D
PRUDENTIAL INSURANCE COMPANY OF AM. 6,754.95 N
PUBLIC SVC CO OF NM 505.94 N
PUGET POWER 562.49 A
PUCCINO, INC. DBA TO BE SEEN 3,750.45 N
PUENTE HILLS MERCH ASSOC 1,157.98 D
PUNCH/SHAH SAFARI 44,081.58 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- ------------------------------------------------------------------------------
<S> <C> <C>
Q106 $ 2,001.75 A
R N KNITTED HEADWEAR 4,686.00 N
R'CO 8,343.65 A
RANDA CORP. 12,619.30 A
REPUBLIC FACTORS CORP. 754,992.72 N
RIVERSIDE, CITY OF 1,236.73 N
ROADWAY EXPRESS 30,453.52 A
ROADWAY PACKAGE SYSTEM 10,149.36 A
ROBERTA / ROAM INC. 13,788.40 A
ROFFE NECKWEAR 19,187.04 A
ROGERS-WHITLEY 2,617.50 N
ROSENTHAL & ROSENTHAL 49,138.88 A
ROSS DISPLAY FIXTURE 5,940.18 A
S A J 4,649.64 A
C/O MARKHAM CASH FUND
SACI PARTNERSHIP AND 2XS INC 24,916.65 D
SACRAMENTO MUNICIPAL UTILITY DIST. 1,356.44 D
SAMARA, M W 1,930.98 A
SANTA MARIA REFRIG 626.09 A
SANTA MARIA TOWN CENTER ASSOCIATES 118,862.79 D
SASH/FOREVER WAY 14,274.30 A
SCRAMBLE CLOTHING CO 2,773.25 A
SEAFIRST BANK 2,130,087.71 N
(ACCOUNT 429 784 4888)
SEAFIRST BANK/CLSC-WEST 2,119.45 A
SEAFIRST BANKCARD SERVIC 1,006.59 A
(ACCOUNT 016 380 4371)
SEAFIRST BANKCARD SERVIC 37,969.39 A
(ACCOUNT 016 364 4765)
SEAFIRST BANKCARD SERVIC 1,228.79 A
(ACCOUNT 016 383 5560)
SEAFIRST BANKCARD SERVIC 529.87 A
(ACCOUNT 016 364 4315)
SEAFIRST BANKCARD SERVIC 1,949.64 A
(ACCOUNT 016 364 4722)
SEAFIRST BANKCARD SERVIC 772.41 A
(ACCOUNT 016 364 4633)
SEAFIRST BANKCARD SERVIC 1,286.06 A
(ACCOUNT 016 364 4307)
SEAFIRST BANKCARD SERVIC 2,413.96 A
(ACCOUNT 016 384 2532)
SEAFIRST BANKCARD SERVIC 500.22 A
(ACCOUNT 016 378 8554)
SEAFIRST BANKCARD SERVIC 592.66 A
(ACCOUNT 016 364 4692)
SEAFIRST BANKCARD SERVIC 933.00 A
(ACCOUNT 016 378 3234)
SEAFIRST BANKCARD SERVIC 849.44 A
(ACCOUNT 016 364 4455)
SEAFIRST BANKCARD SERVIC 672.33 A
(ACCOUNT 016 364 4110)
SEAFIRST BANKCARD SERVIC 906.40 A
(ACCOUNT 016 364 4439)
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
SEAFIRST BANKCARD SERVIC $ 500.22 A
(ACCOUNT 016 378 8554)
SEAFIRST BANKCARD SERVIC 592.66 A
(ACCOUNT 016 364 4692)
SEAFIRST BANKCARD SERVIC 933.00 A
(ACCOUNT 016 378 3234)
SEAFIRST BANKCARD SERVIC 849.44 A
(ACCOUNT 016 364 4455)
SEAFIRST BANKCARD SERVIC 672.33 A
(ACCOUNT 016 364 4110)
SEAFIRST BANKCARD SERVIC 906.40 A
(ACCOUNT 016 364 4439)
SEAFIRST BANKCARD SERVIC 1,803.21 A
(ACCOUNT 016 364 4714)
SEAFIRST BANKCARD SERVIC 1,136.12 A
(ACCOUNT 016 364 4080)
SEAFIRST BANKCARD SERVIC 805.53 A
(ACCOUNT 016 383 0968)
SEAFIRST BANKCARD SERVIC 2,200.09 A
(ACCOUNT 016 379 9602)
SEAFIRST BANKCARD SERVIC 556.18 A
(ACCOUNT 016 385 2058)
SEAFIRST BANKCARD SERVIC 967.53 A
(ACCOUNT 016 370 9441)
SEAFIRST BANKCARD SERVIC 2,934.33 A
(ACCOUNT 016 381 2013)
SEAFIRST BANKCARD SERVIC 1,010.93 A
(ACCOUNT 016 379 0605)
SEAFIRST BANKCARD SERVIC 613.19 A
(ACCOUNT 016 364 4676)
SEAFIRST BANKCARD SERVIC 1,321.67 A
(ACCOUNT 016 364 4390)
SEAFIRST BANKCARD SERVIC 1,240.60 A
(ACCOUNT 016 364 4552)
SEAFIRST BANKCARD SERVIC 928.76 A
(ACCOUNT 016 365 8561)
SEAFIRST BANKCARD SERVIC 2,293.55 A
(ACCOUNT 016 364 4099)
SEAFIRST BANKCARD SERVIC 754.76 A
(ACCOUNT 016 371 1624)
SEAFIRST BANKCARD SERVIC 2,045.75 A
(ACCOUNT 016 368 1334)
SEAFIRST BANKCARD SERVIC 3,166.78 A
(ACCOUNT 016 364 4161)
SEAFIRST BANKCARD SERVIC 1,360.66 A
(ACCOUNT 016 364 4560)
SEAFIRST BANKCARD SERVIC 1,037.43 A
(ACCOUNT 016 381 2005)
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
SEAFIRST BANKCARD SERVIC $ 1,683.28 A
(ACCOUNT 016 383 5587)
SEAFIRST BANKCARD SERVIC 857.84 A
(ACCOUNT 016 379 6921)
SEAFIRST BANKCARD SERVIC 1,327.49 A
(ACCOUNT 016 364 4684)
SEAFIRST BANKCARD SERVIC 525.90 A
(ACCOUNT 016 380 6218)
SEAFIRST BANKCARD SERVIC 546.15 A
(ACCOUNT 016 383 5382)
SEAFIRST BANKCARD SERVIC 544.91 A
(ACCOUNT 016 379 2381)
SEAFIRST BANKCARD SERVIC 799.70 A
(ACCOUNT 016 364 4048)
SENSORMATIC ELECTRIC 15,524.37 N
SHAH SAFARI/PUNCH 44,453.50 A
SHALINI ORIG 556.00 A
SHERMAN MALL ASSOC 1,471.23 N
SHERMAN MALL ASSOC. LTD. PARTSHP. 17,751.59 N
SHOK SWIMWEAR 978.84 A
SHOWMART/NC 17 2,194.00 A
C/O BANKRUPTCY CLAIMS ASSISTANCE
SI-LLOYD ASSOC. L.P. 47,189.79 N
SILVER EAGLE CO 9,956.90 A
SKK INC 1,540.02 A
SOCKRATIES INC 2,035.25 A
SONITROL NORTHWEST 766.84 A
SOUTH HILL COMPANY 1,299.97 N
SOUTH HILL COMPANY 1,661.70 N
SOUTH PLAINS MALL ASSOC 1,347.72 N
SOUTH SOUND CENTER 647.44 N
SOUTH SUN 1,760.06 A
SPIEGEL NECKWEAR CO 9,362.33 A
SPORT IMPRINTS INC 783.68 A
SPOT INTERNATIONAL 2,424.73 N
STANLEY DESANTIS 648.09 A
STANLEY THE TAILOR 2,267.25 A
STAR OF INDIA 80,151.66 A
STARLINE CREATIONS 2,860.12 A
STREETWEAR 1,689.16 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
STROUD, SUZANNE $ 526.95 A
STUDIO 3 4,227.85 A
STUNT SPORTSWEAR 1,669.50 N
SUN BAN FASHIONS 21,800.19 A
C/O CHESAPEAKE INVESTMENT CO.
