<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 1, 1997 Commission file number 0-15934
JAY JACOBS, INC.
(Exact name of registrant as specified in its charter)
Washington 91-0698077
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1530 Fifth Avenue, Seattle, Washington 98101-1677
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (206) 622-5400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock - par value $.01 per share
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
Applicable only to registrants involved in bankruptcy proceedings during
the preceding five years: Indicate by check mark whether the registrant
has filed all documents and reports required to be filed by Section 12,
13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes X No
As of April 7, 1997, 6,123,917 shares of Common Stock of the Registrant were
outstanding, and the aggregate market value of the shares (based upon the
closing price of the shares traded on April 7, 1997) of Jay Jacobs, Inc., held
by non-affiliates was $761,000. For the purposes of such calculation, all
outstanding shares of Common Stock have been considered held by
non-affiliates, other than the 3,405,989 shares beneficially owned by
directors and executive officers of the Registrant. In making such
calculation, the Registrant does not determine the affiliate or non-affiliate
status of any shares for any other purpose.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS
The current executive officers of the Company are as follows:
Name Age Position
Rex Loren Steffey 47 President and Chief Executive Officer
William L. Lawrence, Jr. 46 Senior Vice President,
Chief Financial Officer and Treasurer
Rex Loren Steffey was named President and Chief Executive Officer of the
Company in September 1994 and became a director in September 1994. From August
1993 to August 1994 he was President and Chief Operating Officer of Paul Harris
Stores, Inc. ("Paul Harris Stores"). From March 1993 to August 1993, Mr.
Steffey was Senior Vice President of Operations at Paul Harris Stores. From
June 1991 to March 1993, Mr. Steffey was Vice President of Merchandise Planning
at Paul Harris Stores. Paul Harris Stores, Inc. filed a voluntary petition for
protection under Chapter 11 of the U.S. Bankruptcy Code in February 1991 and
emerged successfully therefrom in September 1992. See "Employment Contracts".
William L. Lawrence, Jr. was named Senior Vice President and Chief
Financial Officer of the Company in January 1995. He was appointed a director
on August 4, 1995. Prior to joining the Company Mr. Lawrence was Senior Vice
President, Chief Financial Officer for Paul Harris Stores from March 1994 to
January 1995. From March 1993 to March 1994 Mr. Lawrence was Senior Vice
President-Finance. Mr. Lawrence also served as Vice President-Controller,
Corporate Secretary and Assistant Treasurer from 1990 through 1993. Paul Harris
Stores filed a voluntary petition for protection under Chapter 11 of the U.S.
Bankruptcy Code in February 1991 and emerged successfully therefrom in September
1992. See "Employment Contracts".
CURRENT DIRECTORS
Director
Name Age Since
Jay Jacobs 85 1959
Rex Loren Steffey 47 1994
Paul Buxbaum 42 1997
Robert Bartlett 53 1997
William Nandor 55 1997
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Set forth below is certain information concerning those persons serving on
the Board of Directors that are not otherwise serving as executive officers of
the Company.
Jay Jacobs is the founder of the Company and has been a director since its
inception. Mr. Jacobs was the Company's President until 1978, at which time he
became Chairman of the Board. Mr. Jacobs served as Interim President and Chief
Executive Officer of the Company from July through September 1994.
Robert Bartlett has been a director of Bartlett, Joseph & Associates, a
retail management consulting firm since 1987. Mr. Bartlett is a career
management consultant with over 20 years of experience serving the retail
industry. Mr. Bartlett previously served as the Partner-In-Charge, Retail
Management Consulting, Coopers and Lybrand West Region and as a partner and
national director for retail consulting for Touche Ross and Company. Mr.
Bartlett is a member and on the board of advisors of the Retail Management
Institute at the University of Santa Clara.
Paul Buxbaum is President of Buxbaum, Ginsberg & Associates, Inc., a national
merchandising firm that does consulting regarding a company's restructuring
needs and future operating capacity. Since 1995 Mr. Buxbaum has served as
director and member of the Audit Committee of Richman Gordman Half Price Stores.
Since January 1993, Mr. Buxbaum has served as Chairman of the Board of Directors
of Ames Department Stores, Inc. In June, 1997 Mr. Buxbaum became Chairman of
the Board of Directors of the Company.
