JG Industries Inc/IL – ‘PRE 14C’ for 2/11/00

On:  Thursday, 2/17/00   ·   For:  2/11/00   ·   Accession #:  950131-0-1326   ·   File #:  1-00258

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Preliminary Proxy Information Statement   —   Schedule 14C
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PRE 14C     Schedule 14C - Information Statement                 108    395K 

Document Table of Contents

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SCHEDULE 14C INFORMATION  

INFORMATION STATEMENT PURSUANT TO SECTION 14(C) 
OF THE SECURITIES 
EXCHANGE ACT OF 1934  

Check the appropriate box:  

Preliminary information statement [X] 
Confidential, for use of the  
Commission only (as permitted 
by Rule 14c-5(d)(2))  
Definitive information statement [ ]  

JG INDUSTRIES, INC. 
___________________________________________________ 
(Name of Registrant as Specified in Its Charter)  

Payment of Filing Fee (Check the appropriate box):  

[ ] No fee required.  

[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11. 

(1) Title of each class of securities to which transaction applies: 

Not Applicable  
___________________________________________________ 

(2) Aggregate number of securities to which transaction applies:  

Not Applicable  
___________________________________________________ 

(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): 

Not Applicable  
___________________________________________________ 

(4) Proposed maximum aggregate value of transaction:  

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$7,626,000 (representing the aggregate consideration to be received by the  
Registrant) 
___________________________________________________ 

(5) Total fee paid: 
$1,525.20 
___________________________________________________ 

[ ] 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: 
___________________________________________________ 

(2) Form, Schedule or Registration Statement No.: 
___________________________________________________ 

(3) Filing Party: 
___________________________________________________ 

(4) Date Filed: 
___________________________________________________ 

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NOTICE OF ACTION BY WRITTEN CONSENT OF MAJORITY SHAREHOLDERS

----------------------------- 

JG INDUSTRIES, INC. 
5630 West Belmont 
Chicago, Illinois 60634 
(773) 481-5410

----------------------------- 

To the Shareholders of JG Industries, Inc.:                                     

This Information Statement is being furnished to the shareholders of JG         
Industries, Inc. (the "Company") pursuant to Section 14(c) of the Securities    
Exchange Act of 1934 (the "Exchange Act").  This Information Statement shall    
also serve as a notice which is hereby being given pursuant to Section 7.10 of  
the Illinois Business Corporation Act of 1983, as amended (the "Act"), prior to 
a written consent action of the majority shareholders of the Company.  WE ARE   
NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.        

The Company anticipates that on or before March ___, 2000, the holders of a     
majority of the issued and outstanding common and preferred shares of the       
Company will approve by written consent the following actions:                  

Action 1:  Amend the articles of incorporation to specify that voluntary        
dissolution of the Company requires a majority vote of the
   outstanding common and preferred shareholders of the Company;

Action 2:  Approve the sale of interests in real property (the "Real Property   
       Interests") which constitutes substantially all the assets of the
Company to Ames Department Stores, Inc. ("Ames"); and     

Action 3:  Approve the dissolution of the Company and the liquidation of the    
  Company's assets subsequent to the sale of the Real Property
Interests to Ames.                                        

Under Illinois law and the Company's articles of incorporation, as amended, the 
written consent of the holders of a majority of the issued and outstanding      
common and preferred shares of the Company, acting together as a single class   
(the "Majority Holders"), is the only vote of any class of the Company's capital
stock that is necessary to take the above-listed actions.                       

Accordingly, the Majority Holders have the right to approve the above-listed    
actions without the affirmative vote of the other holders of the Company's      
capital stock and have indicated their intentions to vote in favor of the above-
listed actions.                                                                 

If the sale of the Real Property Interests to Ames is consummated, and such sale
constitutes sale of substantially all the assets of the Corporation, pursuant to
Section 11.65 of the Act, shareholders who did not execute the written consent  
will have the right to dissent from such sale of the Corporation's assets       
provided that such shareholders comply with all the procedures to dissent set   
out in Section 11.70 of the Act.                                                

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Currently, the Company expects that holders of its common stock (including      
holders of preferred stock which is convertible into common stock) will receive 
in excess of $1.00 in cash for each share of common stock.  However, changes    
that occur during the course of the Company's liquidation, the inability to sell
assets for anticipated proceeds and/or unanticipated liabilities that arise     
during the liquidation could cause the anticipated payments to holders of the   
Company's stock to vary significantly.  Further, there are customary conditions 
to the closing of the sale of the Real Property Interests to Ames.  The failure 
of this sale to close for any reason would have an adverse effect on the planned
liquidation.  The Company does not anticipate distributing any amount to        
shareholders in this liquidation prior to October 16, 2000 and the liquidation  
could take significantly longer.                                                

This Information Statement was mailed to the shareholders of the Company on or  
about February ___, 2000.                                                       

                                 By order of the Board of Directors.

                                    --------------------------------------

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JG INDUSTRIES, INC. 
5630 West Belmont 
Chicago, Illinois 60634 
(773) 481-5410  

----------------------------- 

INFORMATION STATEMENT 

----------------------------- 

INTRODUCTION  

   This Information Statement is being furnished to the holders of record at
the close of business on February ___, 2000 (the "Record Date") of the          
outstanding shares of (i) common stock, no par value per share (the "Common     
Stock") and (ii) Series B convertible preferred stock, no par value per share   
(the "Series B Preferred Stock," together with the Common Stock, the "Shares")  
in connection with the anticipated sale of Real Property Interests to Ames and  
the subsequent dissolution and liquidation of the Company.  A copy of the Sale  
Purchase Agreement is attached hereto as Annex A.                               

    As of the Record Date, there were 1,061,654 shares of the Company's Common
Stock outstanding and 1,500 shares of the Company's Series B Preferred Stock    
issued and outstanding. The holders of outstanding shares of Common Stock are   
entitled to one vote per share. The holders of Series B Preferred Stock are     
entitled to vote with the holders of Common Stock, with each share of Series B  
Preferred Stock having the number of votes equal to the number of shares of     
Common Stock into which one share of Series B Preferred Stock may be converted. 
As of the date of this Information Statement, each share of Series B Preferred  
Stock is entitled to 444.44 votes.  HOWEVER, WE ARE NOT ASKING FOR ANY          
SHAREHOLDER CONSENT OR PROXY AND YOU ARE REQUESTED NOT TO SEND US YOUR CONSENT  
OR PROXY.                                                                       

THE AMENDMENT 

The Majority Holders intend to amend by written consent the Company's 
articles of incorporation to provide that a majority vote of the Shares is      
necessary for the voluntary dissolution of the Company.  Article 7 of the       
Company's articles of incorporation provides that a majority vote of the Shares 
voting together may amend the articles of incorporation.  Therefore, the        
Majority Holders may, without soliciting the consent of the other shareholders, 
amend the Company's articles of incorporation as described in this Information  
Statement.  The effect of this amendment is that in connection with the Sale (as
defined below), the Majority Holders may, without soliciting the consent of the 
other shareholders of the Company, dissolve and liquidate the Company and       
Goldblatt's Department Stores, Inc., a wholly-owned subsidiary of the Company   
("Goldblatt's").                                                                

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BACKGROUND AND REASONS FOR THE TRANSACTIONS 

    During the past year, the Company discussed the sale of part or all of the
Company with several parties.  From August through October of 1999, the Company 
agreed to negotiate exclusively with a party other than Ames for the sale of the
Company.  The offer made as a result of these negotiations was rejected by the  
Company.  Ames first approached the Company in July of 1999.  When Ames followed
up on these discussions a few weeks later, the Company had agreed to negotiate  
exclusively with the other party.  After the exclusivity period ended, the      
Company continued to negotiate with the other party and with Ames.  In November 
of 1999, the Company determined that Ames was willing to pay a higher price than
the other party.  Negotiations with Ames continued through December and January.
As a result of these negotiations, Ames delivered a draft of a Sale-Purchase    
Agreement to the Company in January of 2000.  The Company's Board of Directors  
met on Friday, January 28 and Tuesday, February 1 to consider the proposed sale 
and the dissolution and liquidation of the Company.  On February 1, 2000, the   
Company's board (i) determined that the sale of the leasehold interests in the  
real estate where seven of the Company's eight stores are located (the "Sale")  
for a purchase price of $7,626,000 and the dissolution and liquidation of the   
Company were fair to and in the best interest of the Company and its            
shareholders; and (ii) recommended and approved such Sale, dissolution and      
liquidation.  On February 2, 2000, the Company and Ames entered into the Sale-  
Purchase Agreement for the Sale.                                                

  In making the foregoing determinations, the Company's Board of Directors
considered a number of factors, including, without limitation, the following:   

 (i)    the Company's weak financial condition, including its continuing
operating losses;                                                               

  (ii)   the Company's poor future prospects, including the uncertainty of
whether the Company could continue as a going concern;                          

(iii)  The alternatives to the Sale, dissolution and liquidation after
discussions with interested parties;                                            

(iv)   the historical and recent market prices of the shares of Common
Stock and the fact that the Sale, dissolution and liquidation should enable the 
holders of shares of Common Stock to realize a premium over the prices at which 
such shares traded prior to the execution of the Sale-Purchase Agreement;       

    (v)    the conditions to closing under the Sale-Purchase Agreement as well
as the other terms of this agreement (including the $1,000,000 escrow payment); 

    (vi)   the uncertainty of (A) the amount that shareholders will ultimately
receive in the liquidation, which the Company currently anticipates to be in    
excess of $1.00 per share of Common Stock and (B) the timing of payments to     
shareholder after the liquidation, which payments the Company currently does not
anticipate making until after October 16, 2000.                                 

   The Company's board did not assign relative weights to the above factors.
Rather, the board based its position and recommendation on the totality of      
information presented to and considered by it.                                  

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THE SALE  

 Pursuant to the Sale-Purchase Agreement, Ames will purchase in the Sale
interests in the leased real estate where seven of the Company's eight stores   
are located for a purchase price of $7,626,000 in cash.  Included in the Sale   
are the leasehold improvements. Excluded from the Sale are the retail inventory 
and most of the trade fixtures in those seven stores. Of the purchase price,    
$1,000,000 was deposited with and is being held in escrow pursuant to the Sale- 
Purchase Agreement. The balance of the purchase price will be paid at closing.  

 If the Majority Holders approve the Sale and certain conditions are met
(including the ability of the Company to deliver the properties vacant of       
tenants and in broom clean conditions), the Company will assign six of its      
leases to Ames and terminate one of its leases subject to Ames entering into a  
new lease for the same site.  The closing of this transaction is conditioned on 
the Company delivering certain instruments identified in Section 12.01 of the   
Sale-Purchase Agreement by the closing date, which is scheduled for April 14,   
2000.  Also, under the Sale-Purchase Agreement, the Company will make certain   
customary representations and warranties that must be true in order for the     
closing to occur, which representations and warranties will survive for a period
of six months after the closing.  As a result, none of the proceeds from the    
Sale or the liquidation described below will be distributed to the shareholders 
prior to October 16, 2000.  Moreover, as described below, the distribution of   
such proceeds could occur significantly later than October 16, 2000.            

     In the event that a material part of the properties is destroyed or damaged
by fire or other casualty prior to the closing, Ames will in some cases have the
option to terminate the Sale-Purchase Agreement with respect to some or all of  
the leases.  There can be no assurances that the Sale will be consummated.  The 
failure of the Sale to close could have a material adverse effect on the        
liquidation.                                                                    

 This section is a summary of the terms of the Sale and is therefore not
complete.  You should read the copy of the Sale-Purchase Agreement relating to  
the Sale which is attached to this Information Statement as Annex A.            

DISSOLUTION AND LIQUIDATION 

  Because of the Company's continuing operating losses and for the reasons
set forth in "Background and Reasons for the Transactions" above, the Company   
began winding-up its operations shortly after the end of its fiscal year on     
January 29, 2000.  The Company has closed its stores and commenced the process  
of selling its inventory and trade fixtures in sales to the public.             

Additionally, the Company has begun to solicit purchasers for its sole
owned store site, located at 4700-12 South Ashland Avenue, Chicago, Cook County,
Illinois.  Initially, the Sale contemplated that Ames would purchase this       
property.  Ames, however, decided not to purchase this real property.  Thus, in 
preparation for dissolution, the Company expects to sell this real property     
separately, subsequent to the closing of the Sale.  This property is subject to 
a mortgage with a current value of approximately $760,000.  Four potential      
purchasers have expressed interest in purchasing the real property and the      
Company is exploring all three possibilities. As yet, the Company has not       
entered into any definitive agreements for the sale of the remaining real       
property.                                                                       

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Although the Company will endeavor to sell the remaining real property for the  
highest available price, it cannot make any assurances as to its ability to sell
the real property or as to the sale price. The Company does not anticipate      
distributing any amounts to shareholders prior to the completion of the sale of 
the remaining real property.                                                    

     In anticipation of winding-up its operations, the Company offered to settle
a dispute with a minority shareholder of two of its subsidiaries, Sussex Group  
Holding, Inc. and Sussex Group, Ltd. Douglas A. Smith owns 5% of the issued and 
outstanding stock of Sussex Group Holding, Inc.  Mr. Smith also owns 1% of the  
issued and outstanding stock of Sussex Group Ltd.  Currently, Mr. Smith and the 
Company disagree about the value of his minority interest.  Accordingly, unless 
Mr. Smith and the Company are able to resolve this issue, the Company intends on
filing an action for declaratory judgment in a court of competent jurisdiction  
requesting a declaration of its rights and a valuation of Mr. Smith's minority  
interest.  Although the Company will aggressively pursue its rights in an action
for declaratory judgment, it cannot speculate as to when a court will decide    
this issue.  The Company does not anticipate distributing any amounts to        
shareholders prior to resolving this dispute with Mr. Smith.                    

 In winding up the affairs of the Company and concluding the liquidation
process, the Company shall continue to liquidate its assets, allowing a         
reasonable time in an effort to minimize losses attendant on liquidation.  Any  
stockholder or director may purchase any of the assets at any public or private 
liquidation sale.  There can be no assurance that the Company will be able to   
sell all or any substantial portion of its assets remaining after the Sale or as
to the amount of sale proceeds.  In particular, there can be no assurance as to 
whether the Company will be able to sell its remaining owned real property or as
to the price at which it will sell such property.  Moreover, events such as the 
failure of the Sale to close, the inability to sell the assets (or to sell the  
assets at favorable prices) and/or unanticipated liabilities that arise during  
the winding-up and liquidation make it difficult to predict or give any         
assurance as to the payment that the shareholders of the Company will ultimately
receive from the liquidation.                                                   

   Because of the survival of the representations and warranties made by the
Company in the Sale for six months, the Company's shareholders will not receive 
proceeds from its liquidation prior to October 16, 2000, and the distribution of
such proceeds could occur significantly later.                                  

PRIORITY OF DISPOSITION OF PROCEEDS ON LIQUIDATION  

On dissolution of the Company, the Company will be liquidated and the 
proceeds of liquidation will be applied first to the payment of obligations of  
the Company and the expenses of liquidation and to the setting up of any        
reserves for contingencies which the Board of Directors may consider necessary. 
Any remaining proceeds of liquidation and any other funds will then be          
distributed to the shareholders.                                                

     Each shareholder of the Company will receive in cash such shareholder's pro
rata share of the liquidation proceeds.  Holders of the Company's Series B      
Preferred Stock will receive, in lieu of receiving the liquidation value of and 
any accrued cumulative dividends with respect to the Company's Series B         
Preferred Stock, the amount they would have received if they converted their    

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shares into shares of Common Stock immediately prior to the allocation and      
distribution of the liquidation proceeds.  Additionally, the holders of any     
outstanding options for Common Stock will be deemed for purposes of allocating  
liquidation proceeds to have exercised their options immediately prior to the   
distribution of the liquidation proceeds and shall receive their pro rata share 
of the liquidation proceeds, net of the option exercise price and any applicable
withholdings.                                                                   

     There are no federal or state regulatory requirements that must be complied
with or from which approval must be obtained in connection with the transactions
described in this Information Statement.                                        

MATERIAL FEDERAL INCOME TAX CONSEQUENCES  

    The following is a summary of the material federal income tax consequences
of the Sale and the dissolution and liquidation of the Company and is not       
intended to be a complete analysis of all potential tax effects to investors in 
the Company.  The discussion does not address the tax consequences that may be  
relevant to investors subject to special treatment under federal income tax laws
(including, without limitation, dealers in securities, banks, insurance         
companies, tax-exempt organizations, foreign individuals and entities, persons  
who hold Company stock as a hedge against risk, or a constructive sale, or      
conversion transaction).  The following summary is not binding on the Internal  
Revenue Service.  The summary is based on the Internal Revenue Code, laws,      
regulations, rulings, and decisions in effect on the date hereof, all of which  
are subject to change, possibly with retroactive effect.  Tax consequences under
state, local, and foreign laws are not addressed.                               

INVESTORS IN THE COMPANY ARE STRONGLY URGED TO CONSULT THEIR OWN TAX  
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM FROM THE PROPOSED SALE AND 
LIQUIDATION, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL, AND FOREIGN  
INCOME AND OTHER TAX LAWS IN PARTICULAR CIRCUMSTANCES.                          

Consequences to Company                                                         

   Upon the Sale, the Company will recognize gain or loss for federal income
tax purposes equal to the difference between the amount realized on the sale and
the Company's adjusted tax basis in such assets at the time of the sale.  The   
amount realized on the sale will equal the consideration paid for the Company's 
assets plus any liabilities that Ames assumes (or liabilities the assets are    
subject to at the time of the sale).   If the Company recognizes a net gain on  
the sale of its assets, it anticipates that it will not, because of a net       
operating loss of approximately $20,000,000, have any federal income tax        
obligation with respect to such gain, except under the alternative minimum tax  
rules.  The Company expects that its tax liability with respect to the Sale will
be less than five percent of the proceeds.                                      

 Prior to the liquidation, the Company will dispose of all of its assets
(other than cash) not sold in connection with the Sale.  The Company should     
recognize gain or loss on each of these transactions and may be required to pay 
taxes as a result.  The amount of the Company's tax                             

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obligation with respect to these transactions will depend on the terms of the   
transaction. As long as the gain from these sales do not exceed the Company's   
remaining net operating loss, the only federal income tax liability should be   
alternative minimum tax, which should not exceed two percent of the proceeds.   

   Immediately prior to the liquidation, the Company does not expect to hold
any assets other than cash.  Consequently, the actual liquidation should not    
create any additional federal income tax obligations for the Company.           

Consequences to Investors                                                       

     Upon the liquidation of the Company, each holder of a Common Share and each
holder of a Series B Preferred Share will recognize gain or loss on each share  
equal to the difference between (i) the sum of the cash and other assets, if    
any, distributed to them with respect to such share and (ii) their adjusted tax 
basis in the share of stock.  A holder's adjusted tax basis in each share will  
depend upon various factors, including the original cost of the share and the   
amount and nature of any distributions subsequently received with respect to the
share.  Any gain or loss recognized on the distribution generally will be       
capital.                                                                        

  Holders of options to acquire Common Shares who received such options in
connection with their employment, will recognize compensation income equal the  
difference between the holder's pro rata share of the liquidation proceeds,     
computed assuming that the holder exercised the option immediately prior to the 
liquidation and the exercise price for the option.  Any compensation income     
recognized will be ordinary income and will be subject to applicable withholding
for income taxes and employment taxes.                                          

   In the case of individual holders, capital gains are subject to a maximum
tax rate of 20% if the shares were held for more than 12 months on the date of  
the liquidation. Ordinary income and short term capital gains (i.e., gains on   
sales of shares held less than 12 months on the date of liquidation) are taxed  
at the taxpayer's applicable federal marginal income tax rate for both          
individuals and corporations. The deductibility of capital losses is subject to 
certain limitations under the Internal Revenue Code.                            

ACCOUNTING TREATMENT  

The Company maintains its accounting records on the basis of Generally
Accepted Accounting Principles.  As a result of the Sale and subsequent         
dissolution and liquidation of the Company, the assets and liabilities will be  
adjusted to estimate fair market value as of January 29, 2000.  It is not       
possible at this time to determine whether a gain or loss will be recognized.   

DISSENTER'S RIGHT OF APPRAISAL

In connection with the sale of substantially all of the assets of the 
Company, the shareholders of the Company are entitled to dissent and obtain     
payment for their shares (also                                                  

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referred to herein as "appraisal rights") under Section 11.65 of the Illinois   
Act ("Section 11.65") as to Shares owned by them. The procedure for asserting   
such appraisal rights is set forth below and is set forth in detail in Section  
11.70 of the Illinois Act ("Section 11.70"). Section 11.70 is reprinted in its  
entirety as Annex D to this Information Statement. All references in this       
summary to a "shareholder" are to the record holder of the Shares as to which   
appraisal rights are asserted. A person having a beneficial interest in Shares  
that are held of record in the name of another person, such a broker or nominee,
must act promptly to cause the record holder to follow the steps summarized     
below properly and in a timely manner to perfect whatever appraisal rights the  
beneficial owner may have.                                                      

The following summary is not a complete statement of the law relating to        
appraisal rights and is qualified in its entirety by reference to Annex D.  If  
you wish to exercise your statutory appraisal rights or wish to preserve the    
right to do so, you should carefully review this summary and Annex D because    
failure to comply strictly with the procedures set forth in the statute will    
result in the loss of your appraisal rights.                                    

Because the Majority Holders are taking the actions described in this 
Information Statement by written consent, the other shareholders of the Company 
are not being asked to vote on such actions.  Accordingly, a shareholder does   
not need to have voted against such actions in order to exercise its appraisal  
rights pursuant to Section 11.70.  Moreover, no shareholder is being requested  
to vote on such actions.  Pursuant to Section 11.65, a shareholder entitled to  
dissent and obtain payment for his or her Shares may not challenge the corporate
action creating his or her entitlement unless such action is fraudulent or      
constitutes a breach of a fiduciary duty owed to the shareholder.               

    In accordance with Section 11.70, the Company is obligated to mail to each
holder of Shares as of the record date (other than the Majority Holders) notice 
that such shareholder is entitled to appraisal rights for their Shares (the     
"Notice").  Prior to or in connection with delivering such notice, the Company  
is required to furnish to the shareholders material information with respect to 
the transaction that will objectively enable a shareholder to determine whether 
or not to exercise his or her appraisal rights.  This Information Statement is  
intended to provide that information.                                           

 You may assert your appraisal rights only if you deliver to the Company
within 30 days from the date of mailing of the Notice a written demand for      
payment of your shares (the "Payment Demand").  The Notice will state the date  
which begins the 30 day period.                                                 

    Within 10 days after the date on which the Written Consent is effective or
30 days after the shareholder delivers to the Company the Payment Demand, the   
Company shall send each shareholder who has delivered a Payment Demand a        
statement setting forth the opinion of the Company as to the estimated fair     
value of the Shares, certain financial statements of the Company and either a   
commitment to pay for the shares at the estimated fair value upon transmittal to
the Company of the share certificates or instructions to the dissenting         
shareholder to sell his or her shares within 10 days after delivery of the      
Company's statement to the shareholder. "Fair value", with respect to a         
dissenter's shares, means the value of the share immediately before the         
consummation of the corporate action to which the dissenter objects excluding   
any appreciation or depreciation in anticipation of the corporate action, unless
exclusion would be inequitable.  Section                                        

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11.70 sets forth the procedures to be followed in the event that a shareholder  
does not agree with the opinion of the Company as to the estimated fair value of
his or her shares. See Annex D.                                                 

DESCRIPTION OF AMES 

 Ames is a large regional discount retailer that as of February 10, 2000
operates 454 discount department stores in 19 contiguous states in the          
Northeast, Midwest and Mid-Atlantic regions, as well as the District of         
Columbia.  Ames' stores are situated in rural communities, small cities and     
suburbs of larger metropolitan areas.  Ames' stores offer for sale a range of   
brand name and other merchandise for the home and family at discounted prices,  
including apparel, housewares, electronics, ready-to-assemble and patio         
furniture, jewelry, crafts, pet supplies, health and beauty items, stationery,  
sporting goods and seasonal products.  The principal executive offices of Ames  
are located at 2418 Main Street, Rocky Hill, CT 06067, (860) 257-2000.          

BUSINESS  

     The Company is an Illinois corporation organized on February 27, 1928.  The
Company operates in one industry segment of the retail market that is defined as
"Discount Department Stores."  The Company's wholly-owned subsidiary,           
Goldblatt's, offers customers a diverse assortment of both nationally branded   
and private label merchandise, emphasizing a full range of both soft and hard   
line goods.  The stores frequently feature special promotions of merchandise    
purchased on advantageous terms.  Soft line merchandise includes men's, women's,
children's and infant's wearing apparel and accessories.  Hard line merchandise 
includes textiles and domestics, television and electronic, small appliances and
housewares, cosmetics and notions, hardware, toys and sporting goods.   Over the
past five years, soft line departments have provided between 51% and 54% of     
owned sales.  Goldblatt's also licenses jewelry, shoe, millinery and optical    
departments for operation at certain of its stores.  As of January 31, 2000     
Goldblatt's operations were comprised of seven discount department stores       
located in the Chicago, Illinois vicinity and one in Indiana.  See also Item 1  
in the Company's annual report on Form 10-K for the fiscal year ended January   
30, 1999 attached as Annex B (the "1999 Annual Report").                        

PROPERTIES  

The Company owns in fee one retail location at 4700-12 South Ashland  
Avenue, Chicago, Illinois.  This property has gross square footage of 135,000.  
This property is subject to a mortgage with a current balance of approximately  
$760,000 in favor of a regional financial institution.  Goldblatt's leases the  
real property for its other seven retail locations at:                          

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7538 Stony Island, Chicago, Illinois                          
35th Street and Martin Luther King Drive, Chicago, Illinois   
1450 North Cicero Avenue, Chicago, Illinois                   
87th Street and the Dan Ryan Expressway, Chicago, Illinois    
         Scottsdale Shopping Center, 7975 South Cicero Avenue, Chicago, Illinois
The Village Shopping Center, 3440 Village Court, Gary Indiana 
5630 W. Belmont Avenue, Chicago, Illinois                     

The leased properties have an aggregate gross square footage of over 538,000 and
the lease terms, excluding renewal options, expire between October 2000 and     
January 2008.  Aggregate minimum rentals with respect to the leases are         
approximately $1,840,000 annually.                                              

   Upon approval by written consent of the Majority Holders of the Sale, the
Company intends to sell the property owned in fee and pay off the mortgage. See 
"Dissolution and Liquidation" for a more detailed description of the current    
status of the sale of the owned real property.  There can be no assurances as to
the amount of the net proceeds from the sale of the owned real property or that 
the Company will be able to sell the owned real property.                       

