SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
JAY JACOBS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Set forth the amount on which
the filing fee is calculated and state how it was determined.
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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<PAGE>
JAY JACOBS, INC.
1530 Fifth Avenue
Seattle, Washington 98102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
July 9, 1998
To the Shareholders of Jay Jacobs, Inc.:
You are invited to attend the Annual Meeting of Shareholders (the
"Meeting") of Jay Jacobs, Inc., a Washington corporation. The Meeting will be
held at the Company's headquarters, located at 1530 Fifth Avenue, Seattle,
Washington on July 9, 1998, at 9:00 a.m., Pacific Time, for the following
purposes:
1. electing five directors who will serve until their successors are duly
elected and qualified; and
2. to transact any other business that properly comes before the Meeting
or any adjournment of the Meeting.
Only shareholders of record at the close of business on June 22, 1998 will
be entitled to vote at the Meeting or any adjournments of the Meeting.
Your vote is important. Whether you plan to attend the meeting or not,
please sign, date and return your proxy card to us in the return envelope as
soon as possible. If you plan to attend the meeting, please mark the appropriate
box on the proxy card so we can prepare an accurate admission list. If you
attend the meeting and prefer to vote in person, you will be able to do so.
By Order of the Board of Directors
/s/ WILLIAM L. LAWRENCE, JR.
-----------------------------------------------
Secretary
Seattle, Washington
June 24, 1998
<PAGE>
JAY JACOBS, INC.
1530 Fifth Avenue
Seattle, Washington 98102
June 24, 1998
------------
PROXY STATEMENT
------------
General
- -------
The Board of Directors of Jay Jacobs, Inc., a Washington corporation (the
"Company"), is furnishing this Proxy Statement in connection with its
solicitation of proxies to be voted at the Company's 1998 annual meeting of
shareholders (the "Meeting"). The Meeting will be held at the Company's
headquarters located at 1530 Fifth Avenue, Seattle, Washington, 98101, on July
9, 1998, at 9:00 a.m. Pacific Time. This Proxy Statement and the accompanying
proxy are being mailed to shareholders of the Company on or about June 24, 1998.
Record Date and Outstanding Shares
- ----------------------------------
The Board of Directors has fixed June 22, 1998, as the record date (the
"Record Date") for determining the holders of the Company's voting securities
who are entitled to receive notice of and to vote at the Meeting. The Company's
voting securities consist of its common stock, par value $0.01 per share
("Common Stock") and its Series B Preferred Stock, par value $0.01 per share
("Series B Stock"). At the close of business on the Record Date, there were
549,220 shares of Common Stock oustanding and 25,000 shares of Series B Stock
outstanding (collectively the "Voting Shares").
Solicitation and Revocability of Proxy
- --------------------------------------
A proxy in the form accompanying this proxy statement is solicited on
behalf of the Board of Directors of the Company. The Company will bear the cost
of preparing and mailing the proxy, the proxy statement, and any other material
furnished to the shareholders by the Company in connection with the Meeting.
Proxies will be solicited by use of the mails, and officers and employees of the
Company may, without additional compensation, also solicit proxies by telephone
or personal contact. Copies of solicitation materials will be furnished to
fiduciaries, custodians, and brokerage houses for forwarding to beneficial
owners of the stock held in their names.
Any shares of stock of the Company held in the name of fiduciaries,
custodians, or brokerage houses for the benefit of their clients may only be
voted by the fiduciary, custodian, or brokerage house itself -- the beneficial
owner may not vote the shares directly and must instruct the person or entity in
whose name the shares are held how to vote the shares held for the beneficial
owner. Therefore, if any shares of stock of the Company are held in "street
name" by a brokerage house, only the brokerage house, at the instructions of its
client, may vote the shares.
