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 Section 240.14a-11c or Section 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)(1) 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:
----------------------------------------------------------------------
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
WEDNESDAY, AUGUST 28, 2002
AT 8:00 A.M. EASTERN DAYLIGHT TIME
DAYTON MARRIOTT HOTEL
1414 S. PATTERSON BLVD.
DAYTON, OHIO 45409
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
July 25, 2002
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 2002 Annual Meeting of
Shareholders. The meeting will be held at 8:00 a.m., eastern daylight time, on
Wednesday, August 28, 2002, 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/ Bud Bergren
Byron L. Bergren
President and
Chief Executive Officer
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 August 28, 2002, 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 2003. The
Board of Directors recommends a vote FOR the election of its
nominees, Byron L. Bergren, Mark F.C. Berner, Dennis S.
Bookshester, Eugene I. Davis, Charles Macaluso, Steven C. Mason,
Thomas J. Noonan, Jr., Laura H. Pomerantz, Jack A. Staph, and
Charles H. Turner; and
(2) Such other business as may properly come before the meeting or any
postponements or adjournments thereof.
Only shareholders of record on July 8, 2002 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/ Bud Bergren
Byron L. Bergren
President and
Chief Executive Officer
July 25, 2002
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 2,
2002. 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.
THE ELDER-BEERMAN STORES CORP.
3155 El-Bee Road
Dayton, Ohio 45439
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 28, 2002
DATE OF THE PROXY STATEMENT -- JULY 25, 2002
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
Wednesday, August 28, 2002, 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 July 25, 2002, to all shareholders of record at the close of
business on July 8, 2002.
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 July 8, 2002, there were 11,528,587 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 Wells Fargo
Bank Minnesota, N.A. will tabulate votes and act as Inspectors of Election at
the 2002 Annual Meeting, or any postponements or adjournments thereof.
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, plus reasonable expenses. To date, the Company has
paid $3,500 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, Edward A.
Tomechko, Executive Vice President -- Chief Financial Officer, Secretary and
Treasurer of Elder Beerman, and Steven D. Lipton, Senior Vice
President -- Controller of Elder Beerman.
2
ITEM NUMBER 1
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Currently, the Board of Directors has ten members and each member is
elected annually for a one-year term. The terms of the following directors
expire at the Annual Meeting: Byron L. Bergren, Mark F.C. Berner, Dennis S.
Bookshester, Eugene C. Davis, Charles Macaluso, Steven C. Mason, Thomas J.
Noonan, Jr., Laura H. Pomerantz, Jack A. Staph and Charles H. Turner. 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 Byron L. Bergren, Mark F.C. Berner, Dennis S. Bookshester,
Eugene C. Davis, Charles Macaluso, Steven C. Mason, 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 2003.
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.
NOMINEES FOR DIRECTOR AT THE ANNUAL MEETING:
<Table>
<Caption>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ---- -------- --- ----------------------------------------------------
Byron L. Bergren............... 2002 55 Mr. Bergren has served as President and Chief
Executive Officer of the Company since February
2002. Prior to this time, Mr. Bergren served as
Chairman of the Southern Division of Belk Stores,
Inc. ("Belk") from 1999 to 2002. Prior to that he
served as Managing Partner of the Belk Lindsey
division of Belk from 1992 to 1999; Senior Vice
President of Corporate Sales Promotion and Marketing
of Belk from 1991 to 1992; and Senior Vice President
of Merchandising and Marketing of the Belk Charlotte
division from 1988 to 1991.
Mark F. C. Berner.............. 2000 48 Mr. Berner is Managing Partner of SDG Resources,
L.P., an oil and gas investment fund. From 1996 to
1999, 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.
</Table>
3
<Table>
<Caption>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ---- -------- --- ----------------------------------------------------
Dennis S. Bookshester.......... 1999 63 Mr. Bookshester serves as Chairman of the Illinois
Racing Board. From 1999 through May 2002, he served
as the President and 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
Playboy Enterprises.
