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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:
<Table>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12.
</Table>
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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2
THE ELDER-BEERMAN STORES CORP.
[ELDER-BEERMAN LOGO]
3155 El-Bee Road
Dayton, Ohio 45439
---------------------------------------------------
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
---------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, SEPTEMBER 20, 2001
AT 8:00 A.M. EASTERN DAYLIGHT TIME
DAYTON MARRIOTT HOTEL
1414 S. PATTERSON BLVD.
DAYTON, OHIO 45409
3
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
August 24, 2001
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 2001 Annual Meeting of
Shareholders. The meeting will be held at 8:00 a.m., eastern daylight time, on
Thursday, September 20, 2001, 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.
The Company requests that all shareholders thoroughly read the accompanying
notice of annual meeting and proxy statement.
Thank you for your attention to this important matter.
/s/ Frederick J. Mershad
Frederick J. Mershad
Chairman of the Board
and Chief Executive Officer
4
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
------------------------
NOTICE OF ANNUAL MEETING
------------------------
The Annual Meeting of Shareholders of The Elder-Beerman Stores Corp. will
be held on September 20, 2001, 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 ten Directors for a one-year term expiring in 2002. The
Board of Directors recommends a vote FOR the election of its
nominees, Mark F. C. Berner, Dennis S. Bookshester, Eugene I.
Davis, Charles Macaluso, Steven C. Mason, Frederick J. Mershad,
Thomas J. Noonan, Jr., Laura H. Pomerantz, Jack A. Staph and
Charles H. Turner; and
(2) To transact any other business that may properly come before the
meeting.
Only shareholders of record on August 17, 2001 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
/s/ Frederick J. Mershad
Frederick J. Mershad
Chairman of the Board
and Chief Executive Officer
August 24, 2001
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY FILL OUT, SIGN, DATE AND MAIL THE ENCLOSED 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.
------------------------
Also enclosed is a copy of our Annual Report for the year ended February 3,
2001. 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.
5
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 20, 2001
DATE OF THE PROXY STATEMENT -- AUGUST 24, 2001
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, September 20, 2001, 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
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
Transfer Agent, Wells Fargo Bank Minnesota, N.A., Attention: Shareowner
Services, 161 North Concord Exchange Street South, St. Paul, MN 55075
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 August 24, 2001, to all shareholders of record at the close of
business on August 17, 2001.
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
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. If you do not
indicate instructions on the card, your shares will be voted FOR the
election of the Company's nominees for director.
- IN PERSON -- You may come to the Annual Meeting and cast your vote there.
The Board of Directors of the Company is soliciting votes FOR the Company's
ten nominees for election to the Board of Directors.
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.
Each share of Elder-Beerman common stock (the "Common Stock") is entitled
to one vote. As of August 17, 2001, there were 11,416,515 shares of Common Stock
outstanding.
6
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 Norwest Bank
Minnesota, NA, 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 Amended Code of Regulations (the "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 ten nominees for director receiving the greatest number of votes will
be elected 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.
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 director of the
Company, as identified in this Proxy Statement under "Certain Information
Regarding Participants." 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 $5,000.00, plus reasonable expenses. To date, the Company
has paid $3,500.00 to Morrow & Co. as an advance on expenses.
OTHER MATTERS
The Board of Directors does not know of any other matter that will be
presented at the Annual Meeting other than the election of directors 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. For business to be conducted or considered at the
Annual Meeting, proposals must have been received at our executive offices not
less than 45 nor more than 90 calendar days prior to the date of the Annual
Meeting.
CERTAIN INFORMATION REGARDING PARTICIPANTS
Elder-Beerman and certain other persons may be deemed to be "participants"
within the meaning of Regulation 14A under the Exchange Act. The participants in
this solicitation may include the current directors of Elder-Beerman, the
nominees for director, Scott J. Davido, Executive Vice President -- Chief
Financial Officer, Treasurer and Secretary of Elder-Beerman and Steven D.
Lipton, Senior Vice President -- Controller of Elder Beerman.
2
7
ITEM NUMBER 1
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Currently, the Board of Directors has eleven members and each member is
elected annually for a one-year term. The terms of the following directors
expire at the Annual Meeting: Mark F.C. Berner, Dennis S. Bookshester, Eugene C.
Davis, Charles Macaluso, Steven C. Mason, Frederick J. Mershad, Thomas J.
Noonan, Jr., Bernard Olsoff, Laura H. Pomerantz, Jack A. Staph and Charles H.
Turner. Pursuant to Section 9 of our Regulations, the Board has determined to
decrease its size to ten (instead of eleven) directors. Mr. Olsoff has not been
nominated for re-election since he is at the retirement age for the Company's
directors. For election as directors at the Annual Meeting, the Nominating and
Corporate Governance Committee has recommended, and the Board of Directors has
approved, the re-nomination of Mark F.C. Berner, Dennis S. Bookshester, Eugene
C. Davis, Charles Macaluso, Steven C. Mason, Frederick J. Mershad, Thomas J.
Noonan, Jr., Laura H. Pomerantz, Jack A. Staph and Charles H. Turner to serve as
directors for a one-year term of office that will expire at the Annual Meeting
of Shareholders in 2002.