Any person giving a proxy in the form accompanying this proxy statement has
the power to revoke it at any time before its exercise. The proxy may be revoked
by filing with the Secretary of the Company an instrument of revocation or a
duly executed proxy bearing a later date. The proxy may also be revoked by
affirmatively electing to vote in person while attending the Meeting. However, a
shareholder who attends the Meeting need not revoke the proxy and vote in person
unless the shareholder wishes to do so. All valid, unrevoked proxies will be
voted at the Meeting in accordance with the instructions given. If a signed
proxy is returned without instructions, it will be voted for the nominees for
director, for the approval of the proposals presented, and in accordance with
the
<PAGE>
recommendations of management on any other business that may properly come
before the Meeting or matters incident to the conduct of the Meeting.
Voting and Quorum
- -----------------
The shares represented by each proxy will be voted in accordance with the
instructions given on the proxy, or, in the absence of instructions to the
contrary, will be voted (i) "FOR" the election of the five nominees for the
Board of Directors named on the following pages, provided that if any one or
more of such nominees should become unavailable for election for any reason,
such shares will be voted for the election of such substitute nominee or
nominees as the Board of Directors may propose, and (ii) at the discretion of
the persons named in the proxy, on any other business that may properly come
before the Meeting.
Under Washington law and the Company's Articles of Incorporation and
Bylaws, the presence in person or by proxy of holders of a majority of the
Voting Shares is required to constitute a quorum for the transaction of business
at the Meeting. Abstentions and broker non-votes will be considered present at
the meeting for the purpose of determining a quorum.
If a quorum is present at the Meeting, the five nominees for the Board of
Directors who receive the greatest number of votes cast for the election of
directors by the shares present in person or by proxy at the Meeting shall be
elected directors. The affirmative vote of a majority of shares present in
person or by proxy at the Meeting is required for approval of any other matters
submitted to a vote of the shareholders. The Series B Stock is entitled to vote,
together with the holders of Common Stock as a single class, on any matter
submitted to the shareholders for a vote. Each holder of Common Stock will be
entitled to one vote for each share of Common Stock held by that shareholder.
Each holder of Series B Stock will, for each share of Series B Stock, be
entitled to that number of votes equal to the number of shares of Common Stock
into which such share of Series B Stock is convertible. Shareholders will not be
entitled to cumulate votes in the election of directors.
In the election of directors, an abstention or broker non-vote will have no
effect on the outcome. In the case of any other matter, abstention from voting
will have the practical effect of voting against such matter.
2
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees
- --------
The Board of Directors of the Company will consist of five directors, who
will be elected at the Meeting to serve until their successors are duly elected
and qualified. Unless a proxy received by the Company directs otherwise or is
properly revoked, that proxy will be voted FOR the election of the following
nominees:
<TABLE>
<CAPTION>
Director or
Name Age Officer Since Position with Company
- ---- --- ------------- ---------------------
<S> <C> <C> <C>
Rex Loren Steffey 48 09/94 President; Chief Executive Officer;
Director
William L. Lawrence, Jr. 47 12/97 Executive Vice President; Chief
Financial Officer; Director
Michael D. Sullivan 57 12/97 Chairman of the Board
Edward L. Cahill 44 12/97 Director
Kim Z. Golden 42 12/97 Director
</TABLE>
All of the nominees are currently directors of the Company. If any nominee
is unable to stand for election, the shares represented by all proxies in favor
of the above slate will be voted for the election of the substitute nominee
recommended by the Board of Directors. The Company is not aware that any nominee
is or will be unable to stand for election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ALL OF THE NOMINEES NAMED ABOVE.
Directors and Executive Officers
- --------------------------------
Rex Loren Steffey has served as the Company's President and Chief Executive
Officer since September 1994 and has been a Director of the Company since
September 1994. From March 1993 to September 1994 Mr. Steffey held various
positions with Paul Harris Stores, Inc. ("Paul Harris"), an Indiana-based
fashion retailer and, immediately prior to joining the Company, was Paul Harris'
President and Chief Operating Officer.
