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SCHEDULE 14A
(Rule 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
THE ELDER-BEERMAN STORES CORP.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(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): .........................
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] 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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THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
July __, 2000
Dear Fellow Shareholders:
On behalf of the Board of Directors and management of The Elder-Beerman
Stores Corp., I cordially invite you to attend the 2000 Annual Meeting of
Shareholders. The meeting will be held at 8:00 a.m., eastern daylight time, on
Thursday, August 24, 2000 at The Dayton Marriott Hotel, 1414 South Patterson
Boulevard, Dayton, Ohio 45409.
The matters expected to be acted upon at the meeting are described in
the enclosed Proxy Statement. In addition, there will be a report on current
developments in the Company.
You may have received or may soon receive a separate proxy solicitation
from PPM America, Inc. ("PPM") in connection with items PPM intends to present
at the meeting. In its solicitation, PPM will propose a slate of directors and
twelve additional proposals, which include amendments to the Company's Amended
Articles of Incorporation and Amended Code of Regulations.
THE COMPANY REQUESTS THAT ALL SHAREHOLDERS THOROUGHLY READ THE
ACCOMPANYING NOTICE OF ANNUAL MEETING AND PROXY STATEMENT. In order to elect the
Company's nominees to the Board of Directors and reject PPM's proposals, the
Board of Directors unanimously recommends that you sign, date and mail the
enclosed [WHITE] proxy card today. The shares represented by the enclosed proxy
will be voted AGAINST the PPM proposals. The Board of Directors urges you not to
sign any proxy card sent to you by PPM. If you have already done so, you may
revoke your previously signed proxy by delivering a written notice of revocation
to the Secretary of the Company or a later dated and executed [WHITE] proxy
card, in the enclosed envelope or by attending the annual meeting and voting in
person.
Thank you for your attention to this important matter.
Frederick J. Mershad
Chairman of the Board
and Chief Executive Officer
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THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
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NOTICE OF ANNUAL MEETING
------------------
The Annual Meeting of Shareholders of The Elder-Beerman Stores Corp.
("Elder-Beerman" or the "Company") will be held on August 24, 2000 at 8:00 a.m.,
eastern daylight time, at The Dayton Marriott Hotel, 1414 South Patterson
Boulevard, Dayton, Ohio 45409. The principal business of the meeting will be:
(1) To elect four Directors for a three-year term expiring in
2003. The Board of Directors recommends a vote FOR the
election of its nominees, Dennis S. Bookshester, Stewart M.
Kasen, John A. Muskovich and John J. Wiesner, and AGAINST the
nominees proposed by PPM America, Inc. ("PPM").
(2) To act upon a proposal of the Board of Directors to increase
by 500,000 the number of shares of common stock covered by The
Elder-Beerman Stores Corp. Equity and Performance Incentive
Plan. The Board of Directors recommends a vote FOR the
amendment.
(3) To act upon PPM's proposal to amend Article IX of the
Company's Amended Articles of Incorporation (the "Articles")
to eliminate the Company's classified Board of Directors. The
Board of Directors recommends a vote AGAINST this proposal.
(4) To act upon PPM's proposal to adopt a new Article XIV to the
Articles to allow the Company to opt out of Chapter 1704 of
the Ohio Revised Code. The Board of Directors recommends a
vote AGAINST this proposal.
(5) To act upon PPM's proposal to amend Article X of the Articles
to lower from 72% to a simple majority the shareholder
approval requirement needed to amend or repeal sections in the
Articles dealing with cumulative voting rights, preemptive
rights to acquire shares, share repurchases by the Company,
the classification of and staggered election system for the
Board of Directors and the Amendment of Article X of the
Articles. The Board of Directors recommends a vote AGAINST
this proposal.
(6) To act upon PPM's proposal to amend Regulation 3(a) of the
Company's Amended Code of Regulations (the "Regulations") to
permit a shareholder or shareholders who own 25% rather than
50% of the outstanding common stock of the Company to call
special meetings of shareholders. The Board of Directors
recommends a vote AGAINST this proposal.
(7) To act upon PPM's proposal to amend Regulation 7(c) of the
Regulations to eliminate the requirement that any shareholder
who desires to bring business before the annual meeting of the
Company's shareholders must notify the Company not more than
90 days, but not less than 60 days, in advance of such meeting
of its intent to do so and of the nature of such business. The
Board of Directors recommends a vote AGAINST this proposal.
(8) To act upon PPM's proposal to amend Regulation 12 of the
Regulations to eliminate the requirement that any shareholder
who desires to propose any nominees for election to the
Company's Board of Directors must notify the Company of its
intent to do so and of the identity of its proposed nominees
not more than 90 days, but not less than 60 days, in advance
of such meeting. The Board of Directors recommends a vote
AGAINST this proposal.
(9) To act upon PPM's proposal to amend Regulation 34 of the
Regulations to lower from 72% to a simple majority the
shareholder approval requirement needed to amend or repeal the
Regulations dealing with the time and place of shareholder
meetings, who may call special meetings of the shareholders,
the order of business (including advance notice of business to
be brought) at shareholder meetings, the size of the Board of
Directors, the filling of newly-created directorships and
Board vacancies, the removal of directors, the nomination of
directors (including advance notice of the intent
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to nominate directors) and the amendment of the Regulations.
The Board of Directors recommends a vote AGAINST this
proposal.
(10) To act upon PPM's proposal to amend Regulation 9 of the
Regulations to lower the shareholder approval requirement
needed to alter the size of the Board from 72% to a simple
majority. The Board of Directors recommends a vote AGAINST
this proposal.
(11) To act upon PPM's proposal to adopt a new Regulation 35 to the
Regulations, pursuant to which the Company would opt out of
the provisions of the Ohio Control Share Acquisition Act,
which Act sets forth certain restrictions on the ability of
persons to acquire 20% or more of the stock of an Ohio
corporation. The Board of Directors recommends a vote AGAINST
this proposal.
(12) To act upon PPM's proposal to direct the Company's Board to
utilize the $16.7 million remaining in its announced share
purchase program to complete the program. The Board of
Directors recommends a vote AGAINST this proposal.
(13) To act upon PPM's proposal to direct the Company's Board to
redeem the Company's poison pill shareholder rights plan. The
Board of Directors recommends a vote AGAINST this proposal.
(14) To act upon PPM's proposal to direct the Company's Board to
revise its compensation program with respect to its senior
officers. The Board of Directors recommends a vote AGAINST
this proposal.
(15) To transact any other business that may properly come before
the meeting.
Only shareholders of record on June 27, 2000 will be entitled to notice
of and to vote at the annual meeting and at any adjournments or postponements of
the meeting. If you own shares through a nominee, you must instruct your nominee
to vote if you wish to have your vote counted.
By Order of the Board of Directors
Frederick J. Mershad
Chairman of the Board
and Chief Executive Officer
July __, 2000
YOUR VOTE IS IMPORTANT
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PLEASE PROMPTLY FILL OUT, SIGN, DATE AND MAIL THE ENCLOSED [WHITE]
PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES. RETURNING A SIGNED PROXY WILL NOT PREVENT YOU
FROM ATTENDING THE MEETING AND VOTING IN PERSON, IF YOU DESIRE.
THE BOARD OF DIRECTORS ALSO URGES YOU NOT TO SIGN ANY PROXY CARD SENT
TO YOU BY PPM. EVEN IF YOU HAVE PREVIOUSLY SIGNED A PROXY CARD SENT TO YOU BY
PPM, YOU CAN REVOKE THAT EARLIER PROXY BY SIGNING, DATING AND MAILING THE
ENCLOSED [WHITE] PROXY CARD IN THE ENVELOPE PROVIDED.
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Also enclosed is a copy of our Annual Report for the year ended January
29, 2000. The Annual Report contains financial and other information about
Elder-Beerman, but is not incorporated into the proxy statement. The Annual
Report is not a part of the proxy soliciting material.
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THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 24, 2000
DATE OF THE PROXY STATEMENT - JULY __, 2000
INFORMATION ABOUT THE ANNUAL MEETING
INFORMATION ABOUT ATTENDING THE ANNUAL MEETING
The Annual Meeting of Shareholders (the "Annual Meeting") of The
Elder-Beerman Stores Corp. ("Elder- Beerman" or the "Company") will be held on
Thursday, August 24, 2000 at 8:00 a.m., eastern daylight time, at The Dayton
Marriott Hotel, 1414 South Patterson Boulevard, Dayton, Ohio 45409.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you this proxy statement (the "Proxy Statement") and the
enclosed [WHITE] proxy card because Elder-Beerman's Board of Directors is
soliciting your permission to vote your shares of common stock at the Annual
Meeting. If you own Elder-Beerman common stock in more than one account, such as
individually and also jointly with your spouse, you may receive more than one
set of these proxy materials. To assist us in saving money and to provide you
with better shareholder services, we encourage you to have all your accounts
registered in the same name and address. You may do this by contacting
Elder-Beerman's Investor Relations Department at (937) 296-2700.
This Proxy Statement summarizes information that we are required to
provide to you under the rules of the Securities and Exchange Commission and is
designed to assist you in voting your shares. This Proxy Statement, together
with the Notice of Annual Meeting of Shareholders and proxy card, are first
being mailed on or about July __, 2000, to all shareholders of record at the
close of business on June 27, 2000.
You may have received or may soon receive a separate proxy solicitation
from PPM America, Inc. ("PPM") in connection with items PPM intends to present
at the Annual Meeting. In its solicitation, PPM will propose three nominees for
election to the Board of Directors and twelve additional proposals
(collectively, the "PPM Proposals"). The PPM Proposals include amendments to the
Company's Amended Articles of Incorporation (the "Articles") and Amended Code of
Regulations (the "Regulations").
INFORMATION ABOUT VOTING
Shareholders can vote on matters presented at the Annual Meeting in two
ways:
- BY PROXY-- You can vote by signing, dating and returning the
enclosed [WHITE] proxy card. If you do this, the individuals
named on the card (your "proxies") will vote your shares in
the manner you indicate. You may specify on your proxy card
whether your shares should be voted for all, some or none of
the Company's nominees for director and whether your shares
should be voted for or against the amendment to the Company's
Equity and Performance Incentive Plan to be presented at the
Annual Meeting and whether your shares should be voted for or
against the PPM Proposals. If you do not indicate instructions
on the card, your shares will be voted FOR the election of the
Company's nominees for director and FOR the amendment to the
Company's Equity and Performance Incentive Plan and AGAINST
PPM's nominees for director and AGAINST the PPM Proposals.
- IN PERSON -- You may come to the Annual Meeting and cast your
vote there.
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The Board of Directors of the Company is soliciting votes FOR the
Company's four nominees for election to the Board of Directors, FOR the
amendment to the Company's Equity and Performance Incentive Plan and AGAINST
PPM's nominees for election to the Board of Directors and AGAINST the PPM
Proposals.
You may revoke your proxy at any time before the vote at the Annual
Meeting by sending a written notice of revocation to Elder-Beerman's Secretary
prior to the Annual Meeting or by attending the Annual Meeting and voting in
person. If you have already signed a proxy card sent to you by PPM, you may
revoke your previously signed proxy by delivering a written notice of revocation
to the Secretary of the Company or a later dated and executed [WHITE] proxy card
in the enclosed envelope.
Each share of Elder-Beerman common stock is entitled to one vote. As of
June 26, 2000, there were 14,923,846 shares of common stock outstanding.
INFORMATION REGARDING TABULATION OF THE VOTE
Elder-Beerman has a policy that all proxies, ballots and votes
tabulated at a meeting of the shareholders are confidential. Representatives of
______________ will tabulate votes and act as Inspectors of Election at the
Annual Meeting.
QUORUM REQUIREMENTS
A quorum of shareholders is necessary to hold a valid meeting. Under
Elder-Beerman's Regulations, if shareholders entitled to cast a majority of all
the votes entitled to be cast at the Annual Meeting are present in person or by
proxy, a quorum will exist to conduct all business at the Annual Meeting.
Abstentions are counted as present for establishing a quorum, but broker
nonvotes are not. A broker nonvote occurs when a broker votes on some matters on
the proxy card but not on others because the broker does not have the authority
to do so.
The holders of a majority of the votes represented at the Annual
Meeting, whether or not a quorum is present, may adjourn the meeting without
notice other than by announcement at the meeting of the date, time and location
at which the meeting will be reconvened.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
ELECTION OF DIRECTORS
The four nominees for directors receiving the greatest number of votes
will be elected at the Annual Meeting.
AMENDMENT TO THE EQUITY AND PERFORMANCE INCENTIVE PLAN
A majority of all the votes cast at the Annual Meeting will be required
for the approval of the amendment to the Equity and Performance Incentive Plan.
PPM PROPOSALS
The affirmative vote of the holders of at least 72% of the outstanding
common stock of the Company is required to approve Items 3, 5, 6, 7, 8, 9 and
10. The affirmative vote of the holders of at least 66-2/3% of the outstanding
common stock of the Company is required to approve Item 4 and the affirmative
vote of a majority of the outstanding common stock of the Company is required to
approve Item 11. No vote of the shareholders can require the Company to take
action with respect to Items 12, 13 and 14.
Abstentions and broker nonvotes will have no effect on the result of
the vote on the items to be presented at the Annual Meeting.
REVOCATION OF PROXY
If you give a proxy, you may revoke it at any time before the vote at
the Annual Meeting by giving notice to Elder-Beerman's Secretary in writing
prior to the Annual Meeting or by voting in person at the Annual Meeting.
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COSTS OF PROXY SOLICITATION
Elder-Beerman will pay all the costs of soliciting these proxies. In
addition to solicitation by mail, proxies may be solicited personally, by
telegram, telephone or personal interview by an officer or regular employee of
the Company. Elder-Beerman will also ask banks, brokers and other institutional
nominees and fiduciaries to forward the proxy material to their principals and
to obtain authority to execute proxies, and reimburse them for their expenses.
In addition, Elder-Beerman has also retained Morrow & Co. to aid in the
distribution and solicitation of proxies, and has agreed to pay them a fee of
approximately $________, plus reasonable expenses.
Background Information about PPM Proposals
On June 7, 2000, PPM filed with the Securities and Exchange Commission
an Amendment to its Schedule 13D with Preliminary Proxy Materials (the "PPM
Proxy") attached. The PPM Proxy sets forth PPM's intentions to solicit proxies
for the election of three nominees for directors to be elected at the Annual
Meeting and the adoption of the PPM Proposals it intends to make at the Annual
Meeting.
PPM indicated in the PPM Proxy that it is soliciting proxies in part
because, "in its view, the Company continues to maintain inappropriate
constraints on shareholder action" and that "the Company's current polices and
methods of doing business reflect a lack of concern for maximizing the value of
the Company for the benefit of its shareholders." The Company's Board of
Directors strongly opposes the PPM Proposals. As described in this Proxy
Statement, the Company believes that the PPM Proposals are not in the best
interest of the shareholders. Additionally, the Company believes that the
Company's actions and policies do reflect a commitment to maximize the value of
the Company for its shareholders. PPM's Proxy contained repetitive statements
about the Company's Board of Directors' failure to adequately maximize
shareholder value; however, PPM's Proxy did not contain any specific actions
that PPM intends to take if PPM's nominees are elected to the Board of
Directors, nor did PPM indicate that it knows of anyone that is prepared to or
willing to buy the Company. If PPM's Proposals are adopted, the Company will be
without any measures to maximize shareholder value if an unsolicited proposal to
buy the Company is received. The PPM Proxy did not address the important issue
of what the Company would do if an unsolicited bid was received by the Company
and the Company did not have the protective provisions in its Articles and
Regulations. As described in this Proxy Statement, the provisions in the
Company's Articles and Regulations that the PPM Proposals would eliminate are
designed to protect the Company's shareholders against unsolicited attempts to
buy the Company that would result in an unfair or disparate price for the
shareholders.
The Company's Actions to Maximize Shareholder Value
The Board of Directors' objective is to enhance the value of the
Company for its shareholders. On February 28, 2000, the Company announced that
it engaged Wasserstein Perella & Co. to explore strategic alternatives in order
to maximize shareholder value. This process is ongoing and the Company is
working with its advisors in order to maximize the value of the Company for the
benefit of its shareholders.
In addition to its exploration of strategic alternatives, the Company
has executed a number of initiatives that the Company believes will help to
generate the best overall result for its shareholders, including:
- The addition of two independent directors to the Board of
Directors at the request of the Company's shareholders.
- The development of a new store prototype and the opening of
the first two of these stores in the Fall of 1999, and the
announcement of three new concept stores in Howell, Michigan,
West Bend, Wisconsin and Jasper, Indiana to be opened during
the fall of this year.
- The expansion of two stores in Sandusky, Ohio and Winfield,
West Virginia.
- The implementation of a planning/distributor merchandising
structure.
- The implementation of an innovative proprietary point of sale
system to bring better and more efficient service to the
Company's customers.
- The $300 million renewal of the Company's credit facilities.
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- The sale of the Bee-Gee Shoe division so that the Company can
focus on its core department store business.
- The closure of two underperforming stores in Wheeling and
Charleston, West Virginia.
- The purchase of 1.1 million shares ($7 million) of the
Company's common stock pursuant to the two-year, $24 million
stock repurchase program implemented during fiscal year 1999.
The Company has also revised its strategic plan to improve performance
and strengthen shareholder value in both the short and long term. The revised
plan includes plans for shifting the Company's merchandising strategy to
emphasize opening and moderate priced, value driven assortments in all families
of business, with an intense focus on certain key businesses, streamlining the
Company's organizational structure and accelerating new store growth in the
concept store format.
Management of the Company and the Board of Directors have devoted
significant time and effort to developing and implementing the Company's plans
and initiatives to improve the operating performance of the Company and to best
maximize the value of the Company for its shareholders. The Company believes
that its nominees are better suited to serve as directors of the Company and to
carry out the plans of the Company. The PPM Proxy does not indicate any concrete
plans that its nominees plan to take that would substantially increase
shareholder value. The Company also believes that the PPM Proposals are harmful
to shareholders because if adopted, the Company would be unprotected against
unsolicited attempts to buy the Company that may not be in the best interests of
the Company's shareholders. The Board of Directors believes that the PPM
Proposals are being initiated by PPM because PPM wants to sell its shares of the
Company's common stock quickly without regard to whether the price it can sell
at would maximize shareholder value and not because PPM is looking out for the
best interests of all of the Company's shareholders.