William Nandor is a principle with the Nandor Group, a management consulting
firm. He has been active in both specialty and mass market retailing for over
thirty years. Mr. Nandor served in several positions with Sears over a six
year period. He then helped develop the marketing and merchandising formula for
Foxmoor Casuals. Mr. Nandor served as President of Apparel Specialty Stores for
five years and led a complete transformation of the chain. As Vice-President
for Sales and Marketing of Fanny Farmer Candy Shops he led a turnaround of the
330 store chain. Mr. Nandor also served as Vice-President of Retailing and then
President of Gymboree Stores during its entree into retailing. Recently he
served as Chief Operating Officer of Impostors Copy Jewelry and Sesame Street
Retail Stores.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that certain of the Company's officers and directors and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities ("Section 16 insiders") file certain reports of ownership and
changes in ownership with the Securities and Exchange Commission (the
"Commission"). Section 16 insiders are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of the copies of such forms received by the
Company, and on written representations by the Company's officers and directors
regarding compliance with the filing requirements, the Company believes that in
fiscal year 1997 all such forms were filed on a timely basis except as follows:
two Form 4 reports each on a single transaction by Rex Steffey, two Form 4
reports also each on a single transaction by William L. Lawrence, Jr., one Form
4 by Shelley Swerland with 3 separate transactions, one amendment by Shelley
Swerland with 2 separate transactions, one Form 5 by the Rose Jacobs
Testamentary Trust with 1 transaction and 1 Form 5 by Jay Jacobs with 2 separate
transactions.
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ITEM 11. EXECUTIVE COMPENSATION
Executive compensation consists primarily of base salary and, depending
on the individual circumstances, one or a combination of the following: stock
options, restricted stock and bonuses. Base salary is determined at the
beginning of each fiscal year. Stock options are granted periodically, based
on individual performance.
For the fiscal years ending January 27, 1996 and February 1, 1997, the
Plan of Reorganization confirmed by the United States Bankruptcy Court (the
"Court") in the Company's Chapter 11 proceeding specified individual limits
on the 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.
During the fiscal year ended January 27, 1996, the Company entered into
contractual arrangements with its CEO and CFO. The Compensation Committee of
the Board of Directors believed that it was important to retain the services
of the Company's key executives to help ensure continuity of management
during the remainder of the Chapter 11 process and the subsequent period when
the Company would emerge from Chapter 11. The contracts for the CEO and
President, Rex Loren Steffey, and the CFO, William L. Lawrence, Jr., were
negotiated with and approved by the Compensation Committee and by the Court,
the Creditors' Committee and creditors in connection with the approval of the
Plan of Reorganization. In negotiating conrtacts with the Company's key
executives, the Compensation Committee used industry-specific information
relative to companies that were in similar circumstances. The contracts
specify base salary, bonus and stock option programs. The contracts with the
CEO and CFO both have terms of five and one-half years. See "Summary
Compensation Table" and "Employment Contracts".
The Company has no employment agreement with its Chairman, Jay Jacobs.
Until May 1994, Mr. Jacobs' annual base salary was $352,000. Upon the
Company's Chapter 11 filing, his annual salary was reduced to $200,000 and
was subsequently increased to $225,000 in August 1995. The Company did not
award any bonus or grant options to acquire any equity securities to Mr.
Jacobs during the fiscal year ended January 27, 1996.
The following table shows the compensation for services rendered during the
fiscal years 1997, 1996, and 1995 for each person that served as the Chief
Executive Officer of the Company during fiscal year 1996 and all other executive
officers of the Company whose salary and bonus exceeded $100,000 during fiscal
year 1997 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------
Annual
Compensation Restricted
------------ Stock Securities
Name and Principal Fiscal Salary Bonus Awards Underlying Options
Position Year ($) ($) ($) (#)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jay Jacobs 1997 181,731 - - -
Chairman of the Board 1996 214,427 - - 100,000
1995 252,621 - - -
Rex Loren Steffey 1997 336,541 - - 100,000(4)
President and CEO 1996 314,422 150,000(1) - -
1995 66,923 - 56,250(2) 200,000
William L. Lawrence, Jr. 1997 201,088 - - 40,000(4)
Senior Vice President 1996 229,437 50,000(3) - 90,000
and CFO 1995 - - - -
</TABLE>
(1) Paid pursuant to an Employment Agreement between Mr. Steffey and the
Company effective July 1, 1995. See "Employment Contracts."