William L. Lawrence, Jr. has served as the Company's Chief Financial
Officer since January 1995, and has served as its Executive Vice President and a
Director since December 1997. 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, Mr. Lawrence was Senior
Vice President-Finance of Paul Harris, and from 1990 until March 1993 he served
as Paul Harris' Vice President-Controller, Corporate Secretary, and Assistant
Treasurer.
Michael D. Sullivan has served as a Director of the Company since December
1997. From October 1996 to the present, Mr. Sullivan has been Chairman of the
Board of Golf America Stores, Inc., a golf apparrel retailing company. Mr.
Sullivan has also been Chairman of the Board of Pro Axon International, LLC, a
hair care products company since December 1994. From August 1974 to November
1994, Mr. Sullivan was President and Chief Executive Officer of Merry-Go-Round
Enterprises, Inc., a fashion retailer. Merry-Go-Round filed a reorganization
petition under Chapter XI of the Federal Bankruptcy law in January 1994, and
subsequently announced a bankruptcy liquidation. Mr. Sullivan is also a director
of Baltimore Gas and Electric Company.
3
<PAGE>
Edward L. Cahill has served as a Director of the Company since December
1997. Mr. Cahill is a founding partner of Cahill, Warnock & Company, LLC, an
asset management firm established to invest in small public companies. Prior to
founding Cahill, Warnock & Company in July 1995, Mr. Cahill was a Managing
Director at Alex. Brown & Sons, Incorporated where, from 1986 through 1995, he
headed the firm's Health Care Investment Banking Group. Mr. Cahill is also a
director of Occupational Health + Rehabilitation Inc, GENEMEDICINE, INC., Prism
Health Group, Inc. and The Maryland Bioprocessing Center.
Kim Z. Golden has served as a Director of the Company since December 1997.
Mr. Golden is a Managing Director of T. Rowe Price Recovery Fund II, L.P. From
May 1991 to the present, Mr. Golden has been a Vice President of T. Rowe Price
Associates ("TRPA"), a mutual fund company. Prior to joining TRPA Mr. Golden
held various positions at Chemical Banking Corporation (now Chase Manhattan)
where he was a Vice President of Corporate Finance. Mr. Golden is also a
Director of Seaman Furniture Company.
Director Compensation
- ---------------------
No employee/director of the Company receives any compensation for serving
as a director. Non-employee directors receive no salary for their services and
receive no fee for their participation in meetings. From time to time, the Board
of Directors may grant options to purchase Common Stock to non-employee
directors. All directors are reimbursed for reasonable travel and other
out-of-pocket expenses incurred in attending meetings of the Board of Directors.
Vacancies
- ---------
Replacement directors for vacancies resulting from an increase in the size
of the Board of Directors or the resignation or removal of a director may be
appointed by the Board of Directors, or may be elected by the shareholders at a
special meeting. Directors so appointed or elected hold office until the next
annual meeting of shareholders and until their successors are elected and
qualified.
Board of Directors Meetings
- ---------------------------
The Board of Directors met twelve times during the fiscal year ended
January 31, 1998 ("Fiscal 1998"). No director attended fewer than 75% of the
aggregate of all meetings of the Board of Directors and the committees of which
the director was a member during the period in which he was a director in Fiscal
1998.
Committees of the Board of Directors
- ------------------------------------
In December 1997, the Company's Board of Directors established a
Compensation Committee, an Audit Committee and a Real Estate Committee.
Compensation Committee. The Compensation Committee reviews and recommends
to the Board of Directors the annual salary, bonus, stock options, and other
benefits, direct and indirect, of the senior executives of the Corporation. The
Compensation Committee also administers policies relating to compensation and
benefits. Michael D. Sullivan, Edward L. Cahill and Kim Z. Golden are the
current members of the Compensation Committee. The Compensation Committee met
two times during Fiscal 1998.
