<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
/X/ Definitive Proxy Statement Commission Only
/ / Definitive Additional Materials (as permitted by Rule
/ / Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
Edison Brothers Stores, Inc.
- ------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
- ------------------------------------------------------------------------------
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTIONS APPLIES:
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(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
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previously. Identify the previous filing by registration statement number, or
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<PAGE> 2
EDISON BROTHERS STORES, INC.
EXECUTIVE OFFICES
501 NORTH BROADWAY
P.O. BOX 14020
ST. LOUIS, MISSOURI 63178
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
To the Holders of Common Stock of
EDISON BROTHERS STORES, INC.
Notice is hereby given that the annual meeting of
the stockholders of Edison Brothers Stores, Inc. will
be held at the headquarters of the Corporation, 501
North Broadway, St. Louis, Missouri, on the 10th day of
June, 1998, at 11 o'clock A.M. for the following
purposes:
(1) To elect six directors;
(2) To consider and act upon a proposal to approve
the Corporation's 1998 Equity Incentive Plan;
(3) To consider and act upon a proposal to approve
the Corporation's 1998 Deferred Stock
Compensation Plan for Non-Employee Directors;
(4) To consider and act upon a proposal to approve
the Corporation's 1998 Restricted Stock Plan
for Non-Employee Directors; and
(5) To transact such other business as may properly
come before the meeting or any adjournments
thereof.
The Board of Directors has set the close of
business on April 21, 1998, as the record date for the
determination of the stockholders entitled to notice of
and to vote at the annual meeting.
Your attention is directed to the proxy statement
which appears on the following pages.
By Order of the Board of Directors
ALAN A. SACHS
Secretary
May 5, 1998
St. Louis, Missouri
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON,
PLEASE SIGN, DATE AND RETURN PROMPTLY THE PROXY
ENCLOSED HEREWITH. A POSTPAID ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE.
<PAGE> 3
EDISON BROTHERS STORES, INC.
EXECUTIVE OFFICES
501 NORTH BROADWAY
P.O. BOX 14020
ST. LOUIS, MISSOURI 63178
1998 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of the
Corporation. A stockholder giving a proxy may revoke it by written
communication delivered to the Secretary of the Corporation at any time before
the proxy is exercised. All proxies not so revoked will be voted as instructed
therein. In addition to solicitations by mail, officers and other employees of
the Corporation may, in a limited number of instances, solicit proxies in
person or by telephone, at no additional compensation. When appropriate, banks,
brokerage firms and other fiduciaries holding shares of record are requested to
forward proxy material to the beneficial owners of such shares for the purpose
of obtaining authorization for the execution of proxies. All costs of
solicitation of proxies, including reimbursement to such fiduciaries for their
reasonable expenses incurred therefor, will be borne by the Corporation. This
proxy statement and accompanying materials are first being mailed to
stockholders on May 5, 1998.
The total number of outstanding shares of Common Stock entitled to vote at
the annual meeting is 9,596,701. Stockholders are entitled to one vote for each
share of Common Stock held. Only holders of record of Common Stock at the close
of business on April 21, 1998 are entitled to vote at the annual meeting or any
adjournments thereof. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
annual meeting will constitute a quorum for the transaction of business.
Abstentions and broker non-votes will be counted for purposes of determining
the presence or absence of a quorum. (A broker non-vote occurs when shares held
in the name of a broker or other nominee are voted on some matters but not
others because, as to the latter, the nominee does not have discretionary
authority to vote the shares and has not received instructions from the
beneficial owner.) Since directors will be elected by a plurality of the votes
cast at the meeting, any shares not voted (whether by abstention, broker
non-vote or otherwise) will not affect the results of the election. With
respect to the proposals to approve the Corporation's 1998 Equity Incentive
Plan, 1998 Deferred Stock Compensation Plan for Non-Employee Directors and 1998
Restricted Stock Plan for Non-Employee Directors, each of which requires the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote, abstentions will be counted as present and thus will have the
same effect as a negative vote; broker non-votes will not be considered present
for purposes of the proposals and therefore will have no effect on the outcome.