LEGAL PROCEEDINGS 

As of the date hereof, there are no material legal proceedings pending
against the Company.                                                            

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MARKET FOR THE COMPANY'S COMMON EQUITY  

Effective with the close of business on October 7, 1998, the Company's
Common Stock was delisted from the Nasdaq Stock Market because the Company's    
Common Stock fell below the Nasdaq requirement of maintaining a $1,000,000      
aggregate market value.  Since that date, the Company's Common Stock has been   
trading over-the-counter.  Bid quotations and trading activity are maintained   
and reported to the Company by National Quotation Bureau, LLC.  The Company has 
not paid dividends during the five fiscal year period ending on January 31,     
2000.  As of the Record Date there were approximately ______ holders of record  
of the Common Stock.                                                            

                                                                [Download Table]

                                   Price Range      
                              High              Low 
                                                    
Fiscal 2000                                         
     First Quarter           $0.75             $0.38
     Second Quarter           0.69              0.16
     Third Quarter            0.38              0.13
     Fourth Quarter           0.50              0.15
Fiscal 1999                                         
     First Quarter           $1.06             $0.75
     Second Quarter           1.06              0.50
     Third Quarter            0.75              0.25
     Fourth Quarter           0.50              0.13

FINANCIAL STATEMENTS  

    See Item 8 in the 1999 Annual Report attached as Annex B.  See also Item 1
in the Company's quarterly report on Form 10-Q for the fiscal quarter ended     
October 30, 1999 attached as Annex C; See Item 6 in the 1999 Annual Report for  
selected financial data.                                                        

MANAGEMENT'S DISCUSSION AND ANALYSIS  

    See Item 7 in the 1999 Annual Report attached as Annex B and Item 2 in the
Company's quarterly report on Form 10-Q for the fiscal quarter ended October 30,
1999 attached as Annex C.                                                       

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  
OWNERS AND MANAGEMENT 

  The following table sets forth certain information as of the Record Date
regarding the beneficial ownership of the Company's Common Stock (on an as-     
converted basis) by (i) all persons who owned of record or, to the knowledge of 
the Company, beneficially, 5% or more of the outstanding shares of Common Stock 
(on an as-converted basis), (ii) each director, (iii) the Chief Executive       
Officer and the other three most highly compensated executive officers, and (iv)
all directors and executive officers as a group.                                

                                                        [Enlarge/Download Table]

                                                                 Number of                 
                                                                   Shares       Approximate
                                                                Beneficially    Percentage 
                                                                   Owned         of Class  
Name of Beneficial Owner                                           -----         --------  
                                                                                           
Sheldon Collen(1)............................................     5,333(6)          **     
Sheldon Harris(1)............................................ 301,158(5)(6)(7)     15.9    
Lionel Goldblatt(1)(2).......................................    60,829(3)          3.2    
William Hellman(1)(2)........................................  357,921(4)(7)       18.9    
Philip Rootberg(1)(2)........................................ 251,461(5)(6)(7)     13.3    
Noel Goldblatt(1)............................................     6,000(6)          **     
Clarence Farrar(1)(2)........................................    15,574(8)          **     
                                                                 ------            ----    

All current directors and executive officers as a group          998,276(9)        52.6    
   (seven persons)                                               =======           ====    

_________                                                                       
**Less than 1%                                                              
(1)  Director. Mr. Harris and Mr. Lionel Goldblatt are brothers-in-law. Mr.     
Lionel Goldblatt and Mr. Noel Goldblatt are cousins.                  
(2)  Executive Officer.                                                         
(3)  Includes 8,333 shares issuable upon exercise of currently exercisable      
employee stock options.                                               
(4)  Includes 66,667 shares issuable upon exercise of currently exercisable     
employee stock options.                                               
(5)  With respect to Mr. Harris, includes (i) 25,780 shares of Common Stock held
by Mr. Harris and (ii) 48,154 shares held in trust for the benefit of 
  members of Mr. Harris' family, for which Mr. Harris disclaims beneficial
   ownership. With respect to Mr. Rootberg, includes 18,739 shares of Common
Stock owned by Mr. Rootberg.                                          
(6)  Includes 5,000 shares issuable upon exercise of currently exercisable      
employee stock options.                                               
(7)  For each of Mr. Harris, Mr. Hellman and Mr. Rootberg, the table above      
     includes 222,222 of the 666,666 shares of Common Stock into which the 1,500
shares of Series B Preferred Stock held pursuant to a Shareholders    
     Agreement dated December 13, 1996 (the "Shareholders Agreement"), for which
     Messrs. Harris, Hellman and Rootberg are trustees, are convertible. Messrs.
     Hellman, Rootberg and Harris each disclaims beneficial ownership of 444,444
   of the shares of Common Stock into which the shares of Series B Preferred
Stock held pursuant to the Shareholders Agreement are convertible.    
(8)  Includes 10,667 shares issuable upon exercise of currently exercisable     
employee stock options.                                               
(9)  Includes 105,667 shares issuable upon exercise of currently exercisable    
employee stock options.                                               

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   As of the Record Date, based on information filed with the Securities and
Exchange Commission, the persons known to the Company to beneficially own 5% or 
more of the Company's outstanding Common Stock (on an as-converted basis) are as
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                Number of               
                                                                  Shares     Approximate
                                                               Beneficially   Percentage
                                                                  Owned        of Class 
Name of Beneficial Owner                                          -----        -------- 
------------------------                                                                
                                                                                        
Sheldon Harris................................................   301,158         15.9   
  Evanston Property Management                                                          
  803  1/2 Chicago Avenue                                                               
  Evanston, IL  60202                                                                   
William Hellman...............................................   357,921         18.9   
  JG Industries, Inc.                                                                   
  5630 West Belmont Avenue                                                              
  Chicago, IL  60634                                                                    
Philip Rootberg...............................................   251,461         13.3   
  Rootberg Business Services, Inc.                                                      
  250 South Wacker Drive                                                                
  Suite 800                                                                             
  Chicago, IL  60606                                                                    

AVAILABLE INFORMATION 

    The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance        
therewith files reports, proxy statements and other information with the        
Securities and Exchange Commission (the "SEC").  Reports, proxy statements and  
other information filed by the Company can be inspected and copied at the public
reference facilities at the SEC's office at Judiciary Plaza, 450 Fifth Street,  
N.W., Room 1024, Washington, D.C. 20549, at the SEC's Regional Office at Seven  
World Trade Center, Suite 1300, New York, New York 10048 and at the SEC's       
Regional Office at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C.     
20549, at prescribed rates. Such material may also be accessed electronically by
means of the SEC's home page on the Internet at http://www.sec.gov.             

FORWARD LOOKING STATEMENTS  

   This Information Statement contains forward-looking statements within the
meaning of the Private Securities Litigations Reform Act of 1995.  The words    
"estimate," "anticipate," "project," "intend," "expect," and similar expressions
are intended to identify forward-looking statements. All forward-looking        
statements involve risks and uncertainties that may cause actual results to     
differ materially from anticipated results.  Such risks and uncertainties       
include, without limitation, risks and uncertainties with respect to (i) the    
Sale and the Company's liquidation, (ii) the consummation                       

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of the transactions described in this Information Statement, including the Sale 
and the sale of the Company's owned real property, (iii) unanticipated          
liabilities or proceeds in connection with the liquidation of the Company, (iv) 
the outcome of contingencies, including the settlement of the dispute with Mr.  
Smith, and (v) the timing of the liquidation and dissolution. Readers are       
cautioned not to place undue reliance on these forward-looking statements that  
speak only as of the date of this Information Statement. The Company does not   
undertake any obligation to publicly release any revisions to these forward-    
looking statements to reflect events, circumstances or changes in expectations  
after the date of this Information Statement, or to reflect the occurrence of   
unanticipated events.                                                           

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                                                                         Annex A

SALE-PURCHASE AGREEMENT 
----------------------- 

          SALE-PURCHASE AGREEMENT (the "Agreement"), made as of the _____ day of
February, 2000, by and among GOLDBLATT'S DEPARTMENT STORES, INC., an Illinois   
corporation ("Seller"), having an office at 5630 West Belmont, Chicago, Illinois
60634, JG INDUSTRIES, INC., an Illinois corporation ("Seller's Guarantor"),     
having an office at 5630 West Belmont, Chicago, Illinois 60634, AMES REALTY II, 
INC., a Delaware corporation ("Purchaser"), having an office at 2418 Main       
Street, Rocky Hill, Connecticut 06067-2598, and AMES DEPARTMENT STORES, INC., a 
Delaware corporation ("Purchaser's Guarantor"), having an office at 2418 Main   
Street, Rocky Hill, Connecticut 06067-2598.                                     

W I T N E S S E T H:
------------------- 

         WHEREAS, Seller, as tenant, is the holder of leasehold estates in and
to certain real property and improvements located in Cook County, Illinois, and 
Gary, Indiana, which leased real property and improvements are hereinafter      
described;                                                                      

        WHEREAS, Seller desires to sell, assign and convey to Purchaser, and
Purchaser desires to purchase from Seller, Seller's interest in and to the      
leases described on Schedule I hereto, upon the terms and conditions hereinafter
set forth;                                                                      

         WHEREAS, Seller intends to terminate its interest in and to the lease
described on Schedule II hereto, and Purchaser intends to enter into a new lease
with respect thereto; and                                                       

   WHEREAS, Seller's Guarantor and Purchaser's Guarantor desire to
guaranty the obligations of Seller and Purchaser, respectively, as set forth    
herein.                                                                         

          NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements of the parties hereinafter set forth, and for other good and     
valuable consideration, the receipt and sufficiency of which is hereby          
acknowledged, the parties hereto hereby agree as follows:                       

I.   Sale and Purchase of Leasehold Interests.                                  
-----------------------------------------                             

Seller shall, at the Closing (as hereinafter defined), sell, assign,  
transfer, deliver and convey to Purchaser, or its designee, and Purchaser shall 
acquire, or cause its designee to acquire, from Seller, at the price, and upon  
the terms, provisions, covenants and conditions set forth herein, all of        
Seller's right, title and interest in and to the Leased Premises as defined and 
listed on Schedule I annexed hereto and made a part hereof, together with all of
Seller' s right, title and interest in and to the following, if any:            

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(a)  all easements, rights-of-way, reservations, privileges,
appurtenances, and other estates and rights pertaining to the Leased Premises;  

       (b)  all oil, gas and mineral rights of Seller in and to the Leased
Premises;                                                                       

          (c)  all rights of ingress and egress to and from the Leased Premises;

       (d)  the real estate fixtures attached or appurtenant to the Leased
Premises, or used in connection with, and necessary to, the operation of the    
Leased Premises, together with the machinery, equipment and personal property   
set forth on Exhibit A annexed hereto and made a part hereof (collectively, the 
"Leased Personalty");                                                           

 (e)  all strips and gores adjoining or adjacent to the Leased
Premises; all alleys adjoining the Leased Premises; any land lying in the bed of
any street, road or avenue, opened or proposed, in front of or adjoining the    
Leased Premises to the center line thereof; and any award made or to be made for
damage to the Leased Premises by reason of change of grade of any street or     
otherwise;                                                                      

      (f)  all rights to the present or future use of water, wastewater,
wastewater capacity, drainage, water or other utility facilities, to the extent 
same pertain to or benefit the Leased Premises;                                 

      (g)  all right, title, and interest of Seller, as landlord, in any
leases, subleases, licenses, permits, franchises, concessions and occupancy     
agreements covering the Leased Premises or any portion thereof, and in all      
security deposits made by tenants under such leases;                            

         (h)  all written and transferable contracts and agreements pertaining
to the Leased Premises, including, but not limited to, service contracts,       
equipment leases, employment, janitorial, cleaning, pest control, waste         
disposal, snow removal, landscaping, maintenance or other agreements;           

         (i)  all licenses and permits pertaining to the Leased Properties (as
hereinafter defined) to the extent such licenses and permits are transferable to
Purchaser; and                                                                  

       (j)  all other property, if any, owned by Seller, and pertaining to
the Leased Premises, including, without limitation, plans and specifications,   
and engineering plans and studies.                                              

The Leased Premises, together with all of the foregoing items listed in (a)     
through (j) above, are hereinafter collectively referred to as the "Leased      
Properties". The Leased Properties, together with the Belmont Property, as      
defined in and set forth on Schedule II annexed hereto and made a part hereof,  
are collectively referred to herein as the "Properties".                        

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II.  Purchase Price.                                                            
---------------                                                       

 The purchase price payable by Purchaser to Seller for the conveyance of
Seller's right, title and interest in and to the Leased Properties (the         
"Purchase Price") is Seven Million Six Hundred Twenty Six Thousand and No/100   
Dollars ($7,626,000.00) payable as follows:                                     

(a)  One Million Dollars ($1,000,000.00) (the "Downpayment"),         
simultaneously with the execution and delivery of this Agreement, by a bank wire
transfer of immediately available funds to an account designated by Weil,       
Gotshal & Manges LLP ("Escrow Agent"). The Downpayment shall be held and        
disbursed by Escrow Agent in accordance with the terms of Article 19. If the    
Closing shall occur, Seller shall, except as otherwise provided herein, be      
entitled to receive the Downpayment and all interest accrued thereon, if any,   
and such interest shall be credited against the portion of the Purchase Price   
payable pursuant to Section 2(b); and                                           

(b)  Six Million Six Hundred Twenty Six Thousand and No/100 Dollars   
($6,626,000.00), subject to payments, credits and apportionments as hereinafter 
provided, at the Closing in cash, by good unendorsed certified or bank check    
payable to the order of Seller, or by wire transfer of immediately available    
federal funds to an account designated by Seller in writing not less than three 
(3) business days prior to the Closing Date (as hereinafter defined).           

III. Condition of Title.                                                        
-------------------                                                   

   At the Closing, Seller shall convey, and Purchaser shall accept, good and
valid leasehold interest, as tenant, in and to the Leased Properties, free and  
clear of all liens and encumbrances.                                            

IV.  Closing Date.                                                              
-------------                                                         

  The consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place at 10:00 a.m. at the offices of Weil, Gotshal &     
Manges LLP located at 767 Fifth Avenue, New York, New York (or at such other    
place as the parties may designate in writing) on April 14, 2000, or on such    
other date and time as Seller and Purchaser may mutually agree in writing. The  
date on which the Closing shall be held is referred to in this Agreement as the 
"Closing Date".                                                                 

V.   Apportionments and Payments.                                               
----------------------------                                          

5.01  The following amounts paid or payable with respect to the Leased
Properties shall be apportioned between Seller and Purchaser as of 11:59 p.m. on
the day immediately preceding the Closing Date, and the net amount thereof shall
either be added to (if such net amount is in Seller's favor) or deducted from   
(if such net amount is in Purchaser's favor) the payment required pursuant to   
Section 2(b):                                                                   

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    (a)  real estate taxes, water rates and charges, sewer taxes and
  rents, and vault charges, if any, payable by Seller, on the basis of the
 calendar year or fiscal period, as applicable, for which same have been
assessed;                                                             

       (b)  prepaid rents and additional rent and other amounts payable by
tenants under the Subleases (as hereinafter defined);                 

         (c)  value of fuel stored on the Leased Premises, if any, at Seller's
cost, including any taxes thereon;                                    

      (d)  amounts paid or payable by Seller under Service Contracts (as
hereinafter defined) being transferred to Purchaser;                  

    (e)  utilities, including, without limitation, telephone, steam,
   electricity and gas, payable by Seller, on the basis of the most recently
  issued bills therefore, subject to adjustment after the Closing when the
next bills are available;                                             

         (f)  personal property taxes, if any, payable by Seller, on the basis
 of the calendar year or fiscal year, as applicable, for which assessed;

         (g)  Seller's share, if any, of all revenues for the operation of the
 Leased Premises other than rent and additional rent (including, without
limitation, parking charges, and telephone booth and vending machine  
revenues), if any;                                                    

     (h)  trade association dues, trade subscriptions and dues to rent
stabilization associations, payable by Seller, if any;                

          (i)  all rent and other charges (including, without limitation, common
   area maintenance charges, real estate taxes and other operating expenses)
     paid or payable by Seller, as tenant, under the Store Leases (as defined in
and set forth on Schedule I); and                                     

        (j)  such other items as are customarily apportioned between sellers
and purchasers of real properties of a type similar to the Leased     
Properties and located in the city, county, and state where the Leased
Properties are located.                                               

    5.02  Purchaser shall receive a credit against the Purchase Price for year
1999 real estate taxes and year 2000 real estate taxes through and including the
Closing Date based upon one hundred fifteen percent (115%) of the actual year   
1998 real estate taxes for each of the Properties. For purposes of              
clarification, if the Closing Date occurs on April 14, 2000, Purchaser shall    
receive a credit against the Purchase Price for 365 days of the year 1999 and   
105 days of the year 2000 based upon one hundred fifteen percent (115%) of the  
year 1998 real estate taxes. Notwithstanding the foregoing, promptly after the  
tax rate for year 2000 is fixed, real estate taxes shall be recomputed and      
Purchaser shall refund to Seller the amount, if any, by which the credit        
received by Purchaser                                                           

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pursuant to this Section 5.02 exceeds the actual real estate taxes due and      
payable for the year 1999 and the partial year 2000.                            

   5.03  If on the Closing Date any tenant under a Sublease is in arrears in
the payment of rent or has not paid the rent payable by it for the month in     
which the Closing occurs (whether or not it is in arrears for such month on the 
Closing Date), any rents received by Purchaser or Seller from such tenant after 
the Closing shall be applied to amounts due and payable by such tenant during   
the following periods in the following order of priority: (x) first to the month
in which the Closing occurred, (y) second, to all time periods following the    
month in which the Closing occurred, and (z) third, after Purchaser has been    
paid in full for all time periods following the Closing, to Seller). If rents or
any portion thereof received by Seller or Purchaser after the Closing are due   
and payable to the other party by reason of this allocation, the appropriate    
sum, less a proportionate share of any reasonable attorneys' fees and costs and 
expenses expended in connection with the collection thereof, shall be promptly  
paid to the other party.                                                        

5.04  At the Closing, Seller shall assign to Purchaser all of Seller's
right, title and interest in and to any pending legal actions or proceedings    
against any tenant under the Subleases and will deliver to Purchaser any and all
relevant books and records (including any rent or additional rent statements,   
receipted bills and copies of tenant checks used in payment of such rent or     
additional rent), and any and all consents or other documents necessary for the 
collection of such rent and additional rent by Purchaser.                       

  5.05  The parties hereto agree that any errors or omissions in computing
apportionments at the Closing shall be corrected from time to time promptly     
after notice from the party discovering such error.                             

   5.06  Notwithstanding anything herein to the contrary, Seller agrees that
in the event that any Landlord Estoppel Certificate delivered to Purchaser at   
Closing, as required pursuant to Section 12.01, shall disclose that amounts due 
by Seller under the Store Leases, excluding real estate taxes, but including,   
without limitation, utility charges, common area maintenance charges, operating 
expenses and other types of additional rent (collectively, the "Outstanding     
Store Charges") may be outstanding, Seller shall deposit with Purchaser, at     
Closing, One Hundred Thousand and No/100 Dollars ($100,000.00) (the "Escrow     
Amount"). Such Escrow Amount shall be held by Purchaser, in escrow, in an       
interest bearing account, for a period of six (6) months following the Closing  
Date (the "Escrow Period"), and shall be applied by Purchaser, if necessary,    
against any such Outstanding Store Charges within five (5) business days of     
notice to Seller. In the event that the Escrow Amount is insufficient to pay the
Outstanding Store Charges, Seller shall pay to Purchaser, within thirty (30)    
days of demand therefore, the amount of any such deficiency. Within five (5)    
business days following the termination of the Escrow Period, Purchaser shall   
refund to Seller any portion of the Escrow Amount still remaining, together with
any and all interest accrued thereon.                                           

5.07  The provisions of this Article 5 shall survive the Closing for a
period of six (6) months.                                                       

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VI.  Inspections and Information.                                               
----------------------------                                          

  6.01  At any time from the date hereof through and including the Closing
Date, Purchaser (or its agents) shall have the right, from time to time, upon   
reasonable notice to Seller, and during reasonable hours, to inspect and/or     
exhibit the Properties to third parties and to make such non-invasive tests,    
surveys and inspections of the Properties as Purchaser deems necessary or       
appropriate, including, without limitation, topographical surveys, soil tests,  
environmental audits (including asbestos and toxic waste analysis), structural  
and foundation surveys and equipment inspections and testing. Purchaser shall   
give due regard to the presence and rights of any tenants under the Subleases   
and exercise (and cause its agents to exercise) due care and ordinary prudence  
in performing such tests, surveys and inspections. At Purchaser's request,      
Seller shall promptly furnish Purchaser with any required authorization to make 
violation searches.                                                             

6.02  In connection with Purchaser's exercise of any of the rights set
forth in Section 6.01, Purchaser hereby agrees to indemnify and save Seller     
harmless from and against any and all loss, cost, expense, damages or other     
liability that Seller shall suffer arising out of the exercise of such rights by
Purchaser or its contractors or agents. Such indemnity shall survive the Closing
for a period of six (6) months.                                                 

  6.03  At any time from the date hereof through and including the Closing
Date, Seller shall furnish to Purchaser all information maintained by Seller    
pertaining to the Properties reasonably requested by Purchaser or its           
representatives.                                                                

VII. Seller's Representations and Warranties.                                   
----------------------------------------                              

   7.01  As of the date hereof, Seller represents, covenants and warrants to
Purchaser, its successors and assigns, as follows (all references to the        
"Seller's knowledge" shall refer to the actual knowledge of Clarence Farrar and 
William Hellman after due inquiry):                                             

  (a)  Seller has good and valid leasehold title to the tenants'
interest in the Leased Premises, free and clear of all liens and      
encumbrances;                                                         

    (b)  to Seller's knowledge, the present condition and use of the
  Properties comply in all material respects with all applicable building,
    fire, zoning, and other laws, rules, ordinances and regulations applicable
thereto;                                                              

    (c)  to Seller's knowledge, the present condition and use of the
 Properties do not violate, in any material respect, any applicable deed
restrictions or other covenants, restrictions or agreements, site plan
   approvals, zoning or subdivision regulations or urban redevelopment plans
applicable thereto that would prevent Purchaser from operating the    
Properties as such are currently being operated;                      

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     (d)  the Properties are served by water, sewer, gas, electricity,
telephone and other utilities necessary to operate the Properties as  
currently being operated, and are supplied by facilities of public    
   utilities subject to such utility supplier's customary billing practices,
and, to the extent payable by Seller, all such charges are current and
otherwise not delinquent ;                                            

        (e)  no written notices of any violations of any applicable federal,
state, county or municipal law, ordinance, regulation, order or rule  
relating to the Properties or the construction, management, ownership,
     maintenance, operation, use, improvement, acquisition, or sale thereof have
been received by Seller, where such notices are currently pending or  
unresolved;                                                           

(f)  to Seller's knowledge, there is no action or proceeding
    (including proceedings to redefine zoning classifications or otherwise) or
   governmental investigation pending, threatened against or relating to the
Properties or the transactions contemplated by this Agreement, nor, to
Seller's knowledge, is there any basis for such action;               

    (g)  to Seller's knowledge, there are no (x) current and pending
 federal, state, county or municipal plans to change the highway or road
   systems in the vicinity of the Properties or to restrict or change access
   from any such highway or roads to the Properties, or (y) proposed changes
in street grade or location which may adversely affect access to the  
Properties;                                                           

    (h)  to Seller's knowledge, there are no pending or contemplated
    condemnation or eminent domain proceedings affecting the Properties or any
part thereof;                                                         

       (i)  all machinery, equipment and other personal property listed on
     Exhibit A is owned by Seller, free and clear of any liens and encumbrances.
All other Leased Personalty and the Belmont Personalty (as defined in 
   Schedule II) is owned or leased by Seller free and clear of any liens and
encumbrances;                                                         

(j)  all components of all improvements included within the 
Properties, including, but not limited to, the roofs and structural   
    elements thereof and the heating, ventilation, air conditioning, plumbing,
    electrical, mechanical, sewer, wastewater, storm water, paving and parking
  equipment, and systems and facilities included therein, are sound and in
good working order and repair, ordinary wear and tear excepted;       

          (k)  Seller has delivered to Purchaser, or its representatives, copies
of all written communications received by or prepared by Seller or its
    representatives in respect of any matter involving material non-compliance
with, or a material violation of, law, where such non-compliance is   
currently pending and unresolved;                                     

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        (l)  there are no leases executed by Seller, as tenant, with respect
  to the Leased Properties, other than the Store Leases (as defined in and
listed on Schedule I);                                                

    (m)  (i) each of the Store Leases is in full force and effect in
accordance with its respective terms, has not been modified, amended, 
 renewed or extended since its original execution except as set forth on
Schedule I, constitutes the entire understanding between the landlords
    thereunder and Seller, as tenant, with respect to the Leased Premises, has
 been duly executed and delivered on behalf of Seller, and constitutes a
    legally valid instrument, binding and enforceable upon Seller according to
its terms; (ii) all work required to be performed by Seller, as tenant
     under the Store Leases, up to the date of Closing has been performed; (iii)
 there are no existing defaults on the part of Seller, as tenant, or, to
Seller's knowledge, landlord under the Store Leases, Seller has not   
     received from any landlord under the Store Leases, or delivered to any such
 landlord, a notice of default, and no event has occurred that, with the
giving of notice or the passage of time, or both, would constitute a  
    default on the part of either Seller, as tenant, or to Seller's knowledge,
    landlord under the Store Leases; (iv) no rent or additional rent under any
   of the Store Leases has been prepaid for more than one (1) month, and all
     rent and additional rent due and payable under the Store Leases (including,
     but not limited to, common area maintenance charges, real estate taxes, and
 operating expenses) up to the date of Closing will be paid prior to the
Closing; (v) the landlords under the Store Leases have no option to   
terminate or otherwise modify the terms of and conditions of the Store
Leases other than as specifically provided therein; (vi) no action,   
   proceeding or arbitration is pending with respect to any Store Lease; and
    (vii) all brokerage commissions and other compensation and fees payable by
Seller by reason of the Store Leases have been or will be paid in full
prior to Closing;                                                     

        (n)  there are no leases executed by Seller, as tenant, with respect
  to the Belmont Property, other than the Belmont Lease (as defined in and
listed on Schedule II);                                               

          (o)  there are no leases executed by Seller, as landlord, with respect
  to the Leased Properties, other than the leases and occupancy agreements
described on Exhibit B annexed hereto and made a part hereof (the     
"Subleases"). True and complete copies of all Subleases, including all
amendments thereto, have been made available to Purchaser for review; 

 (p)  (i) all of the Subleases are in full force and effect in
    accordance with their respective terms, and none of the Subleases has been
  modified, amended, renewed or extended except as set forth on Exhibit B;
 (ii) all work required to be performed by Seller, as landlord under the
Subleases, up to the date of Closing has been performed; (iii) all    
construction allowances or other sums to be paid to any of the tenants
under the Subleases up to the date of Closing have                    

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been paid in full; (iv) there is no outstanding and uncured claim of  
  default under any of the Subleases on the part of Seller, or to Seller's
knowledge, any tenant; (v) none of the tenants under the Subleases has
    asserted any defense, setoff or counterclaim with regard to its tenancy or
   its Sublease and no action, proceeding or arbitration is pending with any
tenant in respect of its tenancy or its Sublease; (vi) no rent or     
   additional rent under any of the Subleases has been prepaid for more than
one (1) month, and there are no arrears in the payment of rent or     
    additional rent for more than one (1) month; (vii) there are no written or
    oral promises, understandings or commitments between Seller and any tenant
other than those contained in the Subleases; (viii) all brokerage     
    commissions and other compensation and fees payable by Seller by reason of
    the Subleases (and any renewals, extensions or expansions thereof, whether
     or not options therefore have yet been exercised) have been or will be paid
  in full prior to Closing; and (ix) in any case where a Sublease requires
   that the lessor under the Store Lease or the holder of a mortgage grant a
     nondisturbance or similar agreement to the tenant, the requirements of such
 Sublease have been complied with and fulfilled or the tenant under such
Sublease has executed and delivered to Seller a written waiver of such
requirements;                                                         

   (q)  to Seller's knowledge, other than the prime leases, ground
leases, mortgages and other superior interests described on Exhibit C 
 (collectively, the "Ground Leases"), there are no superior interests to
 which the Store Leases or the Belmont Lease is subject and subordinate;