SUNRISE MALL 777.49 A
SUPER TRADER INC 7,125.89 A
SUPERBA INC 9,726.06 A
SUSAN'S SEWING SOLUTIONS 646.05 A
SWERLAND, DOUGLAS 313,921.00 A
T JUNIORS 2,941.13 N
TACOMA MALL PARTNERSHIP 1,524.41 N
TACOMA MALL PARTNERSHIP 1,089.35 N
TAMPA ELECTRIC 1,502.26 N
TCW INVEST MANAGER 3,266.70 N
TEAMMATES/REFLEX ACCESSORIES INC. 28,038.85 A
TFW INC 6,116.64 A
THRU THE LOOP 4,233.60 A
TIMELY TRENDS 7,284.70 A
C/O PHOENIX FACTORS, INC.
TIMES COMMUNITY NEWSPAPE 675.00 A
TNT REDDAWAY TRUCKLINE 15,333.16 A
TODD ELECTRIC 819.51 N
TOKENS BY MAXINE DENKER 3,228.96 A
TOM & ROSEMARIE STEIGER 1,292.87 N
TOMMIE'S TAILORING 627.00 A
TOP LINE USA 702.05 A
TOP THIS 10,263.29 A
C/O MARKHAM CASH FUND, INC.
TOTEM S.C.ASSOCIATES 4,845.69 N
TOTEM S.C.ASSOCIATES 3,059.67 N
TOTEM S.C.ASSOCIATES 338.45 N
TRACY EVANS LTD 8,102.95 D
TRC INC 17,226.64 A
TRI-COASTAL 7,138.79 A
TRUST COMPANY BANK-BONHOMME 12,694.03 A
TRUST COMPANY BANK-GRANITE 64,254.39 A
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
TRUST COMPANY BANK-OATS CODE 47 $ 2,725.38 A
TRY 1 21,864.00 A
TURNBERRY ASSOCIATES 1,977.86 N
TWO OF US 62,750.00 A
C/O ARGO PARTNERS
TYLER MALL ASSOCIATES, LTD. 180,527.38 N
TYPHOON 4,140.00 A
UNITED PARCEL SERVICE 125,908.29 A
UP FRONT 574.64 A
URBAN CLOTHING CO 540.04 A
US WEST COMMUNICATIONS 5,536.57 N
UTAH STATE TAX COMMISSION 58.25 A
VALLEY VIEW MALL 81,510.72 D
VALZA CORP 86,640.00 D
VANCOUVER MALL 3,252.39 N
VENUS ENTERPRISES 3,624.63 N
VETTA JEWELRY 16,034.07 A
VILLA LINDA MALL LTD 26,205.00 N
(SEE FOOTNOTE #4)
VISION PRODUCTS 1,440.00 D
VOGLIO APPAREL INC 34,825.60 A
W. T. QUINN, INC. 1,250.00 A
WALLACE COMPUTER SERVICES, INC 623.23 A
WASHINGTON SQUARE, INC 740.74 N
WASHINGTON SQUARE, INC 1,225.65 N
WEST BEACH ADVERTISING 3,828.00 A
C/O BANKRUPTCY CLAIMS ASSISTANCE
WEST COAST PAPER CO 5,282.03 A
WEST OAKS ASSOC. LTD 4,137.59 D
WESTERN FASHION 678.86 N
WESTGATE JOINT VENTURE 50,000.00 N
WESTLAND BAY FAIR MALL 1,031.15 N
WESTLAND BAYFAIR MALL, LP 4,529.00 N
WESTLAND BAYFAIR MALL, LP 1,522.69 N
WESTLAND BAYFAIR MALL, LP 3,875.00 N
WESTLAND BAYFAIR MALL, LP 2,134.00 N
WESTLAND SHOP CENTER LP 1,419.46 N
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
GENERAL UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
WESTLAND SHOP CENTER LP $ 2,665.11 N
WESTMINSTER MALL COMPANY 1,272.00 N
WESTMINSTER, CITY OF 224.43 A
WESTSIDE ACCESSORIES 3,876.01 N
WESTWOOD MALL 8,367.82 A
WILLIAM DIERICKX CO 1,754.26 A
WISCONSIN DEPT OF REVENUE 723.55 A
WMI/ROVELLE VISITOR 2,200.00 A
WOODHOUSE MENSWEAR 11,154.14 A
WVM PARTNERS LTD 518.00 N
XTRMZ LTD 50,288.60 A
C/O AMERICAN CREDIT INDEMNITY COMPANY
YAKIMA MALL SHP CTR CORP 3,604.08 N
YELLOW FREIGHT SYSTEM, INC 16,964.27 A
Z CAVARICCI 48,495.00 A
ZADIKIAN, REBECA 700.00 N
ZAPFAX 2,717.70 A
ZELLERBACH 2,034.07 A
ZUM ZUM/DOUBLE Z MFG, INC 4,288.12 N
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
CONTINGENT UNSECURED CLAIMS
<TABLE>
<CAPTION>
CLAIMANT AMOUNT STATUS
- -------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES SHOE CORPORATION AS PER PER ORDER A
DATED AUGUST 11, 1995
STATE BOARD OF EQUALIZATION $ 29,062.17 A
(SEE FOOTNOTE #5)
</TABLE>
A=Claim amount is not disputed by Debtor, D=Claim amount is disputed by Debtor,
N=No determination has been made by Debtor re allowance of the claim
<PAGE>
FOOTNOTES
---------
1. This claim, filed by a former employee of the Company, is for damages
relating to a charge of alleged employment discrimination filed by the claimant
with the Equal Employment Opportunity Commission (the "EEOC"), Charge No.
###-##-####. The EEOC has issued a determination in the referenced Charge that
the Company did not violate federal law with respect to this claimant. The
Company intends to object to the claim.
2. The Company and claimant have agreed to a settlement of this prepetition
rent claim in the amount of $11,000, but the settlement has not yet been
documented or approved by the Court.
3. Each of these claims is a contingent claim for damages to the
landlord-claimant which would have arisen from the rejection of a lease that was
ultimately assumed by the Company. The Company will object to these claims
unless they are withdrawn by the respective claimants.
4. Each of these claims is a contingent claim for damages to the
landlord-claimant which would have arisen from the rejection of a lease which
the Company will assume on the Effective Date of the Plan. The Company will
object to these claims unless they are withdrawn by the respective claimants.