Other than as set forth in the Notice of Meeting, the Corporation is
unaware of any matter to be presented to the stockholders for action at the
annual meeting. If any other matters do come before the meeting, the proxies
solicited hereby will be exercised in accordance with the discretion of the
persons named therein.
BACKGROUND--CHANGE IN CONTROL
On November 3, 1995, the Corporation and 65 of its subsidiaries filed
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court in Wilmington, Delaware. On
September 9, 1997, an Amended Joint Plan of Reorganization (the "Plan of
Reorganization") was confirmed by the Bankruptcy Court. The Corporation
emerged from Chapter 11 on September 26, 1997 (the "Emergence Date").
The Plan of Reorganization provided for the cancellation, as of the
Emergence Date, of all existing common stock of the Corporation (the "Old
Common Stock") and the issuance of a total of 10,000,000 shares of new common
stock of the Corporation (herein referred to either as the "New Common Stock"
or the "Common Stock") to holders of allowed general unsecured claims and
holders of Old Common Stock who exercised certain Rights granted to them
pursuant to the Plan of Reorganization, plus an additional 225,000 restricted
shares to be issued to certain of the Corporation's senior executives. Trading
in the Old Common Stock on the New York Stock Exchange had been suspended by
the Exchange effective June 30, 1997 and the Old Common Stock was subsequently
delisted by the Exchange. The New Common Stock was listed for trading on the
Nasdaq National Market on December 11, 1997. The initial distribution of shares
of the New Common Stock pursuant to the Plan of Reorganization was made on
December 12, 1997. Additional distributions of shares of New Common Stock
pursuant to the Plan of Reorganization have been and will be made periodically.
1
<PAGE> 4
Pursuant to the Plan of Reorganization, as of the Emergence Date the Board
of Directors of the Corporation was reconstituted to consist of eight
individuals, six of whom were selected by the statutory Creditors' Committee,
one of whom was currently an outside director and one of whom was the
Corporation's then-Chairman, President and Chief Executive Officer. The latter
two individuals have since resigned and the number of directors constituting
the Board, as provided in the Corporation's by-laws, has been reduced to six.
1. ELECTION OF DIRECTORS
A board consisting of six directors is to be elected, each to serve until
the next annual meeting of stockholders and until his or her successor is
elected and qualifies. Set forth below are the names of the nominees and
certain biographical information. Each of the nominees has been a director of
the Corporation since September 26, 1997. It is the intention of the persons
appointed as proxies in the enclosed form of proxy to vote such proxy for the
election as directors of the nominees hereinafter named, unless authority to do
so is withheld. In the event a nominee named below is unable to stand for
election because of some unexpected occurrence, the persons appointed as
proxies in the enclosed form of proxy will vote such proxy for such substitute
nominee(s), if any, as may be designated by the Board of Directors.
JEFFREY A. COLE, age 56, has been Chairman since 1992, Chief Executive
Officer since 1983, and a director since 1969 of Cole National Corporation, a
vision care and personalization retailer and provider of managed vision care
programs. Mr. Cole is also a director of Hartmarx Corporation and a member of
the Supervisory Board of Pearle Trust B.V.
JACOB W. DOFT, age 28, has been Managing Director of Highline Capital
Management, L.L.C., an investment advisory firm, since 1995. From 1993 to 1995,
Mr. Doft attended the Harvard Business School.
H. MICHAEL HECHT, age 58, has been President and Chief Executive Officer of
Dickson Trading (North America) Inc. since 1996. During the two preceding
years, Mr. Hecht served in a variety of consulting capacities. From 1992 to
1994, he was President and Chief Executive Officer of Builder's Emporium, and
prior to that was President of Carter Hawley Hale Stores, Inc.