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 58 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 was appointed interim President effective
January 1, 2002, and served in this capacity until
Mr. Bergren's appointment as President. Mr. Mason
was also appointed as non-executive Chairman of the
Board in January, 2002. 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.
Thomas J. Noonan, Jr........... 1997 62 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
</Table>
4
<Table>
<Caption>
DIRECTOR
NAME SINCE AGE PRINCIPAL OCCUPATION AND DIRECTORSHIPS
- ---- -------- --- ----------------------------------------------------
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 54 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 PBS Realty Advisors, LLC, as
one of the Principals, a company providing
commercial real estate advisory and brokerage
services. The partnership was formed in September of
2002. Prior to that, she was associated with Newmark
& Company Real Estate, Inc., a commercial real
estate company, as Senior Managing Director and
served in this capacity from August 1996 to August
2002. 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 56 Mr. Staph is currently a consultant, lawyer and
private investor. He also serves as President of
Cleveland Marathon, Inc. and 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 45 Mr. Turner is Executive 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.
</Table>
5
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 eight times during
2001.
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 2001, the members of the Executive Committee were
Messrs. Mershad (who served on the Executive Committee as Chairman until August
19, 2001), Staph (who served on the Executive Committee until August 19, 2001)
and Mason (who has served as Chairman of the Executive Committee since August
19, 2001). Messrs. Noonan, Davis and Macaluso joined the Executive Committee on
August 19, 2001. The Executive Committee held twelve meetings in 2001. 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. During fiscal year 2001, after the announcement of Mr.
Mershad's retirement, the Board of Directors charged the Executive Committee
with additional duties regarding the search for a new Chief Executive Officer
and President and general oversight of the Company's business and financial
position pending the naming of a new Chief Executive Officer and President. 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 2001, the members of the Audit and Finance Committee
were Messrs. Noonan (Chairman), Davis and Turner. Mr. Macaluso joined the Audit
and Finance Committee on September 20, 2001. Mr. Berner served on the Audit and
Finance Committee until September 20, 2001. The Audit and Finance Committee held
six meetings in 2001. Mr. Davis attended fewer than 75% of the Audit and Finance
Committee meetings in 2001. 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 2001, the members of the Compensation Committee were
Messrs. Staph (Chairman), and Mason. Mr. Berner joined the Compensation
Committee on September 20, 2001. Mr. Olsoff served as Chairman of the
Compensation Committee until his retirement from the Board on September 20,
2001. Mr. Macaluso served on the Committee until September 20, 2001. The
Compensation Committee held five meetings in 2001. 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
6
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 2001, the members of the Nominating and Corporate
Governance Committee were Messrs. Mason (Chairman), Bookshester, Staph, and Mrs.
Pomerantz. Mr. Mershad served on the Nominating and Corporate Governance
Committee until his retirement from the Company on December 31, 2001. The
Nominating and Corporate Governance Committee held two meetings in 2001. Mr.
Bookshester and Mrs. Pomerantz each attended fewer than 75% of the Nominating
and Corporate Governance Committee meetings in 2001. 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 2001, 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 attended, other than members of the Executive Committee, which has the
fee structure described in the next paragraph.
During fiscal year 2001, after the announcement of Mr. Mershad's
retirement, the Board of Directors charged the Executive Committee with
additional duties regarding the search for a new Chief Executive Officer and
President and general oversight of the Company's business and financial position
pending the naming of a new Chief Executive Officer and President. As a result
of these increased responsibilities, compensation for members of the Executive
Committee, all of whom are non-employee directors, was changed in September 2001
to the following schedule: in person meetings, $2,500; telephonic meetings,
$1,000; and independent work conducted at the request of the Executive
Committee, $300 per hour. These compensation levels for the members of the
Executive Committee will remain the same.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Except as noted in the following sentence, 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 director). During Mr. Mason's tenure as interim President from
January 1, 2002 until Mr. Bergren's appointment as President on February 11,
2002, Mr. Mason remained on the Compensation Committee. During this time, the
Compensation Committee neither met nor acted on any matters. 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.
