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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 17, 1997
Date of Report (Date of earliest event reported)
JAY JACOBS, INC.
(Exact name of Registrant as Specified in Charter)
Washington 0-15934 91-0698077
(State or Other (Commission File No.) (I.R.S. I.D. No.)
Jurisdiction
of Incorporation)
1530 Fifth Avenue
Seattle, Washington 98101
(Address of Principal Executive Offices) (Zip Code)
(206)622-5400
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On April 17, 1997, pursuant to an agreement between Jay Jacobs,
Chairman, founder and majority shareholder of Jay Jacobs, Inc. (the
"Company") and the members of the Postconfirmation Creditors Committee
(the "PCC") under the Company's Chapter 11 Plan of Reorganization (the
"Plan), the Company accepted the resignations of four of its six directors
and reduced the size of its board of directors to five directors. The
directors who resigned were David Taylor, owner of The Box Maker, Inc.,
Gilbert Scherer, President of American Passage Company, Shelley Swerland,
daughter of Mr. Jacobs, and William L. Lawrence, Jr., Senior Vice
President and Chief Financial Officer of Jay Jacobs, Inc. Three new
directors were elected to fill the remaining vacancies. The reconstituted
board is 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., Mr. Jacobs, and Rex Steffey, CEO and President of Jay Jacobs, Inc.
The PCC initially recommended Alan Schlesinger, Chairman, CEO and
President of Lamonts Apparel, Inc., as a Director. Mr. Schlesinger joined the
Board in April 1997 and subsequently resigned. Mr. Bill Nandor replaced Mr.
Schlesinger.
The agreement was reached to facilitate the resolution of the
payment to the prepetition creditors in the amount of approximately
$2,500,000 due earlier this year under the Plan (the "1997 Payment"). The
PCC members granted an initial moratorium, subject to extension by the PCC
members until July 1, 1997 to resolve the 1997 payment.
To induce the PCC members 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 the PCC's representative of definitive agreements. Upon
execution of such documents, the Company will amend this Form 8-K to
include the information required by Item 1 thereof, as well as any
required exhibits.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits.
10.1 Letter Agreement, dated April 15, 1997, between Mr. Jay Jacobs
and the members of the Postconfirmation Creditors Committee,
certain provisions of which are consented to by the Company.
99 Company News Release, dated April 17, 1997
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SIGNATURE
Pursuant to the requirements of section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, herewith duly authorized.
JAY JACOBS, INC.
By: /s/ Rex Loren Steffey
Rex Loren Steffey
President and Chief Executive
Officer
Dated: May 2, 1997
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EXHIBIT INDEX
Exhibit No. Description
10.1 Letter Agreement, dated April 15,
1997, between Mr. Jay Jacobs and
the members of the Postconfirmation
Creditors Committee, certain provisions
of which are consented to by the
Company.
99 Company News Release, dated April 17, 1997.
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[LETTERHEAD]
April 15, 1997
Postconfirmation Creditors Committee
c/o Lawrence C. Gottlieb, Esq.
Siegel, Sommers & Schwartz, L.L.P.
470 Park Avenue South
New York, New York 10016
Re: Forbearance, Proxy and Option Letter Agreement
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Dear Mr. Gottlieb:
This letter (this "Letter") sets forth our mutual agreement regarding:
(A) certain mutual covenants not to sue between the members of the
Postconfirmation Creditors Committee (the "PCC"), on the one hand, and Jay
Jacobs (the "Shareholder"), acting for himself and as trustee of the Rose Jacobs
Testamentary Trust (the "Trust"), on the other hand, with respect to Jay Jacobs,
Inc. (the "Company"), and the forbearance by the members of the PCC with respect
to the Company's defaults under the Chapter 11 Plan of Reorganization (the
"Plan"), in exchange for (B) agreements by the Shareholder (i) to grant to a
designated representative of the members of the PCC (the "Representative") an
irrevocable proxy to vote a total 3,312,689 shares (the "Shares") of the
Company's common stock (the "Common Stock"), 250,664 of which are held by the
Shareholder and 3,062,025 of which are held by the Trust, (ii) to grant the
Representative an option to purchase up to 1,000,000 of the Shares, and (iii) to
assist the members of the PCC to obtain the right to nominate and elect a
controlling majority of the Company's board of directors, each under certain
conditions. Completion of the proposed transactions is subject to the execution
and/or delivery of a definitive agreement or agreements and other documents, in
form and substance acceptable to each of the parties and their respective legal
counsel (collectively, the "Agreement"). Pending execution of the Agreement, we
mutually agree as follows:
1. MUTUAL RELEASES; PCC FORBEARANCE.
(a) The Shareholder, on the one hand, and the PCC and its
members on the other hand, will covenant not to sue one another for their
actions or omissions relating to the Company during the Proxy Period (as defined
below), except to the extent such actions or omissions are not in good faith or
involve intentional misconduct or knowing violations of the law.