LAWRENCE E. HONIG, age 50, is Chairman of the Board, President and Chief
Executive Officer of the Corporation, a position he has held since January
1998. Prior to joining the Corporation, Mr. Honig was an Executive Vice
President of Alliant Foodservice, Inc. From 1994 to 1996, Mr. Honig was
President and Chief Executive Officer of Federated Systems Group, Inc., a
subsidiary of Federated Department Stores. Prior to his employment with
Federated, Mr. Honig was a Vice Chairman and a director of The May Department
Stores Company.
RANDOLPH I. THORNTON, JR., age 52, is a Managing Director and Senior Credit
Officer of Citibank, N.A.
STEPHEN E. WATSON, age 53, has been President and Chief Executive Officer
of Gander Mountain, L.L.C., a retailer of outdoor sporting goods, since 1997.
From 1973 to 1996, he served in a variety of executive capacities with Dayton
Hudson Corporation, including President from 1990 to 1996. Mr. Watson is a
director of Shopko Stores, Inc.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Audit Committee of the Board has responsibility for evaluating the
internal control and audit procedures of the Corporation. The Committee
recommends annually to the entire Board of Directors a firm of independent
accountants to audit the financial statements of the Corporation, reviews the
audit program with the firm selected and reviews reports and recommendations of
the auditors. In addition, the Audit Committee reviews in advance the non-audit
services that may be provided by the independent accountants during the year,
including the effect that performing such services might have on audit
independence, approves guidelines, including dollar limits, for such non-audit
services and reviews the services performed to see that they are consistent
with its guidelines. The Audit Committee consists of Randolph I. Thornton, Jr.
(Chairman), Jacob W. Doft and Stephen E. Watson.
The Compensation Committee of the Board determines the base salaries of all
senior executives of the Corporation and administers the Corporation's
Executive Performance Incentive Compensation Plan. It also administers the
Corporation's 1997 Stock Option Plan and 1997 Directors Stock Option Plan and,
subject to stockholder approval as set forth in Proposals Two, Three and Four
of this proxy statement, the 1998 Equity Incentive Plan, the 1998 Deferred
Stock Compensation Plan for Non-Employee Directors and the 1998 Restricted
Stock Plan for Non-Employee Directors. The Compensation Committee consists of
Jacob W. Doft (Chairman) and Jeffrey A. Cole.
The Nominating and Corporate Governance Committee of the Board establishes
criteria and recommends candidates for membership on the Board of Directors;
annually evaluates the performance of the Board of Directors, individually and
as a group; makes recommendations concerning the size and composition of the
Board and the
2
<PAGE> 5
number, function, size and composition of Board committees; annually reviews
the performance of the Chief Executive Officer and other senior officers of the
Corporation; and oversees and reviews succession planning for the Chief
Executive Officer position and other senior management positions. The Committee
will consider recommendations by stockholders of nominees for membership on the
Board if submitted in accordance with the procedures set forth in the
Corporation's by-laws. The Nominating and Corporate Governance Committee
consists of H. Michael Hecht (Chairman) and Randolph I. Thornton, Jr.
Directors who are employees of the Corporation receive no additional
compensation for their attendance at meetings of the Board or any of its
committees. Directors who are not employees of the Corporation receive an
annual retainer of $25,000 and $1,500 for participation in each Board meeting
and $1,000 for participation in each committee meeting. When participation in a
Board or committee meeting is by telephone, the fee paid is one-half of the
amount reported above.
On February 26, 1998, the Board of Directors adopted the 1998 Deferred
Stock Compensation Plan for Non-Employee Directors. Under this plan, which is
subject to stockholder approval (see Proposal Three at pages 19-20 of this
proxy statement), directors may elect to defer receipt of all or part of their
annual retainer and meeting fees, with such deferred amounts to be credited to
a stock-equivalent account and paid in the form of Common Stock following
termination of service as a director.