5. This claim is for penalties and interest on the claimant's priority tax
claim recoverable in the event that (a) such claim is not paid in accordance
with the terms of the Plan, or (b) this case is dismissed or converted to
chapter 7 prior to full payment of such claim.
<PAGE>
JAY JACOBS, INC.
PROJECTED STATEMENTS OF OPERATIONS
FINANCIAL ASSUMPTIONS
YEAR ENDING JANUARY 31
($ IN 000'S)
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2001
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Comparative Store Sales Increase -2.9% 5.0% 5.0% 5.0% 5.0% 5.0%
Beginning Store Count 174 134 144 151 161 171
# of New Store Openings 7 10 10 10 10 10
# of Closed Stores 47 15 8 10 15 25
# of Replacement Stores 0 15 5 10 15 25
Year End Store Count 134 144 151 161 171 181
Gross Margin % 41.4% 43.2% 43.6% 43.7% 43.7% 43.7%
CAPITAL EXPENDITURES
Store Remodels $0 $50 $600 $600 $700 $700
Replacement Stores $0 $900 $300 $600 $900 $1,500
New Stores $500 $600 $600 $600 $600 $600
General $100 $100 $200 $300 $400 $600
-------- -------- -------- -------- -------- --------
TOTAL $600 $1,650 $1,700 $2,100 $2,600 $3,400
</TABLE>
<PAGE>
EXHIBIT E-2
JAY JACOBS, INC.
PROJECTED STATEMENT OF OPERATIONS
Year Ending January 31
Includes New Store Additions
($ in 000's)
<TABLE>
<CAPTION>
11 Mos.
1995 % Sales 1996 % Sales 1997 % Sales 1998
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $90,490 $75,330 $78,619 $87,421
Cost of Sales 53,150 58.7% 44,109 58.6% 44,685 56.8% 49,322
------------------------------------------------------------------------------------------------------
Gross Profit $37,340 41.3% $31,221 41.4% $33,935 43.2% $38,099
Store Expenses
Payroll & Related 15,211 16.8% 11,753 15.6% 11,175 14.2% 12,150
Occupancy 17,542 19.4% 12,504 16.6% 12,760 16.2% 13,904
Other 1,220 1.3% 1,103 1.5% 1,130 1.4% 1,241
------------------------------------------------------------------------------------------------------
Total Store Expenses $33,973 37.5% $25,359 33.7% $25,064 31.9% $27,294
------------------------------------------------------------------------------------------------------
Store Profit (Loss) $3,367 3.7% $5,862 7.8% $8,871 11.3% $10,804
Distibution Center Exp. 1,254 1.4% 1,229 1.6% 1,295 1.6% 1,362
Corporate Expenses 8,592 9.5% 7,151 9.5% 7,196 9.2% 7,646
------------------------------------------------------------------------------------------------------
Operating Income (Loss) ($6,479) -7.2% ($2,518) -3.3% $380 0.5% $1,795
Net Interest Exp (Inc.) (103) -0.1% 0.0% 214 0.3% 365
Reorganization Items 7,597 8.4% (1,411) -1.9% 0 0.0% 0
------------------------------------------------------------------------------------------------------
Income Before Income Taxes ($13,973) -15.4% ($1,107) -1.5% $166 0.2% $1,431
------------------------------------------------------------------------------------------------------
Taxes 66 0.1% 572
------------------------------------------------------------------------------------------------------
Net Income (Loss) ($13,973) -15.4% ($1,107) -1.5% $100 0.1% $858
------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
11 Mos.
%Sales 1999 %Sales 2000 %Sales 2001 %Sales
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales $97,296 $107,799 $118,826
Cost of Sales 56.4% 54,818 56.3% 60,731 56.3% 66,941 56.3%
------------------------------------------------------------------------------------------------------
Gross Profit 43.6% $42,479 43.7% $47,067 43.7% $51,886 43.7%
Store Expenses
Payroll & Related 13.9% 13,384 13.8% 14,749 13.7% 16,166 13.6%
Occupany 15.9% 15,251 15.7% 16,757 15.5% 18,162 15.3%
Other 1.4% 1,376 1.4% 1,473 1.4% 1,568 1.3%
------------------------------------------------------------------------------------------------------
Total Store Expenses 31.2% $30,011 30.8% $32,979 30.6% $35,896 30.2%
------------------------------------------------------------------------------------------------------
Store Profit (Loss) 12.4% $12,468 12.8% $14,089 13.1% $15,990 13.5%
Distribution Center Exp. 1.6% 1,564 1.6% 1,646 1.5% 1,778 1.5%
Corporate Expenses 8.7% 8,034 8.3% 8,417 7.8% 8,789 7.4%
------------------------------------------------------------------------------------------------------
Operating Income (Loss) 2.1% $2,870 2.9% $4,026 3.7% $5,423 4.6%
Net Interest Exp (Inc.) 0.4% 255 0.3% 101 0.1% 51 0.0%
Reorganization Items 0.0% 0 0.0% 0 0.0% 0 0.0%
------------------------------------------------------------------------------------------------------
Income Before Income Taxes 1.6% $2,614 2.7% $3,925 3.6% $5,373 4.5%
------------------------------------------------------------------------------------------------------
Taxes 0.7% 1,046 1.1% 1,570 1.5% 2,149 1.8%
------------------------------------------------------------------------------------------------------
Net Income (Loss) 1.0% $1,569 1.6% $2,355 2.2% $3,224 2.7%
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JAY JACOBS, INC.
BALANCE SHEET
YEAR ENDING JANUARY 31
($ IN 000'S)
1995 1996 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash & Equiv. $ 8,745 $ 1,225 $ 1,000 $ 1,000 $ 1,147 $ 3,022 $ 5,494
Receivables 414 450 459 468 478 487 497
Inventories 8,385 7,614 7,458 7,836 8,518 9,187 9,847
Other Current Assets 354 375 338 304 313 322 332
--------------------------------------------------------------------
Total Current Assets 17,898 9,663 9,256 9,608 10,456 13,018 16,170
Property & Equipment
Beg Balance 6,244 4,550 4,670 4,852 5,515 6,601
Additions (199) 1,650 1,700 2,100 2,600 3,400
Depreciation (1,495) (1,530) (1,518) (1,437) (1,514) (1,632)
--------------------------------------------------------------------
Ending Balance 6,244 4,550 4,670 4,852 5,515 6,601 8,369
--------------------------------------------------------------------
TOTAL ASSETS $ 24,142 $ 14,213 $ 13,926 $ 14,460 $ 15,971 $ 19,620 $ 24,539
--------------------------------------------------------------------
--------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Accounts Payable $2,407 $2,892 3,302 3,301 $3,392 $3,464 $3,484
Accrued Payroll 697 573 584 307 317 329 340
Accrued Restructuring 267 0 0 0 0 0 0
Current portion LTD 0 2,166 608 583 382 382 0
Short Term Borrowings 0 0 1,021 1,161 0 0 0
Taxes Payable 0 0 5 29 52 78 107
Other current Liabs 741 782 1,111 982 1,282 1,307 1,332
--------------------------------------------------------------------
Total Current Liabilities 4,112 6,413 6,630 6,362 5,426 5,560 5,264
Deferred rent credits 1,318 959 899 883 1,150 1,200 1,150
Liabilities subject to
compromises/Long Term Debt 12,718 1,955 1,347 764 382 0 0
Shareholders' Equity
Common Stock 12,768 12,768 12,768 12,768 12,768 12,768 12,768
Retained Earnings
Beginning Balance (6,774) (7,881) (7,719) (6,317) (3,755) 91
Net Income (Loss) (1,107) 100 858 1,569 2,355 3,224
Adjustments 0 63 544 993 1,491 2,042
--------------------------------------------------------------------
Ending Balance (6,774) (7,881) (7,719) (6,317) (3,755) 91 5,357
--------------------------------------------------------------------
Total Equity 5,994 4,887 5,049 6,451 9,013 12,859 18,125
--------------------------------------------------------------------
TOTAL LIABS & EQUITY $ 24,142 $14,213 $13,926 $14,460 $15,971 $19,620 $24,539
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
EXHIBIT E-3
<PAGE>
<TABLE>
<CAPTION>
JAY JACOBS, INC.