Audit Committee. The Audit Committee reviews the Company's accounting
policies, practices, internal accounting controls and financial reporting. The
Audit Committee also oversees the engagement of the Company's independent
auditors, reviews the audit findings and recommendations of the independent
auditors, and monitors the extent to which management has implemented the
findings and recommendations of the independent auditors. Michael D. Sullivan,
Edward L. Cahill and Kim Z.
4
<PAGE>
Golden are the current members of the Audit Committee. The Audit Committee met
one time during Fiscal 1998.
Real Estate Committee. The Real Estate Committee establishes and
periodically reviews policies relating to the Company's use and occupancy of
real property, including periodic reviews of the status of the Company's leases
and relationships with its landlords. The Real Estate Committee also oversees
the Company's strategy and plans with respect to the occupancy or expansion of,
or improvements to, the Company's real properties. Michael D. Sullivan, Rex
Loren Steffey, Edward L. Cahill and Kim Z. Golden are the current members of the
Real Estate Committee. The Real Estate Committee met one time during Fiscal
1998.
Securities Ownership of Directors, Executive Officers and Principal Shareholders
- --------------------------------------------------------------------------------
All share amounts with respect to the Company's Common Stock in the
following table and throughout this proxy statement reflect a 1 for 15 reverse
split of the Company's Common Stock which was approved by the shareholders of
the Company at a Special Meeting of the Shareholders on March 24, 1998.
The following table sets forth certain information regarding ownership of
the Company's Common Stock as of June 22, 1998 by (i) each person known by the
Company to own beneficially more than 5% of the Common Stock, (ii) each director
and director nominee of the Company, (iii) the Chief Executive Officer and each
of the other named executive officers, and (iv) all directors and officers as a
group. Except as otherwise noted, beneficial ownership of Common Stock by each
person listed below is based on such person's beneficial ownership of Series B
Stock. Numbers of shares beneficially owned by holders of Series B Stock and all
percentage calculations assume that all outstanding shares of B Stock have been
converted to Common Stock.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Beneficially Shares
Name Owned Outstanding
---- ---------------- -------------
<S> <C> <C>
Rex Loren Steffey/1 72,235 1.64
William L. Lawrence, Jr./2 60,801 1.39
Michael D. Sullivan/3 63,164 1.46
Edward L. Cahill/4 2,464,956 56.06
Kim Z. Golden/5 1,369,427 31.37
T. Rowe Price Recovery Fund II, L.P. 1,369,427 31.37
Cahill, Warnock Strategic Partners Fund, L.P. 2,335,648 53.17
Strategic Associates, L.P. 129,308 2.99
All Officers and Directors as a Group 4,030,583 88.20
- --------------
/1 Consists of 72,235 shares issuable on exercise of currently exercisable
options or options exercisable within 60 days of the date of this proxy.
5
<PAGE>
/2 Consists of 60,801 shares issuable on exercise of currently exercisable
options or options exercisable within 60 days of the date of this proxy.
/3 Consists of 10,000 shares issuable on exercise of currently exercisable
options or options exercisable within 60 days of the date of this proxy and
53,164 shares issuable on conversion of warrants held by Mr. Sullivan.
/4 Consists of 2,393,144 shares issuable on conversion of Series B Preferred
Stock and 71,812 shares issuable on conversion of warrants held by Cahill,
Warnock Strategic Partners Fund, L.P. and Strategic Associates, L.P., both
limited partnerships managed by Cahill, Warnock & Company, LLC. Mr. Cahill is a
managing member of Cahill, Warnock & Company, LLC.
/5 Consists of 1,329,557 shares issuable on conversion of Series B Preferred
Stock and 39,870 shares issuable on conversion of warrants held by T. Rowe Price
Recovery Fund II, L.P., a limited partnership managed by T. Rowe Price Recovery
Fund II Associates, LLC. Mr. Golden is a Managing Director of T. Rowe Price
Recovery Fund II Associates, LLC. Mr. Golden disclaims beneficial ownership of
shares owned by T. Rowe Price Recovery Fund II, L.P. or T. Rowe Price Recovery
Fund II Associates, LLC.