As previously announced by the Company, Mr. Mershad will retire as
chairman, chief executive officer and president of the Company and resign from
the Board, effective December 31, 2001. If elected to the Board of Directors at
the Annual Meeting, Mr. Mershad will not serve for his entire one-year term. The
Board does not currently anticipate filling the vacancy created by Mr. Mershad's
retirement. If the vacancy is not filled by the Board pursuant to the Section 10
of the Regulations, the Board will consist of nine members as of January 1,
2002.
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. Except as
disclosed in the preceding paragraph, 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, the current Board of Directors will
designate replacements for the nominees. The shares of Common Stock represented
by your proxies will be voted for any such replacement nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE TEN NOMINEES FOR
DIRECTOR NOMINATED BY THE COMPANY.
Listed below are the names of the Company's ten nominees for election to
the Board of Directors. 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 AT THE ANNUAL MEETING:
<Table>
<Caption>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- -------- --- ----------------------------------------------------
Mark F. C. Berner.............. 2000 47 Mr. Berner is Managing Partner of SDG Resources,
L.P., an oil and gas investment fund. From 1996 to
1998, he was a private investment consultant in New
York. In 1995, Mr. Berner served as Senior Vice
President and Counsel for Turnberry Capital
Management, L.P., a private equity fund. His prior
position was as a Director of the First Boston
Special Situations Fund, a private investment
partnership. Mr. Berner also currently serves as a
Director of ThinkSheet, Inc., and served as a
Director of Renaissance Technologies from 1997
through March, 2000. Mr. Berner is also a member of
the bar of the State of New York.
Dennis S. Bookshester.......... 1999 62 Mr. Bookshester serves as the Chief Executive
Officer of Fruit of the Loom, Inc., 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.
Eugene I. Davis................ 2000 46 Mr. Davis is Chairman and Chief Executive Officer of
Pirinate Consulting Group, L.L.C., a corporate
strategy consulting firm, and of Murdock
Communications Corp., a telecommunications
enterprise. He also serves as Chief Executive
Officer of SmarTalk Teleservices Corp., an
independent provider of prepaid calling cards, that
filed for protection under Chapter 11 of the United
States Bankruptcy Code in January 1999, and is
currently being liquidated. During 1998 and 1999,
Mr. Davis was Chief Operating Officer of Total-Tel
Communications, Inc., a long distance
telecommunications provider. From 1996 to 1997, Mr.
Davis was the Chief Executive Officer of Sport
Supply Group, Inc., a sporting goods and athletic
equipment distributor. From 1992 to 1997, he served
as President of Emerson Radio Corp., a consumer
electronics distributor. Mr. Davis also currently
serves as a Director of Coho Energy, Inc., Murdock
Communications Corp., Tipperary Corporation and
Eagle Geophysical Corp.
Charles Macaluso............... 1999 57 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 65 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.
</Table>
4
9
<Table>
<Caption>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- -------- --- ----------------------------------------------------
Frederick J. Mershad........... 1997 58 Mr. Mershad has served as Chairman of the Board of
Elder-Beerman since December 1997, as Chief
Executive Officer and a Director of Elder-Beerman
since January 1997 and as Chairman of the Board,
Chief Executive Officer, President and a Director of
since July 2000. 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 Department Stores, Inc. 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.
Thomas J. Noonan, Jr........... 1997 60 Mr. Noonan has served as a Director of Elder-Beerman
since 1997. Mr. Noonan is 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. He also serves as
the Chairman, President and Chief Executive Officer
of Intrenet, Inc. ("Intrenet"), a truckload carrier
service provide that filed for protection under
chapter 11 in January 2001, and is currently being
liquidated. Mr. Noonan has served in his current
position at Intrenet since January 2001. He has been
a Director of Intrenet since 1991 and was named
Chairman in December 2000. Mr. Noonan also serves as
the Chief Executive of R&S Liquidating Company,
Inc., which was formerly known as WSR, Inc. ("WSR")
an automotive aftermarket retailer, and has served
in this capacity since April 2000. Prior to that Mr.
Noonan was WSR's Chief Restructuring Officer from
August 1998 through December 1999. Mr. Noonan served
as Executive Vice President and Chief Financial
Officer of Herman's Sporting Goods, Inc. from August
1994 through 1999, a sporting goods retailer that
filed for protection under chapter 11 of the United
States Bankruptcy Code and is currently being
liquidated.
Laura H. Pomerantz............. 1998 53 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,
</Table>
5
10
<Table>
<Caption>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- -------- --- ----------------------------------------------------
Mrs. Pomerantz served as Executive Vice President
and a Director of The Leslie Fay Companies, Inc.
("Leslie Fay"), an apparel design and manufacturing
company, from January 1993 to November 1994, and as
Senior Vice President and Vice President of Leslie
Fay from 1986 through 1992.
Jack A. Staph.................. 1997 55 Mr. Staph is currently a consultant, lawyer and
private investor. He also serves as Vice President
and Treasurer of Bernadette Travel, Inc. 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.