Under the Corporation's 1997 Directors Stock Option Plan (the "1997
Directors Plan"), which was approved as part of the Plan of Reorganization,
each non-employee director received on September 26, 1997 (the effective date
of the Plan of Reorganization) an option to purchase 3,500 shares of Common
Stock at an exercise price of $5.58 per share. Each non-employee director who
is first elected or appointed after the date hereof will also receive, on the
date of such election or appointment, an option to purchase 3,500 shares of
Common Stock, at an exercise price equal to the fair market value of the Common
Stock as of that date. As amended by the Board of Directors on April 15, 1998
pursuant to Section 11 of the 1997 Directors Plan, each director who has
received an initial option grant and who remains a director at the completion
of an annual meeting of stockholders commencing with the annual meeting held in
the calendar year following the calendar year in which such director received
the initial grant will automatically be granted, as of the date of completion
of each such annual meeting, an option to purchase 5,000 shares of Common
Stock, such option to be exercisable at a price per share equal to the fair
market value of a share of Common Stock as of such date. All options granted
under the 1997 Directors Plan become exercisable in installments of one-third
of the total number of shares covered by the option on each of the first
through third anniversaries of the grant date. The options expire ten years
after the date of grant, and may not be exercised (subject to certain
exceptions) unless the optionee is at the time of exercise a non-employee
director and has been such continuously since the granting of the option.
On April 15, 1998, the Board of Directors adopted the 1998 Restricted Stock
Plan for Non-Employee Directors. Under this plan, which is subject to
stockholder approval (see Proposal Four at pages 20-21 of this proxy
statement), each non-employee director will receive, upon approval of the plan
(or upon first becoming a member of the Board, if later), a one-time grant of
7,500 shares of Common Stock, restricted as to transferability and subject to
forfeiture as provided in the plan.
During the 52 weeks ended January 31, 1998, there were nine meetings of the
Board of Directors, two of the Audit Committee, two of the Compensation
Committee and none of the Nominating and Corporate Governance Committee. As
indicated above, all of the incumbent directors were appointed pursuant to the
Plan of Reorganization and first became directors on September 26, 1997, the
effective date of the Plan of Reorganization. Each such director has attended
at least 75% of the total of (i) all Board meetings held between that date and
January 31, 1998 and (ii) all meetings during that period of Board committees
on which the director has served.
3
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number and percentage of outstanding
shares of Common Stock beneficially owned as of April 15, 1998 by (i) each
director, (ii) each person named in the Summary Compensation Table on page 6 of
this proxy statement, and (iii) all directors and executive officers of the
Corporation as a group.
<TABLE>
<CAPTION>
Amount and Nature
Name of of Beneficial Percent
Beneficial Owner Ownership<F1><F2><F3> of Class<F4>
- ---------------------------- --------------------- ------------
<S> <C> <C>
Jeffrey A. Cole 500 --
David B. Cooper, Jr. 23,000 --
Jacob W. Doft 500 --
Michael J. Fine 25,000 --
H. Michael Hecht 1,000 --
Lawrence E. Honig 56,530<F5> --
Karl W. Michner 23,947 --
Alan D. Miller 77,777 --
Alan A. Sachs 23,634 --
Randolph I. Thornton, Jr. 24,000 --
Stephen E. Watson 500 --
All directors and executive
officers as a group 299,913 2.8%
<FN>
<F1> Sole voting and dispositive power, except for the following shares as to
which the named individual has shared voting and dispositive power: Mr.
Honig, 3,630 shares; and Mr. Thornton, 24,000 shares.
<F2> Includes restricted stock granted as of September 26, 1997, as follows:
Mr. Cooper, 23,000 shares; Mr. Fine, 25,000 shares; Mr. Michner, 23,000
shares; Mr. Miller, 75,000 shares; and Mr. Sachs, 23,000 shares. (See page
7, footnote 3.)