   (r)  other than the Store Leases, the Belmont Lease, the Ground
Leases, and the Subleases, there are no leases, tenancies, licenses or
  other occupancy agreements to which Seller is a party or by which Seller
may be bound for any portion of the Leased Premises or the Belmont    
Premises;                                                             

       (s)  other than the contracts described on Exhibit D annexed hereto
and made a part hereof (the "Service Contracts"), there are no service
     contracts, maintenance contracts, construction contracts, equipment leases,
 concession agreements, union or employment contracts and any other such
    agreements affecting the Properties to which Seller is a party or pursuant
     to which Seller is otherwise obligated. The Service Contracts have not been
    modified except as set forth on Exhibit D, and true and complete copies of
    all Service Contracts, including all modifications thereto, have been made
   available to Purchaser for inspection. There has been no written claim of
  default under any of the Service Contracts by an party thereto which has
   not been cured; to Seller's knowledge, there exists no event which alone,
  or with notice or the passage of time or both would constitute a default
   under any of the Service Contracts by any party thereto; and all sums due
     and payable under the Service Contracts up to the date of Closing have been
or will be paid in full prior to the Closing;                         

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       (t)  there are no employees employed by Seller or by any management
company or otherwise at or in connection with the Properties for which
Purchaser shall have any responsibilities or liabilities following the
Closing;                                                              

  (u)  Seller has not retained anyone to file notices of protest
  against, or to commence actions to review, real property tax assessments
    against the Properties, and to Seller's knowledge, no such action has been
   taken by or on behalf of the tenant under any Sublease or by or behalf of
the ground lessor, prime landlord, or landlord under any Store Lease; 

          (v)  to Seller's knowledge, no special or other assessments for public
   improvements or otherwise have been levied or imposed with respect to the
Properties which have resulted or could result in a lien against the  
  Properties, and Seller has not received written notice of any pending or
contemplated change in any applicable legal requirements which may    
     adversely affect, in any material respect, the use, management or operation
of the Properties;                                                    

   (w)  there are no actions, suits, or proceedings ("Litigation")
    pending, being prosecuted or, to Seller's knowledge, threatened before any
court, board, agency, or governmental instrumentality (x) against or  
    relating to the Properties or any portion thereof, (y) against or relating
to the Subleases, the Store Leases, the Ground Leases, or the Belmont 
  Lease, or (z) which seek to enjoin or obtain damages with respect to the
transactions contemplated hereby;                                     

       (x)  Seller is not a "foreign person" as defined in Section 1445 of
the Internal Revenue Code of 1986, as amended, and the regulations    
promulgated thereunder;                                               

        (y)  All certificates of occupancy necessary for the current use and
     operation of the Properties have been issued, are in full force and effect,
  and true and complete copies thereof have been provided to Purchaser; no
   alterations have been made at the Leased Premises or Belmont Premises (as
defined on Schedule II) since the issuance of such certificates of    
    occupancy which would require any additional approvals of any governmental
authorities; the use of the Properties is in conformity with the      
certificates of occupancy; and such certificates are transferable to  
Purchaser;                                                            

        (z)  Seller has not received and, to Seller's knowledge, there is no
written notice or request from any insurance company or Board of Fire 
   Underwriters (or organization exercising functions similar thereto), from
   landlord or any ground lessor, prime lessor or superior leaseholder under
   the Store Leases or the Belmont Lease or from any mortgagee of the Leased
     Premises or the Belmont Premises, requesting the performance of any work or
   alteration in respect of the Properties which has not been complied with;

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       (aa)  the present condition and use of the Properties comply in all
   material respects with all applicable Environmental Laws and any permits,
  authorizations or licenses required to operate the Properties. Seller is
   not aware of any fact, circumstance or condition that could reasonably be
   expected to result in Purchaser incurring liability under any Environment
Laws. Seller has and will provide Purchaser with copies of any and all
    environmental reports and/or assessments in its possession relating to the
    Properties. "Environmental Laws" shall mean any federal, state, county, or
municipal statute, law, regulation or ordinance pertaining to the     
protection of the environment, as well as those governing asbestos in 
commercial buildings, including, without limitation, the Comprehensive
   Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
  (S) 9601 et. seq., the Solid Waste Disposal Act, 42 U.S.C. (S) 6901, the
   Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et. seq., and the
Clean Air Act 42 U.S.C. (S) 7401 et. seq., each as amended;           

          (bb)  all financial data and information contained in any Exchange Act
(as hereinafter defined) filing by Seller's Guarantor relating to the 
Properties is true and correct and contains no material omission;     

    (cc)  no filings are required of Seller or Seller's Guarantor in
   connection with the transactions contemplated by this Agreement under the
   Hart-Scott-Rodino Anti-Trust Improvements Act of 1976 and the regulations
promulgated thereunder;                                               

(dd)  except for the consent of the shareholders of Seller's
    Guarantor, or as otherwise provided for herein, no consent, authorization,
  order or appeal, or filing or registration with, or other action by, any
   governmental authority or other entity is required in connection with the
     execution, delivery and performance by Seller or Seller's Guarantor of this
     Agreement and all other documents contemplated hereby, and the consummation
   by Seller and Seller's Guarantor of the transactions contemplated hereby;

    (ee)  Seller is a wholly owned subsidiary of Seller's Guarantor;

      (ff)  Each of Seller and Seller's Guarantor is a corporation, duly
organized, validly existing and in good standing under the laws of the
  State of Illinois; each of Seller and Seller's Guarantor has full power,
 right and authority to enter into this Agreement and, at Closing, shall
    have full power, right and authority to perform its obligations hereunder;
 and the persons signing this Agreement on behalf of Seller and Seller's
Guarantor are authorized to do so;                                    

        (gg)  the execution and delivery of this Agreement, the consummation
   of the transactions herein contemplated, and compliance with the terms of
    this Agreement will not (i) violate any provisions of Seller's or Seller's
    Guarantor's articles of incorporation or bylaws, or (ii) violate, conflict
     with, or, with or without notice or the passage of time, result in a breach
of, constitute a default                                              

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under or accelerate the performance required by, any of the terms or  
    provisions of any instrument, indenture, contract, agreement, franchise or
     permit to which Seller or Seller's Guarantor is a party or by which Seller,
Seller's Guarantor, or the Properties are bound, or any applicable    
     regulations of any governmental authority, or any judgment, order or decree
    of any court having jurisdiction over Seller, Seller's Guarantor and their
property, including, without limitation, the Properties;              

       (hh)  Each of Seller and Seller's Guarantor is solvent; no receiver
   has been appointed for Seller or Seller's Guarantor or any their property
   nor is any application for receivership pending with respect to Seller or
    Seller's Guarantor; and neither Seller nor Seller's Guarantor contemplates
 insolvency; no proceedings are pending by or against Seller or Seller's
    Guarantor in bankruptcy or reorganization in any federal, state or foreign
court, nor has Seller or Seller's Guarantor committed any act of      
bankruptcy; and                                                       

         (ii)  no representation or warranty made by Seller in this Agreement,
    in any Schedule or Exhibit annexed hereto, or in any letter or certificate
furnished to Purchaser pursuant to the terms hereof, each of which is 
incorporated herein by reference and made a part hereof, contains any 
untrue statement of a material fact or omits to state a material fact 
necessary to make the statements contained herein or therein not      
misleading.                                                           

    7.02  Seller acknowledges that each of the representations, warranties and
agreements made by it in this Article 7 and elsewhere in this Agreement is      
material to Purchaser.                                                          

 7.03  The representations and warranties of Seller set forth in Section
7.01 and elsewhere in this Agreement shall be true, accurate and correct on the 
date of this Agreement and shall be deemed to be repeated on and as of the      
Closing Date. If at Closing, any representation or warranty is untrue,          
inaccurate or incorrect, then Purchaser shall elect either (x) to waive such    
misrepresentations or breaches of warranties and consummate the transaction     
contemplated hereby with a reduction of or credit to the Purchase Price to be   
implemented in accordance with Section 7.05, or (y) in addition to any other    
rights at law or in equity, to terminate this Agreement, by notice given to     
Seller on or before the Closing Date. If, prior to Closing, Purchaser becomes   
aware that any representation or warranty of Seller set forth in Section 7.01 or
elsewhere in this Agreement would be untrue, inaccurate or incorrect if such    
representation or warranty was not qualified as to knowledge with respect       
thereto, Purchaser shall give Seller prompt notice thereof, and if Seller shall 
not cure such condition prior to Closing, Purchaser shall consummate the        
transaction contemplated hereby with a reduction of or credit to the Purchase   
Price to be implemented in accordance with Section 7.05. Notwithstanding the    
foregoing, in the event that Purchaser becomes aware, prior to Closing, that any
representation or warranty of Seller set forth in Section 7.01(b) or (c) would  
be untrue, inaccurate or incorrect with respect to an Operating Store Lease (as 
defined in Exhibit A) if such representation or warranty were not qualified as  
to knowledge with respect thereto, Purchaser shall give Seller prompt notice    
thereof and if                                                                  

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Seller shall not be able to cure such condition within a reasonable period of   
time, Purchaser shall have the option to terminate this Agreement. In the event 
that Seller shall attempt to cure such condition, Purchaser shall have the      
option to delay the Closing Date and Seller shall indemnify Purchaser for       
rentals paid on the Store Leases and the Belmont Lease through and including the
Closing, but in an amount that shall not be less than two (2) months rental with
respect to each of the Store Leases and the Belmont Lease. In the event         
Purchaser elects to terminate this Agreement, this Agreement shall be terminated
and neither party shall have any further rights, obligations or liabilities     
hereunder, except the obligations specifically stated in this Agreement to      
survive termination, and except that Purchaser shall be entitled to the         
Downpayment together with any interest accrued thereon subject to Article 19.   

7.04  All of the covenants, warranties and representations recited in 
Section 7.01 shall inure to the benefit of Purchaser and its successors and     
assigns, and shall survive the Closing of this transaction for a period of six  
(6) months, except for those regarding the Belmont Property or the Belmont      
Lease.                                                                          

7.05  In the event Purchaser elects to consummate the transaction     
contemplated hereby and waive any breaches or deemed breaches of representations
or warranties pursuant to Section 7.03, Purchaser's notice to Seller pursuant to
Section 7.03 shall include the amount by which Purchaser proposes that the      
Purchase Price be reduced, together with a justification thereof, reflecting    
additional costs to be borne by Purchaser. Purchaser's adjustment will be       
determinative as long as Seller is not able to demonstrate manifest error or bad
faith.                                                                          

VIII.  Purchaser's Representations and Warranties                               
------------------------------------------                        
 As of the date hereof, Purchaser represents and warrants to Seller, its
successors and assigns, as follows:                                             

 (a)  Each of Purchaser and Purchaser's Guarantor is a corporation, duly
organized, validly existing and in good standing under the laws of the State of 
Delaware; each of Purchaser and Purchaser's Guarantor has full power, right and 
authority to enter into this Agreement and to perform its obligations hereunder;
and the persons signing this Agreement on behalf of Purchaser and Purchaser's   
Guarantor are authorized to do so;                                              

    (b)  the execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, and compliance with the terms of this         
Agreement will not (i) violate any provisions of Purchaser's or Purchaser's     
Guarantor's articles of incorporation or bylaws, or (ii) violate, conflict with,
or, with or without notice or the passage of time, result in a breach of,       
constitute a default under or accelerate the performance required by, any of the
terms or provisions of any instrument, indenture, contract, agreement, franchise
or permit to which Purchaser or Purchaser's Guarantor is a party or by which    
Purchaser, Purchaser's Guarantor, or their properties is bound, or any          
applicable regulations of any governmental authority, or any judgment, order or 
decree of any court having jurisdiction over Purchaser, Purchaser's Guarantor   
and their property;                                                             

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  (c)  Each of Purchaser and Purchaser's Guarantor is solvent; no receiver
has been appointed for Purchaser or Purchaser's Guarantor or any of their       
property nor is any application for receivership pending with respect to        
Purchaser or Purchaser's Guarantor; and neither Purchaser nor Purchaser's       
Guarantor contemplates insolvency; no proceedings are pending by or against     
Purchaser or Purchaser's Guarantor in bankruptcy or reorganization in any       
federal, state or foreign court, nor has Purchaser or Purchaser's Guarantor     
committed any act of bankruptcy;                                                

(d)  no filings are required of Purchaser or Purchaser's Guarantor in 
connection with the transactions contemplated by this Agreement under the Hart- 
Scott-Rodino Anti-Trust Improvements Act of 1976 and the regulations promulgated
thereunder; and                                                                 

    (e)  no consent, authorization, order or appeal, or filing or registration
with, or other action by, any governmental authority or other entity is required
in connection with the execution, delivery and performance by Purchaser or      
Purchaser's Guarantor of this Agreement and all other documents contemplated    
hereby, and the consummation by Purchaser and Purchaser's Guarantor of the      
transactions contemplated hereby.                                               

IX.  Operation of the Properties Prior to Closing.                              
---------------------------------------------                         

    Between the date hereof and the Closing Date, Seller covenants as follows:

(a)  Seller will not modify, cancel, extend or otherwise change in any
manner any of the terms, covenants or conditions of the Store Leases, the Ground
Leases, any Sublease, any Service Contract, the insurance policies maintained by
Seller with respect to the Properties, or any other agreements affecting the    
Properties, except with Purchaser's prior written consent, or enter into any new
lease of space in the Properties, any other occupancy agreements affecting the  
Properties, or any other agreement affecting the Properties, except with        
Purchaser's prior written consent.                                              

  (b)  Seller will keep all permits in full force and effect and renew any
permits which are due to expire prior to Closing.                               

    (c)  Seller will maintain the Properties in at least as good condition and
repair as prevails on the date hereof, reasonable wear and tear excepted.       

  (d)  Seller will not remove or permit the removal from the Properties of
any of the Leased Personalty or the Belmont Personalty.                         

  (e)  Seller will perform and observe all of the covenants and conditions
required to be performed and observed by tenant under the Store Leases. Seller  
will not waive any of it rights or exercise any of its options under the Store  
Leases. Seller will deliver to Purchaser copies of (i) any notices received by  
Seller from the landlords or any superior interest holder under the Store       
Leases, or (ii) any notices delivered by Seller to such landlords, within five  
(5) days after receipt or delivery thereof.                                     

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    (f)  Seller will perform and observe all covenants and conditions required
to be performed and observed by it as landlord under the Subleases. Seller will 
not waive any of it rights or exercise any of its options under the Subleases.  
Seller will deliver to Purchaser copies of (i) any notices received by Seller   
from any tenants under the Subleases, or (ii) any notices delivered by Seller to
such tenants, within five (5) days after receipt or delivery thereof.           

    (g)  Seller will perform and observe all covenants and conditions required
to be performed and observed by it as a party to the Service Contracts. Seller  
will not waive any of it rights or exercise any of its renewal options under the
Service Contracts. Seller will deliver to Purchaser copies of any notices (i)   
received by Seller from any contractors under the Service Contracts, or (ii) any
notices delivered by Seller to such contractors, within five (5) days after     
receipt or delivery thereof.                                                    

     (h)  Seller will pay, when due, for all goods and supplies delivered to and
services performed at, the Properties. This Section 9(h) shall survive the      
Closing.                                                                        

X.   Casualty and Condemnation.                                                 
--------------------------                                            

     10.01  If, prior to the Closing, a "material" part (as hereinafter defined)
of one (1) or more of the Properties is damaged or destroyed by fire or other   
casualty, Seller shall notify Purchaser of such fact and Purchaser shall have   
the option to (a) terminate this Agreement with respect to the Property or      
Properties so damaged or destroyed, upon notice to Seller given not later than  
thirty (30) days after receipt of Seller's notice, or (b) close title as        
provided in this Agreement, and, at the Closing, receive an assignment of all   
insurance proceeds (including rental and business interruption insurance        
proceeds) to which Seller is entitled or can claim, and a reduction to the      
Purchase Price equal to the amount of all deductibles. For purposes hereof, a   
"material" part of any Property shall be deemed to have been damaged or         
destroyed if the cost of repair or replacement thereof shall be greater than Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00), as reasonably estimated
by Seller. Notwithstanding the foregoing, in the event that a "material" part of
two (2) or more of the Operating Store Properties (as defined in Exhibit A) are 
damaged or destroyed by fire or other casualty, Seller shall notify Purchaser of
such fact and Purchaser shall have the option to terminate this Agreement in its
entirety upon notice to Seller given not later than thirty (30) days after      
receipt of Seller's notice. If, prior to the Closing, an "immaterial" part of   
one (1) or more of the Properties is damaged or destroyed by fire or other      
casualty ("immaterial" being any damage or destruction which is not "material") 
Purchaser shall have the option to (a) postpone the Closing until the damage is 
repaired by Seller, or (b) close title as provided in this Agreement, and, at   
the Closing, receive an assignment of all insurance proceeds (including rental  
and business interruption insurance proceeds) to which Seller is entitled or can
claim, and a reduction to the Purchase Price equal to the amount of all         
deductibles.                                                                    

10.02  If, prior to the Closing, all or any "significant" portion (as 
hereinafter defined) of one (1) or more of the Properties is taken by           
condemnation or eminent domain (or is the subject of a pending taking which has 
not been consummated), Seller                                                   

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shall notify Purchaser of such fact and Purchaser shall have the option to      
terminate this Agreement with respect to the Property or Properties so taken,   
upon notice to Seller given not later than thirty (30) days after receipt of    
Seller's notice. Notwithstanding the foregoing, if all or any "significant"     
portions of two (2) or more of the Operating Store Properties are taken by      
condemnation or eminent domain (or are the subjects of pending takings which    
have not been consummated), Seller shall notify Purchaser of such fact and      
Purchaser shall have the option to terminate this Agreement in its entirety,    
upon notice to Seller given not later than thirty (30) days after receipt of    
Seller's notice. If Purchaser does not elect to terminate this Agreement, or if 
an "insignificant' portion ("insignificant" being any taking which is not       
"significant") of one or more of the Properties is taken, Purchaser shall close 
title as provided in this Agreement, and, at the Closing, Seller shall assign to
Purchaser any and all rights it has to compensation and damages with respect to 
such taking (and pay over to Purchaser any such compensation and damages already
received). For purposes hereof, a "significant" portion of a Property means (x) 
any portion of the improvements with respect thereto, (y) a portion of the      
parking areas relating thereto, if the taking reduces the remaining available   
number of parking spaces below the number deemed necessary by Purchaser to      
operate its business, or (z) any portion of land which adversely affects ingress
or egress to such Property.                                                     

    10.03  Seller shall promptly notify Purchaser of any casualty or actual or
threatened condemnation affecting the Properties. Seller will not settle any    
proceeding relating to a condemnation or taking without Purchaser's prior       
written consent.                                                                

10.04  In the event Purchaser elects to terminate this Agreement with 
respect to less than all of the Properties, Purchaser's notice to Seller        
pursuant to Section 10.01 or Section 10.02 shall include the amount by which    
Purchaser proposes that the Purchase Price be reduced, together with a          
justification therefor, reflecting additional costs to be borne by Purchaser.   
Purchaser's adjustment will be determinative so long as Seller is not able to   
demonstrate manifest error or bad faith.                                        

XI.  Conditions Precedent to Purchaser's Obligation to Close.                   
--------------------------------------------------------              

    Purchaser's obligation under this Agreement to consummate the transactions
contemplated hereby is subject to the fulfillment of each of the following      
conditions:                                                                     

     (a)  The representations and warranties of Seller contained herein shall be
true, accurate and correct as of the Closing Date (subject to the provisions of 
Section 7.03);                                                                  

(b)  Definitive copies of the information statement complying with the
requirements of Section 14(c) of the Securities Exchange Act of 1934 (the       
"Exchange Act") shall have been sent to Seller's Guarantor's shareholders       
pursuant to Rule 14c-2 of the Exchange Act at least twenty (20) days prior to   
the approval of the transactions contemplated by this Agreement by Seller's     
Guarantor's shareholders; and Seller's Guarantor's shareholders shall have      
approved the transactions contemplated by this Agreement and the subsequent     
dissolution and liquidation of Seller;                                          

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     (c)  The landlord under the Belmont Lease shall have executed and delivered
to Purchaser a new lease with respect to the Belmont Property, which lease shall
be in form and substance satisfactory to Purchaser;                             

(d)  Seller shall have delivered all of the documents and other items 
required pursuant to Section 12.01, and shall have performed all other          
covenants, undertakings and obligations, and complied with all conditions       
required by this Agreement to be performed or complied with by Seller at or     
prior to Closing; and                                                           

     (e)  Seller shall have delivered the Leased Properties to Purchaser, vacant
of tenancies and other occupancies, and in broom clean condition.               

XII. Closing Documents and Deliveries.                                          
---------------------------------                                     

    12.01  At the Closing, Seller, at its sole cost and expense, shall deliver
to Purchaser, or its designee, the following:                                   

          (a)  Assignments and assumptions of Seller's right, title and interest
in and to the Store Leases (the "Assignments of Store Leases"),       
substantially in the form attached hereto as Exhibit G, conveying to  
     Purchaser good and valid leasehold title to the Leased Properties, free and
     clear of all liens and encumbrances, which Assignment of Store Leases shall
be duly executed and acknowledged by Seller;                          

      (b)  Assignments and assumptions of Seller's leasehold interest as
   landlord in and to the Subleases and the security deposits thereunder, if
any (the "Sublease Assignments"), in form and substance reasonably    
acceptable to Purchaser taking into account customary practices in    
Illinois, and duly executed and acknowledged by Seller;               

          (c)  Assignments (the "General Assignments") transferring to Purchaser
   all of Seller's right, title and interest in and to the permits and other
property being conveyed to Purchaser under this Agreement, in form and
    substance reasonably acceptable to Purchaser taking into account customary
practices in Illinois, and duly executed and acknowledged by Seller;  

     (d)  Original letters, executed by Seller, or its agent, advising
tenants under the Subleases of the assignment to Purchaser of Seller's
  interest in the Leased Properties and directing that any rents and other
  payments pursuant to the Subleases thereafter be sent to Purchaser or as
Purchaser may otherwise direct;                                       

      (e)  Written notice to all contractors under the Service Contracts
   advising them of the assignment to Purchaser of the Service Contracts and
deposits thereunder;                                                  

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   (f)  Originals of all documents referred to in the Exhibits and
  Schedules to this Agreement; to the extent maintained in Seller's files,
complete sets of as-built plans and specifications for the Leasehold  
   Buildings and the Belmont Buildings and maintenance records and operating
manuals pertaining to the Properties; and all keys to the Leased      
Properties;                                                           

  (g)  All assignable guaranties and warranties which Seller has
received in connection with any work or services performed, or to be  
 performed with respect to, or Leased Personalty installed in the Leased
Premises (to the extent same are in full force and effect), and Seller
shall cooperate with Purchaser in enforcing any such guaranties and   
  warranties which are not assignable, which obligations shall survive the
Closing;                                                              

         (h)  A Landlord Estoppel Certificate and Consent substantially in the
     form of Exhibit E annexed hereto and made a part hereof, from each landlord
 under the Store Leases, and any prime landlord, ground lessor, or other
    superior interest holder with respect to the Store Leases, dated as of the
Closing Date, and in substance reasonably acceptable to Purchaser;    

   (i)  A Tenant Estoppel Certificate substantially in the form of
    Exhibit F annexed hereto and made apart hereof, from each tenant under the
Subleases, dated as of the Closing Date, and in substance reasonably  
acceptable to Purchaser;                                              

      (j)  Certified or official bank checks payable to the order of the
  appropriate governmental officials in payment of all applicable transfer
 and other such taxes and, and all customary tax documents required as a
result of the transactions contemplated hereby;                       

          (k)  Payment to Purchaser of the Escrow Amount if required pursuant to
Section 5.06;                                                         

(l)  Seller's most recent tax bills relating to each of the 
Properties;                                                           

         (m)  Consents and non-disturbance and attornment agreements from each
    prime landlord, ground lessor, mortgagee, or other entity or person with a
     superior interest in the Leased Properties in form and substance reasonably
satisfactory to Purchaser;                                            

          (n)  A termination agreement fully executed by Seller and the landlord
 under the Belmont Lease, terminating the Belmont Lease, which agreement
 shall be in form and substance reasonably satisfactory to Purchaser and
   which shall contain a statement from the landlord that all rent and other
sums due and payable under the Belmont Lease (including, without      
limitation, common area maintenance charges, real estate taxes and    
  operating expenses) have been fully paid up to and including the Closing
Date;                                                                 

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    (o)  A sworn certificate of the secretary of Seller and Seller's
     Guarantor certifying that annexed thereto is (i) a true and correct copy of
Seller's and Seller's Guarantor's by-laws and that they have not been 
    modified or amended, and are in full force and effect, and (ii) a true and
correct copy of Seller's and Seller's Guarantor's board of directors  
  resolution authorizing the transaction and the delivery of the documents
required hereby;                                                      

          (p)  A closing settlement statement (the "Closing Statement"), setting
  forth the amount due and payable to Seller and Purchaser at Closing, and
fully executed by Seller; and                                         

          (r)  All other documents Seller is required to deliver pursuant to the
provisions of this Agreement.                                         

12.02  At the Closing, Purchaser, at its sole cost and expense, shall 
deliver to Seller the following:                                                

         (a)  The portion of the Purchase Price payable at Closing pursuant to
Section 2(b), subject to apportionments, credits and adjustments as   
provided in this Agreement;                                           

     (b)  All assignment and assumption agreements with respect to the
Store Leases and the Subleases fully executed by Purchaser;           

(c)  The Closing Statement, fully executed by Purchaser; and

         (d)  All other documents Purchaser is required to deliver pursuant to
the provisions of this Agreement.                                     

XIII.  Mechanics' Liens.                                                        
-----------------                                                 

     If, subsequent to the Closing Date, any mechanics' or other lien, charge or
order of the payment of money shall be filed against the Properties, or against 
Purchaser or Purchaser's assigns, based upon any act or omission, or alleged act
or omission before or after the Closing Date, of Seller, its agents, servants or
employees, or any contractor, subcontractor or materialman connected with the   
construction and completion by Seller of improvements at the Properties or      
repairs made to the Properties by or on behalf of Seller (whether or not such   
lien, charge or order shall be valid or enforceable as such), within ten (10)   
days after notice to Seller of the filing thereof, Seller shall take such       
action, by bonding, deposit, payment or otherwise, as will remove or satisfy    
such lien of record against the Properties. The provisions of this Article 13   
shall survive the Closing.                                                      

XIV.  Expenses.                                                                 
---------                                                           

    Seller shall pay all transfer taxes, sales tax and other taxes incurred or
payable with respect to the assignment of Seller's interest in the Leased       
Properties to Purchaser, if any, and all fees, costs and expenses associated    
with the termination of the Belmont                                             

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Lease. Each party shall pay its own attorney's and accountant's fees. The       
provisions of this Article 14 shall survive the Closing or the termination of   
this Agreement.                                                                 

XV.  Brokerage.                                                                 
----------                                                            

     Purchaser and Seller each warrant and represent to the other that no broker
was involved in the negotiation and consummation of this transaction. Purchaser 
and Seller agree to indemnify and hold the other harmless, and defend the others
from and against any claim, loss, damage, liability, cost and expense           
(including, without limitation, reasonable attorneys' fees) resulting from the  
claims of any broker that shall involve a breach by the indemnifying party of   
the foregoing warranty and representation. The provision of this Article shall  
survive the Closing or any earlier termination of this Agreement.               