Charles H. Turner.............. 2000 44 Mr. Turner is Senior Vice President of Finance,
Chief Financial Officer and Treasurer of Pier 1
Imports, Inc. ("Pier 1"), and has served in this
capacity since August 1999. Mr. Turner served as
Pier 1's Senior Vice President of Stores from July
1994 through August 1999 and served as Controller
and Principal Accounting Officer of Pier 1 from
January 1992 through August 1994. Mr. Turner also
currently serves as a Director of the Boys & Girls
Clubs of Greater Fort Worth.
</Table>
DIRECTOR WITH TERM EXPIRING AT THE ANNUAL MEETING AND WHO WAS NOT NOMINATED FOR
RE-ELECTION TO THE BOARD:
<Table>
<Caption>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
---- -------- --- ----------------------------------------------------
Bernard Olsoff................. 1997 72 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 Leslie Fay.
</Table>
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11
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 15 times during 2000.
Mr. Bookshester and Mrs. Pomerantz each attended fewer than 75% of the Board
meetings.
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 2000, the members of the Executive Committee were
Messrs. Mershad (Chairman), Mason and Staph and Mr. Muskovich until he departed
from the Company in June 2000. The Executive Committee did not hold any meetings
in 2000. Except to the extent that its powers are limited by law, by Elder-
Beerman's Amended Articles of Incorporation 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 2000, the Chairman of the Audit and Finance Committee
was Mr. Noonan. Messrs. Macaluso and Olsoff and Stewart M. Kasen served on the
Audit and Finance Committee until September 21, 2000. Messrs. Berner, Davis and
Turner joined the Audit and Finance Committee on September 21, 2000. The Audit
and Finance Committee held ten meetings in 2000. The Audit and Finance Committee
is responsible for: (i) monitoring the Company's corporate compliance program;
(ii) recommending the Company's outside auditors; (iii) reviewing the
independence of the Company's outside auditors; (iv) reviewing the audit results
and recommendations of the Company's outside auditors; (v) reviewing the
Company's financial statements, including meeting each quarter with management
and the Company's outside auditors to review quarterly earnings results and the
quality of those earnings prior to their public release; (vi) reviewing and
evaluating the Company's systems of internal accounting controls; (vii)
reviewing and evaluating the Company's internal audit functions and meeting from
time to time with the internal auditors outside the presence of other employees;
and (viii) reviewing such other matters in relation to the accounting, auditing
and financial reporting practices and procedures of the Company as the Audit and
Finance Committee may, in its own discretion, deem desirable in connection with
the review functions described above.
Compensation Committee
During fiscal year 2000, the members of the Compensation Committee were
Messrs. Olsoff (Chairman) and Staph. John J. Wiesner served on the Compensation
Committee until September 21, 2000. Messrs. Macaluso and Mason joined the
Compensation Committee on September 21, 2000. The Compensation Committee held
six meetings in 2000. 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 2000, the members of the Nominating and Corporate
Governance Committee were Messrs. Mason (Chairman), Bookshester, Mershad and
Staph and Mrs. Pomerantz. The Nominating and
7
12
Corporate Governance Committee held two meetings in 2000. Mr. Mason attended
fewer than 75% of the Nominating and Corporate Governance Committee meetings.
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. The Nominating and Corporate Governance
Committee does not consider nominees recommended by shareholders. Instead, these
nominees would be considered by the entire Board of Directors.
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 2000, non-employee directors were paid
an annual retainer of $20,000 for their service on the Board of Directors.
Non-employee directors may elect to take their annual retainer as cash or in the
form of discounted stock options. At the beginning of each fiscal year,
non-employee directors also receive an annual grant of restricted shares with a
market value of $10,000 on the date of the grant. When first joining the board,
a non-employee director also receives an initial grant of 1,300 restricted
shares and options to purchase 7,000 shares of Common Stock. Non-employee
committee chairpersons are paid an additional $5,000 fee for their services on
their respective committees. Non-employee directors are also each paid a meeting
fee of $1,500 for each board meeting attended, plus $500 for each committee
meeting.
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.
8
13
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 August 17, 2001 (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.
<Table>
<Caption>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
BENEFICIAL OWNER OWNERSHIP (1) OF CLASS
---------------- ----------------- --------
Snyder Capital Management, Inc.............................. 2,974,900(2) 26.06%
350 California Street, Suite 1460
San Francisco, CA 94104
PPM America, Inc............................................ 1,966,868(3) 17.23%
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
The D3 Family Fund.......................................... 900,000(4) 7.88%
19605 N.E. Eighth Street
Camas, WA 98607
Dimensional Fund Advisors Inc............................... 617,700(5) 5.41%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Mark F.C. Berner............................................ 7,700(6) *
Dennis S. Bookshester....................................... 27,367(6) *
Eugene I. Davis............................................. 7,700(6) *
Charles Macaluso............................................ 35,994(6) *
Steven C. Mason............................................. 53,916(6) *
Frederick J. Mershad........................................ 488,062(6) 4.28%
Thomas J. Noonan, Jr........................................ 19,780(6) *
Bernard Olsoff.............................................. 34,325(6) *
Laura H. Pomerantz.......................................... 25,155(6) *
Jack A. Staph............................................... 34,725(6) *
Charles H. Turner........................................... 13,304(6) *
James M. Zamberlan.......................................... 73,947(6) *
Scott J. Davido............................................. 34,705(6) *
Steven D. Lipton............................................ 21,471(6) *
- -------------------------------------------------------------------------------------------
All directors and executive officers as a group:............ 890,278 7.80%
</Table>
- ---------------
* less than 1%
9
14
(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 June 30, 2001) of such
shares in a Form 13F filed on August 14, 2001.