(2) During fiscal year 1995, Mr. Steffey was granted 100,000 shares of
restricted stock, subject to approval of the Bankruptcy Court, which was
given on May 17, 1995. One-third of the restricted stock vested upon
confirmation of the Plan on November 16, 1995 (the "Date of Confirmation"),
and one-third will vest on each of the first and second anniversaries of
the Confirmation Date. Unvested restricted shares will be forfeited to the
Company if Mr. Steffey ceases to be a full-time employee for any reason.
In the event of the death or disability of Mr. Jacobs, the restricted
shares shall become fully vested and all transfer restrictions removed.
As of February 1, 1997, Mr. Steffey owned an aggregate of 300,000 shares
valued at $151,250 based upon the closing price of the Company's common
stock on January 31, 1997.
(3) Paid pursuant to an Employment Agreement between Mr. Lawrence and the
Company effective July 1, 1995. See "Employment Contracts".
(4) For details regarding the options granted to Mr. Steffey and Mr. Lawrence,
see "Option Grants in Last Fiscal Year".
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The following table sets forth certain information regarding options
granted during fiscal year 1997 to the Named Executive Officers of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
% of Total Assumed Annual Rates
Number of Options of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exer. Option Term(1)
Options in Fiscal Price Expiration 5%($) 10%($)
Name Granted(#) Year ($/Sh.) Date
<S> <C> <C> <C> <C> <C> <C>
Rex Loren Steffey (2) 100,000 10.0% $0.25 8/13/2006 $40,700 $65,000
Wm. Lawrence, Jr. (2) 40,000 10.4% $0.25 8/13/2006 $16,280 $26,000
</TABLE>
(1) Potential realizable value is based on the assumption that the stock price
of the common stock appreciated at the annual rate shown (compounded
annually) from the date of grant until the end of the ten-year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price performance.
(2) For details regarding the options granted to Mr. Steffey and Mr. Lawrence,
see "Employment Contracts."
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The following table sets forth certain information regarding options
exercised by Named Executive Officers during fiscal year 1997 as well as certain
information regarding options held by such individuals as of January 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number Value of
of Securities Unexercised
Underlying In-the-Money
Options at Fiscal Options at
Shares Value Year End (#) F/Y/E ($)(1)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise(#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Jay Jacobs - - 100,000/ 0 18,750
Rex Loren Steffey - - 300,000 58,594
Wm. Lawrence, Jr. - - 124,000 24,609
</TABLE>
(1) Calculation based on the closing price of the Company's common stock on
February 1, 1997 ($0.4375), less the exercise price, multiplied by the
number of in-the-money options held. There is no guarantee that if and
when these options are exercised they will have this value.
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EMPLOYMENT CONTRACTS
The Company signed an employment agreement with Rex Loren Steffey,
President and Chief Executive Officer of the Company, effective July 1, 1995.
The contract 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 Company's Plan of
Reorganization, and (ii) additional amounts based on pretax profit percentages
from 10% (fourth quarter, first year, fiscal year 1996) to 5% (final year,
fiscal year 2001), and (c) the grant of options on February 1, 1996 and 1997 to
acquire an aggregate of 100,000 additional shares of the Company common stock.
The contract allows the Company to terminate Mr. Steffey's employment with
cause 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.
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 (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 (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), 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 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 rate cash incentive payment for the year
of termination.
The actual amount of the percentage of pretax profits payable under the
employment contracts for the fourth quarter of fiscal year 1996 was capped at
$150,000 under Mr. Steffey's contract and $50,000 under Mr. Lawrence's contract.
Further, the Second Amended Plan of Reorganization provides that in the event of
a default in payment to the class of general, nonpriority unsecured creditors,
the cash incentive compensation payments to Mssrs. Steffey and Lawrence shall be
subordinate to the payments due to such unsecured creditors under the Plan. In
addition, the contracts provide the Mr. Jacobs shall nominate and recommend Mr.
Steffey for a Board seat during the term of his contract.
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DIRECTORS' FEES
In fiscal 1997, directors that were not employees of the Company were
paid $1,500 for each Board of Directors meeting attended. 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDE INFORMATION
None.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of June 13, 1997, with
respect to all shareholders known by the Company to be beneficial owners of more
than five percent of its outstanding common stock. It also shows beneficial
ownership for (i) each director, (ii) each of the Named Executive Officers and
(iii) the current executive officers and directors as a group.