7
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 July 8 , 2002 (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.............................. 2,874,700(2) 24.9%
350 California Street, Suite 1460
San Francisco, CA 94104
PPM America, Inc............................................ 1,966,868(3) 17.06%
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Dimensional Fund Advisors Inc............................... 633,000(4) 5.49%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Byron L. Bergren............................................ 55,200 *
Mark F.C. Berner............................................ 11,474(5) *
Dennis S. Bookshester....................................... 33,474(5) *
Eugene I. Davis............................................. 11,474(5) *
Charles Macaluso............................................ 60,576(5) *
Steven C. Mason............................................. 76,165(5) *
Thomas J. Noonan, Jr........................................ 36,564(5) *
Laura H. Pomerantz.......................................... 28,929(5) *
Jack A. Staph............................................... 47,735(5) *
Charles H. Turner........................................... 31,519(5) *
James M. Zamberlan.......................................... 98,866(5) *
Steven D. Lipton............................................ 33,035(5) *
- -------------------------------------------------------------------------------------------
All directors and executive officers as a group:............ 481,938 4.18%
</Table>
- ---------------
* less than 1%
(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 April 11, 2002) of such
shares in a Form 13G filed on April 12, 2002.
(3) PPM America, Inc. ("PPM") a registered investment advisor, reported the
beneficial ownership (as of December 31, 2001) of such shares in a Form 13F
filed on February 14, 2001. All such shares are held in portfolios of PPM
America
8
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) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported the beneficial ownership (as of March 31, 2002) of such
shares in a Form 13f filed on May 3, 2002. 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.
(5) These amounts include shares of Common Stock that the following persons had
a right to acquire within 60 days after July 8, 2002.
<Table>
<Caption>
STOCK OPTIONS EXERCISABLE
NAME BY OCTOBER 8, 2002
- ---- -------------------------
Mr. Berner.................................... 2,334
Mr. Bookshester............................... 22,790
Mr. Davis..................................... 2,334
Mr. Macaluso.................................. 49,892
Mr. Mason..................................... 64,655
Mr. Noonan.................................... 25,054
Ms. Pomerantz................................. 13,419
Mr. Staph..................................... 35,825
Mr. Turner.................................... 18,379
Mr. Zamberlan................................. 78,800
Mr. Lipton.................................... 25,800
</Table>
9
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 2001.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- -----------------------------------
AWARDS PAYOUTS
----------------------- ---------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(5) ($) SARS (#) ($) ($)(10)(11)
------------------ ---- ------- ------ ------------ ---------- ---------- --------- ------------
Byron L. Bergren(1)........ 2001 142,500 250,000
President and Chief 2000
Executive Officer 1999
Frederick J. Mershad(2).... 2001 639,992 65,993(12)
Former Chairman, 2000 671,539 100.000(7) 9,705
President and 1999 600,000 581,250(6) 300,000(7) 7,665
Chief Executive Officer
Scott J. Davido(3)......... 2001 292,199 3,816
Executive Vice President 2000 261,923 37,295 29,690(8) 30,000(9) 4,236
Chief Financial Officer, 1999 217,596 36,000 60,550 45,625 25,000(9) 382
Treasury and Secretary
John S. Lupo(4)............ 2001 212,200
Executive Vice President 2000
Merchandising & Marketing 1999
James M. Zamberlan......... 2001 364,046 3,558
Executive Vice President 2000 351,346 9,703 30,000 4,359
Stores 1999 309,808 53,156 29,690 20,000 2,712
Steven D. Lipton........... 2001 220,821 6,480
Senior Vice President -- 2000 203,538 43,315 11,876 15,000 6,660
Controller 1999 180,115 35,830 10,000 5,801
</Table>
- ---------------
(1) Mr. Bergren was elected as President and Chief Executive Officer of the
Company, effective February 11, 2002. As part of his employment contract,
Mr. Bergren was issued options and shares of restricted stock upon the
execution of his employment agreement, which occurred during the Company's
2001 fiscal year.