(3) PPM America, Inc. ("PPM") a registered investment advisor, reported the
beneficial ownership (as of December 31, 2000) of such shares in a Form 13F
filed on February 14, 2001. 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 America Fund Management GP, Inc. (general partner
of SIF I) disclaim beneficial ownership of all such shares.
(4) The D3 Family Fund ("D3") reported the official ownership (as of August 4,
2000) of such shares in a Schedule 13D filed on August 4, 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).
(5) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported the beneficial ownership (as of June 30, 2001) of such
shares in a Schedule 13F filed on August 2, 2001. All such shares are owned
by investment companies, trusts or separate accounts (the "Funds").
Dimensional is an investment advisor or manager to all of the Funds and
possesses voting and/or investment power over the shares. Dimensional
disclaims beneficial ownership of all shares.
(6) These amounts include shares of Common Stock that the following persons had
a right to acquire within 60 days after August 17, 2001.
<Table>
<Caption>
STOCK OPTIONS EXERCISABLE
NAME BY OCTOBER 16, 2001
---- -------------------------
Mr. Mershad......................................... 361,401
Mr. Davido.......................................... 22,600
Mr. Zamberlan....................................... 55,828
Mr. Lipton.......................................... 16,600
Mr. Berner.......................................... 2,334
Mr. Bookshester..................................... 20,457
Mr. Davis........................................... 2,334
Mr. Macaluso........................................ 29,084
Mr. Mason........................................... 46,180
Mr. Noonan.......................................... 12,044
Mr. Olsoff.......................................... 26,589
Ms. Pomerantz....................................... 13,419
Mr. Staph........................................... 26,589
Mr. Turner.......................................... 5,938
</Table>
10
15
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 2000.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(5) ($) (#) ($) ($)(9)(10)
------------------ ---- ------- ------ ------------ ---------- ---------- ------- ------------
Frederick J. Mershad...... 2000 671,539 100,000 9,705
Chairman and 1999 600,000 581,250 300,000 7,665
Chief Executive Officer 1998 559,263 120,000 29,403 1,050,000 75,000 9,970
John A. Muskovich(1)...... 2000 196,971 270,837(11)
President, 1999 425,000 310,000(6) 160,000(8) 6,000
Chief Operating Officer 1998 412,207 85,000 37,602 473,127(7) 30,000(8) 9,950
Through June 29, 2000
Scott J. Davido........... 2000 261,923 37,295(3) 29,690 4,236
Executive Vice
President -- 1999 217,596 36,000 60,550 45,625 30,000 382
Chief Financial Officer, 1998 174,076 21,280 26,626 26,599 25,000 4,585
Treasurer and Secretary
Charles P. Shaffer(2)..... 2000 297,692 7,613 8,792
Senior Vice President -- 1999 243,654 44,303 95,190 10,000 7,159
General Merchandise 1998 220,769 60,000 37,495 40,000 5,483
Manager
James M. Zamberlan........ 2000 351,346 9,703 30,000 4,359
Executive Vice
President -- 1999 309,808 53,156 29,690 20,000 2,712
Stores 1998 278,803 79,650 234,892 15,000 8,050
Steven D. Lipton.......... 2000 203,538 43,315(4) 15,000 6,660
Senior Vice President -- 1999 180,115 35,830 11,876 10,000 5,801
Controller 1998 154,976 21,132 26,412 0 7,985
Fiscal Year 2000 includes 53 weeks.
</Table>
- ---------------
(1) Mr. Muskovich was terminated by the Company on June 29, 2000.
(2) Mr. Shaffer served as Executive Vice President -- Merchandising and
Marketing until August 11, 2000. He currently serves as Senior Vice
President, General Merchandise Manager.
(3) Includes a 2,711 deferred shares and 678 restricted shares awarded to Mr.
Davido as the deferred portion of his 2000 bonus pursuant to the Company's
Equity and Performance Incentive Plan.
(4) Includes 5,935 deferred shares and 1,484 restricted shares awarded to Mr.
Lipton as the deferred portion of his 2000 bonus pursuant to the Company's
Equity and Performance Incentive Plan.
(5) Moving expense reimbursement.
(6) This restricted share grant was cancelled on June 30, 2000 pursuant to the
terms of the restricted share agreement.
(7) Mr. Muskovich received $322,493 of his 1998 restricted shares grants. The
remaining shares were cancelled on June 30, 2000, pursuant to the
termination of his position as President and Chief Operating Officer.
(8) All of Mr. Muskovich's option grants were cancelled on September 30, 2000,
pursuant to the terms of the option agreement.
(9) Includes life insurance premium payments paid by the Company in 2000 in the
following amounts: Mr. Mershad $4,865, Mr. Muskovich $1,430, Mr. Zamberlan
$2,759, Mr. Davido $2,636, Mr. Shaffer $2,332 and Mr. Lipton $1,820.