PROJECTED STATEMENT OF CASH FLOWS
YEAR ENDING JANUARY 31
($ IN 000'S)
1996 1997 1998 1999 2000 2001
<S> <C> <C> <C> <C> <C> <C>
Cash Flows From Operations:
Net Income (Loss) ($1,107) $100 $858 $1,569 $2,355 $3,224
Depreciation & Amortization 895 1,530 1,518 1,437 1,514 1,632
Deferred Rents (359) (60) (16) 267 50 (50)
NOL Recovery 0 63 544 993 1,491 2,042
Reorganization Items (1,411)
Changes in Working Capital
Accounts Receivable (36) (9) (9) (9) (10) (10)
Inventories 771 155 (378) (682) (699) (659)
Other current assets (21) 38 34 (9) (9) (10)
Accounts Payable 485 410 (1) 91 72 20
Accrued Payroll (124) 11 (278) 11 11 12
Taxes Payable 0 5 24 24 26 29
Other current liabs (226) 329 (129) 300 25 25
----------------------------------------------------------
Cash Flows From Operations (1,133) 2,571 2,168 3,991 4,857 6,254
Cash Flows From Investing
Fixed Assets, Net 199 (1,650) (1,700) (2,100) (2,600) (3,400)
Cash Flows From Financing Activities:
Proceeds From Bank Loan 0 1,021 140 (1,161) 0 0
Payments on Prof. Fees Debt (1,325)
Payments on Tax Debt (414) (201) (201) (201) 0 0
Payments on other Debt (4,597) (1,965) (407) (382) (382) (382)
----------------------------------------------------------
Cash From Financing (6,336) (1,145) (468) (1,744) (382) (382)
----------------------------------------------------------
Net Change In Cash ($7,270) ($224) $(0) $147 $1,875 $2,472
Beginning Cash $8,745 $1,225 $1,000 $1,000 $1,147 $3,022
----------------------------------------------------------
Ending Cash $1,225 $1,000 $1,000 $1,147 $3,022 $5,494
----------------------------------------------------------
</TABLE>
EXHIBIT E-4
<PAGE>
LIQUIDATION ANALYSIS
Section 1129(a)(7)(A)(ii) of the US Bankruptcy Code (the "Code") states that
the court shall confirm a plan of reorganization only if certain requirements
are met. One of these requirements is that each impaired class of claims or
interest must receive or retain at least the amount or value they would
receive if the debtor were liquidated under a Chapter 7 scenario on the
effective date of the plan.
The following presents the major assumptions utilized in preparing the
Liquidation Analysis (the "Analysis"), assuming a Chapter 7 scenario in which a
court-appointed trustee would liquidate the assets of the Debtor.
Underlying the analysis that follows are a number of estimates and assumptions
that, although developed and considered by management, are inherently subject to
significant economic and competitive uncertainties and contingencies beyond the
control of the Debtor and management. The Analysis is also based upon
assumptions with regard to liquidation decisions that are subject to change.
Accordingly, there can be no assurance that the values reflected in the Analysis
would be realized if the Debtor was, in fact, to undergo such a liquidation.
OVERALL ASSUMPTIONS
1. The Analysis assumes an orderly liquidation of the assets following a
decision to liquidate as of January 1, 1996.
2. The Chapter 7 liquidation is assumed to take place over six weeks following
the decision date and be completed by February 15, 1996. The Debtor would
transfer ownership of the inventory to a liquidating company which would
operate the stores and incur all related expenses. It is assumed the
company would realize 60% of the value of the inventory. These estimated
proceeds are then applied to creditors' claims pursuant to Sections 724(b)
and 726(a) of the Code.
3. The attached analysis is based on analysis by management. Other estimated
percentages are discussed in the Notes to Liquidation Analysis section.
4. The gross values of assets and liabilities are derived from the December
1995 month end projection (January 1996 month-end projection, for
continuing operating expenses), financial statements prepared by the Debtor
for the disclosure statement with the following adjustments:
- There are no capital expenditures after January 1, 1996.
- There are no inventory receipts after January 1, 1996. There is no
reduction in planned flow prior to January 1996.
- Scheduled cash payments (administrative rent, taxes, professional
fees, etc.) are made through January 1, 1996.
5. All divisions are liquidated. Lease properties are turned back to the
lease holder.
EXHIBIT F
<PAGE>
6. This analysis does not consider the effect of any possible preference
actions.
7. Following review of the Form 10-K for fiscal year ended January 29, 1995,
and subsequent review by the Debtor, there is no knowledge of other
significant contingent liabilities.
<PAGE>
JAY JACOBS INC.
LIQUIDATION ANALYSIS
ASSUMING LIQUIDATION BEGINS ON 1/01/96
($000)
<TABLE>
<CAPTION>
PROJECTED
02/15/96
ESTIMATED ASSETS ESTIMATE
- ---------------- ----------
<S> <C>
POST LIQUIDATION CASH and
CASH EQUIVALENTS (A) $12,681
---------
TOTAL ASSETS $12,681
---------
LESS PRIORITY CLAIMS:
POSTPETITION CURRENT LIABILITIES
- -----------------------------------------
ACCOUNTS PAYABLE (B) $3,289
ACCRUED PAYROLL $583
LETTERS OF CREDIT $100
OTHER CURRENT LIABILITIES (C) $697
---------
TOTAL CURRENT LIABILITIES $4,669
POST PETITION ADMINISTRATIVE EXPENSES
- -----------------------------------------
PROFESSIONAL FEES (D) $600
ADMINISTRATIVE LEASE COSTS (E) $12,124
OPERATING EXPENSES (F) $1,000
---------
TOTAL POSTPETITION AND $18,393
ADMINISTRATIVE EXPENSES ---------
NET CASH DEFICIT FOR DISTRIBUTION ---------
TO PREPETITION CREDITORS ($5,712)
---------
PREPETITION LIABILITIES
- -----------------------
ALLOWED TAX CLAIMS $700
502B LEASE REJECTION COSTS (G) $9,361
PREPETITION UNSECURED LIABILITIES $8,400
---------
TOTAL PREPETITION LIABILITIES $18,461
---------
DISTRIBUTION FOR PREPETITION LIABILITIES 0.00%
---------
</TABLE>
<PAGE>
NOTES TO LIQUIDATION ANALYSIS
(A) Cash and cash equivalents consist of cash and credit card receivables, and
are valued at 100%. The projected 1/1/96 balance sheet includes $6,231,000
in cash and equivalents. Liquidated receivables (uncleared bankcard
receipts, layaways, and employee advances) are included at 70% of the
projected 1/1/96 balance sheet estimate of $490,000, or $343,000. The
analysis assumes that inventory remaining after January 1, 1996 was sold at
60% of book value to a company specializing in inventory liquidation. The
$5,528,000 in proceeds are included in the cash balance. Debtor management
assumed Prepaid Expenses (primarily deposits and supplies) have
approximately 10% recoverable value. The $40,000 in proceeds are included
in the cash balance. Debtor management estimated Net Fixed Assets
(primarily store fixtures and leasehold improvements) to have approximately
10% recoveable value. $539,000 in proceeds are included in the cash
balance.