<F3> Includes shares which were not owned by the named individual or group
member as of April 15, 1998, but which such individual or group member
could acquire on or before June 14, 1998 under warrants to purchase shares
of Common Stock issued by the Corporation pursuant to the Plan of
Reorganization (each such warrant having an exercise price of $16.40 per
share and an expiration date of September 26, 2008), as follows: Mr.
Michner, 947 shares; Mr. Miller, 2,777 shares; Mr. Sachs, 634 shares; and
all directors and executive officers as a group, 4,483 shares.
<F4> Percentages are calculated based on the number of shares deemed
outstanding under applicable Securities and Exchange Commission rules as
of April 15, 1998. Only percentages of beneficial ownership of 1% or more
are shown.
<F5> Includes 50,000 shares of restricted stock granted on February 26, 1998
under the Corporation's 1998 Equity Incentive Plan. (See Proposal Two at
pages 15-19.)
</TABLE>
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the number and percentage of outstanding
shares of Common Stock beneficially owned by each person known by management to
be the beneficial owner of more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class<F1>
- ------------------------------------------------ ----------------------- ------------
<S> <C> <C>
Citicorp 796,582<F2> 7.6%
Citibank, N.A.
399 Park Avenue
New York, NY 10043
Contrarian Capital Advisors, L.L.C. 643,848<F3> 6.1%
Contrarian Capital Management, L.L.C. 269,822<F3> 2.6%
411 West Putnam Avenue
Greenwich, CT 06830
Morgens, Waterfall, Vintiadis & Company, Inc. 998,723<F4> 9.5%
(and related entities)
10 East 50th Street
New York, NY 10022
Nomura Holding America, Inc. 716,035<F5> 6.8%
2 World Financial Center
New York, NY 10281-1198
Principal Mutual Life Insurance Company 759,462<F6> 7.2%
711 High Street
Des Moines, IA 50392-0088
Swiss Bank Corporation 1,518,334<F7> 14.4%
Aeschenplatz 6 CH-4002
Basel, Switzerland
and
SBC Restructuring and Recovery, Ltd.
c/o Swiss Bank Corporation
222 Broadway
New York, NY 10038
<FN>
<F1> Percentages are calculated based on the number of shares deemed
outstanding under applicable Securities and Exchange Commission rules as
of April 15, 1998.
<F2> The information presented is derived from a Schedule 13G dated February
13, 1998. Citicorp has no voting or dispositive power as to any of the
shares. Its wholly-owned subsidiary, Citibank, N.A., has sole voting and
dispositive power with respect to all of the shares.
<F3> The information presented is derived from a Schedule 13G dated February
12, 1998. Contrarian Capital Advisors, L.L.C. is the beneficial owner of,
and has sole voting and dispositive power with respect to, 643,848 shares;
Contrarian Capital Management, L.L.C. is the beneficial owner of, and has
sole voting and dispositive power with respect to, 269,822 shares.