(10) Include matching contributions paid by the Company in 2000 under the
Company's Retirement Savings Plan in the following amounts: Mr. Mershad
$4,840, Mr. Muskovich $4,840, Mr. Shaffer $6,460, Mr. Davido $1,600, Mr.
Zamberlan $1,600 and Mr. Lipton $4,840.
(11) Includes severance payments pursuant to Mr. Muskovich's employment
agreement.
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STOCK OPTIONS/SAR GRANTS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers during fiscal year 2000 pursuant to the
Company's Equity and Performance Incentive Plan, as amended (the "Plan").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN OF BASE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE($/SH) DATE 5% ($) 10% ($)
---- ------------- ------------ ----------- ---------- --------- ---------
Frederick J. Mershad....... 100,000 17.42 3.13 12/05/10 196,350 498,044
John A. Muskovich.......... 0 0
Scott J. Davido............ 30,000 5.23 3.44 11/13/10 64,864 164,379
James M. Zamberlan......... 30,000 5.23 3.44 11/13/10 64,864 164,379
Steven D. Lipton........... 15,000 2.61 3.44 11/13/10 32,432 82,189
Charles P. Shaffer......... 10,000 1.74 3.44 11/13/10 21,621 54,793
</Table>
- ---------------
(1) Options vest annually in one-fifth increments beginning one year from date
of grant.
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17
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options exercised
during fiscal year 2000 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
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS HELD AT OPTIONS/SARS HELD AT
SHARES VALUE FEBRUARY 03, 2001 (#) FEBRUARY 03, 2001 ($)(1)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
Frederick J.
Mershad............ 0 $0.00 246,401 422,599 $0.00 $0.00
John A. Muskovich.... 0 $0.00 0 0 $0.00 $0.00
Scott J. Davido...... 0 $0.00 17,600 58,400 $0.00 $0.00
James M. Zamberlan... 0 $0.00 46,600 79,400 $0.00 $0.00
Steven D. Lipton..... 0 $0.00 14,600 31,400 $0.00 $0.00
Charles P. Shaffer... 0 $0.00 23,000 52,000 $0.00 $0.00
</Table>
- ---------------
(1) Based on the closing price on NASDAQ of the Company's Common Stock on
February 2, 2001 (the last trading day in fiscal year 2000) of $3.00.
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN OFFICERS
The Company has entered into employment agreements with Frederick J.
Mershad, Chairman, President and Chief Executive Officer, John A. Muskovich, who
departed as President and Chief Operating Officer, and the other executive
officers as described below (the "Employment Agreements"). Mr. Mershad's
Employment Agreement sets forth (a) Mr. Mershad's compensation and benefits,
subject to increases at the discretion of the Board of Directors, (b) the
Company's right to terminate Mr. Mershad for cause or otherwise; (c) the amounts
to be paid by the Company in the event of Mr. Mershad's termination, death or
disability while rendering services; (d) Mr. Mershad's duty of strict confidence
and to refrain from conflicts of interest; (e) Mr. Mershad's obligations not to
compete for the term of the agreement plus one year unless Mr. Mershad
terminated his employment for good reason or the employer terminates Mr. Mershad
other than for cause; and (f) the Mr. Mershad's right to receive severance
payments. In general, the Employment Agreement provides that if Mr. Mershad is
terminated for any reason, other than for cause or following a "change in
control," (as defined in the Employment Agreement), 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 Mr. Mershad (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. As previously announced by the Company,
Mr. Mershad will retire as chairman, president and chief executive officer of
the Company, effective December 31, 2001. Mr. Mershad's Employment Agreement
will be terminated at such time.
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18
Mr. Muskovich, the former President and Chief Operating Officer of the
Company, was terminated by the Company on June 30, 2000. Pursuant to the terms
of Mr. Muskovich's Employment Agreement, the Company was required to give Mr.
Muskovich notice six months prior to December 30, 2000 if the Company elected
not to renew his Employment Agreement. The Company gave Mr. Muskovich notice on
June 29, 2000 that the Company would terminate his Employment Agreement and his
employment. Pursuant to the terms of his Employment Agreement, Mr. Muskovich
will receive payments equal to the remaining base salary that would have been
paid to him by the Company under the remaining term of his Employment Agreement,
which expires on December 30, 2002.
The Company will enter into a Separation and Retirement Agreement (the
"Separation Agreement") with Mr. Mershad. The Separation Agreement will
supercede Mr. Mershad's Employment Agreement and set forth the payments and
benefits Mr. Mershad will be entitled to (i) from the date of the Separation
Agreement until his retirement as Chairman, President and Chief Executive
Officer and resignation as a Director on December 31, 2001 (the "Retirement
Date") and (ii) following the Retirement Date. Pursuant to the anticipated terms
of the Separation Agreement, until the Retirement Date, Mr. Mershad will be
entitled to his current base salary and benefits that would have been payable
pursuant to the terms of his Employment Agreement. After the Retirement Date,
the Company will pay to Mr. Mershad (i) his current base salary for the period
beginning with the Retirement Date and ending on December 31, 2004 (the
"Retirement Period") and (ii) his bonus (if any) earned in 2001. During the
Retirement Period, Mr. Mershad will also be entitled to medical benefits
equivalent to those provided to him prior to the Retirement Date and the
automobile benefit that he received prior to the Retirement Date. After the
Retirement Period, Mr. Mershad shall be entitled to purchase medical and dental
coverage until March 1, 2008 at the rate provided for in the Consolidated
Omnibus Budget Reconciliation Act of 1986, as amended. After the Retirement
Date, Mr. Mershad will be entitled to the employee discount made available to
other retired employees and any post-retirement eligibility for benefits
provided for under the Company's 401(k) Plan. Mr. Mershad's options to purchase
shares of Common Stock and restricted shares that are unvested as of the
Retirement Date will be forfeited. The options and restricted shares that are
vested as of the Retirement Date are subject to the stock option agreements and
restricted share agreements entered into by the Company and Mr. Mershad in
connection with the grant of such options and restricted shares. The option
agreements provide that Mr. Mershad will have one year from the Retirement Date
to exercise the options that are vested on the Retirement Date. The Company will
pay all of the legal fees and costs incurred by Mr. Mershad in connection with
any enforcement or defense of his rights under the Separation Agreement.