THE BOARD OF DIRECTORS BELIEVES THAT THE ELECTION OF THE NOMINEES
PROPOSED BY PPM AND THE ADOPTION OF THE PPM PROPOSALS IS NOT IN THE
BEST INTEREST OF THE COMPANY'S SHAREHOLDERS AND RECOMMENDS THAT YOU
VOTE AGAINST THE NOMINEES PROPOSED BY PPM AND AGAINST THE PPM
PROPOSALS.
OTHER MATTERS
The Board of Directors does not know of any other matter that will be
presented at the Annual Meeting other than the proposals discussed in this Proxy
Statement. Under our Regulations, generally no business besides the items
discussed in this Proxy Statement may be conducted or considered at the Annual
Meeting. However, if any other matter properly comes before the Annual Meeting,
the persons you have designated as your proxies will act on such proposal in
their discretion.
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ITEM NUMBER 1
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
The Board of Directors has eleven members and is divided into three
classes. Classes II and III each consist of four members and Class I consists of
three members. A single class of directors is elected annually for a three-year
term.
The terms of the following Class II directors expire at the Annual
Meeting: Dennis S. Bookshester, Stewart M. Kasen, John A. Muskovich and John J.
Wiesner. For election as Class II directors at the Annual Meeting, the
Nominating and Corporate Governance Committee has recommended, and the Board of
Directors has approved, the re-nominations of Messrs. Bookshester, Kasen,
Muskovich and Wiesner to serve as directors for the three-year term of office
which will expire at the Annual Meeting of Shareholders in the year 2003. Each
director elected will serve until the term of office of the class to which he is
elected expires and until the election and qualification of his successor.
The directors to be elected will be elected by a plurality of the votes
cast for directors. Except to the extent that shareholders indicate otherwise on
their proxies solicited by Elder-Beerman's Board of Directors, the holders of
such proxies intend to vote these proxies for the election as directors of the
persons named in the following table as nominees for election. The Board has no
reason to believe that the persons nominated will not be available to serve. If
a vacancy among such nominees occurs prior to the Annual Meeting, shares of
common stock of Elder-Beerman (the "Common Stock") represented by such proxies
will be voted for such other person or persons as shall be determined by the
holders of such proxies in their discretion or, so long as such action does not
conflict with the provisions of Elder-Beerman's Articles, the Board of Directors
may, in its discretion, reduce the number of directors to be elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE FOUR NOMINEES
FOR DIRECTOR NOMINATED BY THE COMPANY.
PPM is seeking the election of three of its nominees for director. PPM
has nominated Mark F.C. Berner, Moira A. Cary and Eugene I. Davis to be elected
to the Board. The Board of Directors believes that the election of PPM's
nominees is not in the best interest of the shareholders. PPM indicated in the
PPM Proxy that it "thinks the election of highly qualified, interested and
independent individuals as directors would greatly improve the Board." PPM did
not state why these individuals are capable of improving the Company's Board of
Directors. Three of the four of the Company's nominees are independent directors
and all of the Company's nominees are highly qualified and interested. In fact,
Messrs. Bookshester and Macaluso were elected to the Board in December 1999 at
the request of Snyder Capital Management, Inc. (the Company's largest
shareholder) and PPM that the Company add two independent directors to the
Board. In total, nine of the Company's 11 Directors are independent of the
Company other than for their roles as Directors. The Board of Directors believes
that the Company's nominees are familiar with the Company and its businesses and
operations and are committed to the strategic alternative process.
Listed below are the names of the Company's four nominees for election
to the Board of Directors in Class II, and those continuing directors in Classes
III and I who have previously been elected to terms that will expire in the year
2001 and the year 2002, respectively. Also listed is the year in which each
individual first became a director of the Company and the individual's principal
occupation and other directorships.
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NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS ENDING IN 2003:
NAME DIRECTOR AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
SINCE
Dennis S. Bookshester 1999 61 Mr. Bookshester serves as the Chief Executive Officer of
Fruit of the Loom, a garment manufacturer that filed for
protection under Chapter 11 of the United States Bankruptcy
Code in December 1999. Mr. Bookshester also currently
serves as a Director of Fruit of the Loom and Playboy
Enterprises and as Chairman of Cutanix Corp.
Stewart M. Kasen 1997 60 Mr. Kasen is currently a private investor. Mr. Kasen
previously served as the President and Chief Executive
Officer of Factory Card Outlet Corp. ("Factory Cards") from
May 1998 through October 1999 and as Chairman from April
1997 through 1999. Factory Cards filed for protection under
Chapter 11 of the United States Bankruptcy Code in March
1999 and is developing a reorganization plan. Mr. Kasen
served as Chairman of the Board, President, and Chief
Executive Officer of Best Products Co., Inc. ("Best
Products"), a Richmond, Virginia, retail catalogue showroom
company, from June 1994 through April 1996, President and
Chief Executive Officer from June 1991 to June 1994, and
President and Chief Operating Officer from 1989 to June
1991. Best Products filed for protection under chapter 11 of
the United States Bankruptcy Code in January 1991. Best
Products' plan of reorganization was confirmed in June 1994,
and it filed a petition for bankruptcy under chapter 11 again
on September 24, 1996. Mr. Kasen also currently serves as a
Director of Markel Corp.
John A. Muskovich 1997 53 Mr. Muskovich has Served as President and Chief Operating
Officer of Elder-Beerman since December 1997 and served
as Executive Vice President of Administration of
Elder-Beerman from February 1996 to December 1997. In
addition, Mr. Muskovich served as Chief Financial Officer
from December 1997 through March 1999. Prior to this
time, Mr. Muskovich served as Director of Business Process
for Kmart Corp. from September 1995 to February 1996;
President of the Claims Services Group with Federated
Department Stores, Inc. ("Federated") from February 1992 to
August 1995; Vice President of Benefits of Federated from
1994 to 1995; and Vice President, Corporate Controller of
Federated from 1988 to 1992.
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John J. Wiesner 1997 61 Mr. Wiesner has Served as Interim Chief Executive Officer of
Stage Stores, Inc., a Regional Apparel Retailer, Since February
2000. Mr. Wiesner Retired From C.r. Anthony, a Regional
Apparel Retailer, in June 1997. Prior to Retirement, Mr.
Wiesner Served as Chairman of the Board of Directors,
President and Chief Executive Officer of C.r. Anthony, From
April 1987 to June 1997. Mr. Wiesner Also Currently Serves
as a Director of Stage Stores, Inc., Lamonts Apparel, Inc. and
the Loewen Group, Inc. and as a Member of the Advisory
Committee of the Board of Directors of Fiesta Stores, Inc.
DIRECTORS IN CLASS III CONTINUING IN OFFICE UNTIL 2001:
NAME DIRECTOR AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
SINCE
Charles Macaluso 1999 56 Mr. Macaluso is a Principal in East Ridge Consulting, Inc., a
management advisory and investment firm he founded in
1999. Prior to this, Mr. Macaluso served as a Principal from
1996 through 1999 in Miller Associates, Inc., a management
consulting firm. Prior to this, Mr. Macaluso was a partner
with the Airlie Group, L.P. and an analyst for Investment
Limited Partners, L.P., both private investment partnerships,
from 1986 through 1996.
Steven C. Mason 1997 64 Mr. Mason Retired From Mead Corp., a Forest Products
Company, in November 1997. Prior to Retirement, Mr. Mason
Served as Chairman of the Board and Chief Executive Officer
of Mead Corp. From April 1992 to November 1997. Mr.
Mason Also Currently Serves as a Director of Ppg Industries,
Inc. and Convergys.
Frederick J. Mershad 1997 57 Mr. Mershad has Served as Chairman of the Board of
Elder-beerman Since December 1997, as Chief Executive
Officer of Elder-beerman Since January 1997 and as
President and a Director of Elder-beerman From January
1997 to December 1997. Prior to This Time, Mr. Mershad
Served as President and Chief Executive Officer of the
Proffitt's Division of Saks, Inc. ("Proffitt's") From February
1995 to December 1996; Executive Vice President,
Merchandising Stores for Proffitt's From May 1994 to
January 1995; Senior Vice President, General Merchandise
Manager, Home Store for the Rich's Department Stores
Division of Federated From August 1993 to May 1994; and
Executive Vice President, Merchandising and Marketing of
the Mcrae's Department Stores Division of Proffitt's From
June 1990 to August 1993.
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Jack A. Staph 1997 54 Mr. Staph is Currently a Consultant, Lawyer and Private
Investor. Mr. Staph has Also Served in an Unrestricted
Advisory Capacity to Cvs Corp. Since June 1997. Prior to
This Time, Mr. Staph Served as Senior Vice President,
Secretary, and General Counsel of Revco D.s., Inc., a Retail
Pharmacy Company, From October 1972 to August 1997.
DIRECTORS IN CLASS I CONTINUING IN OFFICE UNTIL 2002:
NAME DIRECTOR AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
SINCE
Thomas J. Noonan, Jr. 1997 60 Mr. Noonan Serves as Executive Vice President of Wsr, Inc.
("Wsr"), an Automotive Aftermarket Retailer, and has Served
in This Capacity Since January 2000. Mr. Noonan Served as
Wsr's Chief Restructuring Officer From August 1998
Through December 1999. He Also Serves as the Chief
Executive Officer of the Coppergate Group ("Coppergate"), a
Financial Investment and Management Company, and has
Served in This Capacity Since May 1996. Prior to That, He
Served as a Managing Director of Coppergate From April
1993 Through May 1996. Mr. Noonan Served as Executive
Vice President and Chief Financial Officer of Herman's
Sporting Goods, Inc., a Sporting Goods Retailer That Filed for
Protection Under Chapter 11 of the United States Bankruptcy
Code and is Currently Being Liquidated From August 1994
Through 1999. Mr. Noonan Also Currently Serves as a Director
of Intrenet Inc.
Bernard Olsoff 1997 71 Mr. Olsoff Retired From Frederick Atkins, a Retail Marketing
and Consulting Company, in 1997. Prior to This Time, Mr.
Olsoff Served as President, Chief Executive Officer and Chief
Operating Officer of Frederick Atkins, From 1994 to April
1997, and President and Chief Operating Officer From 1983
to 1994. Mr. Olsoff Also Currently Serves as a Director of
the Leslie Fay Companies, Inc., an Apparel Design and
Manufacturing Company ("Leslie Fay").
Laura H. Pomerantz 1997 52 Mrs. Pomerantz Currently Serves as President of Lhp
Consulting & Management, a Real Estate Consulting Firm, and
has Served in This Capacity Since 1995. Through Lhp
Consulting & Management, Mrs. Pomerantz is Also
Associated With Newmark Real Estate Co., Inc., a Commercial
Real Estate Company, as Senior Managing Director and has
Served in This Capacity Since August 1996. Prior Thereto, Mrs.
Pomerantz Served as Senior Managing Director of S.l. Green
Real Estate Company, a Commercial Real Estate Company,
From August 1995 to July 1996, and was Affiliated With
Koeppel Tenor Real Estate Services, Inc., a Commercial Real
Estate Company, From March 1995 Through July 1995. Prior
to This Time, Mrs. Pomerantz Served as Executive Vice
President and a Director of Leslie Fay, From January 1993 to
November 1994, and as Senior Vice President and Vice
President of Leslie Fay From 1986 Through 1992.
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ITEM NUMBER 2
PROPOSED AMENDMENT TO THE COMPANY'S EQUITY AND PERFORMANCE INCENTIVE PLAN
GENERAL
The Elder-Beerman Stores Corp. Equity and Performance Incentive Plan
(the "Plan") was approved in December, 1997 pursuant the Company's plan of
reorganization, which was confirmed by the United States Bankruptcy Court. On
April 13, 2000, the Board of Directors approved an amendment to the Plan,
subject to shareholder approval at the Annual Meeting. The proposed amendment
would increase the number of shares of Common Stock to be issued under the Plan
from 2,250,000 to 2,750,000, thereby making additional shares available for
grant under the Plan. The additional shares represent approximately 3.34% of the
issued and outstanding stock of the Company. To date, options to acquire
approximately 1,835,318 shares of Common Stock have been granted under the Plan
and approximately 445,607 shares of Common Stock in the form of restricted
shares and deferred shares have been granted under the Plan. The Board of
Directors intends to continue granting these awards in order to assist the
Company in developing and maintaining strong management and an increase in the
maximum number of shares under the Plan would allow these future grants.
A summary description of the Plan is set forth below. The full text of
the Plan, as amended by this proposal, is annexed to this Proxy Statement as
Annex A, and the following summary is qualified in its entirety by reference to
Annex A.
SUMMARY OF THE PLAN
General. Under the Plan, the Board of Directors (the "Board") is
authorized to make awards of options to purchase shares of Common Stock ("Option
Rights"), awards of Tandem Appreciation Rights and/or Free-Standing Appreciation
Rights ("Appreciation Rights"), awards of restricted shares ("Restricted
Shares"), awards of deferred Shares ("Deferred Shares"), and awards of
performance shares ("Performance Shares") and performance units ("Performance
Units"). The terms applicable to awards of the various types, including those
terms that may be established by the Board when making or administering
particular awards, are set forth in detail in the Plan.
Shares Available Under the Plan. Subject to adjustments as provided in
the Plan, the number of shares of Common Stock that may be issued or transferred
(i) upon the exercise of the Option Rights or Appreciation Rights, (ii) as
Restricted Shares and released from substantial risks and forfeiture thereof,
(iii) as Deferred Shares, (iv) in payment of Performance Shares or Performance
Units that have been earned, (v) as awards to Non-Employee Directors, or (vi) in
payments of dividend equivalents paid with respect to awards made under the Plan
may not exceed, in the aggregate, 2,750,000 shares (2,250,000 of which were
approved in 1997 and 500,000 of which are being added by the proposed amendment)
plus any shares relating to awards that expire or are forfeited or canceled.
Such shares of Common Stock may be shares of original issuance or treasury
shares or a combination of both.
Limitations on Specific Kinds of Awards. In addition to the general
limitation on the number of shares of Common Stock available under the Plan, the
Plan specifically prevents grants to any participant in excess of 300,000 shares
of Common Stock during any calendar year. Additionally, no participant may be
granted, during any calendar year, more than 300,000 Appreciation Rights, 75,000
Restricted Shares, 5,000 Deferred Shares and Performance Shares or Performance
Units having an aggregate maximum value as of their respective dates of grant in
excess of $1,000,000.
Eligibility. Officers, including officers who are members of the Board,
Non-Employee Directors, and other key employees of the Company and its
subsidiaries may be selected by the Board to receive benefits under the Plan.
The Board may also make awards under the Plan to any person who has agreed to
commence serving in any such capacity within 90 days of the date of the grant of
the award.
Option Rights. The Board may grant Option Rights, which entitle the
participant to purchase a specified number of shares of Common Stock at an
option price, which may be equal to or more or less than (but not less than 75%
of) the fair market value of the shares of Common Stock, as determined by the
Board, on the date of the grant. However, if the Board grants Option Rights that
are intended to qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended from time to time (the "Code"), the option price per share may not be
less than 100% of the fair market value of the shares of Common Stock, as
determined by the Board, on the date of the grant. The grant will specify
whether the option
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price will be payable (i) in cash or by check acceptable to the Company, (ii) by
the actual or constructive transfer to the Company of nonforfeitable,
unrestricted shares of Common Stock owned by the participant having a value at
the time of exercise equal to the total option price, or (iii) by a combination
of such methods of payment. Any grant may provide for deferred payment of the
option price from the proceeds of sale through a bank or broker on a date
satisfactory to the Company of some or all of the shares to which such exercise
relates.
No Option Right may be exercised more than ten years from the date of
the grant. Each grant must specify the period of continuous employment with the
Company or any subsidiary that is necessary before the Option Rights become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change of Ownership (as defined in the Plan) of the Company.
Successive grants may be made to the same participant whether or not Option
Rights previously granted remain unexercised. The exercise of an Option Right
cancels, on a share-for-share basis, any Tandem Appreciation Right (described
below).
Appreciation Rights. The Board may authorize the granting of Tandem
Appreciation Rights. A Tandem Appreciation Right is a right to receive from the
Company up to 100 percent of the spread between the option price and the current
value of the shares of Common Stock underlying the option. Additionally, the
Board may authorize the granting of Free-Standing Appreciation Rights, which are
rights to receive from the Company an amount determined by the Board as a
percentage of the spread at the time of exercise.
Each grant of Appreciation Rights may utilize any or all of the
following authorizations, and will be subject to all of the following
requirements (i) the amount payable on exercise of an Appreciation Right may be
paid by the Company in cash, in shares of Common Stock or in any combination and
may grant to the participant or retain in the Board the right to elect among the
alternatives, (ii) a maximum amount payable on exercise, (iii) waiting periods
before exercise, (iv) permissible exercise dates, periods or occurrences, and
(v) Performance Objectives (described below) that must be achieved as a
condition to exercise such rights.
Restricted Shares. The Board may also authorize the grant or sale of
Restricted Shares, which constitutes an immediate transfer of ownership of
shares of Common Stock to the participant in consideration of the performance of
services, entitling such participant to voting, dividend and other ownership
rights, but may be subject to substantial risk of forfeiture and restrictions on
transfer. Each grant or sale of Restricted Shares may utilize any or all of the
following authorizations, and will be subject to all of the following
requirements (i) the transfer may be made without additional consideration or in
consideration of a payment by the participant that is less than current fair
market value of the shares of Common Stock, as determined by the Board, (ii)
each grant or sale will provide that the Restricted Shares will be subject to a
"substantial risk of forfeiture" within the meaning of Section 83 of the Code,
except (if the Board so determines) in the event of retirement, disability or
death of the participant or a Change of Ownership (as defined in the Plan) of
the Company, for a period of not less than three years as determined by the
Board, (iii) during the period for which "substantial risk of forfeiture"
continues, the transferability of Restricted Shares will be prohibited or
restricted in the manner and to the extent prescribed by the Board at the date
of the grant, (iv) if Performance Objectives (described below) are specified,
the achievement of those objectives will result in termination of the
restrictions applicable to such shares, and (v) each grant or sale may require
that any or all dividends or other distributions paid thereon during the period
of restriction be automatically deferred and reinvested in additional Restricted
Shares.