(2) Mr. Mershad retired from the Company on December 31, 2001.
(3) Since May 28, 2002, Mr. Davido is no longer with the Company.
(4) Mr. Lupo joined the Company in August 2001.
(5) Moving expense reimbursement.
(6) This restricted share grant was cancelled on December 31, 2001 pursuant to
the terms of the restricted share agreement.
(7) Mr. Mershad's unvested option grants were cancelled on December 31, 2001,
pursuant to the terms of the option agreements. He has a total of 420,201
options at prices ranging from $3.125 to $21.00 that will expire if
unexercised by December 31, 2002.
(8) These restricted share grants were cancelled on May 28, 2002, pursuant to
the terms of the restricted share agreements.
(9) Mr. Davido's unvested option grants were cancelled on May 28, 2002,
pursuant to the terms of the option agreements. He has a total of 37,800
options at prices ranging from $3.438 to $10.89 that will expire if
unexercised by August 28, 2002.
(10) Includes life insurance premium payments paid by the Company in 2001 in the
following amounts: Mr. Mershad $2,640, Mr. Zamberlan $3,558, Mr. Davido
$3,276, and Mr. Lipton $2,430.
(11) Includes matching contributions paid by the Company in 2001 under the
Company's Retirement Savings Plan in the following amounts: Mr. Mershad
$2,430, Mr. Davido $540 and Mr. Lipton $4,050.
(12) Includes severance payments of $60,923 pursuant to the separation agreement
entered into by the Company and Mr. Mershad.
10
STOCK OPTIONS/SAR GRANTS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers during fiscal year 2001 pursuant to the
Company's Equity and Performance Incentive Plan, as amended (the "Plan").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<Table>
<Caption>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN OF BASE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE($/SH) DATE 5% ($) 10% ($)
---- ------------- ------------ ----------- ---------- -------- ----------
Byron L. Bergren.......... 250,000 70.72 2.85 01/23/12 448,087 1,135,541
</Table>
- ---------------
(1) Options vest annually in one-third increments beginning one year from date
of grant.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options exercised
during fiscal year 2001 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 02, 2002 (#) FEBRUARY 02, 2002 ($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Byron L. Bergren......... 0 $0.00 250,000 $0.00 $0.00
Frederick J.Mershad(2)... 0 $0.00 420,201 $0.00 $0.00
Scott J. Davido(3)....... 0 $0.00 32,800 43,200 $0.00 $0.00
James M. Zamberlan....... 0 $0.00 71,800 54,200 $0.00 $0.00
Steven D. Lipton......... 0 $0.00 23,800 22,200 $0.00 $0.00
</Table>
- ---------------
(1) Based on the closing price on NASDAQ of the Company's Common Stock on
February 1, 2002 (the last trading day in fiscal year 2001) of $2.70.
(2) Mr. Mershad's options will expire on December 31, 2002 if he does not
exercise them before that date pursuant to the terms of the option
agreements.
(3) Mr. Davido's options will expire on August 28, 2002 if he does not exercise
them before that date pursuant to the terms of the option agreements.
11
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about Elder-Beerman's Common Stock
that may be issued upon the exercise of options, warrants and rights under all
of Elder-Beerman's existing equity compensation plan as of February 2, 2002.