(B) Accounts Payable consists primarily of inventory purchases and certain
operating expenses paid one month in arrears.
(C) Other current liabilities consist mainly of accrued vacation, payroll taxes
and sales taxes.
(D) Debtor management estimates it will incur approximately $600,000 in costs
after the last fee application through the end of the liquidation process.
(E) Administrative lease costs relate to the required payments to lessors whose
store leases have been assumed prior to September 1, 1995 as well as leases
for stores opened prior to January 1, 1996. Lease costs include rent and
related payments from liquidation date through the end of each store's
lease term.
(F) Debtor management estimates $1,000,000 in corporate expenses related to the
final liquidation of the company for a four month period subsequent to
January 1, 1996.
(G) Lease rejection costs are based on Section 502(B) of the Bankruptcy Code.
This stipulates that upon rejection, the lessor is entitled to the greater
of one year or 15% of payments required under the lease terms. The
estimate considers all stores whose leases expire after January 1, 1996.
Stores operating on month-to-month agreements or that have court approved
settlements or assumptions are not included.
<PAGE>
EMPLOYMENT AGREEMENT
William L. Lawrence, Jr. ("Lawrence") and Jay Jacobs, Inc., a Washington
corporation ("Jay Jacobs"), are entering into the Employment Agreement set out
in this document as of July 1, 1995. Lawrence and Jay Jacobs acknowledge that
the existence and terms of this Employment Agreement are subject to approval by
the U.S. Bankruptcy Court for the Western District of Washington.
1. DURATION OF AGREEMENT AND OF EMPLOYMENT. This Employment Agreement is
being signed by Lawrence and Jay Jacobs in August 1995. The Agreement is
effective as of July 1, 1995. This Agreement, other than the Confidentiality
Obligation of Section 11, will remain in effect until January 31, 2001, unless
it is terminated under one of its Sections prior to that time. The
Confidentiality Obligation of Section 11 remains in effect regardless of
termination of the other portions of this Agreement.
2. SENIOR VICE PRESIDENT AND CFO OF JAY JACOBS; DUTIES. Lawrence is
employed as, and accepts employment as, Senior Vice President and Chief
Financial Officer of Jay Jacobs. Lawrence will perform those duties which are
customarily performed by a Senior Vice President and Chief Financial Officer.
Lawrence reports to the President and CEO of Jay Jacobs.
3. EXCLUSIVE SERVICE AND BEST EFFORTS. Lawrence agrees that he will
devote his full working time and attention to performing the duties of Senior
Vice President and CFO of Jay Jacobs. While serving as Senior Vice President
and CFO of Jay Jacobs, Lawrence will not, without the written consent of the
Board of Directors, directly or indirectly render services to any entity which
competes with the interests of Jay Jacobs. Lawrence agrees that at all times
during this Agreement he will use his best efforts to further Jay Jacobs'
interests.
4. BASE SALARY. Lawrence's annual base salary will be as follows: first
year (which runs less than a full year, from July 1, 1995 through January 27,
1996) $185,000.00 (prorated); second year, which is fiscal 1997 for Jay Jacobs
(January 28, 1996 through January 25, 1997) $200,000.00; third year, which is
fiscal 1998 for Jay Jacobs (January 26, 1997 through January 31, 1998)
$200,000.00; fourth year, which is fiscal 1999 for Jay Jacobs (February 1, 1998
through January 30, 1999); fifth year, which is fiscal 2000 for Jay Jacobs
(January 31, 1999 through January 29, 2000), and sixth year, which is fiscal
2001 (January 30, 2000 through January 27, 2001) $225,000.00. This base salary
will cover all hours Lawrence works. Lawrence will be paid in accordance with
the regular cycle of Jay Jacobs' pay, with appropriate deductions for state and
federal taxes and withholding.
<PAGE>
5. CASH INCENTIVE COMPENSATION. A) Within 15 days after release of the
annual audited financial report of Jay Jacobs for fiscal year 1996, Lawrence
will be paid 3% of any Pretax Income, as defined below, of Jay Jacobs generated
during the fourth fiscal quarter of 1996, ending January 27, 1996, if and only
if the Chapter 11 Plan filed by Jay Jacobs is confirmed by the U.S. Bankruptcy
Court by January 27, 1996, and provided further that the maximum amount to be
paid to Lawrence under this incentive compensation is $50,000.00. "Pretax
Income" for purposes of this Agreement shall mean the amount reflected in Jay
Jacobs' annual financial statements prepared in accordance with Generally
Accepted Accounting Principles, with the exceptions of (a) the amount of the
Cash Incentive Compensation set out in Section 5 of this Agreement, and (b) any
gain arising from the reorganization under Chapter 11.
B) Within 30 days of the Effective Date of the Plan as defined under
the Confirmed Chapter 11 filed by Jay Jacobs, Lawrence will be paid $50,000.00,
in recognition of the savings realized under the Plan of Reorganization
negotiated in part by Lawrence.
C) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 1997, Lawrence will be paid 3% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 1997, as defined in Section
5A.
D) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 1998, Lawrence will be paid 3% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 1998, as defined in Section
5A.
E) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 1999, Lawrence will be paid 2% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 1999, as defined in Section
5A.
F) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 2000, Lawrence will be paid 2% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 2000, as defined in Section
5A.
G) Within 15 days of the release of the annual audited financial
report of Jay Jacobs for fiscal year 2001, Lawrence will be paid 2% of the
Pretax Income of Jay Jacobs, Inc. for fiscal year 2001, as defined in Section
5A.
6. ADDITIONAL STOCK OPTIONS. In addition to any stock options offered or
granted to Lawrence under separate written agreements, including those dated as
of January 30, 1995 as amended, Lawrence will be granted on February 1, 1996 an
option for an additional 20,000 shares of common stock of Jay Jacobs, Inc., and
will be granted on February 1, 1997 an option for another 20,000 shares of
common stock of Jay
-2-
<PAGE>
Jacobs, Inc., and will be granted on February 1, 1997 an option for another
20,000 shares of common stock of Jay Jacobs, Inc., on the same terms and
under the same conditions and vesting schedule as specified in the January
30, 1995 Executive Stock Option Agreement, as amended, except that the
exercise price shall be the fair market value of the stock at the date of the
grant. Such grant shall be authorized pursuant to the Jay Jacobs, Inc. 1995
Stock Option Plan (assuming approval of such plan by the U.S. Bankruptcy
Court), or such other plan or method by which shares will be made available
to Lawrence.
7. BENEFITS. Lawrence is eligible to participate in the benefits package
which Jay Jacobs provides generally to its employees, subject to eligibility and
conditions under the particular benefit plan. Any of these Benefits which are
provided now or in the future may be changed or deleted in part or in full upon
notice.