Deferred Shares. The Board may also authorize the granting or sale of
Deferred Shares, which constitutes an agreement by the Company to deliver shares
of Common Stock to the participant in the future in consideration of the
performance of services and subject to the fulfillment of any conditions during
the deferral period, which the Board may specify. Each grant or sale may be made
without additional consideration or in consideration of a payment to the
participant that is equal to or less than the fair market value of the shares of
Common Stock, as determined by the Board, on the date of the grant. Deferral
periods must constitute not less than one year as determined by the Board at the
date of the grant, except (if the Board so determines) in the event of
retirement, disability or death of the participant or a Change of Ownership (as
defined in the Plan) of the Company. During the deferral period, the participant
will have no right to transfer any rights under the award and will have no
rights of ownership in the Deferred Shares and will have no right to vote them.
Performance Shares and Performance Units. The Board may also authorize
the granting of Performance Shares and Performance Units that will become
payable to a participant upon achievement of specified Performance Objectives
(described below). Each grant will specify the number of Performance Shares or
Performance Units to which it pertains and the Performance Objectives which, if
achieved, will result in payment or early payment of the
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award. Each grant may specify a minimum acceptable level of achievement below
which no payment may be made and will set forth a formula for determining the
number of Performance Shares or Performance Units that will be earned if
performance is at or above the minimum level, but falls short of full
achievement of the specified Performance Objectives. Each grant will specify the
performance period during which the Performance Objectives should be achieved
and will be such period of time, not less than one year, commencing with the
date of the grant as is determined by the Board at the date of the grant.
Each grant will specify the time and manner of payment of Performance
Shares or Performance Units that have been earned. The amount may be paid by the
Company in cash, in shares of Common Stock or in any combination thereof and may
either grant to the participant or retain in the Board the right to elect among
the alternatives. Dividend equivalents on Performance Shares may be paid in cash
or in shares of Common Stock on a current, deferred or contingent basis. Any
grant of Performance Shares may specify a maximum amount payable and any grant
of Performance Units may specify a maximum amount payable or the maximum number
of shares of Common Stock issued upon achievement of Performance Objectives.
Performance Objectives. The Board may establish performance objectives
for participants who have received awards of Performance Shares or Performance
Units, or, if so determined, Option Rights, Appreciation Rights or Restricted
Shares. Section 162(m) of the Code requires that the Plan and the performance
measures which must be attained to earn compensation under performance-based
awards be disclosed to and approved by shareholders. Such performance measures
or "Performance Objectives" may be described either in terms of Company-wide
objectives or objectives that are related to performance of the individual
participant or in the division, subsidiary, department or function within the
Company or a subsidiary in which the participant is employed. The Performance
Objectives applicable to any award to a participant who is or is likely to
become a "covered employee" within the meaning of Section 162(m) of the Code
will be based on specified levels of, or growth in, one or more of the following
criteria:
1. earnings;
2. earnings before interest, tax, depreciation and amortization;
3. earnings per share;
4. share price;
5. total shareholder return;
6. return on invested capital, equity or assets;
7. operating earnings; and
8. sales growth.
If the Board determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the
Performance Objectives unsuitable, the Board may in its discretion modify such
Performance Objectives or the related minimum acceptable level of achievement,
in whole or in part, as the Board deems appropriate or equitable, except in the
case of a "covered employee" where such action would result in the loss of the
otherwise available exemption of the award under Section 162(m) of the Code.
Annual Incentive Awards. The purpose of annual incentive awards
("Annual Incentive Awards") provided under the Plan is to provide for the grant
of short-term performance awards to certain key employees of the Company based
on their attainment of predetermined goals which will further the interests of
the Company and its shareholders. Following the end of the Company's fiscal
year, the Board will determine whether and to what extent the goals, the
threshold or thresholds to be satisfied in order for a participant to qualify
for all or a portion of an Annual Incentive Award, as determined by the Board,
have been met and what Annual Incentive Awards have been earned, and will notify
each participant of his or her entitlement. Annual Incentive Awards will be paid
in cash as soon as practicable following the determination by the Board of such
award, subject to any deferral election made by the participant. A participant
may elect to defer up to 50% of an Annual Incentive Awards, which portion will
be converted and granted as Deferred Shares using the fair market value of the
shares of Common Stock, as determined by the Board, on the last day of the
Company's fiscal year for which such award is earned. Upon the lapse of the
deferral period, each participant will be granted Restricted Shares, the number
of which will be calculated using the fair market value of the shares of Common
Stock, as determined by the Board, on the last day of the Company's fiscal year
to which the award relates, to 25% of the deferred portion of such award
deferred.
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Transferability. Except as determined by the Board on a case-by-case
basis, no Option Right, Appreciation Rights or other derivative security granted
under the Plan will be transferable by a participant other than by will or the
laws of descent and distribution, except (in the case of a participant who is
not a Director or officer of the Company) to a fully revocable trust of which
the participant is treated as the owner for federal income tax purposes. Option
Rights and Appreciation Rights will be excersiable only during the participant's
lifetime by him or her or by the participant's guardian or legal representative.
The Board may specify on the date of the grant that part or all of the
shares of Common Stock that are (i) to be issued or transferred by the Company
upon the exercise of Option Rights or Appreciation Rights, upon the termination
of the deferral period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units or (ii) no longer subject to
the substantial risk of forfeiture and restrictions on transfer, will be subject
to further restrictions on transfer.
Adjustments. The Board may make or provide for such adjustments in the
number of shares of Common Stock covered by outstanding Option Rights,
Appreciation Rights, Deferred Shares, and Performance Shares granted hereunder,
in the prices per share applicable to such Option Rights and Appreciation Rights
and in the kinds of shares covered thereby, as the Board, in its sole discretion
exercised in good faith, may determine is equitably required to prevent dilution
or enlargement of the rights of participants that otherwise would result from
(i) any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or (ii) any merger,
consolidation, spin-off, split-off, spin-out, split-up reorganization, partial
or complete liquidation or other distribution of assets, issuance of rights or
warrants to purchase securities, or (iii) any other corporate transaction or
event having an effect similar to any of the foregoing. Notwithstanding any
other provision of the Plan, following any adjustment, the total percent of
share equivalents to be made available under the Plan will be 15% of shares
outstanding after such adjustment.
Administration and Amendments. The Plan is administered by the Board,
which may from time to time delegate all or any of part of its authority under
the Plan to a committee of the Board. The interpretation and construction by the
Board of any provision of the Plan or of any agreement, notification or document
evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares,
Deferred Shares, Performance Shares or Performance Units and any determination
by the Board pursuant to any provision of the Plan or of any such agreement,
notification or document will be final and conclusive.
The Board may at any time and from time to time amend the Plan in whole
or in part; provided, however, that any amendment which must be approved by the
shareholders of the Company in order to comply with applicable law or the rules
of any national securities exchange upon which the shares of Common Stock are
traded or quoted will not be effective unless and until such approval has been
obtained.
The Board will not, without further approval of the shareholders of the
Company, authorize the amendment of any outstanding Option Rights to reduce the
option price. Furthermore, no Option Right may be canceled and replaced to the
same individual with awards having a lower option price without further approval
of the shareholders.
If a participant holding (i) an Option Right or Appreciation Right that
is not immediately exercisable in full, (ii) any Restricted Shares as to which
the substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, (iii) any Deferred Shares as to which the deferral period has
not been completed, (iv) any Performance Shares or Performance Units which have
not been fully earned, or (v) shares of Common Stock subject to any transfer
restrictions, terminates employment by reasons of death, disability, normal or
early retirement, or in the event of hardship or other special circumstances,
the Board may, in its sole discretion, take any action it deems equitable or in
the Company's best interest.
The Board may permit participants to elect to defer the issuance of
shares of Common Stock or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of the Plan. The Board may also provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
Termination. No grant may be made under the Plan more than 10 years
after the date on which the Plan is first approved, but all grants made on or
prior to such date will continue in effect thereafter subject to the terms
thereof and of the Plan.
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General. The closing price on NASDAQ of the shares of Common Stock of
the Company on June 1, 2000 was $4.50 per share.
PLAN BENEFITS
It is not possible to determine the future awards that will be received
by participants in the Plan. Set forth in the table below are the number of
Non-Qualified Stock Options and Restricted Shares that were granted under the
Plan during the Company's fiscal year 1999 and through April 13, 2000, to each
of (i) the chief executive officer and the four most highly compensated
executive officers of the Company, (ii) all present executive officers as a
group and (iii) all employees, including all present officers who are not
executive officers, as a group.
PLAN BENEFITS
EQUITY AND PERFORMANCE INCENTIVE PLAN
GRANT/AWARD STOCK OPTIONS EXERCISE RESTRICTED SHARES GRANTED
------------- ---------- --------------
NAME AND POSITION DATE GRANTED PRICE ($) NUMBER VALUE ($)(1)
- ----------------- ---- ------- --------- ------ ------------
Frederick J. Mershad................. 2000
Chairman and Chief 1999 90,000 8.00 75,000 581,250(2)
Executive Officer 100,000 9.60
110,000 11.20
John A. Muskovich.................... 2000
President, Chief Operating Officer 1999 48,000 8.00 40,000 310,000(2)
53,500 9.60
58,500 11.20
Scott J. Davido...................... 2000 5,000 29,690
Executive Vice President - Chief 1999 15,000 9.125 5,000 45,625
Financial Officer, Treasurer and 10,000 9.125
Secretary
Charles P. Shaffer................... 2000
Executive Vice President - 1999 15,000 9.125 1,108 5,540(4)
Merchandising and Marketing 25,000 6.750 10,000 67,500
James M. Zamberlan................... 2000 5,000 29,690
Executive Vice President, Stores 1999 20,000 9.125
Executive Officer Group (3).......... 2000 10,000 59,380
1999 545,000 131,108 1,009,915
Non-Executive Director Group......... 2000 34,668 18,000 90,000
1999 44,554 10,875 88,135
Non-Executive Officer Employee Group. 2000 25,000 4,000 23,752
1999 244,000 2,785 13,925(4)
- -------------------------------------
(1) Reflects value on date of award.
(2) Vests three years from date of grant only if certain performance objectives
are met.
(3) Includes five executives listed above.
(4) Restricted Share Company match for 1999 bonus deferral.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the Federal income tax consequences
of certain transactions under the Plan based on Federal income tax laws in
effect on January 1, 2000. This summary is not intended to be complete and does
not describe state or local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
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Non-qualified Stock Options. In general, (i) no income will be
recognized by an optionee at the time a non-qualified Option Right is granted;
(ii) at the time of exercise of a non-qualified Option Right, ordinary income
will be recognized by the optionee in an amount equal to the difference between
the option price paid for the shares and the fair market value of the shares, if
unrestricted, on the date of exercise; and (iii) at the time of sale of shares
acquired pursuant to the exercise of a non-qualified Option Right, appreciation
(or depreciation) in value of the shares after the date of exercise will be
treated as a capital gain (or loss).
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an Incentive Stock Option. If shares of
Common Stock are issued to the optionee pursuant to the exercise of an Incentive
Stock Option, and if no disqualifying disposition of such shares is made by such
optionee within two years after the date of the grant or within one year after
the transfer of such shares to the optionee, then upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
capital gain and any loss sustained will be a capital loss.
If shares of Common Stock acquired upon the exercise of an Incentive
Stock Option are disposed of prior to the expiration of either holding period
described above, the optionee generally will recognize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of such shares at the time of exercise (or, if less, the amount realized
on the disposition of such shares if a sale or exchange) over the option price
paid for such shares. Any further gain (or loss) realized by the participant
generally will be taxed as a capital gain (or loss).
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of a Tandem Appreciation Right or a Free-Standing
Appreciation Right. When the Appreciation Right is exercised, the participant
normally will be required to include as taxable ordinary income in the year of
exercise an amount equal to the amount of cash received and the fair market
value of any unrestricted shares of Common Stock received upon the exercise.
Restricted Shares. The receipt of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares (reduced by any amount paid by the participant for such
Restricted Shares) at such time as the shares are no longer subject to
forfeiture or restrictions on transfer for purposes of Section 83 of the Code
("Restrictions"). However, a recipient who so elects under Section 83(b) of the
Code within 30 days of the date of transfer of the shares will have taxable
ordinary income on the date of transfer of the shares equal to the excess of the
fair market value of such shares (determined without regard to the Restrictions)
over the purchase price, if any, of such Restricted Shares. If a Section 83(b)
election has not been made, any dividends received with respect to Restricted
Shares that are subject to the Restrictions generally will be treated as
compensation that is taxable as ordinary income to the participant.
Deferred Shares. No income generally will be recognized upon the award
of Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of
nonrestricted shares of Common Stock on the date that such shares are
transferred to the participant under the award (reduced by any amount paid by
the participant for such Deferred Shares).
Performance Shares and Performance Units. No income generally will be
recognized upon the grant of Performance Shares or Performance Units. Upon
payment of the earn-out of Performance Shares or Performance Units, the
recipient generally will be required to include as taxable ordinary income in
the year of receipt an amount equal to the amount of cash received and the fair
market value of any nonrestricted shares of Common Stock received.
TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company or subsidiary for which the
participant performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of reasonableness,
is an ordinary and necessary business expense, is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is not disallowed by
the $1 million limitation on certain executive compensation under Section 162(m)
of the Code.
REQUIRED VOTE
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The approval of the Amendment to the Plan requires a majority of all
the votes cast at the Annual Meeting, whether present in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
ITEM NUMBERS 3-14
THE PPM PROPOSALS
THE BOARD OF DIRECTORS' REASONS FOR OPPOSING THE PPM PROPOSALS AND
RECOMMENDING THAT YOU OPPOSE THEM TOO
GENERAL INFORMATION
The Board of Directors opposes Proposals 3, 4, 5, 6, 7, 8, 9, 10, 11,
12, 13 and 14 because such proposals would eliminate protections in the
Company's Articles and Regulations that are designed to give the Board of
Directors the time and information it needs to make decisions regarding
potential acquisitions of the Company and negotiating power with potential
unsolicited purchasers so that the Board can best maximize the value of the
Company for its shareholders. The Board of Directors unanimously believes that
PPM's proposals are not in the best interest of the Company's shareholders and
urges shareholders to reject them.
The provisions in the Company's Articles and Regulations that PPM seeks
to change or eliminate are provisions designed to promote conditions of
continuity and stability in the Company's management and policies. The
provisions were adopted in 1997 pursuant the Company's plan of reorganization,
which was confirmed by the United States Bankruptcy Court. Although the
amendments have certain anti-takeover effects, they were not adopted in response
to any active effort to obtain control. These protections reduce the Company's
vulnerability to unsolicited attempts to buy the Company and other transactions
that are not negotiated with and approved by the Board of Directors. The Board
believes that unsolicited attempts to buy the Company can place undue pressure
on boards of directors and shareholders to act hastily and on incomplete
information. These attempts can be highly disruptive to corporations and can
result in unfair differences in treatment of some shareholders who act
immediately in response to an announcement regarding a potential sale of the
Company and those who choose to act later, if at all.
In the Board of Directors' judgment, the Board is in the best position
to determine the true value of the Company and to negotiate more effectively for
what may be in the best interests of its shareholders. Accordingly, the Board of
Directors believes that it is in the best interest of the Company and its
shareholders to encourage potential acquirors to negotiate directly with the
Board of Directors and that the current protections in the Company's Articles
and Regulations encourage such negotiations and discourage unsolicited attempts
to buy the Company.
In considering the PPM Proposals, shareholders should be aware that the
overall effect of certain of the proposals is to make it more difficult for
holders of a majority of the outstanding shares of Common Stock to change the
composition of the Board of Directors. Because the provisions in the Articles
and Regulations that PPM is proposing be eliminated or changed may have the
effect of continuing the tenure of the current Board of Directors, the Board has
recognized that the individual directors have a personal interest in not
eliminating or changing the provisions that may differ from those of the
shareholders. However, the Board believes that the primary purpose of the
provisions is to ensure that the Board will have sufficient time to consider
fully any unsolicited attempts to buy the Company in light of the short and
long-term benefits and other opportunities available to the Company and, to the
extent the Board determines to proceed with the unsolicited attempt to buy the
Company, to effectively negotiate terms that would maximize the benefits to the
Company and its shareholders.
The Board of Directors' specific responses to each of the PPM Proposals
is set forth below.
ITEM NUMBER 3
ADOPTION OF AN AMENDMENT TO ARTICLE IX OF THE ARTICLES
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of an amendment to Article IX of the Articles, which would
eliminate the Company's classified Board of Directors. The text of this PPM
Proposal is set forth on Annex B to this Proxy Statement.
15
20
RESPONSE OF THE BOARD OF DIRECTORS
The Company's Board of Directors has been divided into three classes
since its emergence from bankruptcy in 1997. Under this system, each director
serves a three-year term, each class is nearly equal as possible in size and one
of the three classes is elected each year. This staggered election of directors
is a common practice that has been adopted by the shareholders of many major
corporations. More than half of the companies comprising the Standard & Poor's
500 have classified boards. The Board is confident that the election of
directors by classes is in the best interest of the Company and its shareholders
and should not be changed. The Board believes that the election of directors by
classes assures continuity and stability in the management of the affairs of the
Company, because, at any given time, a majority of the Board generally will have
had prior experience as directors of the Company and will be familiar with its
business and operations.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 3
ITEM NUMBER 4
ADOPTION OF A NEW ARTICLE XIV TO THE ARTICLES
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of a new Article XIV to the Articles, which would allow the Company
to opt out of Chapter 1704 of the Ohio Revised Code, which governs interested
shareholder transactions. The text of this PPM Proposal is set forth on Annex B
to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
Chapter 1704 of the Ohio Revised Code covers "interested party
transactions." The provision places restrictions on the Company to enter into
certain transactions with a shareholder who owns 10% or more of the Common Stock
of the Company. However, the Board of Directors is permitted to approve in
advance such an interested party transaction. This provision is beneficial to
shareholders because it is intended to encourage those persons proposing to
acquire control of the Company to negotiate with the Board of Directors so that
all of the Company's shareholders receive fair consideration for their shares if
the Company should be sold.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 4
ITEM NUMBER 5
ADOPTION OF AN AMENDMENT TO ARTICLE X OF THE ARTICLES
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of an amendment to Article X of the Articles, which would lower
from 72% to a simple majority the shareholder approval requirement needed to
amend or repeal sections in the Articles dealing with cumulative voting rights,
preemptive rights to acquire shares, share repurchases by the Company, the
classification of and staggered election system for the Board and the Amendment
of Article X of the Articles. The text of this PPM Proposal is set forth on
Annex B to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
The Company's Articles have the provisions that require a 72%
shareholder vote to eliminate or change certain fundamental corporate governance
provisions which the Company views as especially important to protect against
abusive or unfair tactics in unsolicited attempts to buy the Company. These
provisions are not intended as, and cannot properly be used as, a shield against
a fair and fully funded offer that benefits all shareholders equally. The Board
of Directors believes that it is important to require a higher percentage of the
holders of the Company's Common Stock vote on amendments to these important
provisions.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 5
16
21
ITEM NUMBER 6
ADOPTION OF AN AMENDMENT TO REGULATION 3(a) OF THE REGULATIONS
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of an amendment to Regulation 3(a) of the Regulations, which would
permit a shareholder or shareholders who own 25% rather than 50% of the
outstanding Common Stock to call special meetings of shareholders. The text of
this PPM Proposal is set forth on Annex B to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
The Company believes that by requiring a simple majority of the holders
of the outstanding Common Stock to call a special meeting of the shareholders
permits the Company to act without undue interruptions between annual meeting of
shareholders. Allowing a lower percentage of shareholders to call special
meetings potentially could disrupt the Company's operations because the Board of
Directors and the Company's senior officers would be required to focus their
time and efforts on preparation for each special meeting called.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 6
ITEM NUMBER 7
ADOPTION OF AN AMENDMENT TO REGULATION 7(c) OF THE REGULATIONS
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of an amendment to Regulation 7(c) of the Regulations, which would
eliminate the requirement that any shareholder who desires to bring business
before the annual meeting of the Company's shareholders must notify the Company
not more than 90 days, but not less than 60 days, in advance of such meeting of
its intent to do so and of the nature of such business. The text of this PPM
Proposal is set forth on Annex B to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
The Board of Directors believes that the advance notice requirements
provide the Board of Directors with sufficient time and information to evaluate
shareholder proposals and other relevant information, such as existing
shareholder support for the proposal and to formulate an appropriate response.