<Table>
<Caption>
(c) NUMBER OF SECURITIES
(a) NUMBER OF REMAINING AVAILABLE FOR
SECURITIES TO BE ISSUED (b) WEIGHTED -- FUTURE ISSUANCE UNDER
UPON EXERCISE OF AVERAGE EXERCISE PRICE EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OF OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
------------- ------------------------ ------------------------ --------------------------
Equity compensation plans
approved by security
holders(1)..................... 2,026,277 $6.345 489,726
Equity compensation plans not
approved by security
holders(2)..................... -- -- --
Total............................ 2,026,277 $6.345 489,726
</Table>
- ---------------
(1) The Elder-Beerman Stores Corp. Equity and Performance Incentive Plan was
approved in December 1997 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. On September 21, 2000, the Company's
shareholders approved an amendment to the Plan which increased the number of
shares of Common Stock to be issued under the Plan from 2,225,000 to
2,750,000 shares.
(2) The Company does not have any compensation plans that have not been approved
by the Company's shareholders.
EMPLOYMENT AND SEVERANCE AGREEMENTS WITH CERTAIN OFFICERS
The Company has entered into employment agreements with Byron L. Bergren,
President and Chief Executive Officer, Frederick J. Mershad, who retired as
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. Bergren's Employment sets forth (a) Mr. Bergren's compensation and
benefits, subject to increases at the discretion of the Board of Directors; (b)
the Company's right to terminate Mr. Bergren for "cause" (as defined in the
Employment Agreement) or otherwise; (c) the amounts to be paid by the Company in
the event of Mr. Bergren's termination, death or disability while rendering
services; (d) Mr. Bergren's duty of strict confidence and to refrain from
conflicts of interest; (e) Mr. Bergren's obligations not to compete for the term
of the agreement plus one year unless the Company terminates Mr. Bergren other
than for cause or Mr. Bergren terminates his employment at any time following a
"change in control" (as defined in the Employment Agreement); and (f) Mr.
Bergren's rights to receive severance payments. In general, the Employment
Agreement provides that if Mr. Bergren is terminated for any reason, other than
for cause, by reason of death or disability or following a change in control, he
will receive payments equal to the remaining base salary that would have been
paid to him by the company for the longer of one year or the remaining term of
his Employment Agreement, provided that he signs a release of any claims he may
have against the Company arising from his employment. If Mr. Bergren is
terminated within two years of a change in control without cause or for "good
reason" (as defined in the Employment Agreement), he will receive a severance
payment equal to 2.99 times the Internal Revenue Code "base amount" as described
in section 280G of the Internal Revenue Code (provided that he signs a release
of any claims he may have against the Company arising from his employment) and
his options to purchase shares of Common Stock and restricted shares that are
unvested as of the date of the change in control will automatically vest. A tax
gross-up on excise taxes also will be paid if the severance pay exceeds the
limits imposed by the Internal Revenue Code.
Mr. Mershad, the Company's former Chairman, President and Chief Executive
Officer, retired from the Company effective December 31, 2001. Prior to his
retirement, the Company entered into a Separation and
12
Retirement Agreement ("the Separation Agreement") with Mr. Mershad. The
Separation Agreement superceded Mr. Mershad's Employment Agreement and sets
forth the payments and benefits Mr. Mershad is 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 terms
of the separation agreement, until the Retirement Date, Mr. Mershad was 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 is also 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 were unvested as of the Retirement Date were forfeited. The options
and restricted shares that were 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 has one year
from the Retirement Date to exercise the options that were 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.
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. In 2001, the Company paid $467,500 to Mr.
Muskovich under the terms of his Employment Agreement.
The Company has also entered into Employment Agreements that include
severance pay provisions with each of Messrs. Zamberlan, Davido and Charles P.
Shaffer, Senior Vice President and General Merchandise Manager. These Employment
Agreements, as amended, 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
13
substantially similar benefits. Mr. Shaffer's Employment Agreement expired on
August 22, 2001 and the Company did not elect to renew it. As of April 22, 2002,
Mr. Shaffer is no longer with the Company.
Messrs. Zamberlan's and Davido's Employment Agreements, as amended, 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.