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
14
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coverage, or obtains new employment providing substantially similar benefits.
Mr. Shaffer's Employment Agreement expired on August 22, 2001 and the Company
did not elect to renew it.
Messrs. Zamberlan's and Davido's Employment Agreements also provide for the
executive's (or his estate's) right to receive severance payments (i) if he is
terminated by the Company at any time without cause and (ii) upon his death. The
amount of such severance will be equal to (i) the executive's base salary in
effect at the time of termination, payable (i) for the longer of one year or
(ii) through the remaining term of the Employment Agreement, (ii) any bonus paid
on or prior to the termination date and (iii) payment for any of the executive's
accrued, unused vacation days on or prior to the termination date.
The Company has also entered into an Employment Agreement that includes
severance pay provisions with Mr. Lipton. Mr. Lipton's Employment Agreement sets
forth (a) his compensation and benefits, subject to review at the discretion of
the Board of Directors, (b) the Company's right to terminate him for cause or
otherwise; (c) the amounts to be paid by the Company in the event of his
termination, death or disability while rendering services; (d) his duty of
strict confidence and to refrain from conflicts of interest; (e) his obligations
not to compete for the term of the agreement plus one year unless he terminated
his employment for good reason or the employer terminates him other than for
cause; and (f) his 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 Mr. Lipton's Employment Agreement, the amount of any
severance payment by the Company will be 1.5 times his most recent base salary
and bonus. Severance payments made under Mr. Lipton's Employment Agreement 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, Mr. Lipton will continue to be eligible for
health benefits, perquisites, and fringe benefits generally made available to
executives for eighteen months following his termination, unless Mr. Lipton
waives such coverage, fails to pay any amount required to maintain such
coverage, or obtains new employment providing substantially similar benefits.
Mr. Lipton's Employment Agreement also provides for him (or his estate's) right
to receive severance payments (i) if he is terminated by the Company at any time
without cause and (ii) upon his death. The amount of such severance will be
equal to (i) Mr. Lipton's base salary in effect at the time of termination,
payable (i) for the longer of one year or (ii) through the remaining term of the
Employment Agreement, (ii) any bonus paid on or prior to the termination date
and (iii) payment for any of Mr. Lipton's accrued, unused vacation days on or
prior to the termination date.
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
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, as
amended (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
15
20
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 Third
Amended Joint Plan of Reorganization, as amended of the Company, confirmed by an
order entered by the United States Bankruptcy Court for the Southern District of
Ohio, Western Division on December 16, 1997. 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 upcoming year. Additionally, individual performance goals
that are objective and measurable are established for each participant other
than the President and Chief Executive Officer. Bonus program participants
receive no payments unless minimum thresholds of Company financial performance
or individual performance 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
16
21
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.
- 2000 BONUS OBJECTIVES
Annual bonuses for 2000 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 2000, 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 also failed to achieve any of their
respective area of responsibility or individual performance goals, which
resulted in these executives earning no bonus. Many executives were able to
achieve some or all of their respective area of responsibility and individual
performance goals, which resulted in these executives earning in total between
approximately 5% and 74% of each 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 former President and Chief Operating Officer.
Since Mr. Muskovich is no longer with the Company, the Executive Plan now
applies only to Mr. Mershad. 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.
To establish benchmarks for a competitive long-term incentive plan for Mr.
Mershad, the Committee engaged a third party consultant to conduct an analysis
of executive compensation at 12 peer retail companies.
17
22
The Committee reviewed the current compensation packages of Mr. Mershad 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 Mr. Mershad and the earnings per share and
stock price targets that must be met for Mr. Mershad to earn their respective
awards. Pursuant to the terms of the Executive Plan, any 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 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.
2000 BASE SALARY AND ANNUAL BONUS
Effective April 16, 2000, Mr. Mershad's annual base salary was $660,000,
which was an increase of 10% over his 1999 and 1998 base salary of $600,000. 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 2000, Mr. Mershad received no bonus because
the Company failed to meet its bonus threshold corporate operating profit.
On December 5, 2000, pursuant to the Plan, the Committee granted Mr.
Mershad options to purchase 100,000 shares of Common Stock. The exercise price
of the options is equal to the closing price of the Common Stock on the date of
grant. The options will vest in 20,000 share increments on each of the first
through fifth anniversaries of the date of grant.