</TABLE>
Executive Compensation
- ----------------------
The following table sets forth the annual and long-term compensation of
each executive officer of the Company who received annual salary and bonuses
exceeding $100,000 in the fiscal year ended January 31, 1998 (the "Named
Executives"), for services in all capacities to the Company for the last three
fiscal years.
<TABLE>
<CAPTION>
Long-Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------- -------------------------- -------
Other Restricted Securities
Name and Annual Stock Underlying LTIP All Other
Principal Fiscal Salary Bonus Compensation Awards Options/SARs Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)
--------- ------ -------- -------- ------------ ---------- ------------ ------- ------------
<S> <C> <C> <C> <C>
Rex Loren Steffey, 1998 $300,000 $100,000 -0-
President and CEO 1997 $336,541 -0- 6,667
1996 $314,422 $150,000 -0-
William L.
Lawrence, Jr., 1998 $175,000 $60,000 -0-
Executive Vice 1997 $201,088 -0- 2,667
President and CFO 1996 $229,437 $50,000 6,000
</TABLE>
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values
- ---------------------------------------------------------------------
The following table sets forth information concerning exercise of stock
options and warrants during the last fiscal year by each Named Executive and the
fiscal year end value of unexercised options:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at FY-end (#) SARs at FY-end ($)
Shares
Acquired Value
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Rex Loren
Steffey -0- -0-
6
<PAGE>
William L.
Lawrence, Jr. 8,267 -0- $55,554.241 -0-
- --------------
(1) Based on a closing price of 8 43/64 of the Company's Common Stock at the
end of Fiscal 1998.
</TABLE>
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
The Compensation Committee is composed of Michael D. Sullivan, Edward L.
Cahill, and Kim Z. Golden, none of whom are employees or current or former
officers of the Company.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of three nonemployee directors. The Committee is responsible for
developing and making recommendations to the Board with respect to the Company's
compensation policies and the levels of compensation to be paid to executive
officers. In addition, the Committee has responsibility for the administration
and the grant of stock options and other awards under the Company's 1998 Stock
Incentive Plan (the "Plan").
The objectives of the Company's executive compensation program are to
attract and retain highly qualified executives and to motivate them to maximize
shareholder returns by achieving both short-term and long-term strategic Company
goals. The two basic components of the executive compensation program are base
salary and long-term incentive compensation in the form of stock options.
Base Salary. Base salaries for the executive officers are set pursuant to
the terms of employment agreements with Messrs. Steffey and Lawrence which were
in place prior to the formation of the Committee. Base salaries under the
employment agreements are subject to increase on an annual basis in accordance
with the Consumer Price Index.
Cash Bonus Program. The employment agreements for each of Messrs. Steffey
and Lawrence provide for cash bonuses accrued upon the achievement of
performance goals agreed to by the employee and the Compensation Committee.
These performance goals are related to achieving financial goals and specific
goals related to implementation of certain tasks.
Long-Term Incentive Compensation. The Plan is a long-term incentive plan
for executives, managers, and other employees within the Company. The objective
of the Plan is to align employee and shareholder long-term interests by creating
a strong and direct link between compensation and shareholder value. The Plan
authorizes the Committee to award stock options to officers and other employees
of the Company as well as directors of and consultants to the Company. Stock
options are granted at an option price not less than 100% of fair market value
of the Company's Common Stock on the date of grant, in the case of incentive
stock options, and at prices otherwise determined by the Committee, in the case
of nonstatutory stock options. To date, all options granted under the Plan have
been nonstatutory stock options. Stock options granted under the Plan to date
generally vest 20% immediately and the remainder vest in equal annual
installments over four years. The stock options have ten year terms, and
generally terminate in the event of termination of employment. The amount of
stock option grants for an individual is at the discretion of the Committee and
depends upon the individual's level of responsibility and position in the
Company.