Mr. Davido, the Company's former Chief Financial Officer, left the Company
on May 28, 2002. Mr. Davido's Employment Agreement sets forth the payments and
benefits he became entitled to upon leaving. Pursuant to his Employment
Agreement, as amended, the Company is obligated to pay Mr. Davido's base salary
in effect on May 28, 2002 for a period of one year. Mr. Davido is also entitled
to payment for any accrued but unused vacation time.
The Company has also entered into an Employment Agreement that includes
severance pay provisions with Mr. Lipton. Mr. Lipton's Employment Agreement, as
amended, 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 all of the severance payments made to Mr. Lipton
exceed 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, as amended, also provides for his (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 a Severance Agreement with Edward A.
Tomechko. Mr. Tomechko's Severance Agreement provides for his right to receive
severance payments if he is involuntarily terminated by the Company within two
years of a change in control or if he terminates his employment with the Company
for good reason within two years of a change in control. Such severance payable
by the Company will be equal to two times his base salary in effect immediately
prior to his termination. For a period of up to 24 months, he will also be
entitled to medical and dental benefits for himself and his dependents on terms
and conditions substantially similar to those applicable generally to Company
employees during such 24 month period (provided that he was enrolled in the
medical and dental plans made available to the Company employees immediately
prior to his termination). Mr. Tomechko's Severance Agreement also provides for
his right to receive severance payments if he is involuntarily terminated by the
Company for reasons other than death, disability or cause, or if he terminates
his employment with the Company for good reason. Such severance payments include
(i) for a period of one year,
14
payment to Mr. Tomechko of the amount of his base salary as in effect
immediately prior to his termination of employment and (ii) for a period of up
to twelve months, medical and dental benefits for Mr. Tomechko and his
dependents on terms and conditions substantially similar to those applicable
generally to Company employees during such twelve month period (provided that he
was enrolled in the medical and dental plans made available to the Company
employees immediately prior to his termination).
The Company has also entered into an agreement with Renaissance Partners,
LLP regarding John Lupo's service as Executive Vice President, Merchandising and
Marketing. Mr. Lupo's agreement provides for his compensation, termination of
the agreement by the parties thereto and Mr. Lupo's right to receive success
fees upon any termination of the agreement.
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, except for Mr. Lupo. 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 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. Periodically, 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
15
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
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 value 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.
- 2001 BONUS OBJECTIVES
For bonus eligible executives below the level of Senior Vice President,
annual bonuses for 2001 were based on meeting weighted objectives for corporate
operating profit and financial goals in the applicable executive's area of
responsibility. For Senior Vice Presidents, Executive Vice Presidents and the
Chief Executive Officer (the "Senior Bonus Level Executives"), annual bonuses
during the fiscal year 2001 were based solely on meeting a corporate profit
goal.
For the fiscal year 2001, the Company did not achieve the target award
level established for operating profit and therefore, the Company did not pay
any amount for this component of bonuses. As a result, the Senior Bonus
16
Level Executives did not earn any bonus during the fiscal year 2001. 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. Thirty-seven lower level 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 8% and 72%
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.
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. Mr. Mershad's base salary was not adjusted in fiscal year 2001.
2001 BASE SALARY AND ANNUAL BONUS
Mr. Mershad's annual base salary was $660,000. Mr. Mershad was also
eligible in fiscal year 2001 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 2001, 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. On Mr. Mershad's retirement
date, 20,000 of the options were vested and the remaining 80,000 were unvested
and forfeited. Mr. Mershad has until December 31, 2002 to exercise the 20,000
vested options, as well as 400,201 options granted in prior years.
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 year 2001 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.
Jack A. Staph (Chairman)
Mark F.C. Berner
Steven C. Mason
17
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 2, 2002 (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.