Shareholders are not precluded from bringing business before the annual meeting
if they properly comply with the notice and other requirements set forth in the
Regulations. The notice deadlines for submitting shareholder proposals are set
forth in the Company's proxy statement from the previous year. The text of this
PPM Proposal is set forth on Annex B to this Proxy Statement.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 7
ITEM NUMBER 8
ADOPTION OF AN AMENDMENT TO REGULATION 12 OF THE REGULATIONS
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of an amendment to Regulation 12 of the Regulations, which would
eliminate the requirement that any shareholder who desires to propose any
nominees for election to the Company's Board of Directors must notify the
Company of its intent to do so and of the identity of its proposed nominees not
more than 90 days, but not less than 60 days, in advance of such meeting. The
text of this PPM Proposal is set forth on Annex B to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
The Board of Directors believes that Regulation 12 's advance notice
requirements regarding the identity of director nominees provide the Board of
Directors with an appropriate amount of time to properly evaluate the nominees
and make recommendations to the Company's shareholders on the proposed nominees.
The advance notice requirements simply allow the Company the time and
opportunity to obtain the same information about other candidates that it has
about its own nominees. The advance notice requirements do not prohibit
shareholders from nominating people for election to the Board if they properly
comply with the notice and other requirements set forth
17
22
in the Regulations. The notice deadlines for submitting proposed nominees are
set forth in the Company's proxy statement from the previous year. The text of
this PPM Proposal is set forth on Annex B to this Proxy Statement.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 8
ITEM NUMBER 9
ADOPTION OF AN AMENDMENT TO REGULATION 34 OF THE REGULATIONS
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of an amendment to Regulation 34 of the Regulations, which would
lower from 72% to a simple majority the shareholder approval requirement needed
to amend or repeal the Regulations dealing with the time and place of
shareholder meetings, who may call special meetings of the shareholders, the
order of business (including advance notice of business to be brought) at
shareholder meetings, the size of the Board, the filling of newly-created
directorships and Board vacancies, the removal of directors, the nomination of
directors (including advance notice of the intent to nominate directors) and the
amendment of the Regulations. The text of this PPM Proposal is set forth on
Annex B to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
The Board of Directors believes that the time and place of shareholders
meetings, who may call special meetings of shareholder, the order of business at
shareholder meetings, the size of the Board, the filling of newly- created
directorships and Board vacancies, the removal of directors and the nomination
of directors are important provisions. The Board of Directors believes that it
is important to require a higher percentage of the holders of the Company's
Common Stock vote on amendments to these important provisions.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 9
ITEM NUMBER 10
ADOPTION OF AN AMENDMENT TO REGULATION 9 OF THE REGULATIONS
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of an amendment to Regulation 9 of the Regulations, which would
lower the shareholder approval requirement needed to alter the size of the Board
from 72% to a simple majority. The text of this PPM Proposal is set forth on
Annex B to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
The Board of Directors believes that it is important to require a
higher percentage of holders of the Company's Common Stock to change the number
of directors on the Board to enhance the stability of the Board of Directors and
the Company. This requirement eliminates the potential of a smaller group of
shareholders to change the composition of the Board of Directors. If several
additional directors are added to the Board at the same time, a change in
control of the Board could be effected at one meeting of the shareholders, which
would render meaningless the protections afforded by the classified board and
staggered elections of directors would be meaningless.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 10
ITEM NUMBER 11
ADOPTION OF A NEW REGULATION 35 TO THE REGULATIONS
18
23
PPM's Proxy indicates that it will propose that shareholders approve
the adoption of a new Regulation 35 to the Regulations, which would permit the
Company to opt out of the provisions of the Ohio Control Share Acquisition Act,
which sets forth certain restrictions on the ability of persons to acquire 20%
or more of the stock of an Ohio corporation. The text of this PPM Proposal is
set forth on Annex B to this Proxy Statement.
RESPONSE OF THE BOARD OF DIRECTORS
The Ohio Control Share Act (Sections 1701.831 and 1701.832 of the Ohio
Revised Code) was adopted to give shareholders a chance to vote on a change of
control of the Company. The Ohio Revised Code provides that the Control Share
Act will apply to all Ohio corporations unless the corporation specifically opts
out. The Ohio General Assembly set forth its reasons for enacting the Control
Share Act in Section 1701.832 of the Ohio Revised Code. In enacting the Ohio
Control Share Act, the Ohio General Assembly determined that "it is in the
public interest for shareholders to have a reasonable opportunity to express
their views by voting on a proposed shift of control." Accordingly, to protect
the interests of shareholders, the Ohio General Assembly determined that
shareholders should have the right to vote on certain control acquisitions
(Section 1701.832(A)(4) of the Ohio Revised Code). The Control Share Act
provides a mechanism for the shareholders to approve or reject a proposed
control share acquisition, which is an acquisition by one person of 20% or more
of the Common Stock of the Company. Any person who proposes to make a control
share acquisition must deliver a statement of intention to the Company, which
statement must set forth information about the potential acquiror and the
proposed transaction. Upon receipt of the statement of intention, the Board of
Directors is required to call a special shareholders meeting to allow the
shareholders to vote on the proposed transaction. The Board of Directors
believes that the applicability of the Control Share Act to the Company is
beneficial to the shareholders because it gives the shareholders an opportunity
to vote on a proposed change in control of the Company.
Without the protections of the Control Share Act in Ohio, the Company
could be faced with an unsolicited tender offer, where it would be likely that
the Company's Board of Directors would seek to evaluate the terms of the tender
offer while exploring other alternatives, including the possibility of
negotiating a higher price for the sale of the Company. If the Company opts out
of the Control Share Act and other PPM Proposals are adopted, a potential
acquiror could prevent the Company from pursuing other alternatives and
undermine the Board's bargaining power by, for example, more easily calling
special meetings of the shareholders or taking other measures intended to force
a sale of the Company without affording the Board of Directors a complete
opportunity to explore alternatives that could lead to a higher price.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 11
ITEM NUMBER 12
SHARE REPURCHASE PROGRAM
PPM's Proxy indicates that it will propose that shareholders direct the
Company's Board to utilize the $16.7 million remaining in its announced share
purchase program to complete the program.
RESPONSE OF THE BOARD OF DIRECTORS
As PPM indicated in the PPM Proxy, this proposal cannot bind the Board
to take action. The Board, however, will respond to this proposal. The Company
suspended, not abandoned, its stock repurchase to comply with the federal
securities laws during the exploration of strategic alternatives. During this
process, the Board and members of management are in possession of material,
non-public information about the Company and the Company is unable to repurchase
its shares. The Board will evaluate repurchasing the Company's shares when the
Company can do so in compliance with the federal securities laws.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 12
ITEM NUMBER 13
19
24
SHAREHOLDER RIGHTS PLAN
PPM's Proxy indicates that it will propose that shareholders direct the
Company's Board to redeem the Company's shareholder rights plan.
RESPONSE OF THE BOARD OF DIRECTORS
As PPM indicated in the PPM Proxy, this proposal cannot bind the Board
to take action. The Board, however, will respond to this proposal. The Company,
like many publicly held companies in the United States, has in place a
shareholder rights plan. The Company's shareholder rights plan will not stand in
the way of a fair sale that benefits all shareholders. The plan will only hinder
an unsolicited attempt to buy the Company if a potential buyer seeks to acquire
the Company for less than it is worth or treats shareholders unequally. Results
from empirical studies (including a 1997 JP Morgan study and a 1997 Georgeson &
Company, Inc. study) show that companies with shareholder rights plans obtain
higher premiums in change in control transactions than companies without rights
plans. In addition, the studies have shown that the existence of a shareholder
rights plan does not increase the likelihood of either a company being a target
for a potential buyer or the withdrawal of a friendly bid. The Company's rights
plan provides an incentive for a potential buyer to negotiate with the Board
before going forward with a transaction, which allows the Board to seek a higher
share price or non-financial terms more favorable to the Company's shareholders.
If the Board decides to proceed with a sale transaction that is in the best
interest of the Company's shareholders, the Board is able to amend its rights
plan so that it would be inapplicable to such a transaction.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 13
ITEM NUMBER 14
COMPENSATION
PPM's Proxy indicates that it will propose that shareholders direct the
Company's Board to revise its compensation program with respect to its senior
officers.
RESPONSE OF THE BOARD OF DIRECTORS
As PPM indicated in the PPM Proxy, this proposal cannot bind the Board
to take action. The Board, however, will respond to this proposal. The Board of
Directors has extensively studied the best methods to fairly compensate the
Company's management. Each year, the Compensation Committee of the Board, which
is composed entirely of outside directors, sets the compensation for the
Company's executives. To recruit and retain senior managers, the Compensation
Committee sets a salary and long-term incentive structure that is competitive
with other comparably sized retailers. Compensation for each of the Company's
five most highly compensated executives is set by the Compensation Committee
based on four factors: (i) performance of the individual executive, (ii) the
executive's level of responsibility in the Company, (iii) the executive's
importance to the Company and (iv) the general level of executive compensation
in the retail industry, as determined by an annual compensation survey prepared
by the Company's third-party compensation consultant. The survey covers a group
of comparably sized retail companies. The Compensation Committee believes that
compensation in the retail industry is more directly tied to the size of the
enterprise than the type of the retail business and the surveys included
comparably sized retailers outside of the department store business. Based on
these factors and the recommendation of the Compensation Committee, the Board
believes that the compensation paid to its executive officers is fair and
competitive with similar companies.
THE BOARD OF DIRECTORS OPPOSES THIS PROPOSAL
AND RECOMMENDS A VOTE AGAINST ITEM NUMBER 14
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors oversees the business and affairs of
Elder-Beerman and monitors the performance of management. The Board met nine
times during 1999.
BOARD COMMITTEES
The Board of Directors has an Executive Committee, an Audit and Finance
Committee, a Compensation Committee and a Nominating and Corporate Governance
Committee. Each Committee reports to the Board of Directors at its first meeting
after the Committee meeting.
Executive Committee
During fiscal year 1999, the members of the Executive Committee were
Messrs. Mershad (Chairman), Mason, Muskovich and Staph. The Executive Committee
held no meetings in 1999. Except to the extent that its powers are limited by
law, by Elder-Beerman's Articles or Regulations or by the Board of Directors,
during the intervals between meetings of the Board of Directors, the Executive
Committee may exercise, subject to the control of the Board of Directors, all of
the powers of the Board of Directors in the management and control of the
Company's business. All action taken by the Executive Committee is to be
reported to the Board of Directors at its first meeting thereafter.
Audit and Finance Committee
During fiscal year 1999, the members of the Audit and Finance Committee
were Messrs. Noonan (Chairman), Kasen and Olsoff. Mr. Macaluso joined this
Committee in December 1999. The Audit and Finance Committee held seven formal
meetings in 1999. The Audit and Finance Committee is responsible for: (i)
reviewing the professional services to be provided by the Company's auditors and
the independence of such firm from management of the Company; (ii) reviewing the
scope of the audit by the Company's independent auditors; (iii) reviewing the
annual financial statements of the Company; (iv) reviewing and evaluating the
Company's systems of internal accounting controls; (v) reviewing and evaluating
the Company's internal audit function and meeting from time to time with the
internal auditors outside the presence of other employees; (vi) such other
matters with respect to accounting, auditing and financial reporting practices
and procedures of the Company as it may find appropriate or as may be brought to
its attention; and (vii) reviewing the Company's financing plans. The Audit and
Finance Committee is also responsible for the Company's corporate compliance
program to ensure compliance with all applicable laws.
Compensation Committee
During fiscal year 1999, the members of the Compensation Committee were
Messrs. Olsoff (Chairman), Staph and Wiesner. The Compensation Committee held
five formal meetings in 1999. The Compensation Committee is responsible for: (i)
reviewing executive salaries; (ii) approving the salaries and other benefits of
the executive officers of the Company; (iii) administering the bonus, stock
option and other incentive compensation plans of the Company, as well as the
employee stock purchase plan; and (iv) advising and consulting with the
Company's management regarding pension and other benefit plans and compensation
policies and practices of the Company.
Nominating and Corporate Governance Committee
During fiscal year 1999, the members of the Nominating and Corporate
Governance Committee were Messrs. Mason (Chairman), Mershad and Staph and Mrs.
Pomerantz. Mr. Bookshester joined this Committee in December 1999. The
Nominating and Corporate Governance Committee held four formal meetings in 1999.
The Nominating and Corporate Governance Committee is responsible for the
selection, evaluation and nomination of candidates for election to the Board of
Directors. The Nominating and Corporate Governance Committee is also responsible
for recommending to the Board the members and chair of each Board Committee. In
addition, the Nominating and Corporate Governance Committee is responsible for
the process of evaluating the overall performance of the Board of Directors and
its individual members to ensure effective operations of the Board of Directors
and overall corporate governance.
21
26
COMPENSATION OF ELDER-BEERMAN'S DIRECTORS
Compensation
Directors who are employees of Elder-Beerman do not receive any
separate fees or other remuneration for serving as a director or a member of any
Committee of the Board. For fiscal year 1999, nonemployee directors were paid a
retainer of $20,000 for their service on the Board of Directors and Committee
chairmen were paid an additional $5,000. Nonemployee directors were also each
paid a meeting fee of $1,500 for each board meeting attended, plus $500 for each
committee meeting attended. Nonemployee directors may elect to take their annual
retainer as cash or in the form of discounted stock options.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
None of the members of the Compensation Committee was or ever has been
an officer or employee of Elder-Beerman or engaged in transactions with
Elder-Beerman (other than in his capacity as a director). None of
Elder-Beerman's executive officers serves as a director or member of the
compensation committee of another entity, one of whose executive officers serves
as a member of the Compensation Committee or a director of Elder-Beerman.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the only outstanding class of voting
securities. The following table sets forth information regarding ownership of
the Company's Common Stock as of June 26, 2000 (except as otherwise noted) by:
(a) each person who owns beneficially more than 5% of Common Stock of the
Company to the extent known to management, (b) each executive officer and
director of the Company, and (c) all directors and executive officers as a
group. Except as noted, all information with respect to beneficial ownership has
been furnished by each director or officer or is based on filings with the
Securities and Exchange Commission.
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27
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
- -------------------------------------------------------------------------------------
Snyder Capital Management, Inc. 3,122,350(2) 20.87
350 California Street, Suite 1460
San Francisco, CA 94104
PPM America, Inc. 1,966,868(3) 13.15
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
James D. Bennett 1,103,323(4) 7.38
Bennett Management Corporation
2 Stamford Plaza, Suite 1501
281 Tressler Boulevard
Stamford, CT 06901
The D3 Family Fund 900,000(5) 6.02
19605 N.E. Eighth Street
Camas, WA 98607
Dennis S. Bookshester 3,577 *
Stewart M. Kasen 12,070(6) *
Charles Macaluso 5,794(6) *
Steven C. Mason 23,717(6) *
Frederick J. Mershad 300,928(6) 2.01
John A. Muskovich 184,028(6) 1.23
Thomas J. Noonan, Jr. 10,909(6) *
Bernard Olsoff 16,393(6) *
Laura H. Pomerantz 21,489(6)(7) *
Jack A. Staph 16,793(6) *
John J. Wiesner 13,952(6) *
Scott J. Davido 22,613(6) *
Charles P. Shaffer 29,100(6) 0
James M. Zamberlan 48,238(6) 0
- -------------------------------------------- -------------------------- ---------------
All directors and executive
officers as a group (15 persons): 721,728 4.82%
* less than 1%
- --------------------
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(1) Information with respect to beneficial ownership is based on
information furnished to the Company by each shareholder included in
this table. "Beneficial ownership" is a technical term broadly defined
by the Securities and Exchange Commission to mean more than ownership
in the usual sense. So, for example, you not only "beneficially" own
the Elder-Beerman Common Stock that you hold directly, but also the
Elder-Beerman Common Stock that you indirectly (through a relationship,
a position as a director or trustee, or a contract or understanding),
have (or share) the power to vote or sell or that you have the right to
acquire within 60 days.
(2) Snyder Capital Management, Inc. ("SCMI") is the general partner of
Snyder Capital Management, L.P. ("SCMLP"), a registered investment
advisor. SCMI and SCMLP reported the beneficial ownership (as of March
31, 2000) of such shares in a Form 13f dated May 12, 2000.
(3) PPM, a registered investment advisor, reported the beneficial ownership
(as of March 21, 2000) of such shares in Amendment No. 4 to Schedule
13D dated June 7, 2000. All such shares are held in portfolios of PPM
America Special Investments Fund, L.P. ("SIF I") and PPM America
Special Investments CBO II, L.P. ("CBO II"). PPM serves as investment
advisor to both SIF I and CBO II. PPM, PPM America CBO II Management
Company (general partner of CBO II) and PPM American Fund Management
GP, Inc. (general partner of SIF I) disclaim beneficial ownership of
all such shares.