XVI.  Remedies.                                                                 
---------                                                           

16.01  If the Closing fails to occur by reason of Seller's failure or 
refusal to perform its obligations hereunder, Purchaser may (i) terminate this  
Agreement by notice to Seller, and/or (ii) avail itself of all rights and       
remedies at law or in equity, including without limitation, the remedy of       
specific performance. If Purchaser elects to terminate this Agreement, as       
provided herein or pursuant to any other provision of this Agreement, then this 
Agreement shall be terminated and neither party shall have any further right,   
obligations or liabilities hereunder, except for the obligations expressly      
stated herein to survive such termination, and except that Purchaser shall be   
entitled to a return of the Downpayment together with any interest accrued      
thereon subject to Article 19.                                                  

  16.02  If the Closing fails to occur by reason of Purchaser's failure or
refusal to perform its obligations hereunder, Seller, may (i) terminate this    
Agreement by notice to Purchaser, and/or (ii) avail itself of all rights and    
remedies at law or in equity. If Seller elects to terminate this Agreement, as  
provided herein or pursuant to any other provision of this Agreement, then this 
Agreement shall be terminated, and neither party shall have any further rights, 
obligations or liabilities hereunder except for the obligations specifically    
stated herein to survive such termination, and except that Seller shall be      
entitled to the Downpayment together with any interest accrued thereon subject  
to Article 19.                                                                  

XVII.  Indemnification.                                                         
----------------                                                  

17.01  Seller hereby agrees to defend, indemnify and hold Purchaser   
harmless from and against all claims, demands, causes of action, losses,        
damages, liabilities, costs and expenses, including, without limitation, legal  
fees and disbursements, asserted against or incurred by Purchaser, or any of    
Purchaser's affiliates, subsequent to the date of this Agreement by reason of   
(a) any claims made against Purchaser relating to the Properties and arising    
from acts, occurrences or matters that took place or were claimed to have taken 
place prior to the Closing, or (b) the breach of any of the representations,    
warranties and covenants made by Seller herein.                                 

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17.02  Purchaser hereby agrees to defend, indemnify and hold Seller   
harmless from and against all claims, demands, causes of action, losses,        
damages, liabilities, costs and expenses, including, without limitation, legal  
fees and disbursements, asserted against or incurred by Seller, or any of       
Seller's affiliates, subsequent to the Closing Date by reason of (a) any claims 
made against Seller relating to the Properties and arising from acts,           
occurrences, or matters that take place or are claimed to have taken place after
the Closing Date, (b) and the breach of any of the representations, warranties  
and covenants made by Purchaser herein.                                         

17.03  The indemnities provided herein shall survive the Closing for a
period of six (6) months, except for those regarding the Belmont Property or    
Belmont Lease which shall terminate as of the Closing Date.                     

XVIII.  Further Assurances.                                                     
---------------------                                           

   The parties hereto each agree to execute and deliver such other documents
or agreements as may be necessary or desirable for the consummation of the      
transactions contemplated by this Agreement. In addition, from time to time     
after the Closing Date, at Purchaser's request, Seller will execute and deliver 
or cause to be executed and delivered such other instruments of transfer, sale, 
conveyance, assignment and confirmation and take such action as Purchaser may   
reasonably deem necessary or desirable in order to effectively transfer, sell,  
convey and assign the Leased Properties to Purchaser and to otherwise effectuate
the transactions contemplated by this Agreement.                                

XIX.  Escrow.                                                                   
-------                                                             

  19.01  Escrow Agent shall hold the Downpayment in escrow in an interest-
bearing account (the "Escrow Account"), and shall disburse such Downpayment,    
together with interest thereon, if any, to Seller at Closing.                   

    19.02  In the event that the Closing does not occur and either party makes
a written demand upon Escrow Agent for payment of the Downpayment and interest  
thereon, Escrow Agent shall give written notice to the other party of such      
demand. If Escrow Agent does not receive a written objection from the other     
party to the proposed payment within ten (10) business days after the giving of 
such notice, Escrow Agent is hereby authorized to make such payment. If Escrow  
Agent does receive such written objection within such ten (10) day period, or if
for any other reason Escrow Agent in good faith shall elect not to make such    
payment, Escrow Agent shall continue to hold such amount until otherwise        
directed by written instructions from the parties to this Agreement or a final  
judgment of a court of competent jurisdiction. However, Escrow Agent shall have 
the right at any time to deposit the Downpayment and interest thereon, if any,  
with the clerk of the Supreme Court of the County of New York. Escrow Agent     
shall give written notice of such deposit to Seller and Purchaser. Upon such    
deposit Escrow Agent shall be relieved and discharged of all further obligations
and responsibilities hereunder.                                                 

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19.03  The parties acknowledge that Escrow Agent is acting solely as a
stakeholder at their request and for their convenience, and that Escrow Agent   
shall not be liable to either of the parties for any act or omission on its part
unless taken or suffered in bad faith, in willful disregard of this Agreement or
involving gross negligence. Seller and Purchaser shall jointly and severally    
indemnify and hold Escrow Agent harmless from and against all costs, claims and 
expenses, including reasonable attorneys' fees, incurred in connection with the 
performance of Escrow Agent's duties hereunder, except with respect to actions  
or omissions taken or suffered by Escrow Agent in bad faith, in willful         
disregard of this Agreement or involving gross negligence on the part of Escrow 
Agent.                                                                          

   19.04  Seller and the Purchaser each agree (a) that Escrow Agent shall be
entitled to rely on such notices or certificates as may be furnished to it      
without inquiring into the sufficiency or correctness of the same and without   
inquiring as to the application of any funds paid or disbursed pursuant to this 
Agreement, (b) that Escrow Agent is discharged and released from any and all    
responsibility or liability with respect to the Downpayment except for its      
willful misconduct or gross negligence, and (c) that Seller and Purchaser shall 
jointly and severally indemnify Escrow Agent and hold it harmless from any      
claims made against it with respect to the Downpayment, except for its willful  
misconduct or gross negligence.                                                 

19.05  In any action arising between Seller and Purchaser, the parties
agree that Escrow Agent shall be entitled to represent Purchaser in such        
actions.                                                                        

19.06  The Downpayment shall secure the performance of Purchaser's    
obligations hereunder and shall not be considered part of Seller's estate in the
event of any insolvency or bankruptcy of Seller.                                

  19.07  Any interest earned on the Downpayment shall be paid to the party
entitled thereto, and the party receiving such interest shall pay any income    
taxes thereon. The tax identification numbers of the parties shall be furnished 
to Escrow Agent upon request.                                                   

19.08  Escrow Agent has acknowledged agreement to these provisions by 
signing in the place indicated on the signature page of this Agreement.         

XX.  Miscellaneous.                                                             
--------------                                                        

   20.01  Notices. All notices and other communications under this Agreement
shall be in writing; may be given by personal delivery, telecopy, Federal       
Express or similar overnight courier service; and shall be deemed given upon    
receipt thereof. Such notices shall be given to the parties at the following    
addresses (or to such other address as a party may have specified by notice     
given to the other parties pursuant to this provision):                         

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If to Seller or to Seller's Guarantor, to:                  

Goldblatt's Department Stores, Inc. or                      
JG Industries, Inc. (as applicable)                     
Attention:  William Hellman                                 
5630 West Belmont                                           
Chicago, Illinois  60634                                    
Telephone: (773) 481-5410                                   
Facsimile: (773) 481-5417                                   

With a copy to:                                             

Winston & Strawn                                            
Attention:  Stanford J. Goldblatt, Esq.                     
35 West Wacker Drive                                        
Chicago, Illinois  60601                                    
Telephone: (312) 558-5600                                   
Facsimile: (312) 558-4700                                   

If to Purchaser or to Purchaser's Guarantor, to:            

Ames Realty II, Inc. or                                     
Ames Department Stores, Inc. (as applicable)            
Attention: David H. Lissy, Esq.                             
2418 Main Street                                            
Rocky Hill, Connecticut 06067-2598                          
Telephone: (860) 257-2578                                   
Facsimile: (860) 257-5160                                   

With a copy to:                                             

Weil, Gotshal & Manges LLP                                  
Attention: Jeffrey J. Weinberg, Esq.                        
767 Fifth Avenue                                            
New York, New York 10153                                    
Telephone: (212) 310-8000                                   
Facsimile: (212) 310-8007                                   

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If to Escrow Agent, to:                                     

Weil, Gotshal & Manges LLP                                  
Attention: Jeffrey J. Weinberg, Esq.                        
767 Fifth Avenue                                            
New York, New York  10153                                   
Telephone: (212) 310-8000                                   
Facsimile: (212) 310-8007                                   

  20.02  Entire Agreement. This Agreement contains all of the terms agreed
upon between the parties with respect to the subject matter hereof and          
supersedes any and all prior written or oral understandings.                    

20.03  Amendments. This Agreement may not be changed, modified or     
terminated except by an instrument executed by the parties hereto.              

   20.04  Waiver. No waiver by either party of any failure or refusal of the
other party to comply with any of its obligations shall be deemed a waiver of   
any other or subsequent failure or refusal so to comply. To be effective, any   
waiver must be in writing and signed by the party to be charged therewith.      

20.05  Successors and Assigns.                                        

    (a)  This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.      
Seller may not assign this Agreement or all or any part of its rights and       
obligations hereunder without the prior written consent of Purchaser.           

  (b)  Purchaser may, without the consent of Seller, assign this
Agreement and its rights and obligations hereunder to any entity (including a   
newly formed entity) which is affiliated or associated with Purchaser or any of 
Purchaser's direct or indirect beneficial owners. Any obligations of Purchaser  
may be performed by Purchaser's assignee, and Seller agrees to accept such      
performance as if it were the performance of Purchaser; provided, however, no   
such assignment or assumption will release or relieve Purchaser from any of its 
obligations or liabilities under this Agreement.                                

   20.06  Article and Section Headings. The headings of the various Articles
and Sections of this Agreement have been inserted only for the purposes of      
convenience, and are not part of this Agreement and shall not be deemed in any  
manner to modify, explain, qualify or restrict any of the provisions of this    
Agreement.                                                                      

     20.07  Governing Law. This Agreement shall be governed by and in accordance
with the laws of the State of New York without giving effect to the conflict-of-
laws principles thereof.                                                        

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20.08  Counterparts. This Agreement may be executed in two or more    
counterparts, each of which shall be deemed to constitute an original, but all  
of which, when taken together, shall constitute but one instrument.             

   20.09  No Third Party Beneficiaries. The provisions of this Agreement are
intended to be solely for the benefit of the parties hereto, and their          
respective heirs, executors, personal representatives, successors and assigns,  
and none of the provisions of this Agreement are intended to be, nor shall they 
be construed to be, for the benefit of any third party.                         

   20.10  Severability. Should any clause, section or part of this Agreement
be held or declared by a court of competent jurisdiction to be invalid, void,   
illegal or unenforceable for any reason, all other clauses, sections or parts of
this Agreement which can be effected without such illegal clause, section or    
part shall nevertheless continue in full force and effect.                      

   20.11  Guaranty. Seller's Guarantor and Purchaser's Guarantor each hereby
absolutely and unconditionally guaranty all of the obligations set forth herein 
of Seller and Purchaser, respectively, including, without limitation, the       
indemnity obligations set forth in Article 6 and Article 17. Such guaranties    
shall survive the Closing or earlier termination of this Agreement for a period 
of six (6) months.                                                              

[Remainder of page intentionally left blank]

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    IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.                                     

SELLER:             

               GOLDBLATT'S DEPARTMENT STORES, INC.

By:                 
                  --------------------------------
Name:         
Title:        

SELLER'S GUARANTOR: 

JG INDUSTRIES, INC. 

By:                 
                  --------------------------------
Name:         
Title:        

PURCHASER:          

AMES REALTY II, INC.

By:                 
                  --------------------------------
Name:         
Title:        

 PURCHASER'S GUARANTOR

        AMES DEPARTMENT STORES, INC.

By:                 
                  --------------------------------
Name:         
Title:        

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                              ESCROW AGENT, solely for the purpose of evidencing
                              its consent to serve as Escrow Agent in accordance
             with the provisions of Article 19

      WEIL, GOTSHAL & MANGES LLP

By:                 
                  --------------------------------
            Name:  Jeffrey J. Weinberg
Title: Partner

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SCHEDULES 
--------- 

I    Leased Premises                                                            

II   Belmont Property                                                           

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EXHIBITS
--------

A    Machinery, Equipment and other Personal Property                           

B    Subleases                                                                  

C    Ground Leases                                                              

D    Service Contracts                                                          

E    Form of Landlord Estoppel Certificate                                      

F    Form of Tenant Estoppel Certificate                                        

G    Form of Assignment of Store Lease                                          

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SCHEDULE I  
----------  

LEASED PREMISES 
--------------- 

Seller's leasehold interest, as tenant, in and to the land (collectively, the   
"Leased Land") and the improvements (collectively, the "Leasehold Buildings",   
and together with the Leased Land, being hereinafter collectively referred to as
the "Leased Premises") pursuant to the following leases (collectively, the      
"Store Leases"):                                                                

(a)  Lease, dated May 1, 1991, by and between American Real Estate Holdings     
Limited Partnership, a Delaware limited partnership, as landlord, and 
    Seller, as successor-in-interest to The TJX Companies, Inc., as tenant, as
  assigned to Seller pursuant to that certain Assignment dated October 10,
     1991, relating to property located at 4538 Stoney Island, Chicago, Illinois
(the "Stoney Island Store Lease");                                    

(b)  Lease, dated June 30, 1989, by and between Lakes Meadows Association, an   
    Illinois limited partnership, as landlord, and Seller, as tenant, relating
   to property located at 35th Street and Martin Luther King Drive, Chicago,
Illinois (the "35th Street Store Lease");                             

(c)  Lease, dated December 18, 1990, by and between LaSalle National Trust,     
N.A., successor trustee to LaSalle National Bank, a national banking  
  association, as trustee under Trust Agreement Number 52741, as landlord,
     and Seller, as successor-in-interest to 159 Properties, Inc., f/k/a The TJX
    Companies, Inc., as tenant, as assigned to Seller pursuant to that certain
Assignment and Assumption of Lease dated June 5, 1992, and as amended 
   pursuant to that certain Amendment One, dated December 18, 1990, relating
 to property located at 1450 North Cicero Avenue, Chicago, Illinois (the
"North Cicero Store Lease");                                          

(d)  Sublease, dated January 30, 1991, by and between Venture Stores, Inc., a   
     Delaware corporation, as sub-landlord, and Seller, as successor-in-interest
   to The TJX Companies, Inc., as sub-tenant, as assigned to Seller pursuant
 to that certain Assignment and Assumption of Sublease dated February 8,
1991, relating to property located at 87th  Street and the Dan Ryan   
Expressway, Chicago, Illinois (the "87th and Dan Ryan Store Lease");  

(e)  Lease, dated May 3, 1954, by and between A & R Katz Management, Inc., as   
     successor-in-interest to Scott Construction, Inc., as landlord, and Seller,
 as successor-in-interest to Linn Realty Co., as tenant, relating to the
   property located at the Scottsdale Shopping Center, South Cicero and 79th
   Street, Chicago, Illinois, and as subsequently amended (the "South Cicero
Store Lease"); and                                                    

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(f)  Lease, dated June 28, 1985, between Pennsylvania Real Estate Investment    
   Trust, a business trust qualified to do business in the State of Indiana,
     as landlord, and Seller, as successor-in-interest to Goldblatt Bros., Inc.,
  as tenant, as amended pursuant to that certain First Amendment to Lease,
dated July 19, 1985, and that certain Second Amendment to Lease, dated
 April 1, 1986, relating to the property located at The Village Shopping
Center, Gary, Indiana (the "Village Shopping Center Store Lease").    

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SCHEDULE II 
----------- 

BELMONT PROPERTY  
----------------  

Seller's leasehold interest, as tenant, in and to the land (collectively, the   
"Belmont Land") and the improvements (the "Belmont Buildings", and together with
the Belmont Land Land, being hereinafter collectively referred to as the        
"Belmont Premises") pursuant to the following lease (the "Belmont Lease"):      

(a)    Indenture, dated January 30, 1957, by and between American National Bank 
      and Trust Company of Chicago, as Trustee under a certain Trust Agreement
    dated the 4th day of November, 1949 and known as Trust Number 7906, as
       landlord, and Seller, as successor-in-interest to G. B. Community Stores,
      Inc., as tenant, as amended pursuant to that certain Amendment to Lease,
     dated March 16, 1977, and that certain Second Amendment to Lease, dated
   July 25, 1996, relating to the property located at 5360 West Belmont,
Chicago, Illinois;                                                

together with all of Seller' s right, title and interest in and to the          
following, if any:                                                              

(i)    all easements, rights-of-way, reservations, privileges, appurtenances,   
and other estates and rights pertaining to the Belmont Premises;  

(ii)   all oil, gas and mineral rights of Seller in and to the Belmont Premises;

(iii)  all rights of ingress and egress to and from the Belmont Premises;       

(iv)   the real estate fixtures attached or appurtenant to the Belmont Premises,
       or used in connection with, and necessary to, the operation o the Belmont
    Premises, together with the machinery, equipment and personal property
set forth on Exhibit A (collectively, the "Belmont Personalty");  

(v)    all strips and gores adjoining or adjacent to the Belmont Premises; all  
     alleys adjoining the Belmont Premises; any land lying in the bed of any
      street, road or avenue, opened or proposed, in front of or adjoining the
      Belmont Premises to the center line thereof; and any award made or to be
     made for damage to the Belmont Premises by reason of change of grade of
any street or otherwise;                                          

(vi)   all rights to the present or future use of water, wastewater, wastewater 
       capacity, drainage, water or other utility facilities, to the extent same
pertain to or benefit the Belmont Premises; and                   

(vii)  all right, title, and interest of Seller, as landlord, in any leases,    
 subleases, licenses, permits, franchises, concessions and occupancy
     agreements covering the Belmont Premises or any portion thereof, and in
all security deposits made by tenants under such leases.          

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The Belmont Premises, together with all of the foregoing items listed in (i)    
through (vii) above, is hereinafter referred to as the "Belmont Property".      

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EXHIBIT A 
--------- 

MACHINERY, EQUIPMENT AND  
OTHER PERSONAL PROPERTY 

I.   With respect to the Operating Store Leases and the Non-Operating Store     
Leases (as hereinafter defined):                                      

All alarms, CCTVs, safes, E.A.S. (or similar equipment), fire         
   extinguishers, and related security equipment (including, but not limited
to, walkie talkies, covert cameras, E.A.S. ceiling domes and mirrors).

II.  With respect to the Operating Store Leases only:                           

   Those items set forth in item I above, together with all stock room racks
  and shelving, fixtures, rollers, conveyors, overhead motorized rails and
     handling equipment, but excluding therefrom all of Seller's trade fixtures.

As used herein and throughout the Agreement, the term "Operating Store Leases"  
shall mean the Stoney Island Store Lease, the North Cicero Store Lease, the 87th
and Dan Ryan Store Lease, and the Belmont Lease, and the term "Operating Store  
Properties" shall mean the Properties leased to Seller pursuant thereto.  The   
term "Non-Operating Store Leases" shall mean the 35th Street Store Lease, the   
South Cicero Store Lease, and the Village Shopping Center Store Lease, and the  
term "Non-Operating Store Properties" shall mean the Properties leased to Seller
pursuant thereto.                                                               

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EXHIBIT B 
--------- 

SUBLEASES 

1.   Sublease, dated January 1, 1996, by and between Seller, as sublessor, and  
Rainbow Apparel Companies, Inc., a Delaware corporation, as sublessee,
  relating to property located at 87th Street and the Dan Ryan Expressway,
Chicago, Illinois (the "87th and Dan Ryan Store Sublease").           

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EXHIBIT C 
--------- 

GROUND LEASES 

[Information to be provided by Seller within ten (10) business days   
from the date hereof] 

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EXHIBIT D 
--------- 

SERVICE CONTRACTS 

None  

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EXHIBIT E 
--------- 

FORM OF LANDLORD ESTOPPEL CERTIFICATE 

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Landlord Estoppel Certificate and Consent 
----------------------------------------- 

To:  Ames Department Stores, Inc., a Delaware corporation ("Purchaser"), its    
successors and assigns; and                                                     
  Goldblatt's Department Stores, Inc., an Illinois corporation ("Tenant"),
its successors and assigns.                                                     

Re:  Lease dated ____________by and between ______________________, as landlord 
("Landlord"), and Tenant (the "Lease").                               

Ladies/Gentlemen:                                                               

  Landlord understands that Purchaser is acquiring a leasehold interest in
the premises which are the subject of the Lease (the "Premises") and has        
requested certain information from Landlord relative to the Lease.              

Therefore, with respect to the Lease, Landlord hereby certifies to    
Purchaser, its successors and assigns, as of the date hereof, as follows:       

1.   The Lease:                                                                 

(a)  is in full force and effect;                                     

     (b)  has not been modified, changed, altered, supplemented or amended since
its original execution except as set forth above;           

    (c)  constitutes the entire understanding between Landlord and Tenant with
respect to the Premises;                                    

     (d)  has been duly executed and delivered on behalf of Landlord pursuant to
         proper authority therefor and constitutes a legally valid instrument,
       binding and enforceable upon Landlord in accordance with its terms;
and                                                         

 (e)  is not subject to any superior leases except for the following (if
         none, state "none"): _______________________________________________.

2.   There are no existing defaults on the part of Tenant under the Lease,      
  Landlord has not delivered any notice of default to Tenant, and no event
has occurred that, with the giving of notice or the passage of time or
   both, would constitute a default under the Lease except the following (if
    none, state "none"):_____________________________________________________.

3.   There are no uncured defaults on the part of Landlord under the Lease,     
   Landlord has not received any notice of default from Tenant, no event has
occurred that,                                                        

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    with the giving of notice or the passage of time or both, would constitute
    a default under the Lease, and Tenant has no offset, defense, deduction or
claim against Landlord except the following (if none, state           
    "none"):_________________________________________________________________.

4.   The commencement date of the Lease was ________________ and the original   
     term of the Lease expired on ___________________.  Tenant has the following
    renewal or extension options (if none, state "none"):____________________.

5.   The basic annual rent currently payable under the Lease is __________ per  
______ and other sums, including, but not limited to, common area     
maintenance charges, real estate taxes and additional rent, currently 
payable under the Lease are ____________________.                     

6.   Rent and all other sums due and payable under the Lease, including, but not
     limited to, basic annual rent, common area maintenance charges, real estate
     taxes and additional rent, have been paid in full through and including the
  date first written below.  No rent due under the Lease has been paid for
more than thirty (30) days in advance of its due date.                

7.   Tenant's security deposit currently maintained by Landlord under the Lease 
is (if none, state "none"): $_________________.                       

8.   Landlord has no option to terminate or otherwise modify the terms and      
   conditions of the Lease other than as specifically provided in the Lease.

9.   Any improvements required by the terms of the Lease to be made by Tenant   
    have been completed to the satisfaction of Landlord and Landlord will make
 no demand upon Tenant for the removal and reinstatement of any existing
improvements or alterations at the end of the term of the Lease.      

10.  Landlord represents and warrants that, as of the date hereof, there are no 
mortgages, deeds of trust or other security instruments (collectively,
    "Mortgages") that burden the Premises except the following (if none, state
    "none): _________________________________________________________________.
With regard to such Mortgages, no consents are needed from the holders
     thereof with respect to the assignment of Tenant's interest in the Lease to
Purchaser.                                                            

11.  There has been no casualty with respect to the Premises.                   

12.  There does not exist any pending, or to Landlord's knowledge, contemplated,
    condemnation or eminent domain proceedings that affect the Premises or any
    part thereof, and Landlord has received no notice, oral or written, of the
  intention of any governmental body or other entity to take or use all or
any part thereof.                                                     

13.  Landlord acknowledges and consents to Tenant's assignment of the Lease to  
 Purchaser and acknowledge that Purchaser will be operating the Premises
under the trade name Ames Department Stores.                          

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The statements contained herein may be relied upon by Purchaser and   
Purchaser's successors and assigns.  Landlord acknowledges that Purchaser may   
show copies of this Certificate to third parties who are interested in the      
matters covered by this Certificate and agrees that said third parties may also 
rely upon this Certificate.                                                     

The undersigned person is duly authorized to execute this Certificate.

DATED this ____ day of February, 2000.                                

       LANDLORD:
      --------

                             By:____________________________
                             Name:__________________________
                             Title:_________________________

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EXHIBIT F 
--------- 

FORM OF TENANT ESTOPPEL CERTIFICATE 

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Tenant Estoppel Certificate 
--------------------------- 

To:  Ames Department Stores, Inc., a Delaware corporation ("Purchaser"), its    
successors and assigns; and                                           
   Goldblatt's Department Stores, Inc., an Illinois corporation ("Landlord")
its successors and assigns                                            

Re:  Sublease, dated ________________, (the "Sublease") by and between Landlord 
as sub-landlord and ________________, as sub-tenant ("Tenant").       

Ladies/Gentlemen:                                                               

    Tenant understands that Purchaser is acquiring Landlord's leasehold estate
in and to the premises which are the subject of the Sublease (the "Premises")   
and has requested certain information from Tenant relative to the Sublease.     

Therefore, with respect to the Sublease, Tenant hereby certifies to   
Purchaser, its successors and assigns, as of the date hereof, as follows:       

1.   The Sublease:                                                              

(a)  is in full force and effect;                                     

     (b)  has not been modified, changed, altered, supplemented or amended since
its original execution except as set forth above;           

    (c)  constitutes the entire understanding between Landlord and Tenant with
 respect to the Premises and the subject matter covered in the
Sublease;                                                   

   (d)  has been duly executed and delivered on behalf of Tenant pursuant to
         proper authority therefor and constitutes a legally valid instrument,
         binding and enforceable upon Tenant in accordance with its terms; and

(e)  is not subject to any superior leases except for the following:  
         _____________________________________________________________________
         _____________________________________________________________________

2.   The commencement date of the Sublease was ___________ and the original term
of the Sublease expires on ______________.  Tenant has the following  
     renewal or extension options:_____________________________________________.

3.   The basic annual rent currently payable under the Sublease is ____________ 
    ______________, and other sums, including, but not limited to, common area
maintenance charges, real estate taxes and additional rent currently  
payable under the Sublease are                                        

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    __________________________________________________________________________
    _________________________________________________________________________.

4.   The base year for operating expenses and real estate taxes, is (if not     
    applicable, state "not applicable")_______________________________________
     __________________________________________________________________________.

5.   Basic annual rent and all other sums due and payable under the Sublease,   
     including, but not limited to, common area maintenance charges, real estate
 taxes and additional rent, have been paid in full through and including
_____________.  No basic annual rent or additional rent due under the 
     Sublease has been paid for more than thirty (30) days in advance of its due
date.                                                                 

6.   All brokerage commissions required to be paid by tenant in connection with 
the Sublease have been paid in full.                                  

7.   Tenant's security deposit under the Sublease is (if none, state "none"):   
   $_________________.  Except for the security deposit, Tenant has no claim
    against Landlord for any deposits or other security.  Tenant hereby waives
collection of the security deposit against Purchaser unless Purchaser 
actually receives the security deposit from Landlord.                 

8.   Tenant has no right or option to terminate or otherwise modify the terms   
   and conditions of the Sublease other than as specifically provided in the
Sublease.                                                             

9.   Any work required by the terms of the Sublease to be performed by Landlord 
   have been completed to the full satisfaction of Tenant, and any payments,
free rent, partial rent, rebate of rent or other payments, credits,   
  allowances or abatements required to be given by Landlord to Tenant have
been received by Tenant except (if none, state                        
    "none"):__________________________________________________________________
    _________________________________________________________________________.