Deductibility. Section 162(m) of the Internal Revenue Code of 1986 limits
to $1 million per person the amount that the Company may deduct for compensation
paid to any of its most highly compensated officers in any year after 1993. The
levels of salary and bonus generally paid by the Company do not exceed this
limit. Upon the exercise of nonstatutory incentive stock options, however, the
excess of the current market price over the option price (the "option spread")
is treated as compensation and, therefore, it may be possible for option
exercises by an officer in any year to cause the officer's total compensation to
exceed $1 million. Under IRS regulations, option spread compensation from
options that meet certain requirements will not be subject to the $1 million
limit on deductibility.
COMPENSATION COMMITTEE
Michael D. Sullivan
Edward L. Cahill
Kim Z. Golden
8
<PAGE>
Employment Agreements
- ---------------------
Recent Employment Agreements. In December 1997, the Company entered into
new employment agreements with Messrs. Steffey and Lawrence. The agreements are
for five-year terms and provide for an annual salary of $300,000 and $175,000
for Mr. Steffey and Mr. Lawrence, respectively, subject to increase on an annual
basis in accordance with the Consumer Price Index. The agreements also provide
for annual bonuses of up to 45% of the employee's base salary if certain
performance goals agreed to by the employee and the Compensation Committee of
the Board of Directors are met. The agreements may be terminated by the Company
with or without cause and without notice, and may be terminated by Messrs.
Steffey and Lawrence for "Good Reason" (as defined in the agreements) upon 30
days' prior written notice to the Company. In the event of termination by the
Company without cause, or termination by the employee for Good Reason, the
employee is entitled to receive payment of his base salary for a period of two
years following termination, plus any bonus accrued through the date of
termination (the "Severance Payment"). For a period of two years following
termination the employee is subject to a covenant not to compete with the
Company; provided, that if termination by the Company is without cause and
occurs within 60 days of a change in control of the Company (as defined in the
agreement), the employee may elect not to receive the Severance Payment and the
covenant not to compete will not then apply.
Compliance With Section 16(a) Beneficial Ownership Reporting Requirements
- -------------------------------------------------------------------------
Based solely on a review of Forms 3 and 4 and amendments thereto furnished
to the Company pursuant to Rule 16a-3(e) during its most recent fiscal year, and
on representations that none of the Company's officers, directors, or principal
shareholders ("Reporting Persons") were required to report any transactions on
Form 5, the Company believes that, during the fiscal year ended January 31,
1998, the Reporting Persons complied in all material respects with all
applicable filing requirements under Section 16(a) of the Exchange Act.
Certain Relationships and Related Transactions
- ----------------------------------------------
On December 5, 1997 (the "Closing Date"), the Company created and sold two
new series of preferred stock in a private placement for $7,100,000. The
preferred stock, denominated Series A Preferred Stock and Series B Preferred
Stock (the "A Stock" and "B Stock", respectively, and, collectively, the
"Preferred Stock"), was sold in its entirety to investors not previously
affiliated with the Company. The A Stock is non voting and non convertible. The
B Stock is convertible into 86.25% of the sum of (i) the outstanding common
stock of the Company ("Common Stock") on the Closing Date, (ii) additional
shares of Common Stock issuable to certain creditors of the Company immediately
following the Closing Date, and (iii) the shares of Common Stock into which the
B Stock is convertible.
Edward L. Cahill, a current director and nominee for election as a director
of the Company, is a managing member of Cahill, Warnock & Company, LLC ("Cahill
Warnock"). Strategic Associates, L.P. ("Strategic Associates"), a fund managed
by Cahill Warnock purchased 3.3% of each series of Preferred Stock for an
aggregate purchase price of $236,200. Mr. Cahill is also a general partner of
Cahill, Warnock Strategic Partners, L.P., the general partner of Cahill, Warnock
Strategic Partners Fund, L.P. ("Strategic Partners Fund"). Strategic Partners
Fund purchased 60.1% of each series of Preferred Stock for an aggregate purchase
price of $4,263,800.