(4) Mr. Bennett reported the beneficial ownership (as of June 21, 2000) of
such shares in a Schedule 13D filed on June 21, 2000. Mr. Bennett
shares beneficial ownership of as well as voting and dispositive power
with respect to such shares with Bennett Restructuring Fund, L.P. and
Bennett Offshore Restructuring Fund, Inc.
(5) The D3 Family Fund ("D3") reported the beneficial ownership (as of June
21, 2000) of such shares in a Schedule 13D filed June 22, 2000. D3 has
sole voting and dispositive power over such shares. Such shares include
shares held by Haredale Ltd. (20,000), James Henry Hildebrandt (6,500),
Toxford Corporation (3,000) and The Nierenberg Family Trust (50,000).
(6) These amounts include shares of Common Stock that the following persons
had a right to acquire within 60 days after June 26, 2000.
Stock Options Exercisable
Name by August 25, 2000
- ---- --------------------------
Mr. Mershad 107,600
Mr. Muskovich 62,400
Mr. Davido 11,400
Mr. Shaffer 10,000
Mr. Zamberlan 30,400
Mr. Kasen 4,667
Mr. Macaluso 2,217
Mr. Mason 19,314
Mr. Noonan 6,506
Mr. Olsoff 11,990
Ms. Pomerantz 11,086
Mr. Staph 11,990
Mr. Wiesner 9,549
(7) Includes 1,000 shares of Common Stock with shared voting or investment
power.
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SUMMARY COMPENSATION TABLE
The table below shows the before-tax compensation for the years shown
for Elder-Beerman's Chief Executive Officer and the four next highest paid
executive officers (the "Named Executive Officers") at the end of fiscal year
1999.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------------------- -----------------------------------------------------------------
Awards Payouts
--------------------------- ----------------------------
Securities All
Other Restricted Underlying Other
Annual Stock Options/ LTIP Compen-
Name and Salary Bonus Compen- Award(s) SARs Payouts sation
Principal Position Year ($) ($) sation ($)(2) ($) (#) ($) ($)(4)(5)
------------------ ---- ----- --------- ---------- ----- ----- ----- ---------
- ------------------------------------------------------------------------------------------------------------------------------------
Frederick J. Mershad --
Chairman and Chief 1999 600,000 581,250 300,000 7,665
Executive Officer 1998 559,263 120,000 29,403 1,050,000 75,000 9,970
1997 503,344 500,000 51,251 683,703 194,000
John A. Muskovich--
President, Chief 1999 425,000 310,000 160,000 6,000
Operating Officer 1998 412,207 85,000 473,127 30,000 9,950
1997 267,335 598,750 505,325 126,000
Scott J. Davido --
Executive Vice 1999 217,596 36,000 60,550 45,625 25,000 382
President--Chief 1998 174,076 21,280 26,626 26,599 4,585
Financial Officer, 1997 15,935 27,500(1) 3,124 21,000
Treasurer and Secretary
Charles P. Shaffer
Executive Vice President 1999 243,654 44,303(3) 95,190 40,000 7,159
-- Merchandising and 1998 220,769 60,000 37,495 5,483
Marketing 1997 190,385 60,000 37,505 25,000 1,349
James M. Zamberlan --
Executive Vice 1999 309,808 53,156 20,000 2,712
President-- Stores 1998 278,803 79,650 234,892 15,000 8,050
1997 139,944 41,313 20,386 61,000
- -----------------
(1) Includes a $25,000 signing bonus paid in fiscal year 1997.
(2) Moving expense reimbursement.
(3) Includes 4,430 deferred shares and 1,108 restricted shares awarded to Mr.
Shaffer as the deferred portion of his 1999 bonus pursuant to the Equity
and Performance Incentive Plan.
(4) Includes life insurance premium payments paid by the Company in 1999 in the
following amounts: Mr. Mershad $4,425, Mr. Muskovich $2,760, Mr. Zamberlan
$2,712, Mr. Davido $382 and Mr. Shaffer $2,299.
(5) Includes matching contributions paid by the Company in 1999 under the
Company's Retirement Savings Plan in the following amounts: Mr. Mershad
$3,240, Mr. Muskovich $3,240 and Mr. Shaffer $4,860.
STOCK OPTIONS
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The following table sets forth information concerning stock option
grants made to the Named Executive Officers during fiscal year 1999 pursuant to
the Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------------------
Potential Realizable Value
At Assumed Annual Rate
Of Stock Price Appreciation
For Option Term
---------------
Percent Of
Number Of Total
Securities Options/SARs
Underlying Granted To Exercise
Options/SARs Employees In Of Base Expiration
Name Granted(#)(1)(2) Fiscal Year Price($/Sh) Date 5% ($) 10% ($)
---- ---------------- ----------- ----------- ---- ------ -------
Frederick J. Mershad 90,000 (1) 11.41 8.00 2/25/06 261,453 639,230
100,000 (1) 12.67 9.60 2/25/06 130,503 550,256
110,000 (1) 13.94 11.20 2/25/06 (32,447) 429,281
John A. Muskovich 48,000 (1) 6.08 8.00 2/25/06 139,441 340,923
53,500 (1) 6.78 9.60 2/25/06 69,819 294,387
58,500 (1) 7.41 11.20 2/25/06 (17,256) 228,300
Scott J. Davido 15,000 (2) 1.90 9.125 3/15/09 86,080 218,143
10,000 (2) 1.27 9.125 4/22/09 57,387 145,429
Charles P. Shaffer 15,000 (2) 1.90 9.125 4/22/09 86,080 218,143
25,000 (2) 3.17 6.750 8/19/09 106,126 268,944
James M. Zamberlan 20,000 (1) 2.53 9.125 4/22/09 114,773 290,858
(1) Options vest three years from date of grant.
(2) Options vest one-fifth annually, beginning one year from date of grant.
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STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options
exercised during fiscal year 1999 by the Named Executive Officers and the fiscal
year-end value of unexercised options held by the Named Executive Officers. All
of such options were granted under the Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number Of Securities Value Of Unexercised
Underlying Unexercised In-The-Money
Shares Value Options/SARs Held At Options/SARs Held At
Acquired On Realized January 29, 2000 (#) January 29, 2000($)(1)
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --- ----------- ------------- ----------- -------------
Frederick J. Mershad 0 $0.00 92,600 476,400 $0.00 $0.00
John A. Muskovich 0 $0.00 56,400 259,600 $0.00 $0.00
Scott J. Davido 0 $0.00 8,400 37,600 $0.00 $0.00
Charles P. Shaffer 0 $0.00 10,000 55,000 $0.00 $0.00
James M. Zamberlan 0 $0.00 27,400 68,600 $0.00 $0.00
- ----------------
(1) Based on the closing price on NASDAQ of the Company's Common Stock on
January 28, 2000 (the last trading day in fiscal year 1999) of $5.00.
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EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN OFFICERS
The Company has entered into employment agreements with Frederick J.
Mershad, Chairman and Chief Executive Officer and John A. Muskovich, President
and Chief Operating Officer, and several of its other executive officers as
described below (the "Employment Agreements"). These Employment Agreements set
forth (a) the executive's compensation and benefits, subject to increases at the
discretion of the Board of Directors, (b) the Company's right to terminate the
executive for cause or otherwise; (c) the amounts to be paid by the Company in
the event of the executive's termination, death or disability while rendering
services; (d) the executive's duty of strict confidence and to refrain from
conflicts of interest; (e) the executive's obligations not to compete for the
term of the agreement plus one year unless the executive terminated his
employment for good reason or the employer terminates the executive other than
for cause; and (f) the executive's right to receive severance payments. In
general, these Employment Agreements provide that if Mr. Mershad or Mr.
Muskovich is terminated for any reason, other than for cause or following a
"change in control," (as defined in the Employment Agreements), he will receive
payments equal to the remaining base salary that would have been distributed to
him by the Company under the remaining term of his Employment Agreement and the
incentive compensation earned by the executive for the most recent fiscal year.
If such executive (a) is terminated within two years of a change in control
without cause, (b) voluntarily terminates within two years of a change in
control, or (c) is terminated in connection with but prior to a change in
control and termination occurs following the commencement of any discussions
with any third party that ultimately results in a change in control, he will
receive a severance payment equal to the greater of 2.99 times the Internal
Revenue Code "base amount" as described in Section 280G of the Internal Revenue
Code or two times his most recent base salary and bonus and the executive will
continue to be eligible for health benefits, perquisites and fringe benefits
generally made available to senior executives following his termination, unless
the executive obtains new employment providing substantially similar benefits. A
tax gross-up on excise taxes also will be paid if the severance pay exceeds the
limits imposed by the Internal Revenue Code.
The Company has also entered into Employment Agreements that include
severance pay provisions with each of Messrs. Zamberlan, Davido and Shaffer.
These Employment Agreements set forth (a) the executive's compensation and
benefits, subject to review at the discretion of the Board of Directors, (b) the
Company's right to terminate the executive for cause or otherwise; (c) the
amounts to be paid by the Company in the event of the executive's termination,
death or disability while rendering services; (d) the executive's duty of strict
confidence and to refrain from conflicts of interest; (e) the executive's
obligations not to compete for the term of the agreement plus one year unless
the executive terminated his employment for good reason or the employer
terminates the executive other than for cause; and (f) the executive's right to
receive severance payments if he (i) is terminated within two years of a change
in control without cause, (ii) voluntarily terminates for defined good reasons
within two years of a change of control, (iii) terminates his employment for any
reason, or without reason, during the thirty-day period immediately following
the first anniversary of a change in control, or (iv) is terminated in
connection with but prior to a change in control and termination occurs
following the commencement of any discussions with any third party that
ultimately results in a change in control. Specifically, under the Employment
Agreements, the amount of any severance payment by the Company will be the
greater of 2.99 times the Internal Revenue Code "base amount" as described in
Section 280G of the Internal Revenue Code or two times his most recent base
salary and bonus. Severance payments made under the Employment Agreements will
reduce any amounts that would be payable under any other severance plan or
program, including the Company's severance pay plan. A tax gross-up on excise
taxes also will be paid if the severance pay exceeds the limit imposed by the
Internal Revenue Code. In addition, the executive will continue to be eligible
for health benefits, perquisites, and fringe benefits generally made available
to senior executives for two years following his termination, unless the
executive waives such coverage, fails to pay any amount required to maintain
such coverage, or obtains new employment providing substantially similar
benefits.
The Company has also entered into Indemnification Agreements with each
current member of the Board of Directors as well as each of the Company's
executive officers. These agreements provide that, to the extent permitted by
Ohio law, the Company will indemnify the director or officer against all
expenses, costs, liabilities and losses (including attorneys' fees, judgments,
fines or settlements) incurred or suffered by the director or officer in
connection with any suit in which the director or officer is a party or is
otherwise involved as a result of the individual's service as a member of the
Board of Directors or as an officer so long as the individual's conduct that
gave rise to such liability meets certain prescribed standards.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors (the "Committee")
has responsibility for setting and administering the policies that govern
executive compensation. The Committee has authority, among other things, to
review, analyze and recommend compensation programs to the Board and to
administer and grant awards under the Company's Equity and Performance Incentive
Plan (the "Plan"). The Committee is composed entirely of outside directors.
Reports of the Committee's actions and decisions are recommended to the full
Board. The purpose of this report is to summarize the philosophical principles,
specific program objectives and other factors considered by the Committee in
reaching its determination regarding the executive compensation of the Chief
Executive Officer and the Company's executive officers.
The Committee's goal is to ensure the establishment and administration
of executive compensation policies and practices that will enable Elder-Beerman
to attract, retain and motivate the management talent necessary to achieve the
Company's goals and objectives. The Committee's philosophy is that executive
compensation should include the following:
- A competitive mix of short-term (base salary and annual
incentive bonus) and long-term (stock options and restricted
and deferred shares) compensation that helps the Company
attract and retain executive talent.
- Cash compensation that generally reflects competitive industry
levels, with annual incentive bonus opportunities that may
produce total compensation at or above competitive levels if
performance against predetermined objectives exceeds
expectations.
- Opportunities for ownership of Elder-Beerman's Common Stock
that align the interests of Company executives with the
long-term interests of shareholders.
The Company's executive compensation is comprised primarily of (i)
salaries, (ii) annual cash incentive bonuses and (iii) long-term incentive
compensation in the form of stock options, deferred shares and restricted shares
granted under the Plan. Each year the Committee reviews market data and assesses
the Company's competitive position for each of these three components. To assist
in benchmarking the competitiveness of its compensation programs, the Committee
retains a third-party consultant to compile an executive compensation survey for
comparably sized retail companies. Because the Committee believes that
compensation in the retail industry is more directly tied to the size of
enterprise than the type of retail business, these surveys also include
comparably sized retailers outside of the department store business. Each of the
components of executive compensation is discussed below.
COMPONENTS OF COMPENSATION
BASE SALARY
Base salaries for Company executives were initially established in each
of the executive's employment agreements, which were approved pursuant to the
Plan of Reorganization. The Committee reviews base salaries annually and makes
adjustments on the basis of the performance of both the individual executive and
the Company, the executive's level of responsibility in the Company, the
executive's importance to the Company and the general level of executive
compensation in the retail industry. The base salaries and increases in the base
salaries of the Company's executive officers (other than the Chief Executive
Officer) are reviewed and approved by the Committee after considering
recommendations made by the Chief Executive Officer in light of the criteria
discussed above.
ANNUAL BONUS
- GENERAL PARAMETERS
Annual bonus awards are designed to promote the achievement of the
Company's business objectives. In setting the bonus award targets each year that
the Company must meet before it can make any bonus payments, the Committee
considers the Company's prior year's performance and objectives, as well as its
expectations for the
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34
upcoming year. Additionally, individual performance goals are established for
each participant. Bonus program participants receive no payments unless minimum
thresholds are achieved.
Bonus targets are fixed as a percentage of annual base salary based on
comparable incentives paid by other retail companies. Target bonus percentages
for the executive officers ranged from 35% to 50%. The target percentage
increases with the level of responsibility of the executive. Bonus payments may
range from 0% to 150% of the target annual bonus, with payments increasing as
performance improves.
- DEFERRED SHARES AND RESTRICTED SHARES
An executive may elect to defer up to 50% of his annual bonus in the
form of deferred shares. Deferred shares are subject to a deferral period of at
least three years, which is accelerated in the event of death, permanent
disability, termination of employment or change in control of Elder-Beerman.
Holders of deferred shares do not have voting rights for their deferred shares,
but the terms of the deferred shares may provide for dividend equivalents. The
Company matches 25% of the deferred shares in restricted shares.
Restricted shares vest in three years from the date of grant, which is
accelerated in the event of death, permanent disability or a change in control
of Elder-Beerman. Prior to vesting, restricted shares are forfeitable upon
termination of employment. The restricted shares provide for dividend
equivalents and voting rights.
The deferred shares and restricted shares are granted to executives in
accordance with the Plan.
- 1999 BONUS OBJECTIVES
Annual bonuses for 1999 were based on meeting weighted objectives for
the following measurements:
- Corporate operating profit;
- Financial goals in the applicable executive's area of
responsibility; and
- Individual performance goals for the applicable executive
For 1999, the Company did not achieve the target award level
established for operating profit and therefore, the Company did not pay any
amounts for this component of bonuses. Many executives were able to achieve some
or all of their respective area of responsibility and individual performance
goals, which resulted in each executive earning in total between 30% and 55% of
the executive's respective target bonus amounts.
LONG-TERM INCENTIVE AWARDS
- STOCK OPTIONS, DEFERRED SHARES AND RESTRICTED SHARES
The Committee administers the Plan, which provides for long-term
incentives to executive officers in the form of stock options, deferred shares
and restricted shares. The awards of stock options, deferred shares and
restricted shares provide compensation to executives only if shareholder value
increases. To determine the number of stock options, deferred shares and
restricted shares awarded, the Committee reviews a survey prepared by a third-
party consultant of awards made to individuals in comparable positions at other
retail companies and the executive's past performance, as well as the number of
long-term incentive awards previously granted to the executive. The deferred
shares and restricted shares are subject to the terms and conditions described
above.
EXECUTIVE PLAN
At the beginning of Fiscal 1999, the Committee adopted a long-term
incentive award plan (the "Executive Plan") for Mr. Mershad, its Chief Executive
Officer, and Mr. Muskovich, its President and Chief Operating Officer. This
Executive Plan consists of performance-based restricted shares and premium
priced stock options. This Executive Plan was developed to achieve two key
objectives:
- Create strong incentives that will drive shareholder value;
and
- Create a retention mechanism for the top two officers of the
Company.
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35
To establish benchmarks for a competitive long-term incentive plan for
Messrs. Mershad and Muskovich, the Committee engaged a third party consultant to
conduct an analysis of executive compensation at 12 peer retail companies. The
Committee reviewed the current compensation packages of Messrs. Mershad and
Muskovich and evaluated the Company's performance and future performance
objectives. Bearing in mind these factors and the two key objectives for the
Executive Plan, the Committee formulated the amounts of restricted shares and
stock options to be granted under the Executive Plan to Messrs. Mershad and
Muskovich and the earnings per share and stock price targets that must be met
for Messrs. Mershad and Muskovich to earn their respective awards. Pursuant to
the terms of the Executive Plan, any restricted shares granted to Messrs.
Mershad and Muskovich will vest at the end of three years only if the Company
meets target earnings per share levels. The premium price stock options will
vest over a period of three years and the vesting is not contingent on
performance goals.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base salary and increases in the base salary of the Chief Executive
Officer are reviewed annually and approved by the Committee and the nonemployee
members of the Board of Directors after review of the Chief Executive Officer's
performance against predetermined performance criteria set by the nonemployee
Directors.
1999 BASE SALARY AND ANNUAL BONUS
Mr. Mershad's annual base salary was $600,000, the same level since
March 22, 1998. Mr. Mershad is also eligible for an annual bonus of up to 50%
of his base salary. Mr. Mershad's bonus is determined in the same manner
described above for the executive officers. For fiscal year 1999, Mr. Mershad
received no bonus.