10.  Tenant has not assigned, sublet or transferred its interest in the Sublease
and/or the Premises, or any part thereof.                             

11.  No one other than Tenant and its employees occupies the Premises.  Tenant  
is currently open for business in the Premises and does not intend to 
   vacate or abandon actual occupancy of the Premises or to cease conducting
 its normal business operations therefrom prior to the expiration of the
current term of the Sublease.                                         

12.  Tenant has no right or option to expand the Premises, to lease additional  
    space from Landlord, or to relocate to different space, except that Tenant
has a right of first refusal to lease the following (if none, state   
    "none"):__________________________________________________________________
    __________________________________________________________________________
    _________________________________________________________________________.

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13.  Neither the Lease, nor any obligations of Tenant thereunder, have been     
guaranteed by any person or entity, except as follows (if none, state 
  "none"):________________________________________________________________

14.  There are no existing defaults on the part of Tenant under the Sublease,   
   Tenant has not received any notice of default from Landlord, and no event
has occurred that, with the giving of notice or the passage of time or
both, would constitute a default by Tenant or its assigns except the  
   following (if none, state "none"):_______________________________________
   _________________________________________________________________________
   ________________________________________________________________________.

15.  There are no existing defaults on the part of Landlord under the Sublease, 
  Tenant has not delivered any notice of default to Landlord, no event has
  occurred that, with the giving of notice or the passage of time or both,
would constitute a default by Landlord or its assigns, and Tenant is  
   entitled to no credit, offset, or deduction, and has no defense or claim,
against any obligation to pay basic annual rent and other sums due and
payable under the Sublease either by reason of prepayment thereof,    
     Landlord's acts or omissions, or for any other reason whatsoever except the
    following (if none, state "none"):________________________________________
    __________________________________________________________________________
    _________________________________________________________________________.

16.  There has been no casualty with respect to the Premises.                   

17.  No hazardous wastes or toxic substances are being (or have been or will be 
  during the term of the Sublease) used, handled, stored or disposed of by
 Tenant, its employees or agents, on the Premises, or on the property of
     which the Premises are a part, in violation of any applicable environmental
laws, rules or regulations or the terms of the Sublease.              

18.  There does not exist any pending, or to Tenant's knowledge, contemplated,  
    condemnation or eminent domain proceedings that affect the Premises or any
  part thereof, and Tenant has received no notice, oral or written, of the
  intention of any governmental body or other entity to take or use all or
any part thereof.                                                     

19.  Tenant has not received notice of any sale, assignment, mortgage or pledge 
of Landlord's interest in the Sublease or the rents or other amounts  
payable thereunder, with the exception of the proposed assignment to  
Purchaser as contemplated hereby.                                     

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20.  No bankruptcy or insolvency proceedings are pending by or against Tenant   
 and no bankruptcy or insolvency proceedings are contemplated by Tenant.
There are no claims or actions pending against Tenant which if decided
adversely to Tenant would materially and adversely affect Tenant's    
  financial condition or Tenant's ability to perform its obligations under
the Sublease.                                                         

21.  Tenant acknowledges and consents to Landlord's assignment of the Sublease  
and all rents to be paid thereunder to Purchaser.                     

The statements contained herein may be relied upon by Purchaser and   
Purchaser's successors and assigns.  Tenant acknowledges that Purchaser may show
copies of this Certificate to third parties who are interested in the matters   
covered by this Certificate and agrees that said third parties may also rely    
upon this Certificate.                                                          

The undersigned person is duly authorized to execute this Certificate.

DATED this ____ day of February, 2000.                                

     TENANT:
    ------

                             By:____________________________
                             Name:__________________________
                             Title:_________________________

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EXHIBIT G 
--------- 

FORM OF ASSIGNMENT OF STORE LEASE 

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ASSIGNMENT AND ASSUMPTION AGREEMENT 
----------------------------------- 

   THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is made as of
this ______ day of _____________, 2000, by and between GOLDBLATT'S DEPARTMENT   
STORES, INC., an Illinois corporation ("Assignor"), and AMES REALTY II, INC., a 
Delaware corporation ("Assignee").                                              

WITNESSETH: 
----------- 

     WHEREAS, Assignor is the tenant under that certain lease dated ___________,
______ as more fully described on Schedule I attached hereto and made a part    
hereof (the "Lease") with respect to certain premises located at ______________ 
________________, ___________, ______________ (the "Property");                 

 WHEREAS, Assignor desires to transfer and assign to Assignee its entire
right, title and interest as tenant in, to and under the Lease; and             

     WHEREAS, Assignee desires to accept the foregoing assignment and assume all
of Assignor's obligations under the Lease, arising from and after the date      
hereof, upon the terms and conditions herein set forth.                         

    NOW, THEREFORE, in consideration of the foregoing and of the covenants and
conditions herein contained, and for other good and valuable consideration, the 
receipt and sufficiency of which are hereby acknowledged, the parties hereto    
agree as follows:                                                               

      1.  Assignor does hereby sell, transfer and assign to Assignee the
Lease and all of the right, title and interest of Assignor as the tenant in, to 
and under the Lease, including, without limitation, all rights, privileges,     
options and other benefits of Assignor under the Lease.  Notwithstanding the    
foregoing, Assignor agrees to perform, discharge and observe all of the duties, 
obligations, undertakings and liabilities of the tenant in, to and under the    
Lease, arising or accruing prior to the date hereof.                            

        2.  Assignee hereby accepts the foregoing assignment and assumes and
agrees to perform, discharge and observe all of the duties, obligations,        
undertakings and liabilities of the tenant in, to and under the Lease, arising  
from and after the date hereof.                                                 

         3.  This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors in interest and assigns.  The
respective agreements herein set forth are for the benefit only of the parties  
hereto, their successors and assigns, and no provision of this Assignment is    
intended to benefit, nor shall any such provision be enforceable by, any person 
or entity other than the parties hereto and their respective successors in      
interest and assigns.                                                           

[SIGNATURE PAGE FOLLOWS]  

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     IN WITNESS WHEREOF, the Assignor and Assignee have executed this Assignment
the day and year first written above.                                           

       ASSIGNOR:
                                  GOLDBLATT'S DEPARTMENT STORES, INC.,
                     an Illinois corporation

                                    By:  _________________________________
                                    Name:  _______________________________
                                    Its:  ________________________________

       ASSIGNEE:
                   AMES REALTY II, INC.,
                    a Delaware corporation

                                    By:  _________________________________
                                    Name:  _______________________________
                                    Its:  ________________________________

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SCHEDULE I  
----------  

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                                                                         Annex B
------------------------------------------------------------------------------- 
------------------------------------------------------------------------------- 

SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, D.C. 20549  

----------------  

FORM 10-K 

----------------  

(Mark One)                                                                      

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)                       
OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required]                 

For the fiscal year ended January 30, 1999  

OR  

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)                   
OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]              

For the transition period from            to            

Commission File No. 1-258 

----------------  

JG INDUSTRIES, INC. 
(Exact Name of Registrant as Specified in its Charter)  

Illinois                              36-1141010  
(State or other jurisdiction                 (I.R.S. Employer         
of incorporation or organization)             Identification No.)         

5630 West Belmont Avenue,                                         
Chicago, Illinois                            60634        
(Address of Principal Executive                  (Zip Code)             
Offices)                                          

Registrant's telephone number, including area code: (773) 481-5410  

----------------  

Securities registered pursuant to Section 12(b) of the Act: 

NONE  

Securities registered pursuant to Section 12(g) of the Act: 

Title of Each Class 
Common Stock, No Par Value  

Indicate by check mark whether the Registrant (1) has filed all reports     
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
Registrant was required to file such reports) and (2) has been subject to such  
filing requirements for the past 90 days. Yes [X]  No [_]                       

Indicate by check mark if disclosure of delinquent filers pursuant to Item  
405 of Regulation S-K ((S)(S) .229.405 of this chapter) 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. [_]                   

The aggregate market value of Common Stock held by nonaffiliates of the     
Registrant on April 23, 1999 was approximately $375,650. On that date there     
were 1,060,670 shares of Common Stock issued and outstanding.                   

DOCUMENTS INCORPORATED BY REFERENCE 

Parts I and III incorporate by reference certain information to be included 
in Registrant's definitive Proxy Statement for the Annual Meeting of            
Stockholders currently scheduled for July 13, 1999.                             

Index to Exhibits on Pages 23 through 24.                                   

------------------------------------------------------------------------------- 
------------------------------------------------------------------------------- 

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PART I  

Item 1. Business                                                                

General Information 

JG Industries, Inc. ("JG") is an Illinois corporation organized on February 
27, 1928. Effective July 23, 1985 the name of the Company was changed from      
Goldblatt Bros., Inc. to JG Industries, Inc. JG and its subsidiaries are        
hereinafter collectively referred to as the "Company."                          

Prior to December 13, 1996, Jupiter Industries, Inc. ("Jupiter")(a          
shareholder of the Company) had a 55.2% ownership interest in JG, and held      
1,293,258 shares of the Company's Common Stock and all of the Company's issued  
and outstanding Series A Preferred Stock. Pursuant to a Stock Purchase          
Agreement dated December 13, 1996, the Company purchased from Jupiter all       
shares of the Series A Preferred Stock and the Company's Common Stock held by   
Jupiter for an aggregate price of $5,510,864, of which $2,500,108 was paid in   
cash, $1,264,858 was paid by offset against liabilities of Jupiter to the       
Company and $1,745,898 was paid by delivery of a promissory note. Effective     
May 15, 1998, the original $1,745,898 promissory note was amended and restated  
("Restated Note"). The Restated Note did not bear interest and was payable in   
three annual installments of $581,966 each commencing May 15, 1999, with the    
last installment due and payable on May 15, 2001. In addition, the accrued and  
unpaid interest of approximately $149,000 as of May 15, 1999 was forgiven. On   
January 29, 1999, the Company and Jupiter entered into a Cancellation           
Agreement whereby the aforementioned $1,745,898 Restated Noted was canceled in  
return for a lump-sum payment of $500,000 as full settlement of the             
outstanding debt obligation. Subsequent to year-end, the Company made the       
$500,000 lump-sum payment to Jupiter.                                           

The Company operates in one industry segment of the retail market that is   
defined as Discount Department Stores. Goldblatt's Department Stores, Inc. and  
Subsidiaries ("Goldblatt's"), a wholly-owned subsidiary of the Company, offers  
customers a diverse assortment of both nationally branded and private label     
merchandise, emphasizing a full range of both soft and hard line goods. The     
stores frequently feature special promotions of merchandise purchased on        
advantageous terms. Soft line merchandise includes men's, women's, children's   
and infant's wearing apparel and accessories. Hard line merchandise includes    
textiles and domestics, televisions and electronics, small appliances and       
housewares, cosmetics and notions, hardware, toys and sporting goods. Over the  
past five years, soft line departments have provided between 51% and 54% of     
owned sales. Goldblatt's also licenses jewelry, shoe, millinery and optical     
departments for operation at certain of its stores.                             

Goldblatt's continuing operations are comprised of eight discount department
stores located in the Chicago, Illinois vicinity and one in Indiana. The        
department stores maintain a centralized purchasing function, buying goods      
direct from domestic and international manufacturers and through wholesalers.   
No single vendor accounted for more than 4% of total department store           
purchases during fiscal 1999. Supplier relationships are considered strong and  
Goldblatt's continues to obtain favorable pricing and payment terms on many     
purchases.                                                                      

The department store business is seasonal with approximately 30% of total   
sales occurring in the fourth quarter.                                          

                                                                [Download Table]

                            Balance at     Opened/Purchased Closed/Sold Balance at 
Description              Beginning of Year      Stores        Stores    End of Year
-----------              ----------------- ---------------- ----------- -----------
                                                                                   
Discount department                                                                
 stores                                                                            
 Fiscal year 1997.......         14                               4          10    
 Fiscal year 1998.......         10                                          10    
 Fiscal year 1999.......         10                               1           9    

Competition                                                                   

The Company's discount department stores are highly competitive. The Company
competes with national and local retail establishments, both large and small,   
for the patronage of its customers. Some of the largest retail merchandise      
companies with substantially greater resources than the Company have outlets    
located in the same areas in which the Company's subsidiaries operate. The      
Company's overall promotional strategy is to emphasize quality merchandise at   
competitive prices.                                                             

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Employees                                                                       

The Company employs 670 people, comprised of 4 employees of JG and 666      
employees of Goldblatt's. The Company believes that its relationship with its   
employees is good.                                                              

Item 2. Properties                                                              

The Company owns and leases the retail merchandise stores, office and       
warehouse locations described below. In the opinion of management, the          
properties are suitable and adequate for the conduct of its business.           

At April 30, 1999, Goldblatt's owns in fee one retail location in Chicago,  
Illinois. This one property has gross square footage of 135,000. This property  
is subject to a mortgage in favor of a regional financial institution.          
Goldblatt's leases its other eight retail locations, aggregating 580,200 gross  
square feet, with expirations, excluding renewal options, ranging from 2000 to  
2008. Five stores have renewal options of up to 25 years. Aggregate minimum     
rentals with respect to the foregoing leasehold properties are approximately    
$1,840,000 annually.                                                            

Item 3. Legal Proceedings                                                       

No material legal proceedings are currently pending against the Company.    

Item 4. Submission of Matters to a Vote of Security Holders                     

No matters were submitted to vote of the company's shareholders during the  
last quarter of the fiscal year ended January 30, 1999.                         

PART II 

Item 5. Market for the Registrant's Common Equity and Related Stockholder       
Matters                                                                         

Although the Company's Common Stock was listed on the NASD Automated        
Quotation System (trading symbol: JGIN) through the close of business on        
October 7, 1998, the volume of shares traded was limited during the years       
ended January 30, 1999 (fiscal 1999) and January 31, 1998 (fiscal 1998). The    
following table lists the reported high and low bid quotations as quoted on     
the NASD Automated Quotation System for each quarterly period during fiscal     
1999 and 1998 (through October 7, 1998). Such over-the-counter market           
quotations reflect interdealer prices, without retail markup, markdown or       
commission and may not necessarily represent actual transactions. Effective     
with the close of business on October 7, 1998, the Company's Common Stock was   
delisted from the NASDAQ Stock Market, since the Company's Common Stock fell    
below the NASDAQ requirement of maintaining a $1,000,000 market value of the    
public float, and the Company was unable to raise the market value above this   
required level. The Company's Common Stock has been trading over-the-counter    
since this date. Bid quotations and trading activity are maintained and         
reported to the Company by National Quotation Bureau, LLC. The Company has not  
paid dividends in any of the last five years. There were approximately 957      
holders of record of Common Stock on April 23, 1999.                            

                                                                [Download Table]

                                                                  Price Range
                                                                  -----------
                                                                  High   Low 
                                                                  ----- -----
                                                                             
Fiscal 1999                                                                  
  First Quarter.................................................. $1.06 $ .75
  Second Quarter.................................................  1.06   .50
  Third Quarter..................................................   .75   .25
  Fourth Quarter.................................................   .50   .13
Fiscal 1998                                                                  
  First Quarter.................................................. $2.00 $1.38
  Second Quarter.................................................  2.00  1.50
  Third Quarter..................................................  1.38  1.13
  Fourth Quarter.................................................  1.44   .50

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Item 6. Selected Financial Data                                                 

Following is selected financial data for the Company for each of the last   
five fiscal years.                                                              

                                                                [Download Table]

                            1999       1998       1997       1996       1995    
                          ---------  ---------  ---------  ---------  --------- 
                                  (in thousands, except share data)             
                                                                                
Net sales from continu-                                                         
 ing operations.........  $  52,236  $  53,483  $  60,198  $  72,964  $  77,106 
Operating loss..........     (1,883)    (2,423)    (2,195)    (2,871)       (68)
Loss from continuing op-                                                        
 erations...............     (2,323)    (2,569)    (2,101)    (4,103)    (1,121)
Income (loss) from dis-                                                         
 continued operations...                              (49)     6,856      1,608 
Income (loss) before ex-                                                        
 traordinary items......     (2,323)    (2,569)    (2,150)     2,753        487 
Income from extraordi-                                                          
 nary items.............      1,365                                             
Net income (loss).......       (958)    (2,569)    (2,150)     2,753        487 
Net income (loss)                                                               
 available to common                                                            
 shareholders...........     (1,093)    (2,707)    (2,577)     2,472        267 

Per share data:                                                                 
Loss from continuing                                                            
 operations--basic and                                                          
 diluted................      (2.32)     (2.55)     (1.15)     (1.86)      (.57)
Net income (loss)--                                                             
 basic..................      (1.03)     (2.55)     (1.17)      1.05        .11 
Net income (loss)--                                                             
 diluted................      (1.03)     (2.55)     (1.17)      1.04        .11 
Total assets............     12,134     14,213     15,675     25,315     76,007 
Long-term obligations...      1,350      3,343      2,031      2,776     11,269 
Redeemable preferred                                                            
 stock..................                                       3,937      3,657 
Convertible preferred                                                           
 stock..................      1,500      1,500      1,500                       
Weighted average number                                                         
 of common shares                                                               
 outstanding............  1,060,670  1,060,674  2,194,085  2,353,445  2,351,702 

Item 7. Management's Discussion and Analysis of Financial Condition and         
Results of Operations                                                           

Liquidity and Capital Resources                                                 

Approximately $97,000 of net cash was provided by operating activities      
during the year ended January 30, 1999 as compared to approximately $1,235,000  
of net cash used in operating activities during the preceding year. The         
decreased spending stems in large part to a $603,000 reduction in selling,      
general and administrative ("SG&A") expenses in fiscal 1999 as compared to      
fiscal 1998, due to an expense reduction program implemented early in fiscal    
1999. The increase in cash from operating activities is also attributed to the  
liquidation of inventory from a store closed during the year, and the decrease  
in other current assets stemming from the Company's decision to pay rent when   
due, instead of prepaying rent, as was done in the preceding year.              

Goldblatt's Department Stores, Inc. spent $293,000 on capital expenditures  
during fiscal 1999 related to normal capital maintenance. In addition,          
approximately $25,000 of furniture, fixtures and computer equipment previously  
put into storage from the four store closings in fiscal 1997 were transferred   
out to existing Goldblatt's stores for replacement needs. Goldblatt's expects   
to utilize a large portion of the remaining furniture and fixtures in storage   
in fiscal 2000 for both major and minor remodeling projects to be undertaken    
at its existing store locations.                                                

During fiscal 1998, Goldblatt's executed a $2,000,000 line of credit        
agreement with a maturity date of April 15, 1999. The agreement provided a      
line of credit of up to $2,000,000 based on availability of a borrowing base    
equal to 45% of merchandise inventory. The line was collateralized by           
Goldblatt's inventory and cash and cash equivalents. The line of credit         
agreement required that Goldblatt's maintain an inventory level of at least     
$5,500,000, a tangible net worth of $5,500,000 and imposed net loss             
restrictions for fiscal year 1998 and 1999.                                     

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Effective January 28, 1999, Goldblatt's entered into a new Loan and Security
Agreement with another financial institution, replacing the aforementioned      
line of credit agreement. The new agreement provides a revolving line of        
credit of up to $3,000,000 through January, 2001 based on availability of a     
borrowing base equal to 50% of merchandise inventory, computed on a first-in,   
first-out ("FIFO") basis. The line is collateralized by Goldblatt's inventory   
and cash and cash equivalents. The line of credit agreement requires that       
Goldblatt's maintain a FIFO inventory cost of at least $5,500,000.              
Additionally, the Company is required to pay down the outstanding line of       
credit with any available cash on a daily basis. The line is guaranteed by JG.  
As of January 30, 1999, $2,995,000 is available on the line of credit.          

Pursuant to a Stock Purchase Agreement dated December 13, 1996, the Company 
purchased from Jupiter 445 shares of Series A Preferred Stock and 1,293,258     
shares of the Company's Common Stock for an aggregate price of $5,510,864, of   
which $2,500,108 was paid in cash, $1,264,858 was paid by offset against        
liabilities of Jupiter to the Company and $1,745,898 was paid by delivery of a  
promissory note. Effective May 15, 1998, the original $1,745,898 promissory     
note was amended and restated ("Restated Note"). The Restated Note did not      
bear interest and was payable in three annual installments of $581,966 each     
commencing May 15, 1999, with the last installment due and payable on May 15,   
2001. In addition, the accrued and unpaid interest of approximately $149,000    
as of May 15, 1999 was forgiven. As a result of this transaction, the Company   
has recognized an extraordinary gain on debt restructuring of approximately     
$124,000, net of related expenses, during fiscal 1999. On January 29, 1999,     
the Company and Jupiter entered into a Cancellation Agreement whereby the       
aforementioned $1,745,898 Restated Noted was canceled in return for a lump-sum  
payment of $500,000 as full settlement of the outstanding debt obligation.      
Subsequent to year-end, the Company made the $500,000 lump-sum payment to       
Jupiter. As a result of this transaction, the Company has recognized an         
additional extraordinary gain on debt restructuring of approximately            
$1,241,000, net of related expenses, during fiscal 1999.                        

The Company believes that Goldblatt's working capital and line of credit    
will be adequate to fund current operations and service the Company's debt      
through fiscal 2000.                                                            

Year 2000 Issue                                                                 

The Year 2000 issue concerns the inability of information systems to        
properly recognize and process date-sensitive information beyond January 1,     
2000. Many of our systems and related software are Year 2000 compliant.         
However, systems critical to our business which have been identified as non-    
Year 2000 compliant are either being replaced or corrected through programming  
modifications. The Company is utilizing both internal personnel and outside     
vendors to identify the Year 2000 noncompliance problems, modify code as        
necessary and test the modifications.                                           

The Company has focused its efforts on maintaining the data integrity of the
existing financial reporting programs and the current store-level operating     
systems. The Company utilizes an IBM AS400 mainframe system operating with JDA  
software. The Company has already finished initial testing on the financial     
reporting applications of the AS400 system. Based upon a thorough review of     
the programming code by an outside vendor, the AS400 program will require       
minor levels of modification to become Year 2000 compliant. An upgrade to the   
AS400 system has been completed and financed through working capital with       
minimal cost.                                                                   

Testing of the store-level operating systems have focused on cash register  
sales transactions and other backroom reporting processes. On-site testing was  
recently completed. Some programming modifications and new equipment upgrades   
are anticipated, but the amounts are not expected to be material and will be    
financed through working capital.                                               

The Company is monitoring the progress of its primary suppliers and vendors 
regarding their Year 2000 compliance. In general, they have developed or are    
in the process of developing plans to address the Year 2000 issues. The         
Company is also reviewing its own non-information technology systems to         
determine the extent of any changes that may be necessary, and believes that    
there will be minimal changes necessary for compliance.                         

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The Company anticipates total spending of approximately $150,000 through    
fiscal year 2000 on the Year 2000 issue. Maintenance or modification costs      
will be expensed as incurred, while the replacement of certain systems will be  
recorded as assets and amortized. The Company does not expect the costs         
relating to Year 2000 remediation to have a material effect on its results of   
operations or financial condition.                                              

The Company's financial condition or liquidity could be adversely effected  
by business disruption and operational problems if needed modifications to the  
financial reporting programs and store-level operating systems are not made on  
a timely basis. Although not anticipated, the worst-case scenario of failure    
by the Company or its business partners to resolve the Year 2000 issue would    
be a short-term slowdown in processing credit card transactions. Also, we       
anticipate limited disruption in our purchasing function as our internal        
purchasing procedures are manually intensive.                                   

While we continue to focus on solutions for the Year 2000 issues, and expect
to be Year 2000 compliant in a timely manner, we are in the process of          
developing a contingency plan. We expect to finalize the contingency plan by    
September, 1999.                                                                

Results of Operations                                                           

Year Ended January 30, 1999 (fiscal 1999, 52 weeks)                           
vs. Year Ended January 31, 1998 (fiscal 1998, 53 weeks)                       

The net loss decreased by $1,611,000 from $2,569,000 in fiscal 1998 to      
$958,000 in fiscal 1999. That improvement came despite a $400,000 store         
closing provision for the store closed in November, 1998. During fiscal 1999,   
the Company also recognized a $1,365,000 extraordinary gain from debt           
restructuring. In addition, the loss from continuing operations decreased from  
$2,569,000 in fiscal 1998 to $2,323,000 in fiscal 1999.                         

Net sales from continuing operations decreased from $53,483,000 to          
$52,236,000. This decrease is attributable to both the store closing and        
having one less operating week in fiscal 1999 vs. fiscal 1998. The closed       
store represented a decrease in sales of approximately $1,155,000, while the    
effect of the additional week accounted for a sales decrease of $729,000. As a  
result, the Company experienced a $637,000 sales increase on a comparable       
store, comparable week basis for fiscal 1999 as compared to fiscal 1998.        

The Company's gross profit percentage increased to 32.6% of sales from 32.0%
of sales in the previous year. This improvement is attributable to more         
opportunistic purchasing complemented by tightened controls on markdowns.       

Due in large part to the expense reduction program implemented early in     
fiscal 1999, the Company experienced significant cost savings this year. SG&A   
expenses decreased by $603,000 from fiscal 1998. Overall expense control and,   
in particular, reductions in maintenance and other outside service-related      
expenses, supplies, utilities, general insurance, real estate taxes and         
corporate overhead expenditures were at the core of the SG&A expense savings.   
As a result, SG&A expenses have improved to 36.2% of sales in fiscal 1999 from  
36.5% of sales in fiscal 1998.                                                  

Year Ended January 31, 1998 (fiscal 1998, 53 weeks)                           
vs. Year Ended January 25, 1997 (fiscal 1997, 52 weeks)                       

The comparison of fiscal years 1998 and 1997 is materially distorted due to 
the sale of three stores in July, 1996 and the closing of a fourth store in     
November, 1996. In addition, fiscal 1998 includes the results of operations     
for 53 weeks as compared to 52 weeks in fiscal 1997.                            

Net sales from continuing operations decreased from $60,198,000 to          
$53,483,000. The closed stores represented a decrease in sales of               
approximately $8,850,000, which was partially offset by a comparable store      
sales increase of approximately $2,135,000.                                     

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While our aggressive promotional and merchandising programs resulted in     
comparable store sales increases during fiscal 1998, losses from continuing     
operations increased to $2,569,000 as compared to $2,101,000 in the previous    
year. The Company's gross profit percentage decreased to 32.0% of sales from    
32.7% in the previous year. SG&A increased from 36.3% in fiscal 1997 to 36.5%   
in fiscal 1998.                                                                 

There were three significant factors which negatively impacted our profit   
performance during fiscal 1998.                                                 

a. The two federal minimum wage increases effective October 1, 1996 and     
September 1, 1997 resulted in additional payroll expense of approximately       
$400,000.                                                                       

b. Insurance costs rose by approximately $360,000 driven primarily by       
catastrophic illnesses of several of our employees.                             

c. Inventory shrinkage increased over the preceding year in excess of       
$400,000.                                                                       

Forward - Looking Statements                                                    

Except for historical information, the matters discussed or incorporated by 
reference in this report are forward-looking statements that involve risks and  
uncertainties that may affect the Company's actual results and cause results    
to differ materially from such forward-looking statements. Such risks and       
uncertainties include, but are not limited to, economic conditions,             
seasonality of the Company's business, relationships with suppliers and         
financial institutions, computer system enhancements to enable Year 2000        
compliance, ability to attract and retain key personnel, competition,           
regulation and other factors indicated from time to time in the Company's       
filings with the Securities and Exchange Commission.                            