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
Common 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 2000 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
Charles Macaluso
Steven C. Mason
Jack A. Staph
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STOCK PRICE PERFORMANCE
The following graph depicts the value of $100 invested in Elder-Beerman
Common Stock beginning February 17, 1998 (the first trading day of the Common
Stock) through February 3, 2001 (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 $400 million.
2. A Regional Department Store Peer Group, consisting of The Bon-Ton
Stores, Inc., Goody's Family Clothing, 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. The peer group index is
different than the index used by the Company in 1999. The Company
substituted Goody's Family Clothing, Inc. for Stage Stores, Inc. The
change was made because Stage Stores filed for protection under chapter
11 of the United States Bankruptcy Code and its shares are no longer
traded on NASDAQ. No other changes in the peer group index were made.
[PERFORMANCE GRAPH]
<Table>
<Caption>
REGIONAL DEPT STORE PEER
S&P SMALLCAP 600 INDEX GROUP INDEX EBSC
---------------------- ------------------------ ----
Feb 98 100 100 100
May 98 107 118 165
Aug 98 93 112 140
Oct 98 84 64 71
Jan 99 93 70 54
May 99 91 61 51
Jul 99 97 68 37
Oct 99 93 64 41
Jan 00 103 46 30
Apr 00 109 44 28
Jul 00 106 42 26
Oct 00 110 32 24
Feb 01 120 36 18
</Table>
<Table>
<Caption>
REGIONAL
S&P DEPT STORE
SMALLCAP PEER GROUP
QUARTER-END EBSC 600 INDEX INDEX
----------- ------ --------- ----------
February 1998................................. 100.00 100.00 100.00
May 1998...................................... 165.00 107.00 118.00
August 1998................................... 140.00 93.00 112.00
October 1998.................................. 71.00 84.00 64.00
January 1999.................................. 54.00 93.00 70.00
May 1999...................................... 51.00 91.00 61.00
July 1999..................................... 37.00 97.00 68.00
October 1999.................................. 41.00 93.00 64.00
January 2000.................................. 30.00 103.00 46.00
April 2000.................................... 28.00 109.00 44.00
July 2000..................................... 26.00 106.00 42.00
October 2000.................................. 24.00 110.00 32.00
February 2001................................. 18.00 120.00 36.00
</Table>
19
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 8, 2000, the Compensation Committee recommended that the Board
approve a loan to John A. Muskovich (the Company's President and Chief Operating
Officer until June 30, 2000 and a director of the Company until September 21,
2000) 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
interest on the Company's loan to Mr. Muskovich was the same rate charged to the
Company under the Company's Credit Facilities. The principal and interest were
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. Mr. Muskovich repaid the loan
in full on August 18, 2000, with interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten 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 2000 by its directors,
executive officers or ten percent shareholders.
AUDIT COMMITTEE REPORT
The Board of Directors of the Company adopted a written Audit Committee
Charter, a copy of which is included as Appendix A to this proxy statement. All
members of the Audit Committee are independent as defined in Rule 4200(a)(15) of
The Nasdaq Stock Market's listing standards.
The Audit Committee has reviewed and discussed with the Company's
management and Deloitte & Touche LLP ("Deloitte & Touche"), the Company's
independent auditors, the audited financial statements of the Company contained
in the Company's Annual Report to Shareholders for the year ended February 3,
2001. The Audit Committee has also discussed with the Company's independent
auditors the matters required to be discussed pursuant to SAS No. 61
(Codification of Statements on Auditing Standards, Communication with Audit
Committees).
The Audit Committee has received and reviewed the written disclosures and
the letter from Deloitte & Touche required by Independence Standards Board
Standard No. 1 (titled, "Independence Discussions with Audit Committees"), and
has discussed with Deloitte & Touche their independence. The Audit Committee has
also considered whether the provision of information technology services and
other non-audit services to the Company by Deloitte & Touche is compatible with
maintaining their independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 3, 2001, filed with the U.S. Securities and Exchange Commission.
<Table>
Thomas J. Noonan, Jr. Audit Committee Chair
Mark F.C. Berner Audit Committee Member
Eugene I Davis Audit Committee Member
Charles H. Turner Audit Committee Member
</Table>
20
25
AUDIT FEES
Deloitte & Touche has billed the Company $334,465, in the aggregate, for
professional services rendered by Deloitte & Touche for the audit of the
Company's annual financial statements for the fiscal year ended February 3, 2001
and the reviews of the interim financial statements included in the Company's
Forms 10-Q filed during the fiscal year ended February 3, 2001.
FINANCIAL INFORMATION DESIGN AND IMPLEMENTATION FEES
Deloitte & Touche did not bill the Company for professional services
described in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by
Deloitte & Touche during the fiscal year ended February 3, 2001.
ALL OTHER FEES
Deloitte & Touche has billed the Company $72,764, in the aggregate, for
services rendered by Deloitte & Touche for all services (other than those
covered above under "Audit Fees" and "Financial Information Systems Design and
Implementation Fees") during the fiscal year ended February 3, 2001.