EXECUTIVE PLAN
On February 25, 1999 pursuant to the Executive Plan, the Committee
granted Mr. Mershad 75,000 restricted shares and options to purchase 300,000
shares of Elder-Beerman stock. The restricted shares granted to Mr. Mershad will
vest at the end of three years only if the Company meets target earnings per
share levels. The premium price stock options will vest at the end of three
years and the vesting is not contingent on performance goals. At the date of the
grant approximately one-third of the options had an exercise price equal to the
then-current stock price. The remaining two-thirds of the options were set with
exercise prices of 20% to 40% above current market price.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Under Section 162(m) of the Internal Revenue Code, the Company is
precluded from deducting compensation in excess of $1 million per year paid to
each of the Named Executive Officers. Qualified performance-based compensation
is excluded from this deduction limitation if certain requirements are met. The
Plan is designed to permit (but not require) the Committee to grant awards that
will qualify as performance-based compensation that is excluded from the
limitation in Section 162(m). The Committee believes that Section 162(m) should
not cause the Company to be denied a deduction for Fiscal 1999 compensation paid
to the Named Executive Officers. The Committee will work to structure components
of its executive compensation package to achieve maximum deductibility under
Section 162(m) while at the same time considering the goals of its executive
compensation policies.
The foregoing is the report of the Compensation Committee of the Board
of Directors.
Bernard Olsoff
Jack A. Staph
John J. Wiesner
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36
STOCK PRICE PERFORMANCE
The following graph depicts the value of $100 invested in Elder-Beerman
Common Stock (trading symbol "EBSC") beginning February 17, 1998 (the first
trading day of the Common Stock) through January 29, 2000 (the last day of the
Company's fiscal year). Comparisons are made to:
1. The Standard & Poor's SmallCap 600 Index, a market-value
weighted index of 600 domestic companies with an average
equity market value of approximately $500 million.
2. A Regional Department Store Peer Group, consisting of The
Bon-Ton Stores, Inc., Stage Stores, Inc., Gottschalks Inc.,
and Jacobson Stores Inc. The return for this group was
calculated assuming an equal dollar amount was invested in
each retailer's stock based on closing prices as of February
17, 1998.
[LINE GRAPH]
Base
Period
Company/Index Name Feb 98 May 98 Aug 98 Oct 98 Jan 99 May 99 Jul 99 Oct 99 Jan 00
S&P Small Cap 600 Index $100 $107 $93 $84 $93 $91 $97 $93 $103
Regional Dept Store Peer Group Index 100 116 91 57 59 53 58 53 40
EBSC 100 165 140 71 54 51 37 41 30
YEARS ENDING
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 8, 2000, the Compensation Committee of the Board of
Directors of the Company recommended that the Board approve a loan to John A.
Muskovich for the purpose of financing the purchase of his new home in Dayton,
Ohio. Following approval by the Board of this recommendation, on February 8,
2000, the Company made an unsecured loan to Mr. Muskovich in the amount of
$230,000. The Company's loan to Mr. Muskovich bears interest at the same rate
charged to the Company under the Company's Revolving Credit Facility and
Receivable Securitization Facility. The principal and interest are due on the
earlier of (i) three days after the closing of the purchase of Mr. Muskovich's
old residence or (ii) August 8, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than 10
percent of a registered class of our equity securities to file reports of
ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. The
Securities and Exchange Commission requires this group to furnish us with copies
of all such filings. The Company periodically reminds this group of its
reporting obligation and assists in making the required disclosure once the
Company is notified that a reportable event has occurred. The Company is
required to disclose any failure by any of the above mentioned persons to make
timely Section 16 reports.
Based upon its review of such forms received by Elder-Beerman and
written representations from the directors and executive officers that no other
reports were required, Elder-Beerman is unaware of any instances of
noncompliance, or late compliance, with such filings during fiscal year 1999 by
its directors, executive officers or 10 percent shareholders.
INDEPENDENT AUDITORS
In February, 1999, Deloitte & Touche LLP was appointed by the Board of
Directors of the Company, on the recommendation of the Audit and Finance
Committee, as the Company's independent auditors for the fiscal year ended
January 29, 2000. Representatives of Deloitte & Touche are expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if they so desire. They are expected to be available to respond to proper
questions regarding the independent auditors' responsibilities.
SUBMISSION OF SHAREHOLDER PROPOSALS
Pursuant to our Regulations, for any shareholder proposal to be
eligible for inclusion in our proxy statement and form of proxy for our next
annual meeting, your proposals must be received at our executive offices not
less than 60 nor more than 90 calendar days prior to the date of next year's
annual meeting. If public notice of the date of the annual meeting is not given
at least 105 days prior to the annual meeting, submissions must be delivered to
Elder-
32
37
Beerman no later than 10 days following the public announcement of the meeting
date. Such proposals should be submitted by certified mail, return receipt
requested, addressed to us at 3155 El-Bee Road, Dayton, Ohio 45439, Attention:
Secretary.
OTHER MATTERS
The Board of Directors knows of no other matters that are likely to be
brought before the Annual Meeting, but if other matters do properly come before
the meeting, the persons named in the enclosed proxy, or their substitutes, will
vote the proxy in accordance with their best judgment.
The Company's 1999 Annual Report, including financial statements, has
been mailed along with this Proxy Statement.
**********
It is important that the [WHITE] proxy cards be returned promptly. If
you do not plan to attend the Annual Meeting, we urge you to fill out, date and
mail the enclosed [WHITE] proxy card in the enclosed envelope, which requires no
postage if mailed in the United States. THE BOARD OF DIRECTORS ALSO URGES YOU
NOT TO SIGN ANY PROXY CARD SENT TO YOU BY PPM. EVEN IF YOU HAVE PREVIOUSLY
SIGNED A PROXY CARD SENT TO YOU BY PPM, YOU CAN REVOKE THAT EARLIER PROXY BY
SIGNING, DATING AND MAILING THE ENCLOSED [WHITE] PROXY CARD IN THE ENVELOPE
PROVIDED.
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SCHEDULE A
----------
CERTAIN INFORMATION REGARDING DIRECTORS AND CERTAIN EXECUTIVE OFFICERS WHO
ARE DEEMED PARTICIPANTS BECAUSE THEY MAY SOLICIT PROXIES
Because the PPM Proposals contemplate the election of PPM's nominees to
the Board of Directors, the rules of the Securities and Exchange Commission
require the Company to include in this Proxy Statement certain additional
information with respect to "Participants" (as defined in Schedule 14A
promulgated pursuant to the Securities Exchange Act of 1934, as amended).
Pursuant to those rules, the members of the Board of Directors and other
executive officers are deemed Participants in the solicitation of proxies. The
following table sets forth the name and present principal occupation or
employment (except with respect to the directors whose principal occupation is
set forth in the Proxy Statement), and the name, principal business and address
of any corporation or other organization in which such employment is carried on,
of the directors and executive officers of the Company who may assist in
soliciting proxies from the Company's shareholders. Unless otherwise indicated
below, the principal business address of each such Participant is 3155 El-Bee
Road, Dayton, Ohio 45439 and such person is an employee of the Company.
Directors are indicated with an asterisk.
Dennis S. Bookshester*
Fruit of the Loom, Ltd.
One Fruit of the Loom Drive
Bowling Green, KY 42102
Stewart M. Kasen*
Private Investor (no business address)
Charles Macaluso*
East Ridge Consulting Group
48 Dorchester Road
Darien, CT 06820
Steven C. Mason*
Retired (no business address)
Frederick J. Mershad*
John A. Muskovich*
Thomas J. Noonan, Jr.*
Strauss Discount Auto
9A Brick Plant Road
South River, NJ 08882-1098
Bernard Olsoff*
Retired (no business address)
Laura H. Pomerantz*
Newmark & Company Real Estate, Inc.
125 Park Avenue
New York, NY 10017
Jack A. Staph*
Attorney and Private Investor
29525 Chagrin Blvd., Suite #316
Pepper Pike, OH 44122
39
John J. Wiesner*
Stage Stores, Inc.
P.O. Box 35167
Houston, TX 77235
Scott J. Davido Executive Vice President -- Chief Financial Officer,
Treasurer and Secretary
INFORMATION REGARDING OWNERSHIP OF THE COMPANY'S COMMON STOCK BY
PARTICIPANTS
Except as set forth in this Proxy Statement, no Participant owns any
Common Stock of record but not beneficially. The number of shares of Common
Stock held by directors and certain executive officers is set forth in this
Proxy Statement.
TRANSACTIONS IN THE SECURITIES OF THE COMPANY WITHIN THE PAST TWO YEARS AND
CERTAIN OTHER TRANSACTIONS
Except as set forth in the following table, none of the Participants
has purchased or sold or otherwise disposed of any shares of Common Stock of the
Company in the past two years:
NAME DATE NUMBER OF SHARES OF COMMON STOCK
PURCHASED (SOLD)
Frederick J. Mershad 8/3/98 376 (1)
8/28/98 4,000 (2)
11/2/98 523 (1)
12/11/98 2,000 (2)
2/1/99 459 (1)
4/26/99 1,000 (2)
9/7/99 4,000 (2)
John A. Muskovich 8/3/98 426 (1)
9/2/98 2,020 (2)
11/2/98 592 (1)
2/1/99 221 (1)
Scott J. Davido 8/3/98 109 (1)
11/2/98 151 (1)
2/1/99 219 (1)
Laura H. Pomerantz 8/27/98 6,000 (2)
(1) Purchase of shares pursuant to the Company's Employee Stock Purchase Plan.
(2) Purchase of shares in open market.
MISCELLANEOUS INFORMATION CONCERNING PARTICIPANTS
Except as disclosed is this Proxy Statement, to the knowledge of the
Company, (a) none of the Participants identified above was or is a party to a
contract, arrangement or understanding with respect to the Company's securities,
(b) there are no contracts, arrangements or understandings between the Company
and Participants with respect to employment by the Company and its affiliates or
with respect to transactions in which the Company or any of its affiliates are
or will be parties and (c) none of the Participants has any substantial
interest, direct or indirect, by security holdings or otherwise, in any matter
to be voted on at the Company's Annual Meeting.
40
Annex A
THE ELDER-BEERMAN STORES CORP.
EQUITY AND PERFORMANCE INCENTIVE PLAN
(AS AMENDED AND RESTATED AS OF AUGUST 24, 2000)
ARTICLE I
Purpose and Definitions
1.1 PURPOSE. The purpose of the Equity and Performance Incentive Plan
(the "Plan") is to attract and retain directors, officers and key employees for
The Elder-Beerman Stores Corp. (the "Corporation") and its Subsidiaries and to
provide to such persons incentives and rewards for superior performance.
1.2 EFFECTIVE DATE. The Plan will be effective on the confirmation date
of the Joint Plan of Reorganization of The Elder-Beerman Stores Corp. and its
Subsidiaries (the "Joint Plan of Reorganization"). As of the date the Plan
becomes effective, the Plan will be deemed authorized and approved in all
respects and for all purposes, as provided in the Joint Plan of Reorganization,
without any requirements of further action by any shareholders or directors of
The Elder-Beerman Stores Corp.
1.3 DEFINITIONS. As used in the Plan,
"Appreciation Right" means a right granted pursuant to Section 3.3
of the Plan, and includes both Tandem Appreciation Rights and Free-Standing
Appreciation Rights.
"Bankruptcy Code" means 11 U.S.C. Sections 101-1330.
"Board" means the Board of Directors of the Corporation and, to the
extent of any delegation by the Board to a committee (or subcommittee thereof)
pursuant to Section 6.5 of the Plan, such committee (or subcommittee thereof).
"Change of Ownership" means any of the following events:
(a) The sale to any purchaser unaffiliated with the Corporation of
all or substantially all of the assets of the Corporation;
(b) The sale, distribution, or accumulation of more than 50% of the
outstanding voting stock of the Corporation to/by any acquiror or group of
affiliated acquirors that are unaffiliated with the Corporation;
(c) Individuals who, on the completion of the Corporation's chapter
11 reorganization under the Bankruptcy Code, constitute the Board of Directors
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to such completion whose election or nomination for election was approved by
41
a vote of at least two-thirds of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for director, without
objection to such nomination) will be an Incumbent Director; provided, however,
that no individual elected or nominated as a director of the Corporation
initially as a result of an actual or threatened election contest with respect
to directors or any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board will be deemed to be
an Incumbent Director; or
(d) The merger or consolidation of the Corporation with another
entity (as such term is defined in section 101(16) of the Bankruptcy Code) (an
"Entity") unaffiliated with the Corporation if, immediately after such merger or
consolidation, less than a majority of the combined voting power of the then
outstanding securities of such Entity are held, directly or indirectly, in the
aggregate by the holders immediately prior to such transaction of the then
outstanding securities of the Corporation entitled to vote generally in the
election of directors.
(e) In no event may "Change of Ownership" be construed to include
any change of control of the Corporation or any Subsidiary that occurs solely as
a result of any exchange or distribution of equity securities of the Corporation
or any Subsidiary upon consummation of a plan of reorganization for the
Corporation or any Subsidiary in its chapter 11 case.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" means the committee described in Section 6.4.
"Common Shares" means shares of common stock, $0.01 par value per
share, of the Corporation or any security into which such Common Shares may be
changed by reason of any transaction or event of the type referred to in Section
6.1 of the Plan.
"Covered Employee" means a Participant who is, or is determined by
the Board to be likely to become, a "covered employee" within the meaning of
Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a
grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares will become
effective (which date may not be earlier than the date on which the Board takes
action with respect thereto) and may also include the date on which a grant of
Option Rights to a Non-Employee Director becomes effective pursuant to Section
4.2 of the Plan.
"Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 3.5 of the Plan.
"Deferred Shares" means an award made pursuant to Section 3.5 of
the Plan of the right to receive Common Shares or cash in lieu thereof at the
end of a specified Deferral Period.
"Designated Subsidiary" means a Subsidiary that is (i) not a
corporation or (ii) a corporation in which at the time the Corporation owns or
controls, directly or indirectly, less than
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80% of the total combined voting power represented by all classes of stock
issued by such corporation.
"Exercise Right" means the price payable upon exercise of a
Free-Standing Appreciation Right.
"Free-Standing Appreciation Right" means an Appreciation Right not
granted in tandem with an Option Right.
"Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"Market Value per Share" means, as of any particular date, the fair
market value of the Common Shares as determined by the Board, except that, with
respect to options granted pursuant to Section 3.9 and 4.3, Market Value per
Share will be $10.89 per share.
"Non-Employee Director" means a Director of the Corporation who is
not an employee of the Corporation or any Subsidiary.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 3.2 or Section 4.2 of the
Plan.
"Participant" means a person who is selected by the Board to
receive benefits under the Plan and who is at the time an officer, or other key
employee of the Corporation or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within 90 days of the Date
of Grant, and also includes each Non-Employee Director who receives an award of
Option Rights pursuant to Section 4.2 of the Plan; provided, however, that for
purposes of Articles III and V of the Plan, Participant does not include such
Non-Employee Director.
"Performance Objectives" means the measurable performance objective
or objectives established pursuant to the Plan for Participants who have
received grants of Performance Shares or Performance Units or, when so
determined by the Board, Option Rights, Appreciation Rights, Restricted Shares
and dividend credits pursuant to the Plan. Performance Objectives may be
described in terms of Corporation-wide objectives and/or objectives that are
related to the performance of the individual Participant or of the Subsidiary,
division, department, region, store or function within the Corporation or
Subsidiary in which the Participant is employed. The Performance Objectives may
be made relative to the performance of other corporations. The Performance
Objectives applicable to any award to a Covered Employee will be based on
specified levels of or growth in one or more of the following criteria:
1. earnings;
2. earnings before interest, tax, depreciation and amortization;
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3. earnings per share (earnings per share will be calculated
without regard to any change in accounting standards that may be
required by the Financial Accounting Standards Board after the
goal is established);
4. share price;
5. total shareholder return;
6. return on invested capital, equity, or assets;
7. operating earnings;
8. sales growth.
Except where a modification would result in an award no longer
qualifying as performance based compensation within the meaning of Section
162(m) of the Code, if the Board determines that a change in the business,
operations, corporate structure or capital structure of the Corporation, or the
manner in which it conducts its business, or other events or circumstances
render the Performance Objectives unsuitable, the Board may in its discretion
modify such Performance Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Board deems appropriate and equitable.
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 3.6 of the
Plan within which the Performance Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 3.6 of the Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 3.6 of the Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 3.2(g) of the Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 3.4 or Section 4.2 of the Plan as to which neither the substantial risk
of forfeiture nor the prohibition on transfers referred to in Section 3.4 of the
Plan has expired.
"Spread" means the excess of the Market Value per Share on the date
when an Appreciation Right is exercised, or on the date when Option Rights are
surrendered in payment of the Option Price of other Option Rights, over the
Option Price provided for in the related Option Right or Free-Standing
Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity (i) more
than 50% of whose outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more than 50% of
whose ownership interest representing the right generally to make decisions for
such other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Corporation, except that for purposes of determining whether
any person may be a Participant for purposes of any grant of Incentive Stock
Options, "Subsidiary" means any corporation in which at the time the Corporation
owns or controls,
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directly or indirectly, more than 50% of the total combined voting power
represented by all classes of stock issued by such corporation.
"Tandem Appreciation Right" means an Appreciation Right granted in
tandem with an Option Right.
"Voting Shares" means at any time the then-outstanding securities
entitled to vote generally in the election of directors of the Corporation.
ARTICLE II
Shares Available Under the Plan
2.1 SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 6.1 of the Plan, the number of Common Shares that may be
issued or transferred (i) upon the exercise of Option Rights or Appreciation
Rights, (ii) as Restricted Shares and released from substantial risks of
forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of Performance
Shares or Performance Units that have been earned, (v) as awards to Non-Employee
Directors or (vi) in payment of dividend equivalents paid with respect to awards
made under the Plan may not exceed in the aggregate 2,750,000 (2,250,000 of
which were approved in 1997 and 500,000 of which are being added as of August
24, 2000) shares plus any shares relating to awards that expire or are forfeited
or canceled. Such shares may be shares of original issuance or treasury shares
or a combination of the foregoing. Upon the payment of any Option Price by the
transfer to the Corporation of Common Shares or upon satisfaction of any
withholding amount by means of transfer or relinquishment of Common Shares,
there will be deemed to have been issued or transferred under the Plan only the
net number of Common Shares actually issued or transferred by the Corporation.
(b) The number of shares available in Subsection (a) of this
Section will be adjusted to account for shares relating to awards that expire;
are forfeited; or are transferred, surrendered, or relinquished upon the payment
of any Option Price by the transfer to the Corporation of Common Shares or upon
satisfaction of any withholding amount.
(c) Notwithstanding anything in this Section or elsewhere in the
Plan to the contrary, the aggregate number of Common Shares actually issued or
transferred by the Corporation upon the exercise of Incentive Stock Options may
not exceed 200,000 shares, subject to adjustments as provided in Section 6.1 of
the Plan. Further, no Participant may be granted Option Rights for more than
300,000 Common Shares during any calendar year, subject to adjustments as
provided in Section 6.1 of the Plan.