Item 8. Financial Statements and Supplementary Data                             

The Company's consolidated financial statements are listed in Part IV, Item 
14, of this Report and begin on page 9.                                         

Item 9. Changes in and Disagreements with Accountants on Accounting and         
Financial Disclosure                                                            

None.                                                                       

PART III  

Item 10. Directors and Executive Officers of the Registrant                     

The information required by this Item will be set forth in the Proxy        
Statement and such information is incorporated herein by reference.             

Item 11. Executive Compensation                                                 

The information required by this Item will be set forth in the Proxy        
Statement and such information is incorporated herein by reference.             

Item 12. Security Ownership of Certain Beneficial Owners and Management         

The information required by this Item will be set forth in the Proxy        
Statement and such information is incorporated herein by reference.             

Item 13. Certain Relationships and Related Transactions                         

The information required by this Item will be set forth in the Proxy        
Statement and such information is incorporated herein by reference.             

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PART IV 

Item 14. Exhibits, Financial Statements, and Reports on Form 8-K                

(a) The following documents are filed as part of this report:               

                                                                [Download Table]

                                                                      Page 
                                                                     Number
                                                                     ------
                                                                           
(1)Consolidated Financial Statements:                                      
    Report of Independent Accountants...............................     9 
    Consolidated Balance Sheets, January 30, 1999 and January 31,          
     1998...........................................................    10 
    Consolidated Statements of Operations for the fiscal years ended       
     January 30, 1999, January 31, 1998 and January 25, 1997........    11 
    Consolidated Statements of Common Stock and Other Shareholders'        
     Equity for the fiscal years ended January 30, 1999, January 31,       
     1998 and January 25, 1997......................................    12 
    Consolidated Statements of Cash Flows for the fiscal years ended       
     January 30, 1999, January 31, 1998 and January 25, 1997........    13 
    Notes to Consolidated Financial Statements...................... 14-21 

(2)The Index to Exhibits is on pages 23 through 24.                     

(b) Reports on Form 8-K.                                                    

Form 8-K dated October 7, 1998 was filed with the Securities and    
Exchange Commission to report that the Company's Common Stock was       
delisted from the NASDAQ Stock Market effective with the close of       
business on October 7, 1998.                                            

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REPORT OF INDEPENDENT ACCOUNTANTS 

To the Shareholders and Board of Directors of JG Industries, Inc.               

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, common stock and other shareholders'     
equity, and cash flows present fairly, in all material respects, the financial  
position of JG Industries, Inc. and Subsidiaries (the "Company") at January     
30, 1999 and January 31, 1998, and the results of their operations and their    
cash flows for each of the three years in the period ended January 30, 1999,    
in conformity with generally accepted accounting principles. These financial    
statements are the responsibility of the Company's management; our              
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these statements in accordance with      
generally accepted auditing standards which require that we plan and perform    
the audit to obtain reasonable assurance about whether the financial            
statements are free of material misstatement. An audit includes examining, on   
a test basis, evidence supporting the amounts and disclosures in the financial  
statements, assessing the accounting principles used and significant estimates  
made by management, and evaluating the overall financial statement              
presentation. We believe that our audits provide a reasonable basis for the     
opinion expressed above.                                                        

                              PricewaterhouseCoopers LLP

Chicago, Illinois                                                               
April 2, 1999                                                                   

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JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS 

January 30, 1999 and January 31, 1998 
(in thousands, except share data) 

                                                                [Download Table]

                                                        January 30, January 31,
                        ASSETS                             1999        1998    
                        ------                          ----------- -----------
                                                                               
Current assets:                                                                
  Cash and cash equivalents............................  $    212    $    630  
  Receivables, net.....................................       198         281  
  Merchandise inventories..............................     5,724       6,242  
  Other assets--restricted $223 and $0, respectively...       256         304  
                                                         --------    --------  
    Total current assets...............................     6,390       7,457  
                                                         --------    --------  
Land, buildings and equipment, at cost:                                        
  Land.................................................       478         478  
  Buildings............................................       998         998  
  Leasehold improvements...............................     5,670       6,085  
  Furniture and fixtures...............................     6,604       7,346  
                                                         --------    --------  
                                                           13,750      14,907  
Less accumulated depreciation and amortization.........     9,535       9,916  
                                                         --------    --------  
                                                            4,215       4,991  
                                                         --------    --------  
Leasehold rights, net..................................        25          28  
Other assets--restricted $1,299 and $1,538,                                    
 respectively..........................................     1,504       1,737  
                                                         --------    --------  
                                                         $ 12,134    $ 14,213  
                                                         ========    ========  

         LIABILITIES AND SHAREHOLDERS' EQUITY                                  
         ------------------------------------                                  
                                                                               
Current liabilities:                                                           
  Short-term borrowings................................  $      5              
  Current portion of long-term debt....................       530    $     28  
  Accounts payable.....................................     3,084       2,574  
  Accrued liabilities..................................     2,210       2,319  
  Accrued dividends....................................         7           7  
                                                         --------    --------  
    Total current liabilities..........................     5,836       4,928  
                                                         --------    --------  
Long-term debt, less current portion...................       745       2,518  
Other long-term liabilities............................       605         825  
Minority interest......................................     1,457       1,358  
Commitments and contingencies..........................                        
Common stock and other shareholders' equity:                                   
  Common shares: no par value; authorized 10,000,000                           
   shares; issued 2,405,770 shares.....................    11,246      11,246  
  Paid-in capital......................................     5,939       5,939  
  Convertible preferred stock: no par value; authorized                        
   and issued 1,500 shares.............................     1,500       1,500  
  Accumulated deficit..................................   (11,581)    (10,488) 
  Treasury shares--1,345,100 shares at cost............    (3,613)     (3,613) 
                                                         --------    --------  
    Total common stock and other shareholders' equity..     3,491       4,584  
                                                         --------    --------  
                                                         $ 12,134    $ 14,213  
                                                         ========    ========  

The accompanying notes are an integral part of these consolidated financial 
statements. 

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JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS 

for the fiscal years ended January 30, 1999,
January 31, 1998 and January 25, 1997 
(in thousands, except per share data) 

                                                                [Download Table]

                                                     1999      1998      1997   
                                                   --------  --------  -------- 
                                                                                
Net sales from continuing operations.............  $ 52,236  $ 53,483  $ 60,198 
Cost of sales....................................    35,187    36,371    40,526 
                                                   --------  --------  -------- 
Gross profit.....................................    17,049    17,112    19,672 
Selling, general and administrative expenses.....    18,932    19,535    21,867 
                                                   --------  --------  -------- 
Operating loss from continuing operations........    (1,883)   (2,423)   (2,195)
                                                   --------  --------  -------- 
Other income (expenses):                                                        
  Interest income................................       105       114       313 
  Interest expense...............................      (161)     (151)     (161)
  Gain/(loss) on sale of assets and store                                       
   closings, net.................................      (400)                 44 
  Minority interest in net income of                                            
   subsidiaries..................................       (99)      (96)      (89)
                                                   --------  --------  -------- 
                                                       (555)     (133)      107 
                                                   --------  --------  -------- 
Loss from continuing operations before income tax                               
 provision.......................................    (2,438)   (2,556)   (2,088)
Income tax (benefit) provision...................      (115)       13        13 
                                                   --------  --------  -------- 
Loss from continuing operations..................    (2,323)   (2,569)   (2,101)
Discontinued operations:                                                        
  Loss on sale of discontinued operations,                                      
   including income during phase-out period, less                               
   applicable income taxes.......................                           (49)
                                                   --------  --------  -------- 
Loss before extraordinary gain...................    (2,323)   (2,569)   (2,150)
                                                   --------  --------  -------- 
Extraordinary item:                                                             
  Gain on debt restructuring, net of related                                    
   expenses......................................     1,365                     
                                                   --------  --------  -------- 
Net loss.........................................    $ (958) $ (2,569) $ (2,150)
                                                   ========  ========  ======== 
Net loss available to common shareholders........  $ (1,093) $ (2,707) $ (2,577)
                                                   ========  ========  ======== 
Per share data--basic and diluted:                                              
  Loss from continuing operations................   $ (2.32)  $ (2.55)  $ (1.15)
  Loss from discontinued operations..............                         (0.02)
  Extraordinary gain.............................      1.29                     
                                                   --------  --------  -------- 
  Net loss.......................................   $ (1.03)  $ (2.55)  $ (1.17)
                                                   ========  ========  ======== 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY  

for the fiscal years ended January 30, 1999,  
January 31, 1998 and January 25, 1997 
(in thousands, except share data) 

                                                        [Enlarge/Download Table]

                                                                           Total Common  
                                                                          Stock and Other
                          Common  Paid-in Preferred Accumulated Treasury   Shareholders' 
                          Shares  Capital   Stock     Deficit    Shares       Equity     
                          ------- ------- --------- ----------- --------  ---------------
                                                                                         
Balances, January 27,                                                                    
 1996...................  $11,246 $4,775             $ (5,204)  $ (1,285)     $9,532     
Net loss, fiscal 1997...                               (2,150)                (2,150)    
Forgiveness of preferred                                                                 
 stock dividends by                                                                      
 Jupiter................           1,164                                       1,164     
Issuance of 1,500 shares                                                                 
 of Series B preferred                                                                   
 stock..................                   $1,500                              1,500     
Purchase of 1,293,258                                                                    
 common shares..........                                          (2,328)     (2,328)    
Dividends accrued on                                                                     
 redeemable and                                                                          
 convertible preferred                                                                   
 stock..................                                 (427)                  (427)    
                          ------- ------   ------    --------   --------      ------     
Balances, January 25,                                                                    
 1997...................   11,246  5,939    1,500      (7,781)    (3,613)      7,291     
Net loss, fiscal 1998...                               (2,569)                (2,569)    
Dividends accrued on                                                                     
 convertible preferred                                                                   
 stock..................                                 (138)                  (138)    
                          ------- ------   ------    --------   --------      ------     
Balances, January 31,                                                                    
 1998...................   11,246  5,939    1,500     (10,488)    (3,613)      4,584     
Net loss, fiscal 1999...                                 (958)                  (958)    
Dividends accrued on                                                                     
 convertible preferred                                                                   
 stock..................                                 (135)                  (135)    
                          ------- ------   ------    --------   --------      ------     
Balances, January 30,                                                                    
 1999...................  $11,246 $5,939   $1,500    $(11,581)  $ (3,613)     $3,491     
                          ======= ======   ======    ========   ========      ======     

The accompanying notes are an integral part of these consolidated financial 
statements. 

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JG INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS 

for the fiscal years ended January 30, 1999,
January 31, 1998 and January 25, 1997 
(in thousands)

                                                                [Download Table]

                                                      1999     1998      1997   
                                                     ------  --------  -------- 
                                                                                
Cash flows from operating activities:                                           
  Net loss.......................................... $ (958) $ (2,569) $ (2,150)
  Adjustments to reconcile net loss to net cash                                 
   provided by (used in) operating activities:                                  
    Depreciation and amortization...................    929     1,007     1,229 
    Minority interest in net income of                                          
     subsidiaries...................................     99        96        89 
    Net loss (gain) on sale of assets and store                                 
     closings.......................................    400                 (44)
    Extraordinary gain on debt restructuring........ (1,365)                    
  Changes in assets and liabilities:                                            
    Accounts receivable.............................     83         9        17 
    Merchandise inventories.........................    442        63      (458)
    Other assets (current)..........................     48       (80)      111 
    Other assets (noncurrent).......................    233      (107)     (130)
    Accounts payable and accrued liabilities........    406       388    (2,566)
    Other liabilities (noncurrent)..................   (220)      (42)      (61)
                                                     ------  --------  -------- 
      Net cash provided by (used in) operating                                  
       activities...................................     97    (1,235)   (3,963)
Cash flows from investing activities:                                           
  Net proceeds from sale of assets and discontinued                             
   operations.......................................      6        21     6,633 
  Capital expenditures..............................   (366)     (502)   (1,061)
  Purchase of annuity contracts.....................              (32)          
                                                     ------  --------  -------- 
      Net cash (used in) provided by investing ac-                              
       tivities.....................................   (360)     (513)    5,572 
                                                     ------  --------  -------- 
Cash flows from financing activities:                                           
  Borrowings under line of credit...................  4,155     2,275     8,950 
  Repayments under line of credit................... (4,150)   (2,275)   (9,150)
  Proceeds from mortgage borrowing..................              800           
  Principal payments of long-term debt..............    (25)             (2,475)
  Redemption of preferred stock from Jupiter........                     (3,183)
  Proceeds from Due from Jupiter....................                      1,265 
  Proceeds from issuance of convertible preferred                               
   stock............................................                      1,500 
  Dividends paid on convertible preferred stock.....   (135)     (136)      (12)
  Purchase of treasury shares.......................                       (582)
                                                     ------  --------  -------- 
      Net cash (used in) provided by financing                                  
       activities...................................   (155)      664    (3,687)
                                                     ------  --------  -------- 
Net decrease in cash and cash equivalents...........   (418)   (1,084)   (2,078)
Cash and cash equivalents at beginning of year......    630     1,714     3,792 
                                                     ------  --------  -------- 
Cash and cash equivalents at end of year............ $  212  $    630  $  1,714 
                                                     ======  ========  ======== 
Cash paid during the fiscal year for:                                           
  Interest.......................................... $  126  $     45  $    147 
  Income taxes......................................     13        17       407 

The accompanying notes are an integral part of these consolidated financial 
statements. 

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

1. Summary of Significant Accounting Policies                                   

A) Principles of Consolidation--The consolidated financial statements       
include the accounts of JG Industries, Inc. (the "Company" or "JG") and         
subsidiary companies that are majority owned or effectively controlled. The     
Company's majority owned subsidiaries include Goldblatt's Department Stores,    
Inc. ("Goldblatt's") (the Company's discount department store division) and     
Sussex Group Holding Company. The Company is engaged in retail merchandising    
operations in one continuing business segment consisting of nine discount       
department stores primarily located in the Chicago, Illinois vicinity.          
Significant intercompany accounts and transactions have been eliminated.        

Prior to December 13, 1996, Jupiter Industries, Inc. ("Jupiter") was the    
Company's largest shareholder. Jupiter held 1,293,258 shares of the Company's   
Common Stock (approximately 55.2% of issued and outstanding Common Stock) and   
all of the Company's issued and outstanding Series A Preferred Stock.           
Accordingly, the consolidated financial statements of Jupiter included          
operations of the Company. Subsequent to December 13, 1996, Jupiter does not    
hold any shares of the Company's Common Stock.                                  

B) Cash and Cash Equivalents--The Company considers all highly liquid       
investments purchased with an original maturity of three months or less to be   
cash equivalents. As of January 30, 1999 and January 31, 1998, cash and cash    
equivalents are concentrated with banks located in the Midwest region of the    
United States.                                                                  

C) Merchandise Inventories--Merchandise inventories are stated at the lower 
of cost or market. Cost is determined on the last-in, first-out (LIFO) basis    
for approximately 85% and 86% of the inventory using the retail method as of    
January 30, 1999 and January 31, 1998, respectively. The remaining inventory    
is valued on the first-in, first-out (FIFO) basis using the retail method. If   
the FIFO method had been used to value all inventories, cost would have been    
$479,000 and $497,000 higher at January 30, 1999 and January 31, 1998,          
respectively. During fiscal 1999, 1998 and 1997, certain LIFO inventory levels  
were reduced which increased net income by approximately $75,000, $16,000 and   
$176,000, respectively, due to the matching of older historical inventory cost  
with current sales dollars.                                                     

D) Land, Buildings and Equipment--Depreciation is computed using the        
straight-line method over the following estimated useful lives of the assets:   
buildings--25 to 30 years; leasehold improvements--up to 25 years, depending    
on the applicable lease term; and furniture, fixtures and equipment--3 to 12-   
1/2 years. Asset costs and related accumulated depreciation are eliminated      
from the accounts when the asset is disposed of or at the end of its estimated  
useful life. Expenditures for renewals and betterments are capitalized, while   
costs of maintenance and repairs are charged to operations when incurred.       

E) Leasehold Rights--Leasehold rights represent the value or cost of leases 
acquired and improvements. Amortization of the rights is computed using the     
straight-line method over the terms of the related leases. Leasehold rights     
are shown net of accumulated amortization of $25,000 at January 30, 1999 and    
$22,000 at January 31, 1998.                                                    

F) Store Pre-Opening Costs--Noncapital expenditures incurred prior to the   
opening of a new store are charged to expense in the year the store is opened.  

G) Per Share Data--During fiscal 1998, the Company adopted Statement of     
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share". SFAS     
No. 128 requires the presentation of basic earnings per share and, for          
companies with potential dilutive securities, such as stock options and         
warrants, diluted earnings per share. SFAS No. 128 is effective for annual and  
interim periods ending after December 15, 1997 and requires restatement of      
earnings per share for prior periods.                                           

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

For fiscal 1999, 1998 and 1997, basic and diluted per share calculations are
computed based on the weighted average number of common shares outstanding      
(after giving effect to the one-for-three reverse stock split in fiscal 1997)   
of 1,060,670, 1,060,674 and 2,194,085, respectively. Incremental shares from    
assumed conversions of preferred stock of 666,667 in fiscal 1999 and 1998 are   
not included as they would be anti-dilutive. Options to purchase 162,167 and    
171,167 shares of common stock were outstanding at January 30, 1999 and         
January 31,1998, respectively, but were not included in the computation of      
diluted earnings per share since the options' exercise prices were greater      
than the average market price of the common shares, and they also would be      
anti-dilutive.                                                                  

Loss per share applicable to common shares for fiscal 1999, 1998 and 1997 is
computed after recognition of the dividend requirements of $135,000, $138,000   
and $427,000, respectively, on the redeemable and convertible preferred stock.  

H) Income Taxes--The Company files a consolidated federal income tax return 
with subsidiaries in which its ownership interest is 80% or greater.            

The Company provides for income taxes in accordance with SFAS No. 109,      
"Accounting for Income Taxes". SFAS No. 109 requires the use of the liability   
method of accounting for taxes, under which deferred tax assets and             
liabilities are recorded based on the differences between the financial         
statement and tax bases of assets and liabilities and the tax rates in effect   
when these differences are expected to reverse. The principal assets and        
liabilities giving rise to such differences are the different methods of        
accounting for inventory, depreciation and certain accrued liabilities for tax  
and financial statement purposes and net operating loss carryforwards.          
Deferred tax assets are reduced where appropriate by a valuation allowance      
which reflects expectations of the extent to which such assets will be          
realized.                                                                       

I) Financial Instruments--The fair value of cash and cash equivalents is    
assumed to approximate the carrying value of these assets due to the short      
maturity of these instruments. The fair value of the Company's long-term debt   
is estimated to approximate the carrying value based upon borrowing rates       
currently available to the Company for borrowings with similar terms.           

J) Use of Estimates--The preparation of financial statements in conformity  
with generally accepted accounting principles requires management to make       
estimates and assumptions that affect the reported amounts of assets and        
liabilities and disclosure of contingent assets and liabilities at January 30,  
1999 and January 31, 1998 and the reported amounts of revenues and expenses     
during the three years ended January 30, 1999. Actual results could differ      
from those estimates.                                                           

2. Stock Transactions                                                           

On December 13, 1996, the Company, pursuant to the terms of a certain Stock 
Purchase Agreement, by and among Jupiter and the Company, purchased from        
Jupiter, (i) 1,293,258 shares of the Company's Common Stock, and (ii) 445       
shares of the Company's Series A Preferred Stock, for an aggregate purchase     
price of $5,510,864 of which $2,500,108 was paid in cash, $1,264,858 was paid   
by offset against liabilities of Jupiter to the Company, and $1,745,898 was     
paid by delivery of a promissory note.                                          

On December 13, 1996, the Company also declared a one-for-three reverse     
stock split. Accordingly, all references in this report to number of shares,    
prices per share and per share amounts have been retroactively restated to      
reflect the reduced number of common shares outstanding, unless otherwise       
noted.                                                                          

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

3. Receivables                                                                  

Receivables in the consolidated balance sheets are shown net of the         
allowances for doubtful accounts and consist of the following at January 30,    
1999 and January 31, 1998:                                                      

                                                                [Download Table]

                                                                1999  1998 
                                                                ----- -----
                                                                    (in    
                                                                thousands) 
                                                                           
Accounts receivable--trade..................................... $  16 $  70
Accounts receivable--other.....................................   198   232
                                                                ----- -----
                                                                  214   302
  Less allowance for doubtful accounts.........................    16    21
                                                                ----- -----
                                                                $ 198 $ 281
                                                                ===== =====

An analysis of the allowance for doubtful accounts and the net provision    
charged to operations for fiscal 1999, 1998 and 1997 is as follows:             

                                                                [Download Table]

                                                            1999  1998  1997
                                                            ----  ----  ----
                                                            (in thousands)  
                                                                            
Allowance for doubtful accounts, beginning of year......... $21   $ 42  $42 
Accounts receivable written off............................  (5)   (21)  -- 
                                                            ---   ----  --- 
Allowance for doubtful accounts, end of year............... $16   $ 21  $42 
                                                            ===   ====  === 

4. Accrued Liabilities                                                          

Significant components of accrued liabilities consist of accrued real estate
taxes of $1,188,000 and $956,000, and accrued vacation of $274,000 and          
$283,000 as of January 30, 1999 and January 31, 1998, respectively.             

5. Notes Payable and Long-Term Debt                                             

Long-term debt at January 30, 1999 and January 31, 1998 is summarized as    
follows (in thousands):                                                         

                                                                [Download Table]

                                                   Balance                  
                                               ---------------              
Description                                    1/30/99 1/31/98 Interest Rate
-----------                                    ------- ------- -------------
                                                                            
JG:                                                                         
 Jupiter promissory note......................  $ 500  $1,746       6.0%*   
Goldblatt's:                                                                
 Mortgage loan................................    775     800       8.5%    
                                                -----  ------               
                                                1,275   2,546               
Less current maturities.......................    530      28               
                                                -----  ------               
                                                $ 745  $2,518               
                                                =====  ======               

--------                                                                        
*On May 15, 1998, the original $1,746,000 Jupiter promissory note was amended   
and restated to a non-interest bearing status, as of that date.                 

Long-term debt maturing within each of the five fiscal years subsequent to  
January 30, 1999 is as follows (in thousands):                                  

                                                                [Download Table]
                                         
2000................................ $530
2001................................   33
2002................................   36
2003................................   39
2004................................   42

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

The Jupiter promissory note was originally payable in three installments    
commencing December 13, 1997. The Company did not make the first installment    
payment of $581,966 due to pending debt restructuring negotiations. Effective   
May 15, 1998, the original $1,745,898 promissory note obligation was amended    
and restated. The amended and restated promissory note was non-interest         
bearing unless an event of default occurred, as defined in the agreement, at    
which time interest would be accrued at 9% per annum from the date of default.  
The note was payable in three annual installments of $581,966 each commencing   
May 15, 1999, with the last installment due and payable on May 15, 2001. As a   
result of the amendment and restatement, the obligation was reported as a non-  
current liability as of January 31, 1998. In addition, the accrued and unpaid   
interest of approximately $149,000 as of May 15, 1999 was forgiven. As a        
result of this transaction, the Company recognized an extraordinary gain on     
debt restructuring of approximately $124,000, net of related expenses, during   
fiscal 1999. On January 29, 1999, the Company and Jupiter entered into a        
Cancellation Agreement whereby the amended and restated $1,745,898 promissory   
obligation was canceled upon a lump-sum payment of $500,000 to Jupiter.         
Subsequent to year-end, the Company made the $500,000 lump-sum payment to       
Jupiter. As a result of this transaction, the Company recognized an additional  
extraordinary gain on debt restructuring of approximately $1,241,000, net of    
related expenses, during fiscal 1999.                                           

Effective January 30, 1998, Goldblatt's entered into a mortgage loan        
agreement for $800,000 with an 8.5% fixed rate of interest from a regional      
financial institution. The mortgage is secured by a parcel of owned real        
estate housing a Goldblatt's store, and is guaranteed by JG. The loan           
agreement stipulates monthly principal and interest payments of $7,878 and a    
final principal payment of approximately $547,000 due on January 31, 2005. The  
loan agreement requires that no default exists under the line of credit         
agreement.                                                                      

During fiscal 1998, Goldblatt's executed a line of credit agreement, which  
provided a line of credit of up to $2,000,000 through May 1, 1998 based on      
availability of a borrowing base equal to 45% of merchandise inventory. The     
line was collateralized by Goldblatt's inventory and cash and cash              
equivalents. The line of credit agreement required that Goldblatt's maintain    
an inventory level of at least $5,500,000, a tangible net worth of $5,500,000   
and imposed net loss restrictions for fiscal years 1998 and 1999. Interest was  
payable at the prime rate plus 1%. At January 31, 1998, Goldblatt's was in      
violation of the net loss covenant. Subsequent to year-end, the financial       
institution granted Goldblatt's a waiver of this covenant effective January     
31, 1998 and, in addition, amended the line of credit maturity date to April    
15, 1999. There were no outstanding borrowings on the line on January 31,       
1998.                                                                           

Effective January 28, 1999, Goldblatt's entered into a new Loan and Security
Agreement ("Loan Agreement") with another financial institution, replacing the  
aforementioned line of credit agreement. The Loan Agreement provides a          
revolving line of credit of up to $3,000,000 through January, 2001 based on     
availability of a borrowing base equal to 50% of merchandise inventory          
computed on a FIFO basis. The line is collateralized by Goldblatt's inventory   
and cash and cash equivalents. The line of credit agreement requires that       
Goldblatt's maintain a FIFO inventory cost of at least $5,500,000.              
Additionally, the Company is required to pay down the outstanding line of       
credit with any available cash on a daily basis. Interest is payable at the     
prime rate plus 1%. The line is guaranteed by JG. There was $5,000 in           
outstanding borrowings on the line as of January 30, 1999. At January 30,       
1999, the Company had $2,995,000 available on the line of credit.               

The weighted average interest rate on short-term borrowings for fiscal 1999,
1998 and 1997 was 9.28%, 9.50% and 6.44%, respectively.                         

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

6. Preferred Stock                                                              

The Redeemable Preferred Stock consisting of 445 shares of Series "A" 9%    
Cumulative Preferred Stock with a face and liquidation value of $3,183,000 was  
acquired by the Company and canceled on December 13, 1996. In connection with   
this acquisition, Jupiter also waived accrued dividends of $1,164,000. The      
gain related to the waiver was recorded as an increase to paid-in capital.      