<F4> The information presented is derived from a Schedule 13D dated November 3,
1997. The Schedule 13D was filed jointly by Morgens Waterfall Income
Partners, L.P. ("MWIP"); Restart Partners, L.P. ("Restart"); Restart
Partners II, L.P. ("Restart II"); Restart Partners III, L.P. ("Restart
III"); Restart Partners IV, L.P. ("Restart IV"); Restart Partners V,
L.P. ("Restart V"); Endowment Restart, L.L.C. ("Endowment"); Morgens,
Waterfall, Vintiadis & Company, Inc. ("Morgens Waterfall"); MW Capital,
L.L.C. ("MW Capital"); Prime Group, L.P. ("Prime"); Prime Group II,
L.P. ("Prime II"); Prime Group III, L.P. ("Prime III"); Prime Group
IV, L.P. ("Prime IV"); Prime Group V, L.P. ("Prime V"); Prime, Inc.;
MW Overseas Partners ("MW Overseas"); John C. "Bruce" Waterfall
("Waterfall"); and Edwin H. Morgens ("Morgens"). The following numbers
of shares are owned directly by the following entities: MWIP, 13,012;
Restart, 79,558; Restart II, 112,645; Restart III, 78,443; Restart IV,
49,445; Restart V, 15,986; Endowment, 22,678; and MW Overseas, 626,956. By
reason of various relationships as set forth in the Schedule 13D, none of
the reporting persons has sole voting or dispositive power with respect to
any of the shares. The reporting persons have shared voting and
dispositive power with respect to the shares as follows: MWIP, 639,968;
Restart, 706,514; Restart II, 739,601; Restart III, 705,399; Restart IV,
676,401; Restart V, 642,942; Endowment, 649,634; MW Overseas, 626,956;
Morgens Waterfall, 649,634, MW Capital, 639,968; Prime, 706,514; Prime II,
739,601; Prime III, 705,399; Prime IV, 676,401; Prime V, 642,942; Prime,
Inc., 963,033; Waterfall, 998,723; and Morgens, 998,723. Each reporting
person disclaims beneficial ownership of the shares owned, directly or
indirectly, by any other reporting person.
<F5> The information presented is derived from a Schedule 13D dated December
22, 1997. Nomura Holding America, Inc. has sole voting and dispositive
power as to all of the shares.
5
<PAGE> 8
<F6> The information presented is derived from a Schedule 13G dated February
13, 1998. Principal Mutual Life Insurance Company has sole voting power as
to none of the shares, sole dispositive power as to none of the shares,
and shared voting and dispositive power as to all of the shares.
<F7> The information presented is derived from a Schedule 13G (Amendment No. 1)
dated March 20, 1998. The Schedule 13G was filed jointly by SBC
Restructuring and Recovery Ltd. ("SBCRR") and its parent holding
company, Swiss Bank Corporation ("SBC"). SBC has sole voting and
dispositive power as to 790,075 shares and shared voting and dispositive
power as to 728,259 shares. SBCRR has sole voting power as to none of the
shares, sole dispositive power as to none of the shares, and shared voting
and dispositive power as to 728,259 shares.
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to the Corporation's
current Chief Executive Officer, its former Chief Executive Officer and its
four other most highly compensated executive officers serving as of January 31,
1998 (the "named executive officers") for services rendered to the
Corporation and its subsidiaries for the last three fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------------------- -----------------------------------
Awards Payouts
Securities
Other Restricted Underlying All Other
Annual Stock Options/ LTIP Compensa-
Name and Principal Salary<F1> Bonus<F2> Compensation Award(s)<F3> SARs<F4> Payouts tion<F5>
Position Year ($) ($) ($) ($) (#) ($) ($)
------------------ ---- ---------- --------- ------------ ------------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence E. Honig 1997 $ 37,122<F6> -- -- -- 288,000 -- $ 660,007<F7>
Chairman, President 1996 -- -- -- -- -- -- --
and Chief Executive 1995 -- -- -- -- -- -- --
Officer
Alan D. Miller 1997 484,658<F8> $1,587,500 -- $418,500 -- -- 2,949,685<F10>
Former Chairman, 1996 450,000 300,000 -- -- -- -- 600
President and Chief 1995 433,333 -- -- 637,500<F9> 45,000 -- 529
Executive Officer