(d) Upon payment in cash of the benefit provided by any award
granted under the Plan, any shares that were covered by that award will again be
available for issue or transfer hereunder.
(e) Notwithstanding any other provision of the Plan to the
contrary, in no event may any Participant in any calendar year receive more than
300,000 Appreciation Rights, subject to adjustments as provided in Section 6.1
of the Plan.
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(f) Notwithstanding any other provision of the Plan to the
contrary, in no event may any Participant in any calendar year receive more than
75,000 Restricted Shares or 5,000 Deferred Shares, subject to adjustments as
provided in Section 6.1 of the Plan.
(g) Notwithstanding any other provision of the Plan to the
contrary, in no event may any Participant in any calendar year receive an award
of Performance Shares or Performance Units having an aggregate maximum value as
of their respective Dates of Grant in excess of $1,000,000.
ARTICLE III
Long-Term Incentive Awards
3.1 PURPOSE. The purpose of the long-term incentive awards provided
under this Article is to provide the Corporation a means to devise tailored
long-term stock and other incentive awards to officers and other key employees
of the Corporation or a Subsidiary, which will provide incentive for such
employees to act in the best interests of the Corporation's shareholders, will
reinforce such employees' mutuality of interest with shareholders, and will
promote the long-term interests of the Corporation and its Subsidiaries.
3.2 OPTION RIGHTS. The Board may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase Common Shares. Each such grant may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the
following provisions:
(a) Each grant will specify the number of Common Shares to which it
pertains subject to the limitations set forth in Section 2.1 of the Plan.
(b) Each grant will specify an Option Price per share, which may be
equal to or more or less than (but not less than 75% of) the Market Value per
Share on the Date of Grant, except that the Option Price per share for any
Incentive Stock Option will not be less than 100% of the Market Value per Share
on the Date of Grant.
(c) Each grant will specify whether the Option Price will be
payable (i) in cash or by check acceptable to the Corporation, (ii) by the
actual or constructive transfer to the Corporation of nonforfeitable,
unrestricted Common Shares owned by the Optionee (or other consideration
authorized pursuant to Subsection (d) of this Section) having a value at the
time of exercise equal to the total Option Price, or (iii) by a combination of
such methods of payment.
(d) The Board may determine, at or after the Date of Grant, that
payment of the Option Price of any option (other than an Incentive Stock Option)
may also be made in whole or in part in the form of Restricted Shares or other
Common Shares that are forfeitable or subject to restrictions on transfer,
Deferred Shares, Performance Shares (based, in each case, on the Market Value
per Share on the date of exercise), other Option Rights (based on the Spread on
the date of exercise) or Performance Units. Unless otherwise determined by the
Board at or after the Date of Grant, whenever any Option Price is paid in whole
or in part by means of any of the forms of consideration specified in this
Subsection, the Common Shares received upon the exercise of the Option Rights
will be subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that
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apply to the consideration surrendered, but only to the extent of (i) the number
of shares or Performance Shares, (ii) the Spread of any unexercisable portion of
Option Rights, or (iii) the stated value of Performance Units surrendered.
(e) Any grant may provide for deferred payment of the Option Price
from the proceeds of sale through a bank or broker on a date satisfactory to the
Corporation of some or all of the shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at the
election of the Optionee, in installments, with or without interest, upon terms
determined by the Board.
(g) Any grant may, at or after the Date of Grant, provide for the
automatic grant of Reload Option Rights to an Optionee upon the exercise of
Option Rights (including Reload Option Rights) using Common Shares or other
consideration specified in Subsection (d) of this Section. Reload Option Rights
will cover up to the number of Common Shares, Deferred Shares, Option Rights or
Performance Shares (or the number of Common Shares having a value equal to the
value of any Performance Units) surrendered to the Corporation upon any such
exercise in payment of the Option Price or to meet any withholding obligations.
Reload Options may have an Option Price that is no less than the applicable
Market Value per Share at the time of exercise and will be on such other terms
as may be specified by the Board, which may be the same as or different from
those of the original Option Rights.
(h) Successive grants may be made to the same Participant whether
or not any Option Rights previously granted to such Participant remain
unexercised.
(i) Each grant will specify the period or periods of continuous
service by the Optionee with the Corporation or any Subsidiary following the
grant which is necessary before the Option Rights or installments thereof will
become exercisable and may provide for the earlier exercise of such Option
Rights in the event of retirement, disability or death of the Participant or a
Change of Ownership or other similar transaction or event.
(j) Any grant of Option Rights may specify Performance Objectives
that must be achieved as a condition to the exercise of such rights.
(k) Option Rights granted under the Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(l) The Board may, at or after the Date of Grant of any Option
Rights (other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents will be credited against the Option Price.
(m) The exercise of an Option Right will result in the cancellation
on a share-for-share basis of any Tandem Appreciation Right authorized under
Section 3.3 of the Plan.
(n) No Option Right may be exercised more than 10 years from the
Date of Grant.
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(o) Each grant of Option Rights will be evidenced by an agreement
executed on behalf of the Corporation by an officer and delivered to the
Optionee and containing such terms and provisions, consistent with the Plan, as
the Board may approve.
3.3 APPRECIATION RIGHTS. (a) The Board may also authorize the granting
to any Optionee of Tandem Appreciation Rights in respect of Option Rights
granted hereunder at any time prior to the exercise or termination of such
related Option Rights; provided, however, that a Tandem Appreciation Right
awarded in relation to an Incentive Stock Option must be granted concurrently
with such Incentive Stock Option. A Tandem Appreciation Right will be a right of
the Optionee, exercisable by surrender of the related Option Right, to receive
from the Corporation an amount determined by the Board, which will be expressed
as a percentage of the Spread (not exceeding 100%) at the time of exercise.
(b) The Board may also authorize the granting to any Participant of
Free-Standing Appreciation Rights. A Free-Standing Appreciation Right will be a
right of the Participant to receive from the Corporation an amount determined by
the Board, which will be expressed as a percentage of the spread (not exceeding
100%) at the time of exercise.
(c) Each grant of Appreciation Rights may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the
following provisions:
(i) Any grant may specify that the amount payable on
exercise of an Appreciation Right may be paid by the Corporation in
cash, in Common Shares or in any combination thereof and may either
grant to the Participant or retain in the Board the right to elect among
those alternatives.
(ii) Any grant may specify that the amount payable on
exercise of an Appreciation Right may not exceed a maximum specified by
the Board at the Date of Grant.
(iii) Any grant may specify waiting periods before exercise
and permissible exercise dates or periods and will provide that no
Appreciation Right may be exercised except at a time when the related
Option Right (if applicable) is also exercisable and at a time when the
Spread is positive.
(iv) Any grant may specify that such Appreciation Right may
be exercised only in the event of retirement, disability or death of the
Participant or a Change of Ownership or other similar transaction or
event.
(v) Each grant of Appreciation Rights will be evidenced by
an agreement executed on behalf of the Corporation by an officer and
delivered to and accepted by the Participant, which agreement will
describe such Appreciation Rights, identify the related Option Rights
(if applicable), state that such Appreciation Rights are subject to all
the terms and conditions of the Plan, and contain such other terms and
provisions, consistent with the Plan, as the Board may approve.
(vi) Any grant of Appreciation Rights may specify
Performance Objectives that must be achieved as a condition of the
exercise of such rights.
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3.4 RESTRICTED SHARES. The Board may also authorize the grant or sale
to Participants of Restricted Shares. Each such grant or sale may utilize any or
all of the authorizations, and will be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale will constitute an immediate transfer
of the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, but subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale will provide that the Restricted Shares
covered by such grant or sale will be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code except (if the Board so
determines) in the event of retirement, disability or death of the Participant
or a Change of Ownership or other similar transaction or event, for a period of
not less than 3 years as determined by the Board at the Date of Grant.
(d) Each such grant or sale will provide that during the period for
which such substantial risk of forfeiture is to continue, the transferability of
the Restricted Shares will be prohibited or restricted in the manner and to the
extent prescribed by the Board at the Date of Grant (which restrictions may
include, without limitation, rights of repurchase or first refusal in the
Corporation or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Performance
Objectives which, if achieved, will result in termination or early termination
of the restrictions applicable to such shares and each grant may specify in
respect of such specified Performance Objectives, a minimum acceptable level of
achievement and will set forth a formula for determining the number of
Restricted Shares on which restrictions will terminate if performance is at or
above the minimum level, but falls short of full achievement of the specified
Performance Objectives.
(f) Any such grant or sale of Restricted Shares may require that
any or all dividends or other distributions paid thereon during the period of
such restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
(g) Each grant or sale of Restricted Shares will be evidenced by an
agreement executed on behalf of the Corporation by an officer and delivered to
and accepted by the Participant and will contain such terms and provisions,
consistent with the Plan, as the Board may approve. Unless otherwise directed by
the Board, all certificates representing Restricted Shares will be held in
custody by the Corporation until all restrictions thereon have lapsed, together
with a stock power executed by the Participant in whose name such certificates
are registered, endorsed in blank and covering such Shares.
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3.5 DEFERRED SHARES. The Board may also authorize the granting or sale
of Deferred Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and will be subject to all of the requirements
contained in the following provisions:
(a) Each such grant or sale will constitute the agreement by the
Corporation to deliver Common Shares to the Participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is equal
to or less than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale will be subject to a Deferral Period of
not less than one year, as determined by the Board at the Date of Grant, except
(if the Board so determines) in the event of retirement, disability, hardship or
death of the Participant or a Change of Ownership or other similar transaction
or event.
(d) During the Deferral Period, the Participant will have no right
to transfer any rights under his or her award and will have no rights of
ownership in the Deferred Shares and will have no right to vote them, but the
Board may, at or after the Date of Grant, authorize the payment of dividend
equivalents on such Shares on either a current or deferred or contingent basis,
either in cash or in additional Common Shares.
(e) Each grant or sale of Deferred Shares will be evidenced by an
agreement executed on behalf of the Corporation by any officer and delivered to
and accepted by the Participant and will contain such terms and provisions,
consistent with the Plan, as the Board may approve.
3.6 PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also
authorize the granting of Performance Shares and Performance Units that will
become payable to a Participant upon achievement of specified Performance
Objectives. Each such grant may utilize any or all of the authorizations, and
will be subject to all of the requirements, contained in the following
provisions:
(a) Each grant will specify the number of Performance Shares or
Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment will be made in the case of a Covered Employee.
(b) The Performance Period with respect to each Performance Share
or Performance Unit will be such period of time (not less than one year, except
in the event of retirement, disability or death of the Participant or a Change
of Ownership or other similar transaction or event, if the Board so determines)
commencing with the Date of Grant as is determined by the Board at the Date of
Grant.
(c) Any grant of Performance Shares or Performance Units will
specify Performance Objectives which, if achieved, will result in payment or
early payment of the award, and each grant may specify in respect of such
specified Performance Objectives a minimum acceptable level of achievement below
which no payment will be made and will set forth a formula for determining the
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number of Performance Shares or Performance Units that will be earned if
performance is at or above the minimum level, but falls short of full
achievement of the specified Performance Objectives. The grant of Performance
Shares or Performance Units will specify that, before the Performance Shares or
Performance Units are earned and paid, the Board must certify that the
Performance Objectives have been satisfied.
(d) Each grant will specify a minimum acceptable level of
achievement in respect of the specified Performance Objectives below which no
payment will be made and will set forth a formula for determining the amount of
payment to be made if performance is at or above such minimum but short of full
achievement of the Performance Objectives.
(e) Each grant will specify the time and manner of payment of
Performance Shares or Performance Units which have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the
Corporation in cash, in Common Shares or in any combination thereof and may
either grant to the Participant or retain in the Board the right to elect among
those alternatives.
(f) Any grant of Performance Shares may specify that the amount
payable with respect thereto may not exceed a maximum specified by the Board at
the Date of Grant. Any grant of Performance Units may specify that the amount
payable or the number of Common Shares issued with respect thereto may not
exceed maximums specified by the Board at the Date of Grant.
(g) The Board may, at or after the Date of Grant of Performance
Shares, provide for the payment of dividend equivalents to the holder thereof on
either a current or deferred or contingent basis, either in cash or in
additional Common Shares.
(h) Each grant of Performance Shares or Performance Units will be
evidenced by an agreement executed on behalf of the Corporation by any officer
and delivered to and accepted by the Participant, which agreement will state
that such Performance Shares or Performance Units are subject to all the terms
and conditions of the Plan, and contain such other terms and provisions,
consistent with the Plan, as the Board may approve.
3.7 TRANSFERABILITY. (a) Except as otherwise determined by the Board on
a case-by-case basis, no Option Right, Appreciation Right or other derivative
security granted under the Plan will be transferable by an Optionee other than
by will or the laws of descent and distribution, except (in the case of a
Participant who is not a Director or officer of the Corporation) to a fully
revocable trust of which the Optionee is treated as the owner for federal income
tax purposes. Except as otherwise determined by the Board on a case-by-case
basis, Option Rights and Appreciation Rights will be exercisable during the
Optionee's lifetime only by him or her or by his or her guardian or legal
representative.
(b) The Board may specify at the Date of Grant that part or all of
the Common Shares that are (i) to be issued or transferred by the Corporation
upon the exercise of Option Rights or Appreciation Rights, upon the termination
of the Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units or (ii) no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 3.4 of the Plan, will be subject to further restrictions on transfer.
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3.8 PARTICIPATION BY EMPLOYEES OF A DESIGNATED SUBSIDIARY. As a
condition to the effectiveness of any grant or award to be made hereunder to a
Participant who is an employee of a Designated Subsidiary, regardless whether
such Participant is also employed by the Corporation or another Affiliate, the
Board may require the Designated Subsidiary to agree to transfer to the
Participant (as, if and when provided for under the Plan and any applicable
agreement entered into between the Participant and the Designated Subsidiary
pursuant to the Plan) the Common Shares that would otherwise be delivered by the
Corporation upon receipt by the Designated Subsidiary of any consideration then
otherwise payable by the Participant to the Corporation. Any such grant or award
may be evidenced by an agreement between the Participant and the Designated
Subsidiary, in lieu of the Corporation, on terms consistent with the Plan and
approved by the Board and the Designated Subsidiary. All Common Shares so
delivered by or to a Designated Subsidiary will be treated as if they had been
delivered by or to the Corporation for purposes of Section 2.1 of the Plan and
all references to the Corporation in the Plan are deemed to refer to the
Designated Subsidiary except with respect to the definitions of the Board and
the Committee and in other cases where the context otherwise requires.
3.9 AWARDS ON THE EFFECTIVE DATE. Long-term incentive awards pursuant
to this Article will be initially made on the Effective Date as provided in
Exhibit A hereto, with such awards to each applicable employee based on gain
objective and salary.
ARTICLE IV
Awards to Non-Employee Directors
4.1 PURPOSE. The purpose of providing awards to non-employee directors
is to provide the Corporation a means to attract and retain qualified directors,
provide an incentive for such directors to act in the best interests of the
Corporation's shareholders, reinforce such directors' mutuality of interest with
shareholders and promote the long-term interests of the Corporation.
4.2 AWARDS TO NON-EMPLOYEE DIRECTORS. The Board may, from time to time
and upon such terms and conditions as it may determine, authorize the granting
to Non-Employee Directors of Option Rights (other than Incentive Stock Options)
and may also authorize the grant or sale of Restricted Shares to Non-Employee
Directors. A grant of Option Rights may be in lieu of all or a portion of such
Non-Employee Director's annual retainer, as elected by the Non-Employee
Director. Each grant of Option Rights awarded pursuant to this Section will be
upon terms and conditions consistent with Section 3.2 of the Plan. Each grant or
sale of Restricted Shares pursuant to this Article will be upon terms and
conditions consistent with Section 3.4 of the Plan.
4.3 AWARDS ON THE EFFECTIVE DATE. Awards to non-employee directors will
be initially made on the Effective Date as provided in Exhibit A hereto.
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ARTICLE V
Annual Incentive Awards
5.1 PURPOSE. The purpose of the annual incentive awards provided under
the Plan is to provide for the grant of short-term performance awards to certain
key employees of the Corporation or a Subsidiary based on their attainment of
predetermined goals which will further the interests of the Corporation and its
shareholders.
5.2 DEFINITIONS. As used in this Article,
"Annual Incentive Award" means an award made pursuant to this
Article.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Goal" means the threshold or thresholds to be satisfied in order
for a Participant to qualify for all or a portion of an Annual Incentive Award,
as determined by the Board.
"Retirement" means termination of employment on or after attainment
of age 55 with a combined total of age and service with the Company equal to at
least 64.
5.3 ELIGIBILITY FOR ANNUAL INCENTIVE AWARD. The Board annually will
select Participants eligible to receive an Annual Incentive Award, based on the
impact of the employee's position on Corporation performance, the measurability
of such impact, and the Participant's performance and potential.
5.4 ANNUAL INCENTIVE AWARDS. (a) As soon as practicable (but not later
than the April 15) following the end of the Corporation's fiscal year, the Board
will determine whether and to what extent the Goals have been met and what
Annual Incentive Awards have been earned, and will notify each Participant of
his entitlement, if any, to an Annual Incentive Award. Except as provided in
this Article, an Annual Incentive Award will become nonforfeitable upon such a
determination by the Board that such Award has been earned.
(b) In the event of special or unusual events or circumstances
affecting the application of one or more performance measures to an annual
incentive award, the Board may revise the performance measures and/or underlying
factors and criteria applicable to the Annual Incentive Awards affected, to the
extent deemed appropriate by the Board, in its sole discretion, to avoid
unintended windfalls or hardship.
(c) Annual Incentive Awards earned will be paid in cash as soon as
practicable following the determination by the Board of such Award, subject to
any deferral election made pursuant to Section 5.5 of the Plan. Anything in this
Article to the contrary notwithstanding, the Corporation will have no obligation
to make payment of any Annual Incentive Award in the event the Participant's
employment is terminated for Cause.
5.5 DEFERRAL ELECTION. A Participant entitled to receive an Annual
Incentive Award may elect to defer up to 50% of such Award (in whole
percentages). Any such election must be made prior to the last business day of
July of the year for which such Award may be earned and will be irrevocable with
respect to such Annual Incentive Award; provided, however, that for the Annual
Incentive Award applicable to the fiscal year in which the Effective Date
occurs, such election must be made by January 15, 1998. The portion of an Annual
Incentive Award deferred pursuant to this Subsection will be converted and
granted as Deferred Shares under Section 3.5 of the Plan using the
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Market Value per Share on the last day of the Corporation's fiscal year for
which such Award is earned.