[ELDER-BEERMAN LINE GRAPH]
<Table>
<Caption>
REGIONAL
S&P DEPT STORE
SMALLCAP PEER GROUP
QUARTER-END 600 INDEX INDEX EBSC
- ----------- --------- ---------- ----
February 17, 1998....................................... 100 100 100
May 2, 1998............................................. 107 118 165
August 1, 1998.......................................... 93 112 140
October 31, 1998........................................ 84 64 71
January 30, 1999........................................ 93 70 54
May 1, 1999............................................. 91 61 51
July 31, 1999........................................... 97 68 37
October 30, 1999........................................ 93 64 41
January 29, 2000........................................ 103 46 30
April 29, 2000.......................................... 109 44 28
July 29, 2000........................................... 106 42 26
October 28, 2000........................................ 110 32 24
February 3, 2001........................................ 120 36 18
May 5, 2001............................................. 117 33 19
August 4, 2001.......................................... 121 27 24
November 3, 2001........................................ 109 24 18
February 2, 2002........................................ 123 20 16
</Table>
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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.
Except as disclosed in the following sentences, based upon its review of
such forms received by Elder Beerman and written representations from 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
by its directors, executive officers or 10 percent shareholders. Annual
Statements of Changes in Beneficial Ownership on Form 5 for the following
individuals were filed on March 27, 2002, nine days after the March 18, 2002
deadline: Mark F.C. Berner, Dennis D. Bookshester, Scott J. Davido, Eugene I.
Davis, Steven D. Lipton, Charles Macaluso, Steven C. Mason, Thomas J. Noonan,
Jr., Laura H. Pomerantz, Jack A. Staph, Charles H. Turner and James M.
Zamberlan. In addition, Annual Statements of Changes in Beneficial Ownership on
Form 5 were not filed for the fiscal year ended February 3, 2001 for Thomas J.
Noonan, Jr. and Laura H. Pomerantz. Changes for that year are reflected in the
most recent filing. No open market purchases or sales were reflected in those
filings.
AUDIT COMMITTEE REPORT
The Board of Directors of the Company adopted a written Audit Committee
Charter. 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 2,
2002. 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 2, 2002, filed with the U.S. Securities and Exchange Commission.
Thomas J. Noonan, Jr. (Chairman)
Eugene I. Davis
Charles Macaluso
Charles H. Turner
AUDIT FEES
The aggregate fees billed by Deloitte & Touche LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended February 2, 2002, and for the reviews of the
19
financial statements included in the Company's quarterly reports on Form 10-Q
for that fiscal year were $267,351.
FINANCIAL INFORMATION DESIGN AND IMPLEMENTATION FEES
There were no professional services rendered by Deloitte & Touche for the
fiscal year ended February 2, 2002 relating to financial information systems
design and implementation.
ALL OTHER FEES
The aggregate fees billed by Deloitte & Touche for services rendered to the
Company, other than services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees", for the fiscal year ended
February 2, 2002 were $94,486, including related services of approximately
$46,540 and non-audit, primarily tax services of $47,946.
The Audit Committee has considered whether the provision of these services
is compatible with maintaining the principal accountant's independence.
INDEPENDENT AUDITORS
In April, 2001, 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 2, 2002. In
May, 2002, the Board of Directors reappointed Deloitte & Touche as the Company's
independent auditors for the fiscal year ending February 1, 2003.
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 2001 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.
20
[ELDER-BEERMAN LOGO]
THE ELDER-BEERMAN STORES CORP.
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, AUGUST 28, 2002
8:00 A.M. ET
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 August 28, 2002.
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 Edward A.
Tomechko 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.
[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 Byron L. Bergren 06 Steven C. Mason [ ] Vote FOR [ ] Vote WITHHELD
02 Mark F. C. Berner 07 Thomas J. Noonan, Jr. all nominees from all nominees
03 Dennis S. Bookshester 08 Laura H. Pomerantz (except as marked)
04 Eugene I. Davis 09 Jack A. Staph
05 Charles Macaluso 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
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Signature(s) in Box
Please sign exactly as your name(s) appear on
proxy. If held in joint tenancy, 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.