8. RETIREMENT PLAN. Lawrence will be eligible to participate in the Jay
Jacobs' retirement plans, subject to the specific terms of the plans. The
existence and details of the plans are subject to change upon notice from Jay
Jacobs; a written description of the current plan is available from Jay Jacobs.
9. PRESIDENT AND CEO REVIEW OF PERFORMANCE. The President and CEO of Jay
Jacobs will review periodically Lawrence's performance as Senior Vice President
and Chief Financial Officer. The President and CEO may, but is not required to,
provide Lawrence a written report on its impressions of his performance.
Lawrence is encouraged to bring to the President's attention any questions or
concerns he has about his performance.
10. TERMINATION OF AGREEMENT AND OF EMPLOYMENT.
A) TERMINATION BY JAY JACOBS FOR CAUSE. In the event that the
President and CEO of Jay Jacobs in good faith determines that there is cause for
terminating the employment of Lawrence: it will communicate that finding to
Lawrence; Lawrence's employment with Jay Jacobs shall cease; Lawrence will not
be entitled to receive any additional compensation or benefits or vesting beyond
those which have fully accrued and vested as of the date of termination; and
this Agreement shall be considered terminated (other than the Confidentiality
Obligation of Section 11). "Cause" as defined in this Agreement shall mean the
President in good faith finds that Lawrence has: a) wilfully and continually
failed to substantially perform his duties as Senior Vice President or Chief
Financial Officer; b) engaged in a dishonest or otherwise illegal activity which
relates in some way to his duties as Senior Vice President or Chief Financial
Officer; c) been found guilty, whether by trial or plea, of a
-3-
<PAGE>
crime, excluding minor traffic violations; d) engaged in activity which is
inconsistent with the best interests of Jay Jacobs, Inc.; or e) died. In the
event that the President determines that there is "cause" under subsections a.
or d. immediately above, Lawrence will be given a reasonable notice period prior
to termination. This definition of "cause" differs from the definition of cause
or just cause which often appears in collectively bargained or individual
contracts; it is this contractual definition of cause which controls in this
Agreement.
B) TERMINATION BY JAY JACOBS FOR DISABILITY. In the event that the
President of Jay Jacobs in good faith determines that Lawrence has become
physically and/or mentally unable to perform the essential functions of the
Senior Vice President and CFO's job, even after identifying any reasonable
accommodations, it will communicate that finding to Lawrence, Lawrence's
employment with Jay Jacobs shall cease, this Agreement shall be considered
terminated (other than the Confidentiality Obligation of Section 11), and
Lawrence will not be entitled to receive any additional compensation or benefits
or vesting beyond those which have fully accrued and vested as of the date of
the termination, except as set out in the next sentence. In such event,
Lawrence shall receive payment of 60% of his regular base salary for the
remaining term of the Agreement. This Section 10B is agreed to with both
Lawrence and Jay Jacobs having considered what the federal Americans with
Disabilities Act or the Washington State Law Against Discrimination might
otherwise require in the event of a "disability" as defined under those
statutes.
C) TERMINATION BY JAY JACOBS WITHOUT CAUSE. In the event that
during the time Rex Steffey holds the title of President and CEO of Jay Jacobs,
Rex Steffey decides that he wants to terminate Lawrence's employment without
demonstrating "cause" or "disability" as defined in this Agreement: it will
communicate that finding to Lawrence; Lawrence's employment with Jay Jacobs
shall cease; within 15 days of Lawrence's employment ceasing, Lawrence will be
entitled to receive 50% of the applicable base salary for the time from the
termination date through the end of fiscal 2001 (January 27, 2001), provided
that the maximum total payment under this 50% provision will be an amount equal
to one year's base salary; and this Agreement shall be considered terminated
(other than the Confidentiality Obligation of Section 11).
In the event that at some time when Rex Steffey does not hold the title of
President and CEO of Jay Jacobs, the President and CEO decides, or the Board of
Directors of Jay Jacobs decides in a Board Resolution that it wants to terminate
Lawrence's employment without demonstrating "cause" or "disability" as defined
in this Agreement: it will communicate that finding to Lawrence; Lawrence's
employment with Jay Jacobs shall cease;
-4-
<PAGE>
within 15 days of Lawrence's employment ceasing, Lawrence will be entitled to
receive 50% of the applicable base salary for the time from the termination date
through the end of fiscal 2001 (January 27, 2001), provided however that this
payment shall not exceed 12 months' base pay; and this Agreement shall be
considered terminated (other than the Confidentiality Obligation of Section 11).
If Lawrence's employment is terminated without cause under this Section
10C, in addition to the base salary amount described in the previous two
paragraphs, Lawrence would be entitled to receive a one-time payment of the
prorated amount of Cash Incentive Compensation which Lawrence would have
received for the fiscal year in which Lawrence's employment ceases. Lawrence
would not be entitled to receive any other payments or future benefits or future
vesting other than that described in this Section 10C in the event of a
Termination Without Cause.
D) TERMINATION BY LAWRENCE. In the event that Lawrence desires to
terminate his employment with Jay Jacobs: he shall communicate that desire to
the President at least six months prior to the planned effective date of the
termination by Lawrence; and his employment and this Agreement (other than the
Confidentiality Obligation of Section 11) shall cease on the effective date of
his termination of his employment, so long as that date is in fact at least six
months after he communicates that desire. In the event that Lawrence does not
provide at least six months notice, then this Section 10D of the Agreement does
not terminate, and he agrees that he shall be prohibited for a six month period
after he ceases employment with Jay Jacobs from engaging, directly or
indirectly, in any employment with any entity which the President in good faith
finds is competitive with Jay Jacobs. Lawrence agrees that this six month
notice period, and the six month no competition period, is fully reasonable and
enforceable, and serves Jay Jacobs' legitimate interest of ensuring that
Lawrence gives at least six months notice of any plans by him to end his
employment at Jay Jacobs during this Agreement.
11. CONFIDENTIALITY OBLIGATION. In his position as Senior Vice President
and Chief Financial Officer of Jay Jacobs, Lawrence will have access to the very
most sensitive confidential and proprietary information of Jay Jacobs, including
but not limited to business plans, marketing ideas, pricing, profitability,
details of leases, details of suppliers, research materials, employee records,
and related items. Lawrence agrees that during his employment with Jay Jacobs,
and at all times after his employment with Jay Jacobs ends for whatever reasons,
he will use this information only in the interest of Jay Jacobs, and he will not
directly or indirectly in any way disclose this confidential information to
anyone except when it is in the interest of Jay Jacobs.
-5-
<PAGE>
12. NOMINATION TO THE BOARD OF DIRECTORS. Lawrence is currently a member
of the Board of Directors of Jay Jacobs. Jay Jacobs agrees that during the term
of this Agreement, it will nominate and recommend Lawrence for, but will not
guarantee him election to, the position of member of the Board of Directors.
Lawrence is not entitled to any additional compensation for serving on the Board
of Directors, in the event that he is elected to the Board of Directors.
13. DIRECTORS AND OFFICERS INSURANCE COVERAGE. Jay Jacobs did not have
Directors and Officers insurance coverage as of the date this Agreement was
signed. Jay Jacobs at that time was looking into the possibility of obtaining
some level of such coverage. In the event that, after the signing of this
Agreement, Jay Jacobs obtains some level of Directors and Officers insurance
coverage, Lawrence will be covered to the extent that the Senior vice President
and CFO and a Director is covered per the terms of the policy.