INDEPENDENT AUDITORS
In February, 2000, Deloitte & Touche 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
February 3, 2001. In February, 2001, the Board of Directors reappointed Deloitte
& Touche as the Company's independent auditors for the fiscal year ending
February 2, 2002. 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
45 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-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 2000 Annual Report, including financial statements, has been
mailed along with this Proxy Statement.
------------------------
It is important that your 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 proxy card in the enclosed envelope, which requires no postage if
mailed in the United States.
21
26
APPENDIX A
THE ELDER-BEERMAN STORES CORP.
AUDIT & FINANCE COMMITTEE CHARTER
(ADOPTED JUNE 9, 2000)
FUNCTION OF THE COMMITTEE
The Committee will assist the Board in fulfilling the Board's oversight
responsibilities relating to accounting for the Company's financial position and
results of operations, as well as such other matters as may from time to time be
specifically delegated to the Committee by the Board.
COMPOSITION OF THE COMMITTEE
REQUIREMENTS. The Committee will consist of at least three Board members.
No member of the Committee may be an officer or employee of the Company or its
subsidiaries, and each member of the Committee must be, in the opinion of the
Board, free of any relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities as a Committee member.
In determining independence, the Board will observe the requirements of Rules
4200(a)(15) and 4310(c)(26) of the NASD Manual.
Each member of the Committee must be able to read and understand
fundamental financial statements, including the Company's balance sheet, income
statement, and cash flow statement or must become able to do so within a
reasonable period of time after appointment to the Committee.
At least one member of the Committee must have had past employment
experience in finance or accounting, requisite professional certification in
accounting or any other comparable experience or background that results in that
individual's financial sophistication. Such experience may include being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
APPOINTMENT. The Board will appoint the members of the Committee. The Board
will, or will delegate to the members of the Committee the responsibility to,
appoint a Chairman of the Committee. The Chairman of the Committee will, in
consultation with the other members of the Committee, the Company's outside
auditors and the appropriate officers of the Company, be responsible for calling
meetings of the Committee, establishing agenda therefor and supervising the
conduct thereof.
RESPONSIBILITIES OF THE COMMITTEE
The Committee will be responsible for: (i) monitoring the Company's
corporate compliance program, (ii) recommending the Company's outside auditors,
(iii) reviewing the independence of the Company's outside auditor, (iv)
reviewing the audit results and recommendations of the Company's outside
auditors, (v) reviewing the Company's financial statements, including meeting
each quarter with management and the Company's outside auditors to review
quarterly earnings results and the quality of those earnings prior to their
public release, (vi) reviewing and evaluating the Company's systems of internal
accounting, controls, (vii) reviewing and evaluating the Company's internal
audit functions and meeting from time to time with the internal auditors outside
the presence of other employees, and (viii) reviewing such other matters in
relation to the accounting, auditing and financial reporting practices and
procedures of the Company as the Committee may, in its own discretion, deem
desirable in connection with the review functions described above.
MEETINGS OF THE COMMITTEE
The Committee shall meet at least four times annually.
ANNUAL REPORT
The Committee will prepare, with the assistance of management, the outside
auditors and outside legal counsel, a report for inclusion in the Company's
proxy or information statement relating to the annual meeting of
27
security holders at which directors are to be elected that complies with the
requirements of the federal securities laws.
ANNUAL REVIEW OF CHARTER
The Committee will review and reassess, with the assistance of management,
the outside auditors and outside legal counsel, the adequacy of the Committee's
charter at least annually.
2
28
[ELDER-BEERMAN LOGO]
Mark, sign and date your proxy card, detach and return the bottom half 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 THE NOMINEES LISTED BELOW.
1. Election of directors: 01 Mark F. C. Berner 06 Frederick J. Mershad [ ] Vote FOR [ ] Vote WITHHELD
02 Dennis S. Bookshester 07 Thomas J. Noonan, Jr. all nominees from all nominees
03 Eugene I. Davis 08 Laura H. Pomerantz (except as marked)
04 Charles Macaluso 09 Jack A. Staph
05 Steven C. Mason 10 Charles H. Turner
(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.)
----------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ALL NOMINEES.
Attending the Annual Meeting? Mark Box [ ]
Address Change? Mark Box [ ]
Indicate changes below: Date: ______________________________________
----------------------------------------------------
----------------------------------------------------
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 our proxy solicitor at
1-800-566-9061.
29
[LOGO]
THE ELDER-BEERMAN STORES CORP.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, SEPTEMBER 20, 2001
8:00 A.M. EST
DAYTON MARRIOTT HOTEL
1414 SOUTH PATTERSON BOULEVARD
DAYTON, OHIO 45409
THE ELDER-BEERMAN STORES CORP.
3155 EL-BEE ROAD, DAYTON, OHIO 45439 PROXY
- -------------------------------------------------------------------------------
This proxy is solicited by the Board of Directors for use at the Annual Meeting
on September 20, 2001.
The shares of stock you hold in your account will be voted as you specify on
this card.
If no choice is specified, the proxy will be voted "FOR" all director nominees.
By signing the proxy, you revoke all prior proxies and appoint Scott J. Davido
and Steven D. Lipton with full power of substitution, to vote your shares on
matters shown on the reverse side and any other matters that may come before the
Annual Meeting and all adjournments.
See reverse for voting instructions.