On December 13, 1996, the Company, pursuant to the terms of a certain Series
B Convertible Preferred Purchase Agreement (the "Series B Preferred Stock       
Purchase Agreement"), by and among certain officers and a director of the       
Company (collectively, the "Purchasers") and the Company, issued and sold to    
the Purchasers, through a private placement, 1,500 shares of Series B           
Convertible Preferred Stock of the Company, no par value per share (the         
"Series B Preferred Shares"), for an aggregate purchase price of $1,500,000.    
Holders of Series B Preferred Shares are entitled to vote with the holders of   
Common Stock on all matters submitted to a vote of the Company's shareholders   
as a single class. Currently, each share of Series B Preferred Stock is         
entitled to 444.44 votes. After giving effect to the purchase of the Jupiter    
shares previously described, the Purchasers control approximately 47.9% of the  
Company's voting rights.                                                        

Dividends on Series B Preferred Stock accrue daily at a rate equal to 9% per
annum. Dividends accumulate until paid, and are paid when and as declared by    
the Board of Directors. At any time prior to the fifth anniversary of issuance  
(automatic conversion), holders of Series B Preferred Stock may convert such    
shares into a number of shares of the Company's Common Stock. The current       
conversion price is $2.25 per share.                                            

7. Income Taxes                                                                 

The income tax provision before minority interest is comprised of current   
state taxes of $13,000 for fiscal 1999, offset by a tax benefit related to the  
reversal of previously recorded tax liability of $128,000. For fiscal 1998 and  
1997, the income tax provision before minority interest is comprised of         
current state taxes of $13,000.                                                 

At January 30, 1999, the Company has net operating loss carryforwards of    
approximately $23,348,000 available to offset future taxable income for         
federal income tax purposes. These carryforwards expire principally in fiscal   
2000 through 2014. The amount of carryforwards which expired in fiscal 1999     
was $414,551.                                                                   

The components of the net deferred tax assets and liabilities as of January 
30, 1999 and January 31, 1998 are as follows:                                   

                                                                [Download Table]

                                                          1999     1998   
                                                         -------  ------- 
                                                         (in thousands)   
                                                                          
Deferred tax assets:                                                      
  Inventory............................................. $   126  $   163 
  Accruals and other liabilities........................     236      271 
  Alternative Minimum Tax credit........................     398      398 
  Net operating loss carryforwards......................   9,106    8,639 
                                                         -------  ------- 
                                                           9,866    9,471 
  Valuation allowance...................................  (9,085)  (8,604)
                                                         -------  ------- 
                                                             781      867 
                                                         -------  ------- 
Deferred tax liabilities:                                                 
  Property, plant and equipment.........................     781      867 
                                                         -------  ------- 
                                                             781      867 
                                                         -------  ------- 
    Net deferred tax liabilities........................ $   --   $   --  
                                                         =======  ======= 

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

8. Lease Commitments                                                            

The following table presents the future minimum lease commitments for all   
operating leases that have initial or remaining noncancelable terms in excess   
of one year. The leases expire in fiscal 2000 to 2008 and have various renewal  
options.                                                                        

                                                                [Download Table]

                      Fiscal Year                       Operating Leases
                      -----------                       ----------------
                                                         (in thousands) 
                                                                        
  2000.................................................     $ 1,840     
  2001.................................................       1,806     
  2002.................................................       1,725     
  2003.................................................       1,741     
  2004.................................................       1,390     
  Thereafter...........................................       2,217     
                                                            -------     
    Total minimum lease payments.......................     $10,719     
                                                            =======     

Certain store leases contain contingent rental provisions based on retail   
sales. Rent expense, net of insignificant sublease income, for fiscal years     
1999, 1998 and 1997 was $1,894,000, $1,873,000 and $1,962,000, respectively,    
including contingent rentals of $223,000, $228,000 and $209,000, respectively.  
Straight-line rent obligations of $605,000 and $694,000 are included in other   
long-term liabilities at January 30, 1999 and January 31, 1998, respectively.   

9. Sale of Assets and Store Closings                                            

During fiscal 1999, the Company closed one of its underperforming           
Goldblatt's store locations in Chicago and recorded a store closing provision   
of $400,000. During fiscal 1997, the Company sold three stores and recorded a   
gain of $908,000. The gain was offset in part by a loss of $864,000 resulting   
from a store closing that year. The furniture, fixtures and computer equipment  
from the five closed stores (with net book values of approximately $331,000     
and $382,000 as of January 30, 1999 and January 31, 1998, respectively) were    
retained and placed into storage. During fiscal 1999 and 1998, furniture,       
fixtures and computer equipment with a net book value of approximately $25,000  
and $56,000, respectively, were transferred to existing Goldblatt's stores for  
replacement needs. Goldblatt's expects to utilize a large portion of the        
remaining furniture and fixtures in storage in fiscal 2000 for both major and   
minor remodeling projects to be undertaken at its existing store locations.     

10. Pension, Profit-Sharing and Employee Benefit Plans                          

The Company has a defined contribution plan which substantially all non-    
union employees may join after completing one year and 1,000 hours of service.  
Annually, the Company contributes a discretionary amount determined by the      
Board of Directors and participants may voluntarily contribute varying          
percentages of their compensation.                                              

Approximately $120,000, $117,000 and $134,000 of expenses relating to these 
plans are included in the consolidated statements of operations in fiscal       
1999, 1998 and 1997, respectively. All plans are qualified under provisions of  
the Internal Revenue Code.                                                      

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

11. Stock Option Plan                                                           

Effective fiscal 1997, the Company adopted SFAS No. 123, "Accounting for    
Stock-Based Compensation". As provided by SFAS No. 123, the Company has         
elected to continue to account for its stock-based compensation programs        
according to the provisions of Accounting Principles Board ("APB") Opinion No.  
25, "Accounting for Stock Issued to Employees".                                 

The Company currently has stock options granted under two stock option      
plans. Under the 1983 Stock Option and Stock Appreciation Rights Plan ("1983    
Plan"), 100,000 shares are authorized and 7,833 shares are outstanding as of    
January 30, 1999. Under the 1988 Stock Option Plan ("1988 Plan"), 306,667       
shares are authorized and 154,334 shares are outstanding as of January 30,      
1999. All options vest immediately once granted. All options are exercisable    
for a 10-year period beginning on the date of the grant. The weighted-average   
remaining contractual life of options outstanding at January 30, 1999 is        
approximately 7 years.                                                          

Information for the fiscal years ended January 25, 1997, January 31, 1998   
and January 30, 1999 with respect to options under the Company's 1983 and 1988  
Plans is as follows:                                                            

                                                                [Download Table]

                                                             Weighted-Average
                                    Number of Exercise Price  Exercise Price 
                                     Shares     Per Share       Per Share    
                                    --------- -------------- ----------------
                                                                             
Shares under Option:                                                         
  January 27, 1996.................   49,500  $1.50 to $4.88      $2.75      
    Granted........................   58,000       1.38            1.38      
    Expired/Canceled...............  (18,333)      4.88            4.88      
                                     -------                                 
  January 25, 1997.................   89,167    1.38 to 1.50       1.42      
    Granted........................   85,000       1.50            1.50      
    Expired/Canceled...............   (3,000)      1.50            1.50      
                                     -------                                 
  January 31, 1998.................  171,167    1.38 to 1.50       1.46      
    Expired/Canceled...............   (9,000)      1.50            1.50      
                                     -------                                 
  January 30, 1999.................  162,167    1.38 to 1.50       1.46      
                                     =======                                 

No compensation expense has been recognized by the Company as all options   
were granted at the market price of the stock on the day of the grants. Had     
compensation expense for the Company's stock based compensation plans been      
determined based on the fair market value at the grant dates consistent with    
the method of SFAS 123, the Company's pro forma net loss and net loss per       
basic and diluted share would have been approximately $2,644,000 and $2.62,     
and $2,200,000 and $1.20 for fiscal 1998 and 1997, respectively. No options     
were granted during fiscal 1999.                                                

The fair value of each option grant is estimated on the date of grant using 
the Black-Scholes option-pricing model with the following weighted-average      
assumptions for fiscal 1998 and 1997. Adjustments for forfeitures are made as   
they occur.                                                                     

                                                                [Download Table]

                                                             1998   1997  
                                                             -----  ----- 
                                                                          
  Risk free interest rate...................................  6.26%  6.16%
  Expected dividend yield...................................  0.00%  0.00%
  Expected volatility factor................................ 86.32  94.24 
  Expected option term (years)..............................     3      3 

The weighted-average fair value per option at the date of grant for options 
granted in fiscal 1998 and 1997 was $.88 and $.86, respectively.                

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 

12. Fourth Quarter Adjustments                                                  

Results of continuing operations in the fourth quarter of fiscal 1999, 1998 
and 1997 were increased by year-end adjustments of approximately $44,000,       
$66,000 and $170,000, respectively, which related primarily to adjustments to   
inventory and certain miscellaneous accruals.                                   

13. Supplementary Information                                                   

Charges to selling, general and administrative expenses for fiscal 1999,    
1998 and 1997 include the following:                                            

                                                                [Download Table]

                                                      1999   1998   1997 
                                                     ------ ------ ------
                                                        (in thousands)   
                                                                         
Advertising costs................................... $1,102 $1,091 $1,252
Real estate and personal property taxes.............    751    811  1,106

Advertising costs are expensed when incurred.                               

14. Related Party Transactions                                                  

The Company purchased a certain annuity contract from a former affiliate to 
secure consulting payments to the chief executive officer ("Executive"), as     
required by the Employment Agreement and Consulting Agreement. Pursuant to the  
Consulting Agreement, the Executive has agreed to provide certain services to   
the Company for which he (or his estate) will be paid $223,000 per year for     
ten years. The obligations of the Company, pursuant to the Consulting           
Agreement, are secured by the annuity contract, pursuant to a Pledge and        
Security Agreement dated as of January 25, 1991. The total account value of     
the contract as of January 30, 1999 and January 31, 1998 is $1,522,000 and      
$1,538,000, respectively, and is included in other assets and designated as     
"restricted". During fiscal 1999, the Executive commenced providing consulting  
services and, as a result, the Company entered into a settlement option for a   
fixed payout schedule on the annuity contract. The current portion of the       
annuity contract is $223,000 as of January 30, 1999.                            

The Company earned interest of $95,000, $86,000 and $118,000 on this annuity
contract during fiscal 1999, 1998 and 1997, respectively.                       

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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.                    

                       JG Industries, Inc.

Dated: April 29, 1999                     By:      /s/ William Hellman          
                                            ----------------------------------
                                           William Hellman
                                            Chairman and Chief Executive
                                           Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this   
report has been signed below by the following persons on behalf of the          
Registrant and in the capacities and on the dates indicated.                    

                                                                [Download Table]
        

       Signature                      Title                   Date

Chief Executive Officer:                                                        

    /s/ William Hellman           Chairman and Chief        April 29, 1999
-----------------------------------   Executive Officer                         
William Hellman                                             

Directors:                                                                      

    /s/ Sheldon Collen            Director                  April 29, 1999
-----------------------------------                                             
Sheldon Collen                                              

    /s/ Clarence Farrar           Director, and Chief       April 29, 1999
-----------------------------------   Operating Officer                         
Clarence Farrar                                             

   /s/ Lionel Goldblatt           Director                  April 29, 1999
-----------------------------------                                             
Lionel Goldblatt                                              

    /s/ Sheldon Harris            Director                  April 29, 1999
-----------------------------------                                             
Sheldon Harris                                              

    /s/ William Hellman           Director                  April 29, 1999
-----------------------------------                                             
William Hellman                                             

    /s/ Philip Rootberg           Director                  April 29, 1999
-----------------------------------                                             
Philip Rootberg                                             

 /s/ Wallace W. Schroeder         Director                  April 29, 1999
-----------------------------------                                             
Wallace W. Schroeder                                              

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INDEX TO EXHIBITS 

                                                                [Download Table]

Exhibit                                                                       
  No.                                 Description                             
-------                               -----------                             
                                                                              
10.1    Amended and Restated Employment Agreement dated, June 1, 1983, between
        the Company and William Hellman. (Previously filed as Exhibit 10.1 to 
        the 1984 10-K and is incorporated herein by reference.)               
10.2    First Amendment to Amended and Restated Employment Agreement, dated   
        August 8, 1985, between the Company and William Hellman. (Previously  
        filed as Exhibit 10.2 to the 1986 10-K and is incorporated herein by  
        reference.)                                                           
10.3    Guaranty of The Jupiter Corporation, dated as of June 1, 1983 relative
        to the Amended and Restated Employment Agreement, dated as of June 1, 
        1983, by and between the Company and William Hellman. (Previously     
        filed as Exhibit 10.2 to the 1985 10-K and is incorporated herein by  
        reference.)                                                           
10.4    Second Amendment to Amended and Restated Employment Agreement,        
        including a Stock Purchase and Sale Agreement, dated July 23, 1986,   
        between the Company and William Hellman. (Previously filed as Exhibit 
        10.4 to the Company's July 26, 1986 10-Q and is incorporated herein by
        reference.)                                                           
10.7    Incentive Stock Option and Non-Statutory Stock Option Agreement.      
        (Previously filed as Exhibit 4.2 to the Company's Registration        
        Statement on Form S-8, dated September 29, 1984, and is incorporated  
        herein by reference.)                                                 
10.8    1983 Stock Option and Stock Appreciation Rights Plan. (Previously     
        filed as Exhibit 10.4 to the 1984 10-K and is incorporated herein by  
        reference.)                                                           
10.9    1988 Stock Option Plan (Previously filed as Exhibit 10.9 to the 1989  
        10-K and is incorporated herein by reference.)                        
10.10   Third Amendment to Amended and Restated Employment Agreement, dated   
        October 3, 1988, between the Company and William Hellman.(Previously  
        filed as Exhibit 10.10 to the 1989 10-K and is incorporated herein by 
        reference.)                                                           
10.11   Fourth Amendment to Amended and Restated Employment Agreement, dated  
        March 28, 1989, between the Company and William Hellman. (Previously  
        filed as Exhibit 10.11 to the 1989 10-K and is incorporated herein by 
        reference.)                                                           
10.14   Fifth Amendment to Amended and Restated Employment Agreement, dated   
        January 25, 1991 between the Company and William Hellman. (Previously 
        filed as Exhibit 10.14 to the 1991 10-K and is incorporated herein by 
        reference.)                                                           
10.17   Sixth Amendment to Amended and Restated Employment Agreement, dated   
        April 27, 1992, between the Company and William Hellman. (Previously  
        filed as Exhibit 10.17 to the April 25, 1992 10-Q and is incorporated 
        herein by reference.)                                                 
10.19   Eighth Amendment to Amended and Restated Employment Agreement, dated  
        May 26, 1994, between the Company and William Hellman. (Previously    
        filed as Exhibit 10.19 to the April 30, 1994 10-Q and is incorporated 
        herein by reference.)                                                 
10.21   Ninth Amendment to Amended and Restated Employment Agreement, dated   
        June 12, 1995, between the Company, Goldblatt's Department Stores,    
        Inc. and William Hellman. (Previously filed as Exhibit 10.21 to the   
        July 28, 1995 Form 10-Q and is incorporated herein by reference.)     
10.22   Stock Purchase Agreement, dated December 13, 1996, by and among       
        Jupiter Industries, Inc. and the Registrant. (Incorporated by         
        reference from the Registrant's definitive proxy statement filed with 
        the Securities and Exchange Commission on November 22, 1996.)         
10.24   Thirteenth Amendment to Amended and Restated Employment Agreement,    
        dated February 1, 1997, between the Company, Goldblatt's Department   
        Stores, Inc. and William Hellman. (Previously filed as Exhibit 10.24  
        to the January 25, 1997 Form 10-K and is incorporated herein by       
        reference.)                                                           

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                                                                [Download Table]

Exhibit                                                                       
  No.                                 Description                             
-------                               -----------                             
                                                                              
10.25   Employment Agreement, dated February 1, 1997, between the Company and 
        Clarence Farrar. (Previously filed as Exhibit 10.25 to the January 25,
        1997 Form 10-K and is incorporated herein by reference.)              
10.26   Employment Agreement, dated February 1, 1997, between Goldblatt's     
        Department Stores, Inc. and Lionel Goldblatt. (Previously filed as    
        Exhibit 10.26 to the January 25, 1997 Form 10-K and is incorporated   
        herein by reference.)                                                 
10.27   Fourteenth Amendment to Amended and Restated Employment Agreement,    
        dated August 31, 1997, between the Company, Goldblatt's Department    
        Stores, Inc. and William Hellman. (Previously filed as Exhibit 10.27  
        to the January 31, 1998 Form 10-K and is incorporated herein by       
        reference.)                                                           
10.28   Fifteenth Amendment to Amended and Restated Employment Agreement,     
        dated November 12, 1998, between the Company, Goldblatt's Department  
        Stores, Inc. and William Hellman.                                     
21      List of Subsidiaries.                                                 
27      Financial Data Schedule.                                              

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                                                                         Annex C

SECURITIES AND EXCHANGE COMMISSION  
WASHINGTON, D.C. 20549  

FORM 10-Q 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR  
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the quarterly period ended            October 30, 1999                
                          --------------------------------------

OR  

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  

For the transition period from __________________ to ___________________        

Commission File number                   1-258                                  
               -------------------------------------------------

JG INDUSTRIES, INC.   
------------------------------------------------------------------------        
(Exact name of registrant as specified in its charter)  

ILLINOIS                                   36-1141010     
-----------------------------------          ---------------------------        
(State or other jurisdiction of                 (I.R.S. Employer          
incorporation or organization)                 Identification No.)        

5630 WEST BELMONT AVENUE                      CHICAGO, IL  60634        
------------------------------------------------------------------------        
(Address of principal executive offices)  
(Zip Code)  

(773) 481-5410    
------------------------------------------------------------------------        
(Registrant's telephone number, including area code)  

________________________________________________________________________        
(Former name, former address and former fiscal  
year, if changed since last report) 

 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 requirement for the past 90 days.                                        
Yes X  No__                                                                     
---                                                                       

Common Stock outstanding as of October 30, 1999 - 1,061,654 shares              
------------------------------------------------------------------              

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PART I - FINANCIAL INFORMATION  
------------------------------  

ITEM 1. FINANCIAL STATEMENTS  

Company or group of companies for which report is filed:                        

JG INDUSTRIES, INC. AND SUBSIDIARIES (Company)  
----------------------------------------------  

In the opinion of management, all adjustments necessary to fairly present the   
condensed consolidated financial position of the Company as of October 30, 1999,
January 30, 1999, and October 31, 1998 and the results of its operations and its
cash flows for the thirteen and thirty-nine week periods ended October 30, 1999 
(fiscal 2000) and October 31, 1998 (fiscal 1999) have been included. These      
adjustments consist solely of normal recurring accruals. The results of         
operations for such interim periods are not necessarily indicative of results   
for the full year.                                                              

Certain information and footnote disclosures normally included in financial     
statements prepared in accordance with generally accepted accounting principles 
have been condensed or omitted, although the Company believes that the          
disclosures are adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read in     
conjunction with the consolidated financial statements and notes thereto in the 
Company's latest Annual Report on Form 10-K.                                    

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JG INDUSTRIES, INC AND SUBSIDIARIES 
----------------------------------- 
CONDENSED CONSOLIDATED BALANCE SHEETS 
------------------------------------- 
(in thousands, except share data) 
(unaudited) 

                                                        [Enlarge/Download Table]

                                                    October 30    January 30,    October 31 
                                                      1999           1999           1998    
                                                   -----------   ------------   ----------- 
                                                                                            
ASSETS                                                                                      

Current Assets:                                                                             
   Cash and cash equivalents                         $       7      $     212     $     213 
   Receivables, net                                        538            198           697 
   Merchandise inventories                               9,486          5,724         9,221 
   Other current assets - restricted $223,                                                  
     $223 and $0, respectively                             343            256           110 
                                                     ---------      ---------     --------- 
     Total current assets                               10,374          6,390        10,241 
                                                     ---------      ---------     --------- 
Land, buildings and                                                                         
   equipment, at cost                                   13,263         13,750        14,538 
Less accumulated depreciation                                                               
   and amortization                                      9,397          9,535        10,115 
                                                     ---------      ---------     --------- 
                                                         3,866          4,215         4,423 
                                                     ---------      ---------     --------- 
Leasehold rights, net                                       22             25            26 
Other assets - restricted $1,214,                                                           
   $1,299 and $1,549, respectively                       1,421          1,504         1,739 
                                                     ---------      ---------     --------- 
                                                     $  15,683      $  12,134     $  16,429 
                                                     =========      =========     ========= 

LIABILITIES, COMMON STOCK AND                                                               
   OTHER SHAREHOLDERS' EQUITY                                                               

Current Liabilities:                                                                        
   Short-term borrowings                             $   2,366      $       5     $   1,600 
   Current portion of long-term debt                                                        
     and capitalized lease obligations                      42            530           611 
   Accounts payable                                      6,831          3,084         5,323 
   Accrued liabilities                                   1,720          2,210         2,176 
   Accrued dividends                                         7              7             7 
                                                     ---------      ---------     --------- 
     Total current liabilities                          10,966          5,836         9,717 
                                                     ---------      ---------     --------- 
Long-term debt and capitalized lease                                                        
   obligations, less current portion                       732            745         1,914 
Other long-term liabilities                                539            605           693 
Minority interest                                        1,523          1,457         1,432 

Common stock and other shareholders' equity                                                 
   Common shares; no par value; authorized                                                  
     10,000,000 shares; issued 2,406,770,                                                   
     2,405,770 and 2,405,770 shares, respectively       11,246         11,246        11,246 
   Paid-in Capital                                       5,939          5,939         5,939 
   Convertible preferred stock; no par                                                      
     value; authorized and issued 1,500 shares           1,500          1,500         1,500 
   Accumulated deficit                                 (13,149)       (11,581)      (12,399)
   Treasury shares - 1,345,116, 1,345,100 and                                               
     1,345,100 shares at cost, respectively             (3,613)        (3,613)       (3,613)
                                                     ---------      ---------     --------- 
                                                         1,923          3,491         2,673 
                                                     ---------      ---------     --------- 
                                                     $  15,683      $  12,134     $  16,429 
                                                     =========      =========     ========= 

The accompanying notes are an integral part of these  
condensed consolidated financial statements.  

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
FOR THE THIRTEEN AND THIRTY-NINE WEEK PERIODS ENDED OCTOBER 30, 1999 AND  
OCTOBER 31, 1998  
(in thousands, except share data) 
(unaudited) 

                                                        [Enlarge/Download Table]

                                                    13 Weeks Ended                 39 Weeks Ended        
                                              ----------------------------  -----------------------------
                                               October 30      October 31    October 30       October 31 
                                                  1999            1998          1999             1998    
                                              ------------    ------------  ------------     ------------
                                                                                                         
Net sales                                      $   12,402      $   13,725    $   36,042       $   38,145 

Cost of sales                                       7,985           8,919        23,731           25,372 
                                               ----------      ----------    ----------       ---------- 
   Gross profit                                     4,417           4,806        12,311           12,773 

Selling, general and                                                                                     
  administrative expenses                           4,431           4,828        13,354           14,172 
                                               ----------      ----------    ----------       ---------- 
   Operating loss from continuing operations          (14)            (22)       (1,043)          (1,399)

Interest (expense) income, net                        (47)             25          (110)             (52)

Gain on sale of assets                                                                3                  

Provision for store closing                          (222)           (380)         (222)            (380)

Minority interest in net income                                                                          
  of subsidiary                                       (23)            (27)          (66)             (74)
                                               ----------      ----------    ----------       ---------- 
   Loss from operations before                                                                           
     income tax provision                            (306)           (404)       (1,438)          (1,905)

Income tax provision                                  (10)             (9)          (29)             (29)
                                               ----------      ----------    ----------       ---------- 
   Loss before extraordinary gain                    (316)           (413)       (1,467)          (1,934)

Extraordinary item:                                                                                      
   Gain on debt restructuring,                                                                           
      net of related expenses                                                                        124 
                                               ----------      ----------    ----------       ---------- 
   Net loss                                    $     (316)     $     (413)   $   (1,467)      $   (1,810)
                                               ==========      ==========    ==========       ========== 

Net loss applicable to common                                                                            
   shareholders                                $     (350)     $     (447)   $   (1,568)      $   (1,911)
                                               ==========      ==========    ==========       ========== 

Basic and diluted earnings                                                                               
   per common share:                                                                                     

Loss before extraordinary gain                 $    (0.33)     $    (0.42)   $    (1.48)      $    (1.92)

Extraordinary gain                                                                                  0.12 
                                               ----------      ----------    ----------       ---------- 
Net loss per common share                      $    (0.33)     $    (0.42)   $    (1.48)      $    (1.80)
                                               ==========      ==========    ==========       ========== 
Weighted average number of common                                                                        
  shares outstanding                            1,061,221       1,060,670     1,060,853        1,060,670 
                                               ==========      ==========    ==========       ========== 

The accompanying notes are an integral part of these  
condensed consolidated financial statements.  

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JG INDUSTRIES, INC. AND SUBSIDIARIES  

CONSOLIDATED STATEMENTS OF COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY  

for the fiscal year ended January 30, 1999  
and the thirty-nine week period ended October 30, 1999  

(in thousands)  
(unaudited) 

------------------------------  

                                                        [Enlarge/Download Table]

                                                                                                      Total Common   
                                                                                                    Stock and Other  
                                  Common     Paid-In      Preferred     Accumulated     Treasury      Shareholders'  
                                  Shares     Capital        Stock         Deficit        Shares          Equity      
                                ---------  -----------  ------------   -------------   -----------  -----------------
                                                                                                                     
Balances, January 31, 1998       $11,246    $  5,939     $  1,500      $  (10,488)     $  (3,613)      $   4,584     

Net loss, fiscal 1999                                                        (958)                          (958)    

Dividends accrued on                                                                                                 
 convertible preferred stock                                                 (135)                          (135)    
                                --------   ---------    ---------     -----------     ----------      ----------     
Balances, January 30, 1999        11,246       5,939        1,500         (11,581)        (3,613)          3,491     

Net loss, thirty-nine week                                                                                           
 period ended October 30, 1999                                             (1,467)                        (1,467)    

Dividends accrued on                                                                                                 
 convertible preferred stock                                                 (101)                          (101)    
                                --------   ---------    ---------     -----------     ----------      ----------     
Balances, October 30, 1999       $11,246    $  5,939     $  1,500      $  (13,149)     $  (3,613)      $   1,923     
                                ========   =========    =========     ===========     ==========      ==========     

The accompanying notes are an integral part 
of these condensed consolidated financial statements. 

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
----------------------------------------------- 
FOR THE THIRTY-NINE WEEK PERIODS ENDED OCTOBER 30, 1999 AND OCTOBER 31, 1998  
----------------------------------------------------------------------------  
(in thousands)  
--------------  
(unaudited) 
----------- 

                                                        [Enlarge/Download Table]

                                                                   39 Weeks Ended        
                                                             --------------------------- 
                                                              October 30     October 31  
                                                                 1999           1998     
                                                             ------------   ------------ 
                                                                                         
Cash flows from operating activities:                                                    
     Net loss                                                  $   (1,467)    $   (1,810)
     Adjustments to reconcile net loss to net cash                                       
       used in operating activities:                                                     
          Depreciation and amortization                               623            703 
          Minority interest                                            66             74 
          Gain on sale of assets, net                                  (3)               
          Provision for store closing                                 222            380 
     Changes in assets and liabilities:                                                  
          Accounts receivable                                        (340)          (416)
          Merchandise inventories                                  (3,860)        (3,054)
          Other assets (current)                                      (87)           194 
          Other assets (noncurrent)                                    82             (3)
          Accounts payable and accrued liabilities                  3,196          2,512 
          Other liabilities (noncurrent)                              (66)          (132)
                                                               ----------     ---------- 

          Net cash used in operating activities                    (1,634)        (1,552)
                                                               ----------     ---------- 

Cash flows from investing activities:                                                    
     Capital expenditures                                            (302)          (343)
     Proceeds from sale of assets                                       3                
                                                               ----------     ---------- 

          Net cash used in investing activities                      (299)          (343)
                                                               ----------     ---------- 

Cash flows from financing activities:                                                    
     Net borrowings under line of credit                            2,361          1,600 
     Redemption of promissory note to Jupiter                        (500)               
     Principal payments of long-term debt                                                
        and capital lease obligations                                 (32)           (21)
     Dividends paid on convertible preferred stock                   (101)          (101)
                                                               ----------     ---------- 

          Net cash provided by financing activities                 1,728          1,478 
                                                               ----------     ---------- 

Net decrease in cash and cash equivalents                            (205)          (417)

Cash and cash equivalents at beginning of year                        212            630 
                                                               ----------     ---------- 

Cash and cash equivalents at end of thirty-nine week period    $        7     $      213 
                                                               ==========     ========== 

The accompanying notes are an integral part of these  
condensed consolidated financial statements.  