14. BINDING ARBITRATION OF ANY DISPUTE OR DISAGREEMENT. In the event that
Lawrence and Jay Jacobs have any dispute or disagreement over any aspect of his
employment or pay or benefits or cessation of employment (including but not
limited to the amount of pay or incentives he receives, or the basis for Jay
Jacobs terminating his employment, or the basis for his quitting employment, or
the enforceability of the confidentiality or the non-competition-if-no-six-
months-notice provisions of this Agreement), the sole recourse is to submit the
issue to binding arbitration pursuant to this Agreement. Lawrence should inform
the President about the dispute or disagreement as soon as he knows or should
know about the issue; the President will attempt to respond promptly in an
effort to resolve the issue short of arbitration. If Lawrence for whatever
reason is less than fully satisfied with the President's response, or in the
event the President for some reason does not respond, Lawrence is contractually
allowed, and required, to submit that issue to binding arbitration pursuant to
this Agreement, and as supplemented but not contradicted by the Commercial Rules
of the American Arbitration Association.
The arbitration would occur in Seattle, to be held as soon as reasonably
possible after the dispute is submitted, and the arbitrator will issue his or
her decision promptly after the arbitration hearing. Lawrence and Jay Jacobs
will have the right to reasonable discovery prior to the arbitration hearing.
The arbitrator shall decide all issues based on and consistent with this
Agreement. The Arbitrator is authorized to apply, but not add to or delete
from or change, the terms of this Agreement, and the Arbitrator shall have
the authority to order any remedy which a court of law would have the power
to order if the case were being heard in court, including issuing an
injunction. The
-6-
<PAGE>
Arbitrator shall award to the substantially prevailing party at the
arbitration its costs and reasonable attorneys fees. The decision of the
arbitrator shall be final and binding, and may be enforced in the King County
Superior Court.
15. ENTIRE AGREEMENT; MEMORIALIZES DISCUSSIONS; CANNOT BE ALTERED ORALLY.
Lawrence has been working for Jay Jacobs prior to the signing of this Employment
Agreement; Lawrence has not had an individualized written Employment Agreement
with Jay Jacobs prior to the signing of this Employment Agreement. This written
Agreement sets out the entire agreement and understanding between Lawrence and
Jay Jacobs concerning his employment, his compensation, and any bases for ending
his employment at Jay Jacobs. Any and all prior discussions, negotiations,
commitments, and understanding about employment of Lawrence at Jay Jacobs are
merged into and memorialized into this written Agreement. This Agreement cannot
be added to or changed orally, and can only be added to or changed via a written
document attached to this Agreement and signed and dated by Lawrence and the
President and CEO of Jay Jacobs.
16. LAWRENCE REPRESENTED BY LEGAL COUNSEL AND HAS HAD OPPORTUNITY TO
NEGOTIATE TERMS OF THIS AGREEMENT. Lawrence has been represented by legal
counsel of his choice for purposes of negotiating the existence and terms of
this Employment Agreement. Jay Jacobs has agreed to pay $2,000.00 towards
Lawrence's legal fees for counsel of his choice in negotiating this Agreement.
Lawrence and his counsel have had the opportunity to negotiate with Jay Jacobs
and its counsel the terms of this Agreement. Lawrence is entering this
Agreement voluntarily.
17. ASSIGNMENT. The services and employment that Lawrence is to provide
to Jay Jacobs under this Agreement are personal, and Lawrence is not permitted
to assign any of his rights, nor delegate any of his duties, under this
Employment Agreement. Jay Jacobs may assign its rights or delegate its duties
under this Agreement.
18. WAIVER. No waiver of any provision of this Agreement is valid unless
it is in writing and signed by Lawrence and the President and CEO of Jay Jacobs.
No failure to enforce any right under this Agreement, and no failure to follow
any provision of this Agreement, shall be construed to be a waiver of the right
or the provision, and will not affect the remainder of the Agreement.
19. CHOICE OF LAW AND JURISDICTION. This agreement will be governed by
and enforced under the laws of the State of Washington. As noted in Section 14
of this Agreement, any dispute or question of interpretation relating to this
Agreement is to be resolved under the Arbitration provision of the Agreement.
-7-
<PAGE>
20. SAVINGS CLAUSE. If any provision of this Agreement is held to be
invalid or unenforceable to any extent in any context, it nevertheless shall be
enforced to the fullest extent allowed by law in that and other contexts, and
the validity and force of the remainder of this Agreement shall not be affected.
AGREED TO AND ACCEPTED: AGREED TO AND ACCEPTED:
JAY JACOBS, INC.
By /s/ Rex Loren Steffey /s/ William L. Lawrence, Jr.
_____________________________ ____________________________
President, Jay Jacobs, Inc. William L. Lawrence, Jr.
Date: September 7, 1995 Date: September 7, 1995
_________________________ _______________________
-8-
<PAGE>
[LASALLE BANKS LETTERHEAD]
September 28, 1995
Mr. William L. Lawrence, Jr.
Senior Vice President
Jay Jacobs, Inc.
1530 Fifth Avenue
Seattle, Washington 98101
Dear Mr. Lawrence:
LASALLE NATIONAL BANK ("Bank") is pleased to commit to making certain loans and
financial accommodations ("Loans") to JAY JACOBS, INC. ("Company") up to Ten
Million and No/100 Dollars ($10,000,000.00), subject to the terms and conditions
specified below.
1. LOAN FORMULA - Subject to the terms and conditions of the Loan and Security
Agreement, Bank shall, absent the occurrence of an event of default, advance an
amount up to the sum of the following sublimits:
(a) Up to fifty percent (50%) or such lesser sum as determined by Bank, in
its sole discretion, determined on a basis consistent with the credit
procedures of its Asset Based Lending Division, of the lower of the
cost or market value of Company's "Eligible Inventory"; PLUS
(b) Subject to Paragraph 2 below, up to fifty percent (50%) or such lesser
sum as determined by Bank, in its sole discretion, determined on a
basis consistent with the credit procedures of its Asset Based Lending
Division, against the face amount of commercial letters of credit
issued for the purpose of purchasing inventory, provided, that such
commercial letters of credit are in form and substance satisfactory to
Bank;
provided, that the aggregate amount of Loans outstanding at any time
shall in no event exceed TEN MILLION AND NO/100 DOLLARS
($10,000,000.000) (the "Loan Limit").
2. LETTERS OF CREDIT - Bank is willing to issue, upon Company's request,
commercial and/or standby letters of credit, provided, that the aggregate
undrawn face amount of such letters of credit shall not exceed
$5,000,000.00, in the aggregate. Company shall pay Bank's normal charges
for letters of credit, including, without limitation, an
EXHIBIT C
<PAGE>
[LASALLE BANKS LETTERHEAD]
Mr. William L. Lawrence, Jr.
Jay Jacobs, Inc.
September 28, 1995
Page 2
administrative charge equal to one and one-fourth percent (1-1/4%) per
annum payable on the outstanding amount of such letters of credit, which
charges shall be payable monthly in arrears on each day that interest is
payable. Bank's contingent liability under the letters of credit shall
automatically reduce, dollar for dollar, the amount which Company may
borrow pursuant to Paragraph 1 above.