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Postconfirmation Creditors Committee
April 15, 1997
Page 2
(b) During the period from April 1, 1997 to July 1, 1997, which
period may be extended at the discretion of the PCC, the members of the PCC will
forebear from taking any judicial or nonjudicial action against the Company with
respect to any default arising under or relating to the Plan.
2. (a) During the Proxy Period, the Shareholder will grant to the
Representative an irrevocable proxy, with full power of substitution, to vote
the Shares (and any other shares of Common Stock acquired by the Shareholder or
the Trust during the Proxy Period) on all matters with respect to which the
Company's shareholders are entitled to vote. During the Proxy Period, the
Shareholder shall not transfer the Shares except (i) to the lineal descendants
of the Shareholder or the beneficiaries of the Trust, or to a trust established
solely for the benefit of such persons, or (ii) to any other person with the
prior written consent of the Representative, PROVIDED, THAT, the Shares will
remain subject to the terms and conditions of this Letter and the Agreement
following any transfer of the Shares.
(b) Except as set forth in paragraph 2(a), during the Proxy
Period the Shareholder will retain all rights of ownership with respect to the
Shares, including but not limited to the right to receive dividends and
distributions, if any, with respect to the Shares and the right to receive
securities distributed with respect to the Shares in any stock split, stock
combination, stock exchange or similar corporate recapitalization (provided that
the Shares and/or any securities of the Company distributed with respect to the
Shares will, during the Proxy Period, remain subject to the terms of this Letter
and the Agreement).
(c) Unless earlier terminated as provided below, the effective
period of the proxy granted under paragraph 2(a) (the "Proxy Period") will be
from April 1, 1997 to March 31, 1998. The Proxy Period and the Representative's
voting rights under paragraph 2(a) will expire prior to March 31, 1998:
(i) immediately upon the effective date and complete
consummation of any merger, consolidation, share exchange tantamount to a
merger, liquidation, sale of all of the Company's assets or other similar
transaction requiring the approval of the Company's shareholders; or
(ii) immediately upon the confirmation of a new
reorganization plan for the Company.
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Postconfirmation Creditors Committee
April 15, 1997
Page 3
3. OPTION TO PURCHASE SHARES. The Shareholder will grant to the
Representative or one or more of its designated assignees an irrevocable option
to purchase up to 1,000,000 of the Shares (the "Option Shares") at a price of
$0.30 per Share. The option will be fully vested and exercisable by written
notice delivered to the Shareholder at any time between April 1, 1997 and
October 1, 1998 (the "Option Period"). During the Option Period, the
Shareholder will not transfer the Option Shares (other than a transfer to the
lineal descendants of the Shareholder or the beneficiaries of the Trust, or to a
trust established solely for the benefit of such persons), without the prior
written consent of the Representative, PROVIDED, THAT, the Option Shares will
remain subject to the terms and conditions of this Letter and the Agreement
following any transfer of the Option Shares.
4. PCC REPRESENTATION ON BOARD OF DIRECTORS; CERTAIN CONDITIONS.
(a) The Shareholder will use his best efforts to cause, not later
than April 23, 1997; (i) the resignation or removal of all of the directors of
the Company other than the Shareholder and Rex Loren Steffey; (ii) the
appointment or election of 3 persons nominated by the Representative to fill 3
of the remaining vacancies; (iii) the reduction in the number of directors on
the board to 5; (iv) a waiver, effective during the Proxy Period, from William
L. Lawrence, Jr., of his right under his employment agreement with the Company
to be nominated for election to the Company's board of directors; and (v) the
termination of the Buy-Sell Agreement, dated March 31, 1987, among the Company
and certain of its shareholders including the Shareholder. The Shareholder
represents that he has no reason to believe that the foregoing actions cannot be
accomplished by April 23, 1997.
(b) The members of the PCC will use their best efforts to identify 3
qualified, willing and available nominees and provide to the Shareholder
biographical information (of the type required to be disclosed by the Company to
its shareholders and the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) concerning such nominees, not later than April
18, 1997.
5. LIMITATION OF LIABILITY; INDEMNIFICATION; COVENANT NOT TO SUE.
To the full extent permitted by the Company's articles of incorporation, bylaws
and applicable law, none of the directors will be personally liable to the
Company or its shareholders for their conduct as directors other than
intentional misconduct, knowing violations of the law or transactions from which
they personally benefit, and the Company will indemnify all of the directors
against liabilities incurred in connection with their service as directors. The
Shareholder and the directors nominated by the Representative will exchange
mutual covenants not to sue one another for their
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Postconfirmation Creditors Committee
April 15, 1997
Page 4
conduct as directors other than actions for which such directors are not
entitled to the protections described in the preceding sentence. The Company
will provide policies of directors and officers liability insurance, naming the
directors nominated by the PCC as insureds, and providing coverage equivalent to
that provided to the Company's current directors.