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
----------------------------------------------------  
(UNAUDITED) 
----------- 

1)   Merchandise inventories are stated at the lower of cost or market. Cost is 
    determined on the last-in, first-out ("LIFO") basis for approximately 88%,
   85% and 88% of the inventory as of October 30, 1999, January 30, 1999 and
October 31, 1998, respectively, using the retail method. The remaining
 inventory is valued on the first-in, first-out ("FIFO") basis using the
   retail method. If the FIFO method had been used to value all inventories,
    cost would have been $524,000, $479,000 and $542,000 higher at October 30,
1999, January 30, 1999 and October 31, 1998, respectively.            

2)   Receivables are presented net of allowances for doubtful accounts of       
     approximately $16,000 at October 30, 1999 and January 30, 1999, and $17,000
at October 31, 1998.                                                  

3)   Leasehold rights are shown net of accumulated amortization of $28,000 at   
  October 30, 1999, $25,000 at January 30, 1999 and $24,000 at October 31,
1998.                                                                 

4)   The Company entered into a capital lease for computer equipment during     
     fiscal year 2000. Future minimum lease payments at October 30, 1999 for the
following fiscal years are as follows:                                

Fiscal Year                                          Amount 
-----------                                          ------ 
2000                                               $  2,969 
2001                                                 11,874 
2002                                                 11,877 
                                                  --------
Total minimum lease payments                         26,720 
Less amount representing interest                     2,547 
                                                  --------
                                                    24,173
Less current portion of capital lease                       
  obligation                                        10,159
                                                  --------
Long-term capital lease obligations                $ 14,014 
                                                  --------

    The accumulated depreciation on the capital lease was approximately $3,000
as of October 30, 1999.                                               

5)   On January 29, 1999, the Company and Jupiter Industries, Inc. ("Jupiter")  
  entered into a Cancellation Agreement whereby the $1,745,898 amended and
   restated promissory note was canceled in return for a lump-sum payment of
    $500,000 as full settlement of the outstanding debt obligation. During the
first quarter of fiscal 2000, the Company made the $500,000 lump-sum  
    payment to Jupiter. As a result of the negotiated settlement, the $500,000
obligation was reported as a current liability as of January 30, 1999.

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  
------------------------------------------  
(UNAUDITED) 
----------- 

6)   Effective January 28, 1999, Goldblatt's entered into a new Loan and        
     Security Agreement with a national financial institution. The new agreement
  provides a revolving line of credit of up to $3,000,000 through January,
    2001 based on availability of a borrowing base equal to 50% of merchandise
inventory, computed on a FIFO basis. The line is collateralized by    
 Goldblatt's inventory and cash and cash equivalents. The line of credit
  agreement requires that Goldblatt's maintain a FIFO inventory cost of at
 least $5,500,000. Additionally, the Company is required to pay down the
  outstanding line of credit with any available cash on a daily basis. The
line is guaranteed by the Company. As of October 30, 1999, there was  
   approximately $2,366,000 in outstanding borrowings on the line and, as of
that date, approximately $634,000 was available on the line of credit.

7)   On July 13, 1999, the Company's shareholders approved the authorization for
issuance of 2,000 shares of Series C Preferred Stock, no par value per
     share (the "Series C Preferred Stock"). The Liquidation Value of the Series
     C Preferred Stock is initially set at $1,000 per share. Dividends upon each
     Series C Preferred Share will accrue daily at a rate equal to 9% per annum.
     Dividends will accumulate until paid, and will be paid when and as declared
by the Board of Directors.                                            

     The holders of Series C Preferred Stock will not be entitled to vote on any
    matters submitted to the vote of the Company's shareholders. Shares of the
  Company's Common Stock are subordinated to the Series C Preferred Stock.
The Series C Preferred Stock will rank equally with the Series B      
Convertible Preferred Stock, no par value per share, with respect to  
priority of payment of dividends and Liquidation Value.               

    As of October 30, 1999, no shares of the Series C Preferred Stock had been
issued.                                                               

8)   On August 24, 1999, the Company canceled substantially all of the          
outstanding stock options previously granted under prior stock option 
    plans, and then granted a comparable number of new stock options under the
1999 Amendment and Restatement of the 1988 Stock Option Plan. No      
    compensation expense was recognized at the date of grant by the Company as
  all options were granted at the market price of the stock on the date of
the grant. However, these options will be subject to a variable plan  
treatment once the FASB Interpretation of Opinion 25, "Accounting for 
     Certain Transactions Involving Stock Compensation" becomes effective. Under
     this proposed interpretation, the Company will measure compensation expense
at each reporting date. The effects of applying this proposed         
interpretation would be recognized on a prospective basis from the    
effective date, and currently cannot be estimated.                    

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
----------------------------------------------------  
(UNAUDITED) 
----------- 

9)   On November 1, 1999, the Company closed one of its underperforming         
    Goldblatt's store locations in the Chicagoland area. All store merchandise
was purchased by a professional liquidator, who has been contracted to
liquidate the merchandise over a ten-week time frame in the present   
     location. As a result of this store closing, the Company has recorded store
  closing costs of approximately $222,000, which are comprised of a write-
    down of merchandise of approximately $98,000, a write-off of the furniture
and fixtures of approximately $62,000 and a store closing provision of
     approximately $62,000. The store closing provision includes fixed operating
   expenses for rent and insurance costs during the liquidation time period.
     The lease for this store expires on January 31, 2000 and the store location
   will be vacated by this time; thus, there will be no additional financial
obligations to the landlord beyond the current fiscal year-end.       

10)  For the third quarters of fiscal 2000 and 1999, basic and diluted per share
  calculations are computed based on the weighted average number of common
    shares outstanding of 1,061,221 and 1,060,670, respectively. For the first
39-week periods of fiscal 2000 and 1999, basic and diluted per share  
  calculations are computed based on the weighted average number of common
  shares outstanding of 1,060,853 and 1,060,670, respectively. Incremental
 shares from assumed conversions of preferred stock and stock options of
700,253 and 666,667 in the third quarters of fiscal 2000 and 1999,    
respectively, and 677,862 and 666,667 for the first 39-week periods of
     fiscal 2000 and 1999, respectively, are not included as they would be anti-
     dilutive. Options to purchase 6,167 and 162,167 shares of common stock were
 outstanding at October 30, 1999 and October 31, 1998, respectively, but
  were not included in the computation of diluted earnings per share since
    the options' exercise prices were greater than the average market price of
the common shares, and they would also be anti-dilutive.              

     Loss per share applicable to common shares is computed after recognition of
     the dividend requirements on the convertible preferred stock of $101,000 in
fiscal 2000 and in fiscal 1999.                                       

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
----------------------------------------------- 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
--------------------------------------------- 

LIQUIDITY AND CAPITAL RESOURCES   
-------------------------------   

Cash and cash equivalents decreased by $205,000 during the nine months ended    
October 30, 1999, which included approximately $1,634,000 of net cash used in   
operating activities. Accounts receivable increased by $340,000 due primarily to
a normal seasonal increase in layaway receivables during the fall shopping      
season. In addition, merchandise inventory levels increased by approximately    
$3,860,000 as the Company stocked up for the very busy holiday shopping season. 
Accordingly, Goldblatt's trade accounts payable increased by $3,759,000 to      
coincide with the increased inventory levels.                                   

Goldblatt's spent approximately $302,000 on capital expenditures during the     
first nine months of fiscal 2000. These expenditures were for normal capital    
maintenance as well as certain upgrades to existing equipment related to Year   
2000 compliance. Capital expenditures for the remainder of fiscal 2000 will     
focus on a minimal amount of leasehold improvement renovations and additional   
computer equipment pertaining to Year 2000 compliance.                          

Effective January 28, 1999, Goldblatt's executed a new Loan and Security        
Agreement with a national financial institution. The new agreement provides a   
revolving line of credit of up to $3,000,000 through January, 2001 based on     
availability of a borrowing base equal to 50% of merchandise inventory, computed
on a FIFO basis. The line is collateralized by Goldblatt's inventory and cash   
and cash equivalents. The line of credit agreement requires that Goldblatt's    
maintain a FIFO inventory cost of at least $5,500,000. Additionally, the Company
is required to pay down the outstanding line of credit with any available cash  
on a daily basis. The line is guaranteed by the Company. As of October 30, 1999,
there was approximately $2,366,000 in outstanding borrowings on the line and, as
of that date, $634,000 was available on the line of credit.                     

On January 29, 1999, the Company and Jupiter entered into a Cancellation        
Agreement whereby the $1,745,898 amended and restated promissory note was       
canceled in return for a lump-sum payment of $500,000 as full settlement of the 
outstanding debt obligation. During the first quarter of fiscal 2000, the       
Company made the $500,000 lump-sum payment to Jupiter.                          

On November 1, 1999, the Company closed one of its underperforming Goldblatt's  
store locations in the Chicagoland area. All store merchandise was purchased by 
a professional liquidator, who has been contracted to liquidate the remaining   
inventory over a ten-week time frame in the present location. As a result of    
this store closing, the Company has recorded store closing costs of             
approximately $222,000. This includes a write-down of merchandise of            
approximately $98,000, a write-off of the furniture and fixtures of             
approximately $62,000 and fixed operating expenses of approximately $62,000. As 
a result of this store closing, the Company anticipates generating cash proceeds
of approximately $503,000 from the sale of the inventory. Net cash proceeds of  
approximately $441,000 are expected after consideration of the $62,000 in fixed 
operating expenses. The lease for this store expires on January 31, 2000 and the
store location will be vacated by this time; thus, there will be no additional  
financial obligations to the landlord beyond the current fiscal year-end.       

The Company believes that Goldblatt's working capital and line of credit, in    
addition to the cash infusion generated from the sale of the closed store's     
inventory, will be adequate to fund current operations and service the Company's
debt through fiscal 2000.                                                       

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
----------------------------------------------- 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
--------------------------------------------- 

YEAR 2000 ISSUE   
---------------   

The Year 2000 issue concerns the inability of information systems to properly   
recognize and process date-sensitive information beyond January 1, 2000. Many of
our systems and related software are Year 2000 compliant. However, systems      
critical to our business which have been identified as non-Year 2000 compliant  
are either being replaced or corrected through programming modifications. The   
Company is utilizing both internal personnel and outside vendors to identify the
Year 2000 noncompliance problems, modify code as necessary and test the         
modifications.                                                                  

The Company has focused its efforts on maintaining the data integrity of the    
existing financial reporting programs and the current store-level operating     
systems. The Company utilizes an IBM AS400 mainframe system operating with JDA  
software. The Company has already finished testing on the financial reporting   
applications of the AS400 system. Based upon a thorough review of the           
programming code by an outside vendor, the AS400 program is undergoing minor    
levels of modification to become Year 2000 compliant. An upgrade to the AS400   
system has been completed and financed through working capital with minimal     
cost.                                                                           

Testing of the store-level operating and cash register systems has been         
completed. It was determined that no Year 2000 compliance issues threaten the   
stores' ability to process transactions. Credit card authorization software     
upgrades have been performed by our credit card processing company. Although we 
are confident about our ability to operate on January 1, 2000, we have developed
a set of contingency procedures to utilize in the event that forces outside our 
control impact our normal operations. Some programming modifications and new    
equipment upgrades have been completed and financed through working capital with
minimal cost.                                                                   

The Company is monitoring the progress of its primary suppliers and vendors     
regarding their Year 2000 compliance. In general, they have developed plans to  
address the Year 2000 issues. The Company is also reviewing its own non-        
information technology systems to determine the extent of any changes that may  
be necessary, and believes that there will be minimal changes necessary for     
compliance.                                                                     

The Company anticipates total spending of approximately $150,000 through fiscal 
year 2000 on the Year 2000 issue. The Company has already spent approximately   
$100,000 through October 30, 1999. Maintenance or modification costs are being  
expensed as incurred, while the replacement of certain systems are being        
capitalized. The Company does not expect the costs relating to Year 2000        
remediation to have a material effect on its results of operations or financial 
condition.                                                                      

The Company's financial condition or liquidity could be adversely effected by   
business disruption and operational problems if needed modifications to the     
financial reporting programs and store-level operating systems are not completed
on a timely basis. Although not anticipated, the worst-case scenario of failure 
by the Company or its business partners to resolve the Year 2000 issue would be 
a short-term slowdown in processing credit card transactions. Also, we          
anticipate limited disruption in our purchasing function as our internal        
purchasing procedures are manually intensive.                                   

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
----------------------------------------------- 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
--------------------------------------------- 

YEAR 2000 ISSUE - CONTINUED 
--------------------------- 

While we continue to focus on solutions for the Year 2000 issues, and expect to 
be Year 2000 compliant in a timely manner, we have developed a contingency plan.
As a contingency to ensure uninterrupted processing of accounts payable and     
financial reporting applications, the Company has retained the older AS400      
mainframe system to operate in tandem during the first fiscal period of         
operation in the new calendar year.                                             

RESULTS OF OPERATIONS 
--------------------- 

Thirteen Weeks Ended October 30, 1999 (fiscal 2000) vs.                         
-------------------------------------------------------                         
Thirteen Weeks Ended October 31, 1998 (fiscal 1999)                             
---------------------------------------------------                             

The loss from operations before extraordinary gain decreased by approximately   
$97,000 as compared to the third quarter of fiscal 1999.                        

Net sales for the quarter were $12,402,000 as compared to last year's comparable
store sales of $12,743,000. Unseasonably mild weather experienced at the onset  
of the fall put a temporary setback on the sales of fall and winter clothing    
during the early fall shopping season. Since then, sales have rebounded well and
for the month of November, the Company's sales increased by approximately 3.2%  
over last year on a comparable store basis.                                     

Despite the reduced sales volume, the Company's gross profit percentage improved
to 35.6% of sales from 35.0% of sales in the third quarter of fiscal 1999. This 
improvement is attributable to more opportunistic purchasing complemented by    
tighter controls on markdowns.                                                  

Selling, general and administrative ("SG&A") expenses decreased by $397,000 for 
the quarter as compared to the previous year. Savings in store-level operating  
expenses were attained this quarter in part from operating one less store       
location versus last year. Reductions in outside service-related expenses,      
health insurance and corporate overhead expenditures were also experienced this 
quarter as compared to the third quarter of fiscal 1999. SG&A expenses were     
35.7% of sales versus 35.2% of sales during the same period last year.          

On November 1, 1999, the Company closed one of its underperforming Goldblatt's  
store locations in the Chicagoland area. All store merchandise was purchased by 
a professional liquidator, who has been contracted to liquidate the merchandise 
over a ten-week time frame in the present location. As a result of this store   
closing, the Company has recorded store closing costs of approximately $222,000,
which are comprised of a write-down of merchandise of approximately $98,000, a  
write-off of the furniture and fixtures of approximately $62,000 and a store    
closing provision of approximately $62,000. The store closing provision includes
fixed operating expenses for rent and insurance costs during the liquidation    
time period. The lease for this store expires on January 31, 2000 and the store 
location will be vacated by this time; thus, there will be no additional        
financial obligations to the landlord beyond the current fiscal year-end.       

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
----------------------------------------------- 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
--------------------------------------------- 

RESULTS OF OPERATIONS 
--------------------- 

Thirty-nine Weeks Ended October 30, 1999 (fiscal 2000) vs.                      
----------------------------------------------------------                      
Thirty-nine Weeks Ended October 31, 1998 (fiscal 1999)                          
------------------------------------------------------                          

The net loss for the first 39 weeks of fiscal 2000 decreased approximately      
$343,000 as compared to the first 39 weeks of fiscal 1999. Last year's net loss 
is inclusive of a $124,000 extraordinary gain on debt restructuring.            
Consequently, the Company's loss from operations before extraordinary gain has  
improved by $467,000 so far this year as compared to the first 39 weeks of last 
year.                                                                           

Net sales for the nine month period were $36,042,000 versus comparable store    
sales of $35,287,000 for the same period last year. Additional promotional      
efforts made during the Easter selling season spurred a positive sales trend    
attained during the spring season. Unseasonably mild weather experienced during 
the early fall season slightly tempered the sales increase, but through nine    
months, year-to-date comparable store sales have increased by 2.1% over the     
previous year.                                                                  

The Company's gross profit percentage increased to 34.2% of sales from 33.5% of 
sales for the same period last year. This improvement is attributable to more   
opportunistic purchasing along with less markdowns and a reduced level of       
inventory shrinkage.                                                            

SG&A expenses decreased by $818,000 for the nine month period as compared to    
fiscal 1999. Savings in store-level operating expenses were achieved this year  
from operating one less store location versus last year. Reductions in supplies,
utilities, outside service-related expenses, corporate overhead expenditures    
and, particularly, health insurance have also been experienced so far this year.
As a result, SG&A expenses have improved to 37.1% of sales versus 37.2% of sales
for the comparable nine month period last year.                                 

On November 1, 1999, the Company closed one of its underperforming Goldblatt's  
store locations in the Chicagoland area. All store merchandise was purchased by 
a professional liquidator, who has been contracted to liquidate the merchandise 
over a ten-week time frame in the present location. As a result of this store   
closing, the Company has recorded store closing costs of approximately $222,000,
which are comprised of a write-down of merchandise of approximately $98,000, a  
write-off of the furniture and fixtures of approximately $62,000 and a store    
closing provision of approximately $62,000. The store closing provision includes
fixed operating expenses for rent and insurance costs during the liquidation    
time period. The lease for this store expires on January 31, 2000 and the store 
location will be vacated by this time; thus, there will be no additional        
financial obligations to the landlord beyond the current fiscal year-end.       

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JG INDUSTRIES, INC. AND SUBSIDIARIES  
------------------------------------  

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
----------------------------------------------- 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
--------------------------------------------- 

FORWARD - LOOKING STATEMENTS  
----------------------------  

Except for historical information, the matters discussed or incorporated by     
reference in this report are forward-looking statements that involve risks and  
uncertainties that may affect the Company's actual results and cause results to 
differ materially from such forward-looking statements. Such risks and          
uncertainties include, but are not limited to, economic conditions, seasonality 
of the Company's business, relationships with suppliers and financial           
institutions, computer system enhancements to enable Year 2000 compliance,      
ability to attract and retain key personnel, competition, regulation and other  
factors indicated from time to time in the Company's filings with the Securities
and Exchange Commission.                                                        

PART II - OTHER INFORMATION                                                     
---------------------------                                                     

Item 6 - Exhibits and Reports on Form 8-K                                       

(a)   Exhibits                                                                

Exhibit 27 - Financial Data Schedule                          

(b)   Reports on Form 8-K - None                                              

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 under- 
signed thereunto fully authorized.                                              

                           JG INDUSTRIES, INC.
                           -------------------
                            (Registrant)

Date:  December 14, 1999                    /s/ Clarence Farrar                 
-----------------                    -------------------          
                       CLARENCE FARRAR
                 President

                            /s/ Clifford Gutmann
                            --------------------
                        CLIFFORD GUTMANN
                               Chief Financial Officer

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                                                                         Annex D

(S) 805 ILCS 5/11.70.  Procedure to Dissent                                     

 Sec. 11. 70.  Procedure to Dissent.  (a) If the corporate action giving
rise to the right to dissent is to be approved at a meeting of shareholders, the
notice of meeting shall inform the shareholders of their right to dissent and   
the procedure to dissent.  If, prior to the meeting, the corporation furnishes  
to the shareholders material information with respect to the transaction that   
will objectively enable a shareholder to vote on the transaction and to         
determine whether or not to exercise dissenters' rights, a shareholder may      
assert dissenters' rights only if the shareholder delivers to the corporation   
before the vote is taken a written demand for payment for his or her shares if  
the proposed action is consummated, and the shareholder does not vote in favor  
of the proposed action.                                                         

   (b) If the corporate action giving rise to the right to dissent is not to
be approved at a meeting of shareholders, the notice to shareholders describing 
the action taken under Section 11.30 or Section 7.10 [805 ILCS 5/11.30 or 805   
ILCS 5/7. 10] shall inform the shareholders of their right to dissent and the   
procedure to dissent.  If, prior to or concurrently with the notice, the        
corporation furnishes to the shareholders material information with respect to  
the transaction that will objectively enable a shareholder to determine whether 
or not to exercise dissenters' rights, a shareholder may assert dissenter's     
rights only if he or she delivers to the corporation within 30 days from the    
date of mailing the notice a written demand for payment for his or her shares.  

     (c) Within 10 days after the date on which the corporate action giving rise
to the right to dissent is effective or 30 days after the shareholder delivers  
to the corporation the written demand for payment, whichever is later, the      
corporation shall send each shareholder who has delivered a written demand for  
payment a statement setting forth the opinion of the corporation as to the      
estimated fair value of the shares, the corporation's latest balance sheet as of
the end of a fiscal year ending not earlier than 16 months before the delivery  
of the statement, together with the statement of income for that year and the   
latest available interim financial statements, and either a commitment to pay   
for the shares of the dissenting shareholder at the estimated fair value thereof
upon transmittal to the corporation of the certificate or certificates, or other
evidence of ownership, with respect to the shares, or instructions to the       
dissenting shareholder to sell his or her shares within 10 days after delivery  
of the corporation's statement to the shareholder.  The corporation may instruct
the shareholder to sell only if there is a public market for the shares at which
the shares may be readily sold.  If the shareholder does not sell within that 10
day period after being so instructed by the corporation, for purposes of this   
Section the shareholder shall be deemed to have sold his or her shares at the   
average closing price of the shares, if listed on a national exchange, or the   
average of the bid and asked price with respect to the shares quoted by a       
principal market maker, if not listed on a national exchange, during that 10 day
period.                                                                         

   (d) A shareholder who makes written demand for payment under this Section
retains all other rights of a shareholder until those rights are cancelled or   
modified by the consummation of the proposed corporate action.  Upon            
consummation of that action, the corporation shall pay to each dissenter who    
transmits to the corporation the certificate or other evidence of ownership of  
the shares the amount the corporation estimates to be the fair value of the     
shares, plus accrued interest, accompanied by a written explanation of how the  
interest was calculated.                                                        

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   (e) If the shareholder does not agree with the opinion of the corporation
as to the estimated fair value of the shares or the amount of interest due, the 
shareholder, within 30 days from the delivery of the corporation's statement of 
value, shall notify the corporation in writing of the shareholder's estimated   
fair value and amount of interest due and demand payment for the difference     
between the shareholder's estimate of fair value and interest due and the amount
of the payment by the corporation or the proceeds of sale by the shareholder,   
whichever is applicable because of the procedure for which the corporation opted
pursuant to subsection (c).                                                     

    (f) If, within 60 days from delivery to the corporation of the shareholder
notification of estimate of fair value of the shares and interest due, the      
corporation and the dissenting shareholder have not agreed in writing upon the  
fair value of the shares and interest due, the corporation shall either pay the 
difference in value demanded by the shareholder, with interest, or file a       
petition in the circuit court of the county in which either the registered      
office or the principal office of the corporation is located, requesting the    
court to determine the fair value of the shares and interest due.  The          
corporation shall make all dissenters, whether or not residents of this State,  
whose demands remain unsettled parties to the proceeding as an action against   
their shares and all parties shall be served with a copy of the petition.       
Nonresidents may be served by registered or certified mail or by publication as 
provided by law.  Failure of the corporation to commence an action pursuant to  
this Section shall not limit or affect the right of the dissenting shareholders 
to otherwise commence an action as permitted by law.                            

(g) The jurisdiction of the court in which the proceeding is commenced
under subsection (f) by a corporation is plenary and exclusive.  The court may  
appoint one or more persons as appraisers to receive evidence and recommend     
decision on the question of fair value.  The appraisers have the power described
in the order appointing them, or in any amendment to it.                        

   (h) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds that the fair value of his or  
her shares, plus interest, exceeds the amount paid by the corporation or the    
proceeds of sale by the shareholder, whichever amount is applicable.            

(i) The court, in a proceeding commenced under subsection (f), shall  
determine all costs of the proceeding, including the reasonable compensation and
expenses of the appraisers, if any, appointed by the court under subsection (g),
but shall exclude the fees and expenses of counsel and experts for the          
respective parties.  If the fair value of the shares as determined by the court 
materially exceeds the amount which the corporation estimated to be the fair    
value of the shares or if no estimate was made in accordance with subsection    
(c), then all or any part of the costs may be assessed against the corporation. 
If the amount which any dissenter estimated to be the fair value of the shares  
materially exceeds the fair value of the shares as determined by the court, then
all or any part of the costs may be assessed against that dissenter.  The court 
may also assess the fees and expenses of counsel and experts for the respective 
parties, in amounts the court finds equitable, as follows:                      

  (1) Against the corporation and in favor of any or all dissenters if the
court finds that the corporation did not substantially comply with the          
requirements of subsections (a), (b), (c), (d), or (f).                         

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     (2) Against either the corporation or a dissenter and in favor of any other
party if the court finds that the party against whom the fees and expenses are  
assessed acted arbitrarily, vexatiously, or not in good faith with respect to   
the rights provided by this Section.                                            

   If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees for
those services should not be assessed against the corporation, the court may    
award to that counsel reasonable fees to be paid out of the amounts awarded to  
the dissenters who are benefited.  Except as otherwise provided in this Section,
the practice, procedure, judgment and costs shall be governed by the Code of    
Civil Procedure [735 ILCS 5/1-101 et seq.].                                     

(j)  As used in this Section:                                         

    (1) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the consummation of the corporate action to which 
the dissenter objects, excluding any appreciation or depreciation in            
anticipation of the corporate action, unless exclusion would be inequitable.    

(2) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the     
corporation on its principal bank loans or, if none, at a rate that is fair and 
equitable under all the circumstances.                                          

(Source: P.A. 86-1156.)                                                         

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘PRE 14C’ Filing		Date		First		Last			Other Filings
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		10/16/00		4		8
		4/14/00		7		21
Filed on:		2/17/00
For Period End:		2/11/00
		2/10/00		12
		2/2/00		6					8-K
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		1/31/00		12		104
		1/29/00		7		10			10-K405,  NT 10-K
		1/1/00		72		102
		12/14/99		105					10-Q
		11/1/99		100		104
		10/30/99		14		104			10-Q
		8/24/99		99
		7/13/99		68		99			PRE 14A
		5/15/99		69		84
		4/30/99		70					10-K
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		4/23/99		68		70
		4/15/99		71		84
		4/2/99		76					SC 13G
		1/30/99		12		98			10-K
		1/29/99		69		101
		1/28/99		72		101
		11/12/98		91
		10/31/98		93		104			10-Q,  NT 10-Q
		10/7/98		14		75			8-K
		5/15/98		69		84
		5/1/98		84					NT 10-K
		1/31/98		70		96			10-K,  NT 10-K
		1/30/98		84
		12/15/97		81
		12/13/97		84
		9/1/97		74
		8/31/97		91
		2/1/97		90		91
		1/25/97		73		91			10-K,  NTN 10K
		12/13/96		15		90			8-K
		11/22/96		90					DEF 14A
		10/1/96		74
		7/25/96		49					8-K
		1/27/96		79		87			10-K,  10-K/A
		1/1/96		52
		7/28/95		90
		6/12/95		90
		5/26/94		90
		6/5/92		47
		4/27/92		90
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