3. INTEREST RATE - The Loans shall bear interest at the Bank's publicly
announced prime rate (which is not intended to be Bank's lowest or most
favorable rate in effect at any time)(the "Prime Rate") in effect from time
to time, and shall be due and payable on the last business day of each
month in arrears. Said rate of interest shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on
the effective date of each such change in the Prime Rate. All interest
shall be calculated on the basis of a 360-day year.
4. TERM OF LOAN - The original term of the Loans shall be three (3) years,
commencing on the date of execution of Bank's Loan and Security Agreement
unless the liabilities are accelerated, upon the occurrence of an event of
default, pursuant to the Loan and Security Agreement. The Loan and
Security Agreement shall automatically renew itself from year to year
thereafter if neither party terminates it as set forth therein.
5. LOAN COLLATERAL -
(a) A first and only lien on all of Company's assets, (excluding
capitalized leases and other permitted liens determined by Bank, in
its sole discretion) tangible or intangible, whether now owned or
hereafter acquired by Company, and wherever located, including, but
not limited to accounts, inventory, instruments, documents, equipment,
fixtures, general intangibles, and any proceeds of the foregoing.
6. GOOD FAITH DEPOSIT - Company has remitted to Bank $50,000.00 as a good
faith deposit. Said good faith deposit, less (a) Bank's charges and
expenses for its initial examination of Company's Loan collateral, as well
as Company's books and records and (b) all other out-of-pocket expenses
including, but not limited to, Uniform Commercial Code Searches,
appraisals, reasonable legal fees of outside counsel, and Federal Express
charges, is refundable at the time Bank makes the initial disbursement of
the Loan. However, if
<PAGE>
[LASALLE BANKS LETTERHEAD]
Mr. William L. Lawrence, Jr.
Jay Jacobs, Inc.
September 28, 1995
Page 3
Company fails to accept the Loan package described herein, then Company
shall forfeit to Bank the entire good faith deposit and reimburse Bank for
all out-of-pocket expenses.
7. AUDIT FEES - Company shall pay the normal audit fees and out-of-pocket
expenses related to the initial audit, including, but not limited to, air
fare, lodging, and meals, to Bank to cover Bank's initial examinations of
the loan collateral, as well as the Company's books and records.
Thereafter, with respect to Bank's internal auditors, Company shall pay the
normal audit fees to Bank, but said audit fees shall not, absent the
occurrence of an event of default, exceed $10,000.00 in any year of any
original term or renewal term plus out-of-pocket expenses related to any
such audit, including, but not limited to, air fare, lodging, and meals.
If Bank, in its sole discretion, elects to use outside auditors, then,
Company shall pay the normal audit fees and out-of-pocket expenses related
to any such audit, including, but not limited to, air fare, lodging, and
meals, to Bank to cover Bank's periodic examinations of the loan
collateral, as well as the Company's books and records.
8. OUT-OF-POCKET EXPENSES - Company shall reimburse Bank for the costs of the
following: Uniform Commercial Code and other public record searches, lien
and security interest filings, appraisals, reasonable outside attorney's
fees, and express mail, messenger or similar delivery charges.
9. FACILITY FEES - Company shall pay to Bank an annual facility fee equal to
one percent (1%) of the aggregate Loan Limit, which fee shall be fully
earned by Bank and payable on the date that Bank makes its initial
disbursement under the Loan and Security Agreement and on each anniversary
of the date of the Loan and Security Agreement during the original term and
any renewal term.
10. PREPAYMENT FEES - If Company elects to prepay all of a portion of the
Loans, Company shall pay to Bank a prepayment fee equal to (i) three
percent (3%) of the Loan Limit if the Loan and Security Agreement is
terminated during the first year of the original term; (ii) two percent
(2%) of the Loan Limit if the Loan and Security Agreement is terminated
during the second year of the original term; and (iii) one percent (1%) of
the Loan Limit if the Loan and Security Agreement is terminated during the
third year of the original term of any renewal term.
<PAGE>
[LASALLE BANKS LETTERHEAD]
Mr. William L. Lawrence, Jr.
Jay Jacobs, Inc.
September 28, 1995
Page 4
11. COLLECTIONS -
(a) Subject to Bank's consent, payments from all of Company's customers
may be maintained in a depository account at a local bank satisfactory
to Bank and shall be tendered to Bank via automatic clearing house to
a cash concentration account on a daily basis.
(b) Provided that Loans are outstanding, Bank shall, within one (1)
business day after Bank receives cash or other immediately available
funds in Chicago, apply such collections against Company's liabilities
to Bank. In the event no Loans are outstanding, Bank shall, on the
same business day of receipt by Bank at its office in Chicago, apply
such collections as directed by Company.
12. COURT APPROVAL - Disbursement of the Loans hereunder is contingent upon
approval of the bankruptcy court having jurisdiction over the Company.
13. MISCELLANEOUS -
(a) Company shall submit internally-prepared financial statements to Bank
on a monthly basis, 10-Q financial statements on a quarterly basis,
and certified financial statements at year end.
(b) Prior to disbursement under the Loan and Security Agreement, Company
shall provide to Bank original insurance policies which includes (a)
the dollar amount of the coverage on the items located at 1530 Fifth
Avenue, Seattle, Washington 98101 and any other locations, and (b)
endorsements indicating Bank's interest as Lender's Loss Payee on
Company's casualty insurance policies, additional insured on Company's
liability insurance policies and assignee on Company's business
interruption insurance policies (as appropriate).
(c) Company is required to maintain its general checking account and a
cash concentration account with Bank. Normal charges shall be
assessed thereon. Although no compensating balance is required,
Company may keep monthly balances in order to merit earnings credits
which may cover the Bank's service charges for demand deposit account
activities.
(d) Company acknowledges and agrees that there are no other understandings
between the parties, oral or written, relating to the financing
committed to herewith other than what is set forth in this letter.
<PAGE>
[LASALLE BANKS LETTERHEAD]
Mr. William L. Lawrence, Jr.
Jay Jacobs, Inc.
September 28, 1995
Page 5
(e) Disbursement of the Loans hereunder is contingent upon all
documentation (including without limitation, a tangible net worth
covenant) and other legal matters (including without limitation,
completion of Bank's legal due diligence and all matters relating to
the bankruptcy proceedings involving Company) being in form and
substance satisfactory to Bank and Bank's counsel.
(f) Disbursement of the Loans hereunder is contingent upon no material
adverse change, as determined by Bank, in the condition or operations
(financial or otherwise) of Company having occurred and no actions or
proceedings being pending or threatened against Company which might
materially adversely affect Company during the period commencing on
the date of this letter and ending on the date of disbursement of the
Loans.
(g) The Loans proposed herein must be closed and funded within seventy-
five (75) days of the issuance of this commitment letter, or this
commitment shall become null and void unless extended by Bank in
writing. Company and Bank each agree to use their best efforts to
execute closing documents on or before the seventy-fifth (75th) day
following the issuance of this commitment letter.
If the foregoing commitment is acceptable to you, please execute the two
enclosed copies of this letter and return the same to the Bank no later 5:00
P.M. on October 16, 1995.
Very truly yours,
LASALLE NATIONAL BANK
By /s/ Robert Corsentino
----------------------
Title SVP
------------
Accepted and Agreed this 29th
-----
day of September , 1995
---------------
JAY JACOBS, INC.
By /s/ William L. Lawrence, Jr.
----------------------------
Title Senior VP - CFO
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