6. TERMINATION. This Letter and the Agreement will automatically
terminate (unless extended by agreement of the Representative and the
Shareholder, with the consent of the Company), and all rights and obligations of
the parties under this Letter or the Agreement will terminate without any
liability of any party to any other party, if the actions contemplated by
paragraph 4 have not been completed by April 23, 1997, except that the
obligations of the Company under paragraph 7 shall survive termination.
Notwithstanding anything to the contrary contained in this Letter or the
Agreement, in the vent of the termination of this Letter and the Agreement, (i)
the PCC will have all rights and remedies against the Shareholder and the
Company as though this Letter and the Agreement had not been executed, and (ii)
the Shareholder and the Company will have all the rights and remedies against
the members of the PCC as though this Letter and the Agreement had not been
executed.
7. EXPENSES. The reasonable legal fees and expenses of the
Shareholder, and the reasonable expenses (including legal fees and expenses) of
the members of the PCC, incurred in either case in connection with this Letter
and the negotiation and preparation of the Agreement, shall be borne by the
Company, as a third-party beneficiary of the Agreement.
This Letter constitutes a binding agreement of the Shareholder, the
Representative and the members of the PCC with respect to the subject matter
described above, but does not contain all matters upon which agreement must be
reached. A binding commitment with respect to such other matters will result
from the execution and delivery of the Agreement.
If the above accurately reflects your present intention and
understanding with respect to the matters discussed above, please have the
enclosed copy of this Letter executed on behalf of the members of the PCC by
their authorized representative and return it to the undersigned by April 17,
1997. This Letter may be executed in one or more counterparts, each of which
will be an original and all of which together will constitute one and the same
agreement. Delivery of an executed counterpart signature page to this Letter
will be effective as delivery of a manually executed counterpart.
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Postconfirmation Creditors Committee
April 15, 1997
Page 5
This proposal will be withdrawn if it has not been accepted in writing
by that time. Upon receipt of the executed copy, I will instruct Company
counsel to prepare and deliver to you our proposed draft of the Agreement.
/s/ Jay Jacobs
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MR. JAY JACOBS
/s/ Jay Jacobs
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MR. JAY JACOBS, Trustee
ROSE JACOBS TESTAMENTARY TRUST
Agreed And Accepted this ___day of April, 1997
POSTCONFIRMATION CREDITORS COMMITTEE
By:
--------------------------------------
Its
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JAY JACOBS, INC. hereby consents to and agrees to be bound by the obligations
of the Company set forth in paragraphs 5, 6, and 7 above:
JAY JACOBS, INC.
By: /s/ Rex Loren Steffey
----------------------------------------
Rex Loren Steffey, President and CEO
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[LETTERHEAD]
DATE: April 18, 1997
FOR RELEASE: Immediately
CONTACT: Bill Lawrence
Chief Financial
Officer
(206) 622-5400
extension 217
JAY JACOBS, INC.
Seattle, Washington - April 18, 1997 - Jay Jacobs, Inc. (JAYJ) today
reported that an agreement has been reached between Mr. Jay Jacobs, founder,
principal shareholder and Chairman of Jay Jacobs, Inc., and the Post-
Confirmation Creditors Committee (PCC) for the PCC to place three new
members on the company's Board of Directors, effective April 17, 1997.
Effective as of that date, the reconstituted board will be comprised of Rex
Steffey, CEO and President of Jay Jacobs, Paul Buxbaum, President of
Buxbaum, Ginsberg & Associates, Robert Bartlett, Principal of Bartlett
Joseph Associates, Alan Schlesinger, Chairman, CEO and President of Lamonts
Apparel, Inc. and Mr. Jay Jacobs.
This agreement has been reached to enhance the process of finding
additional sources of working capital for the company, and to facilitate the
resolution of the payment to the prepetition creditors due earlier this year
under the company's confirmed reorganization plan. The Post-Confirmation
Creditors Committee also granted a moratorium, subject to extension by the
PCC members, until July 1, 1997 to resolve the January payment.
Rex Steffey, CEO and President said, "We are pleased with the expertise
that the new board members bring to the company and are confident that with
their help, our prospects for obtaining working capital will be greatly
enhanced."
Jay Jacobs is a Seattle based specialty apparel retailer selling to men
and women, currently operating through its 116 stores located in 20 states.