Kim Z. Golden, a current director and nominee for election as a director of
the Company, is the managing director of T. Rowe Price Recovery Fund II
Associates, LLC, the general partner of T. Rowe Price Recovery Fund II, L.P.
("TRP"). TRP purchased 35.2% of each series of Preferred Stock for an aggregate
purchase price of $2,500,000.
9
<PAGE>
Michael D. Sullivan, a current director and nominee for election as a
director of the Company, purchased 1.4% of each series of Preferred Stock for an
aggregate purchase price of $100,000.
On March 11, 1998, the Company entered into a Subordinated Debenture
Purchase Agreement (the "Debenture Agreement") with Strategic Partners Fund,
Strategic Associates, and TRP. Pursuant to the terms of the Debenture Agreement,
(i) Strategic Partners Fund acquired a warrant to purchase 68,014 shares of the
Common Stock as partial consideration for the purchase of a subordinated
debenture of the Company in the principal amount of $1,218,000, (ii) Strategic
Associates acquired a warrant to purchase 3,798 shares of the Common Stock as
partial consideration for the purchase of a subordinated debenture in the
principal amount of $68,000, and (iii) TRP acquired a warrant to purchase 39,870
shares of the Common Stock as partial consideration for the purchase of a
subordinated debenture in the principal amount of $714,000. Each of the warrants
issued pursuant to the Debenture Agreement provide an exercise price of $0.01
per share of Common Stock, or $1.00 per Common Stock equivalent. In addition,
pursuant to the terms of the Debenture Agreement, Strategic Partners Fund,
Strategic Associates and/or TRP may, upon an event of default by the Company,
(i) demand immediate payment, (ii) extend the term of the their respective
portions of the subordinated debenture and receive additional warrants to
purchase the Company's Common Stock or Common Stock equivalents up to an
aggregate amount of 3% of the Company's Common Stock on a fully diluted basis,
(iii) convert the principal amount of their respective portions of the
subordinated debenture into the Company's Series C Preferred Stock, or (iv)
enter into any other written agreement with the Company.
Performance Graph
- -----------------
Set forth below is a line graph comparing the cumulative total stockholder
return of the Company's Common Stock with the cumulative total return of the S&P
500 Index, and the S&P Retail Specialty Apparel Index for the period commencing
on February 28, 1993 and ended on February 28, 1998. The graph assumes that $100
was invested in the Company's Common Stock and each index on February 28, 1993
and that all dividends were reinvested.
<TABLE>
<CAPTION>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
JAY JACOBS, INC. COMMON STOCK, THE S&P 500 INDEX AND
THE S&P RETAIL SPECIALTY APPAREL INDEX THROUGH FEBRUARY 28, 1998
S&P Retail Specialty
Measurement Period Jay Jacobs, Inc. Stock S&P 500 Index Apparel Index
------------------ ---------------------- ------------- -------------
<S> <C> <C> <C>
February 28, 1993 $100.00 $100.00 $100.00
February 28, 1994 $57.14 $108.69 $94.23
February 28, 1995 $24.29 $110.73 $71.66
February 28, 1996 $35.71 $149.24 $82.95
February 28, 1997 $8.57 $181.71 $115.36
February 28, 1998 $8.57 $241.12 $210.55
</TABLE>
10
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse L.L.P. served as the independent auditors of the Company
for Fiscal 1998. A representative of Price Waterhouse L.L.P. is expected to be
present at the Meeting and will have an opportunity to make a statement and/or
to respond to appropriate questions from shareholders. The Board of Directors
has not yet considered the selection of an independent public accountant for the
fiscal year ending January 30, 1999.