Amount and
Nature
of Beneficial Percent
Name and Address Ownership of Class
Jay Jacobs,(5) 3,062,025 44.7
as trustee of the Rose Jacobs
Testamentary Trust
1530 Fifth Avenue
Seattle, WA 98101-1677
David L. Babson & Co., Inc. (1) 350,600 5.1
One Memorial Drive
Cambridge, MA 02142-1300
Jay Jacobs (2)(5) 350,964 5.1
1530 Fifth Avenue
Seattle, WA 98101-1677
Rex Loren Steffey (3) 396,500 5.8
William L. Lawrence, Jr. (4) 124,000 1.8
All current executive officers 3,943,489 57.4
directors as a group
(6 persons)
(1) The information is based upon a Schedule 13G filed with the Commission by
David L. Babson & Co., Inc. ("Babson"), a registered investment advisor
dated February 7, 1997. According to Schedule 13G, Babson claims (i) sole
voting power within respect to 255,600 shares, (ii) shared voting power
with respect to 95,000 shares and (iii) sole dispositive power with respect
to 350,600 shares.
(2) Includes 2,300 shares held by Mr. Jacobs' wife. Includes options to
acquire 100,000 shares, which are exercisable within 60 days.
(3) Includes options to acquire 300,000 shares which, by their terms, are
exercisable within 60 days.
(4) Includes options to acquire 124,000 shares, which are exercisable within 60
days.
(5) PCC Agreement
On April 17, 1997, pursuant to an agreement in principle between Jay
Jacobs, founder and majority shareholder of the Company, and the PCC
(the "PCC Agreement"), the Company accepted the resignation of four of
its six directors and reduced to size of its Board of Directors to five.
The directors who resigned were Shelley Swerland, Gilbert Scherer,
David Taylor and William L. Lawrence, Jr. The reconstituted board was
comprised of Robert Bartlett, Principal of Bartlett Joseph Associates,
Paul Buxbaum, President of Buxbaum, Ginsberg & Associates Inc., Alan
Schlesinger, Chairman, CEO and President of Lamonts Apparel, Inc., and
Mr. Jacobs and Mr. Steffey. As of May 2, 1997, Mr. Schlesinger resigned
from the Board and was replaced by William Nandor.
The PCC Agreement was reached to facilitate the resolution of the payment
to the prepetition creditors in the amount of approximately $2,500,000 due
earlier in 1997 (the "1997 payment") under the Plan. The PCC members granted an
initial moratorium, subject to extension by the PCC until July 1, 1997, to
resolve the 1997 payment.
To induce the PCC to grant the moratorium, Mr. Jacobs agreed, among other
things, to grant to the PCC's designated representative (a) an irrevocable proxy
to vote for a period ending March 31, 1998, all of the 3,312,689 shares of the
Company's Common Stock controlled by Mr. Jacobs and (b) an option, exercisable
until October 31, 1998, to purchase 1,000,000 of such shares at an exercise
price of $0.30 per share. The grant of the proxy and the option are subject to
the execution by Mr. Jacobs and PCC's representative of definitive agreements.
8
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Jay Jacobs is trustee of a trust for the benefit of his two daughters,
Shelley Swerland and Judy Freidt. Under his revocable power of appointment, Mr.
Jacobs has designated Ms. Swerland, Ms. Freidt and Mr. Jacobs's wife as
cotrustees upon his death.
In March 1987 the Jacobs family shareholders of the Company entered into a
Shareholder Agreement. The parties to the Shareholder Agreement may transfer
shares of common stock only within the volume and other restrictions of Rule 144
under the Securities Act of 1933, except Rule 144(k). Proposed transfers of
common stock in excess of Rule 144 volume limitations (other than by gift,
bequest or devise to family members) are subject to a right of first refusal on
the part of the Company and other parties to the Shareholder Agreement. The
Shareholder Agreement was terminated as of April 17, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leased a store in Bellingham, Washington from a limited
partnership, the general partner of which are Mr. Jacobs' grandchildren. The
lease originally provided for rent of $5,000 per month but was renegotiated in
June 1994 to require payments of only $1,000 per month. The lease was rejected
by the Company as of June 1, 1994, with approval of the Bankruptcy Court. The
Company leased the facilities for storage through July 31, 1995. Rental
payments under the lease amounted to $5,000 during the year ended January 27,
1996. The Company believes that the terms of the lease, as originally
negotiated and as enforced until termination were as favorable as terms that
could have been obtained from unaffiliated parties.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on June 17, 1997.
Jay Jacobs, Inc.
By:/s/ Rex Loren Steffey
Rex Loren Steffey
President and Chief Executive
Officer and Director (Principal
Executive Officer)
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