5.6 GRANTS OF RESTRICTED SHARES. The Corporation will grant Restricted
Shares under Section 3.4 of the Plan to each Participant who defers a percentage
of his Annual Incentive Award pursuant to Section 5.5 of the Plan. The number of
Restricted Shares so granted will be equal in value, using the Market Value per
Share on the last day of the Corporation's fiscal year to which the Award
relates, to 25% of the deferred portion of such Award deferred.
5.7 RETIREMENT, DISABILITY, DEATH, TERMINATION OF EMPLOYMENT, CHANGE OF
OWNERSHIP. (a) In the event of the Retirement, disability or death of any
Participant prior to the determination of any Annual Incentive Award, and in the
event the Board determines that the Goal(s) set for the Participant are
attained, such Participant or such Participant's beneficiary, as the case may
be, will be eligible to receive a pro rata portion of his Annual Incentive
Award, such portion determined by multiplying the Annual Incentive Award by a
fraction, the numerator of which is the number of days during the year prior to
his Retirement, disability or death and the denominator of which is 365.
(b) OTHER TERMINATION OF EMPLOYMENT. If a Participant's employment
is terminated (by him or by the Corporation or a Subsidiary) prior to the date
on which any Annual Incentive Award is paid for any reason other than
Retirement, disability or death, the Participant will forfeit any right to an
Annual Incentive Award or any portion thereof; provided, however, that in
unusual circumstances the Board in its sole discretion may waive the forfeiture
in whole or in part.
(c) CHANGE OF OWNERSHIP. If a Participant is employed on the date a
Change of Ownership occurs, the Participant will be eligible to receive an
Annual Incentive Award for the year in which such Change of Ownership occurs of
not less than the Annual Incentive Award payable for the year immediately
preceding such year.
5.8 ADMINISTRATION. (a) This Article will be administered by the Board,
which is the "administrator" for purposes of, and to the extent required by,
ERISA (the "Administrator"). The Board will have such powers as may be necessary
to discharge its duties hereunder, including, but not by way of limitation, to
construe and interpret any provision of this Article or related provisions of
the Plan or of any related agreement, notification or document (including,
without limitation, by supplying omissions from, correcting deficiencies in, or
resolving inconsistencies or ambiguities in the language of this Article or
related provisions of the Plan or such agreement, notification or document), to
determine the rights and status under this Article of Participants and other
persons, to decide disputes arising under this Article and to make any
determinations and findings with respect to benefits under this Article and the
persons entitled thereto as may be required for the purposes of this Article.
(b) The Board may, from time to time, employ and/or designate
agents and delegate to them such administrative duties as it sees fit, and may
from time to time consult with legal counsel who may be counsel to the
Corporation. No member of the Board may act in respect of his own interests
under this Article. All decisions and determinations by the Administrator will
be final and binding on all parties. All decisions of the Board will be made by
the vote of the majority, including actions in writing taken without a meeting.
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(c) All elections, notices and directions under this Article by a
Participant must be made on such forms and in such manner as the Board
prescribes.
5.9 CLAIMS PROCEDURE. To the extent required by ERISA, the Board will
provide to any Participant or beneficiary whose claim for benefits under this
Article has been fully or partially denied (the "claimant") a written notice
setting forth (a) the specific reasons for such denial, (b) a designation of any
additional material or information required and (c) an explanation of this claim
review procedure. Such notice will state that the claimant is entitled to
request a review in writing, by the Board, of the decision denying the claim.
The claim will be reviewed by the Board who may, but need not, grant the
claimant a hearing. On review, the claimant may have legal representation,
examine pertinent documents and submit issues and comments in writing. The
decision on review will be made within 120 days following the request, will be
provided in writing to the claimant and will be final and binding on all parties
concerned.
ARTICLE VI
Administration; General Provisions
6.1 ADJUSTMENTS. The Board may make or provide for such adjustments in
the numbers of Common Shares covered by outstanding Option Rights, Appreciation
Rights, Deferred Shares, and Performance Shares granted hereunder, in the prices
per share applicable to such Option Rights and Appreciation Rights and in the
kind of shares covered thereby, as the Board, in its sole discretion, exercised
in good faith, may determine is equitably required to prevent dilution or
enlargement of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation, or
(b) any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all outstanding awards under
the Plan such alternative consideration as it, in good faith, may determine to
be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 2.1 of the Plan and in
the number of Option Rights to be granted pursuant to Section 4.2 of the Plan as
the Board in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section.
Notwithstanding any other provision of the Plan, following any adjustment
pursuant to this Section, the total percent of share equivalents to be made
available under the Plan will be 15% of shares outstanding after such
adjustment.
6.2 FRACTIONAL SHARES. The Corporation will not be required to issue
any fractional Common Shares pursuant to the Plan. The Board may provide for the
elimination of fractions or for the settlement of fractions in cash.
6.3 WITHHOLDING TAXES. To the extent that the Corporation is required
to withhold federal, state, local or foreign taxes in connection with any
payment made or benefit realized by a Participant or other person under the
Plan, and the amounts available to the Corporation for such withholding are
insufficient, it will be a condition to the receipt of such payment or the
realization of such benefit
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55
that the Participant or such other person make arrangements satisfactory to the
Corporation for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit. The Corporation and a Participant or such other
person may also make similar arrangements with respect to the payment of any
taxes with respect to which withholding is not required.
6.4 ADMINISTRATION OF THE PLAN. (a) Except as otherwise provided in
Section 5.8 of the Plan, the Plan will be administered by the Board, which may
from time to time delegate all or any part of its authority under the Plan to a
committee of the Board (or subcommittee thereof). A majority of the committee
(or subcommittee thereof) will constitute a quorum, and the action of the
members of the committee (or subcommittee thereof) present at any meeting at
which a quorum is present, or acts unanimously approved in writing, will be the
acts of the committee (or subcommittee thereof). To the extent of any such
delegation, references in the Plan to the Board (other than in Section 6.5(a) of
the Plan) are deemed to be references to any such committee or subcommittee.
(b) The interpretation and construction by the Board of any
provision of the Plan or of any agreement, notification or document evidencing
the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred
Shares, Performance Shares or Performance Units and any determination by the
Board pursuant to any provision of the Plan or of any such agreement,
notification or document will be final and conclusive. No member of the Board
may be liable for any such action or determination made in good faith.
6.5 AMENDMENTS, ETC. (a) The Board may at any time and from time to
time amend the Plan in whole or in part; provided, however, that any amendment
which must be approved by the shareholders of the Corporation in order to comply
with applicable law or the rules of any national securities exchange upon which
the Common Shares are traded or quoted will not be effective unless and until
such approval has been obtained. Presentation of the Plan or any amendment
thereof for shareholder approval may not be construed to limit the Corporation's
authority to offer similar or dissimilar benefits under other plans without
shareholder approval.
(b) The Board will not, without the further approval of the
shareholders of the Corporation, authorize the amendment of any outstanding
Option Right to reduce the Option Price. Furthermore, no Option Right may be
canceled and replaced with awards having a lower Option Price without further
approval of the shareholders of the Corporation. This Subsection is intended to
prohibit the repricing of "underwater" Option Rights and may not be construed to
prohibit the adjustments provided for in Section 6.1 of the Plan.
(c) The Board also may permit Participants to elect to defer the
issuance of Common Shares or the settlement of awards in cash under the Plan
pursuant to such rules, procedures or programs as it may establish for purposes
of the Plan. The Board also may provide that deferred issuances and settlements
include the payment or crediting of dividend equivalents or interest on the
deferral amounts.
(d) The Board may condition the grant of any award or combination
of awards authorized under the Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other compensation
otherwise payable by the Corporation or a Subsidiary to the Participant.
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56
(e) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted Shares
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or any Deferred Shares as to which the Deferral
Period has not been completed, or any Performance Shares or Performance Units
which have not been fully earned, or who holds Common Shares subject to any
transfer restriction imposed pursuant to Section 3.7(b) of the Plan, the Board
may, in its sole discretion, accelerate the time at which such Option Right or
Appreciation Right may be exercised or the time at which such substantial risk
of forfeiture or prohibition or restriction on transfer will lapse or the time
when such Deferral Period will end or the time at which such Performance Shares
or Performance Units will be deemed to have been fully earned or the time when
such transfer restriction will terminate or may waive any other limitation or
requirement under any such award.
(f) The Plan does not confer upon any Participant any right with
respect to continuance of employment or other service with the Corporation or
any Subsidiary, nor does it interfere in any way with any right the Corporation
or any Subsidiary would otherwise have to terminate such Participant's
employment or other service at any time.
(g) To the extent that any provision of the Plan would prevent any
Option Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision will be null and void with respect to such
Option Right. Such provision, however, will remain in effect for other Option
Rights and there will be no further effect on any provision of the Plan.
6.6 TERMINATION. No grant (other than an automatic grant of Reload
Option Rights) may be made under the Plan more than 10 years after the date on
which the Plan is first approved by the shareholders of the Corporation, but all
grants made on or prior to such date will continue in effect thereafter subject
to the terms thereof and of the Plan.
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Annex B
Item Number 3
ARTICLE IX. Except as may be provided in any Preferred Stock
Designation, the Board of Directors shall consist of not less than eight nor
more than 11 directors, as shall be fixed from time to time in the manner
provided in the Amended Code of Regulations of the Corporation. Except as
provided otherwise in any Preferred Stock Designation, directors may be elected
by the shareholders only (i) at an annual meeting of shareholders or (ii) at a
special meeting of shareholders called for that purpose if (a) no annual meeting
is held, (b) an annual meeting is held but directors are not elected at such
annual meeting, or(c) the shareholders increase the number of directors. Neither
the holding of a special meeting of shareholders nor the election of directors
at a special meeting of shareholders will, by itself, shorten the term of any
incumbent director. No decrease in the number of directors constituting the
Board of Directors may shorten the term of any incumbent director. Election of
directors of the Corporation need not be by written ballot unless requested by
the presiding officer or by the holders of a majority of the voting power of the
Corporation present in person or represented by proxy at a meeting of
shareholders at which directors are to be elected. For purposes of these Amended
Articles of Incorporation, "voting power of the Corporation" means the aggregate
voting power of (1) all the outstanding shares of Common Stock of the
corporation and (2) all the outstanding shares of any class or series of capital
stock of the Corporation that has (i) rights to distributions senior to those of
the Common Stock including, without limitation, any relative, participating,
optional, or other special rights and privileges of, any qualifications,
limitations or restrictions on, such shares and (ii) voting rights entitling
such shares to vote generally in the election of directors.
Item Number 4
ARTICLE XIV. Pursuant to (S)1704.06(A) of the Revised Code of Ohio, the
provisions of Chapter 1704 of the Revised Code of Ohio (regarding regulation of
transactions involving interested shareholders) shall not be applicable to the
Corporation.
Item Number 5
ARTICLE X. Notwithstanding anything to the contrary contained in these
Amended Articles of Incorporation, the affirmative vote of the holders of not
less than a majority of the voting power of the Corporation, voting together as
a single class, shall be required to amend or repeal, or adopt any provision
inconsistent with any article contained herein; PROVIDED, HOWEVER, that this
Article X shall not alter the voting entitlement of shares that, by virtue of
any Preferred Stock Designation, are expressly entitled to vote on any amendment
to these Amended Articles of Incorporation.
Item Number 6
3. SPECIAL MEETINGS. (a) Special meetings of shareholders may be called
by (i) the Chairman, (ii) the President, (iii) a majority of the Board of
Directors acting with or without a meeting, or (iv) any person or persons who
hold not less than 25% of all the shares outstanding and entitled to be voted at
such meeting. Holders of shares that are entitled to call a special
58
meeting of shareholders by virtue of any Preferred Stock Designation may call
such meetings in the manner and for the purposes provided in the applicable
terms of such Preferred Stock Designation. For purposes of this Amended Code of
Regulations, "Preferred Stock Designation" shall have the meaning specified in
the Amended Articles of Incorporation.
Item Number 7
(c) For business to be properly requested by a shareholder to be
brought before an annual meeting, the shareholder must (i) be a shareholder of
the Corporation of record at the time of the giving of the notice for such
annual meeting provided for in this Amended Code of Regulations and (ii) be
entitled to vote at such meeting. Notwithstanding the foregoing provisions of
this Amended Code of Regulations, a shareholder also must also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder with respect to the matters set forth in
this Regulation 7(c). Nothing in this Regulation 7(c) will be deemed to affect
any rights of shareholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended.
Item Number 8
12. NOMINATIONS OF DIRECTORS; ELECTION. (a) Except as may be otherwise
provided in any Preferred Stock Designation, only persons who are nominated in
accordance with this Regulation 12 will be eligible for election at a meeting of
shareholders to be members of the Board of Directors. (b) Nominations of persons
for election as directors of the Corporation may be made only at an annual
meeting of shareholders (i) by or at the direction of the Board of Directors or
a committee thereof or (ii) by any shareholder who is a shareholder of record at
the time of giving of notice for such annual meeting and who is entitled to vote
for the election of directors at such meeting.
Item Number 9
34. AMENDMENTS. Except as otherwise provided by law or by the Amended
Articles of Incorporation or this Amended Code of Regulations, this Amended Code
of Regulations or any Regulations may be amended in any respect or repealed at
any time at any meeting of shareholders by the affirmative vote of not less than
a majority of the voting power of the Corporation, voting together as a single
class. Except as otherwise provided by law or by the Amended Articles of
Incorporation or this Amended Code of Regulations, the shareholders shall not
take any action without a meeting to alter or amend this Amended Code of
Regulations. Notwithstanding the foregoing provisions of this Regulation 34, no
amendment to Regulations 29, 30 or 31 will be effective to eliminate or diminish
the rights of persons specified in those Regulations existing at the time
immediately preceding such amendment.
Item Number 10
9. NUMBER, ELECTION, AND TERMS OF DIRECTORS. Except as may be provided
in any Preferred Stock Designation and subject to the minimum and maximum number
of authorized directors provided in the Amended Articles of Incorporation, the
size of the Board of Directors shall be established from time to time only (i)
by a vote of a majority of the Whole
59
Board or (ii) by the affirmative vote of the holders of not less than a majority
of the voting power of the Corporation, voting together as a single class.
Item Number 11
35. EXCEPTION TO OHIO GENERAL CORPORATION LAW. Pursuant to Section
1701.831 of the Ohio General Corporation Law (regarding control share
acquisitions), the provisions of such section shall not be applicable to the
Corporation.
60
ELDER-BEERMAN
THE ELDER-BEERMAN STORES CORP.
ANNUAL MEETING OF SHAREHOLDERS
Thursday, August 24, 2000
8:00 a.m.
The Dayton Marriot Hotel
1414 South Patterson Boulevard
Dayton, Ohio 45409
ELDER-BEERMAN
THE ELDER-BEERMAN STORES CORP.
3155 EL-BEE ROAD, DAYTON, OHIO 45439 PROXY
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This proxy is solicited by the Board of Directors for use at the Annual Meeting
on Thursday, August 24, 2000.
The shares of stock you hold in you account will be voted as you specify on this
card.
If no choice is specified, the proxy will be voted "FOR" Items 1 and 2, and
"AGAINST" Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14.
By signing and dating the proxy, you revoke all prior proxies and appoint Scott
J. Davido with full power of substitution, to vote your shares on matter shown
on the reverse side and any other matters that may come before the Annual
Meetings and all adjournments.
See reverse for voting instructions.
61
[LOGO]
Mark, sign and date your proxy card, fold it in half and return it in the
postage paid envelope we have provided or return it to THE ELDER-BEERMAN STORES
CORP., c/o Shareowner Services, P.O. Box 64873, St. Paul, MN 55164-0873.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2, AND AGAINST ITEMS 3,
4, 5, 6, 7, 8, 9, 10, 11, 12, 13 AND 14.
1. Election of directors: 01 Dennis Bookshester 03 John A. Muskovich [_] Vote FOR [_] Vote WITHHELD
02 Stewart M. Kasen 04 John J. Wiesner all nominees from all nominees
(except as marked)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, ------------------------------------------
WRITE, THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.)
------------------------------------------
2. Proposal #2 - Amendment to the Company's Equity and Performance Incentive Plan [_] For [_] Against [_] Abstain
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE FOLLOWING PROPOSALS:
3. Proposal #3 - Adoption of an amendment to Article IX of the Company's Amended
Articles of Incorporation (the "Articles") [_] For [_] Against [_] Abstain
4. Proposal #4 - Adoption of a new Article XIV to the Articles [_] For [_] Against [_] Abstain
5. Proposal #5 - Adoption of an amendment to Article X of the Company's Articles [_] For [_] Against [_] Abstain
6. Proposal #6 - Adoption of an amendment to Regulation 3(a) of the Company's
Amended Code of Regulations (the "Regulations") [_] For [_] Against [_] Abstain
7. Proposal #7 - Adoption of an amendment to Regulation 7(c) of the Regulations [_] For [_] Against [_] Abstain
8. Proposal #8 - Adoption of an amendment to Regulation 12 of the Regulations [_] For [_] Against [_] Abstain
9. Proposal #9 - Adoption of an amendment to Regulation 34 of the Regulations [_] For [_] Against [_] Abstain
10. Proposal #10 - Adoption of an amendment to Regulation 9 of the Regulations [_] For [_] Against [_] Abstain
11. Proposal #11 - Adoption of a new Regulation 35 of the Regulations [_] For [_] Against [_] Abstain
12. Proposal #12 - Proposal to direct the Board to resume purchases under the
Company's Share Repurchase Program [_] For [_] Against [_] Abstain
13. Proposal #13 - Proposal to direct the Board to redeem the Company's
Shareholder Rights Plan [_] For [_] Against [_] Abstain
14. Proposal #14 - Proposal to direct the Board to revise its senior officers'
Compensation system [_] For [_] Against [_] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR PROPOSALS 1 AND 2, AND AGAINST PROPOSALS 3, 4, 5, 6,
7, 8, 9, 10, 11, 12, 13 AND 14.
Attending the Annual Meeting? Mark Box [_]
Address Change? Mark Box [_]
Indicate changes below:
Date:
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Signature(s) in Box
Please sign exactly as your name(s) appear on proxy. If held in joint tenancy,
all persons must sign. Trustees, administrators, etc., should include title and
authority. Corporations should provide full name of corporation and title of
authorized officer signing the proxy.
If you need assistance in voting your shares, please call _____________ at
_____.