SHAREHOLDER PROPOSALS
Shareholder proposals submitted for inclusion in the 1999 proxy materials
and consideration at the 1999 Annual Meeting of Shareholders must be received by
the Corporation by February 24, 1999. Any such proposal should comply with the
rules promulgated by the Securities and Exchange Commission governing
shareholder proposals submitted for inclusion in proxy materials.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's 1998 Annual Report on Form 10-K/A, which includes
the Company's Financial Statements for the fiscal year ended January 31, 1998,
accompanies this Proxy Statement. The Annual Report is not to be treated as part
of or incorporated by reference into the proxy solicitation material.
DISCRETIONARY AUTHORITY
While the Notice of Meeting provides for transaction of any business that
properly comes before the Meeting, the Board of Directors has no knowledge of
any matters to be presented at the Meeting other than those referred to herein.
The enclosed proxy, however, gives discretionary authority if any other matters
are presented.
OTHER BUSINESS
The Board of Directors does not intend to present any business for action
at the Meeting other than the election of directors, nor does it have knowledge
of any matters that may be presented by others. If any other matter properly
comes before the Meeting, the persons named in the accompanying form of proxy
intend to vote in accordance with the recommendations of the Board of Directors.
By Order of the Board of Directors
WILLIAM L. LAWRENCE, JR.
Secretary
June 24, 1998
11
<PAGE>
PROXY
JAY JACOBS, INC.
Annual Meeting, July 9, 1998
PROXY SOLICITED BY BOARD OF DIRECTORS
PLEASE SIGN AND RETURN THIS PROXY
The undersigned hereby appoints Rex Loren Steffey and William L. Lawrence, Jr.,
and each of them, proxies with power of substitution to vote on behalf of the
undersigned all shares that the undersigned may be entitled to vote at the
annual meeting of the shareholders of Jay Jacobs, Inc. (the "Company") on July
9, 1998 and any adjournments thereof, with all powers that the undersigned would
possess if personally present, with respect to the following:
1. Election of Directors: [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
except as marked to vote for all
to the contrary below. nominees listed below.
Instructions: To withhold authority to vote for any individual, strike a
line through the nominee's name below.
Rex Loren Steffey, William L. Lawrence, Jr., Michael D.
Sullivan, Edward L. Cahill, Kim Z. Golden
2. Transaction of any business that properly comes before the meeting or any
adjournments thereof. A majority of the proxies or substitutes at the meeting
may exercise all the powers granted hereby.
To assist the Company in planning for the meeting, please indicate
below your current plans:
[ ] I expect to attend the Annual Meeting.
[ ] I do not expect to attend the Annual Meeting.
(Continued and to be signed on the other side.)
<PAGE>
The shares represented by this proxy will be voted as specified on the
reverse hereof, but if no specification is made, this proxy will be
voted for the election of directors. The proxies may vote in their
discretion as to other matters that may come before this meeting.
Shares:
Date:___________________________, 1998
P
R
O ------------------------------------
X Signature or Signatures
Y
Please date and sign as name is imprinted
hereon, including designation as executor,
trustee, etc., if applicable. A
corporation must sign its name by the
president or other authorized officer.
The Annual Meeting of the Shareholders of
Jay Jacobs, Inc. will be held on July 9,
1998 at 9:00 a.m., Pacific, at the
Company's headquarters, located at 1530
Fifth Avenue, Seattle, Washington.
Please Note: Any shares of stock of the Company held in the name of
fiduciaries, custodians or brokerage houses for the benefit of their clients
may only be voted by the fiduciary, custodian or brokerage house itself--the
beneficial owner may not directly vote or appoint a proxy to vote the shares
and must instruct the person or entity in whose name the shares are held how
to vote the shares held for the beneficial owner. Therefore, if any shares
of stock of the Company are held in "street name" by a brokerage house, only
the brokerage house, at the instructions of its client, may vote or appoint
a proxy to vote the shares.