Michael J. Fine 1997 352,083 129,522 -- 139,500 100,000 -- 1,074
President, Edison 1996 260,606 192,958 -- -- -- -- --
Footwear and 1995 200,000 -- -- -- 13,000 -- --
Womenswear Group
Karl W. Michner 1997 350,000 58,333 -- 128,340 25,000 -- 1,074
President, 1996 350,000 282,333 -- -- -- -- 600
J. Riggings 1995 347,167 -- -- -- 23,500 -- 517
David B. Cooper, Jr. 1997 328,333 330,000 -- 128,340 25,000<F11> -- 1,098,982<12>
Executive Vice 1996 320,000 213,333 -- -- -- -- --
President and Chief 1995 316,666 -- -- -- 20,000 -- --
Financial Officer
Alan A. Sachs 1997 285,000 147,500 -- 128,340 15,000 -- 1,074
Executive Vice 1996 285,000 190,000 -- -- -- -- 600
President, General 1995 282,333 -- -- -- 16,500 -- 533
Counsel and Secretary
<FN>
<F1> Includes all amounts contributed by the named individuals to the Edison
Brothers Stores Savings Plan. The Savings Plan is available to all
employees of the Corporation who have attained the age of 21 and completed
one year of service. An employee may elect to contribute, through payroll
deduction, up to 15% of his or her annual cash compensation (subject to
certain limitations imposed by the Internal Revenue Code). Income tax is
deferred on all amounts contributed by the employee pursuant to Section
401(k) of the Internal Revenue Code. For the years in question, the
Corporation contributed, on a matching basis, between 10% and 50% of the
first 6% of compensation contributed by the employee. The amount of the
Corporation's matching contribution was determined each year based upon
the return on stockholders' equity achieved by the Corporation in the
prior year.
6
<PAGE> 9
<F2> The amounts shown for 1996 were comprised of two elements: (a)
"retention" bonuses paid in September 1996 in accordance with the terms
of the respective Amended and Restated Employment Agreements, dated June
21, 1996 (the "1996 Employment Agreements"), between the Corporation
and each of the applicable named executive officers, as follows: Mr.
Miller, $75,000; Mr. Fine, $45,833; Mr. Michner, $58,333; Mr. Cooper,
$53,333; and Mr. Sachs, $47,500; and (b) bonuses paid in April 1997 in
respect of fiscal 1996 performance pursuant to the Corporation's 1996
Executive Performance Incentive Compensation Plan, as follows: Mr.
Miller, $225,000; Mr. Fine, $147,125; Mr. Michner, $224,000; Mr. Cooper,
$160,000; and Mr. Sachs, $142,500. The amounts shown for 1997 were
comprised of the following elements: (a) "retention" bonuses paid in
September 1997 in accordance with the 1996 Employment Agreements, as
follows: Mr. Miller, $87,500; Mr. Fine, $66,667; Mr. Michner, $58,333;
Mr. Cooper, $55,000; and Mr. Sachs, $47,500; (b) "restructuring"
bonuses paid in September 1997 upon the Corporation's emergence from
Chapter 11, as follows: Mr. Miller, $1,500,000; Mr. Cooper, $275,000; and
Mr. Sachs, $100,000; and (c) a bonus of $62,855 paid in April 1998 to Mr.
Fine in respect of fiscal 1997 performance pursuant to the Corporation's
1997 Executive Performance Incentive Compensation Plan.
<F3> The amounts shown for 1997 reflect grants of Common Stock made as of
September 26, 1997 (the date of the Corporation's emergence from Chapter
11) pursuant to (a) in the case of Mr. Miller, an Employment Termination
Agreement between Mr. Miller and the Corporation dated September 4, 1997
(the "Termination Agreement"), and (b) in the case of Messrs. Fine,
Michner, Cooper and Sachs, Restricted Stock Agreements between each of
them, respectively, and the Corporation, dated June 4, 1997 (the
"Restricted Stock Agreements"). The numbers of shares granted were as
follows: Mr. Miller, 75,000; Mr. Fine, 25,000; Mr. Michner, 23,000; Mr.
Cooper, 23,000; and Mr. Sachs, 23,000. There was no established trading
market for the Common Stock as of the date of grant (see
"Background--Change of Control" at page 1 above). The dollar values
shown in the table reflect the average of the closing prices of the
Common Stock on the Nasdaq National Market over the first twenty days of
trading in the Common Stock following its initial distribution on
December 12, 1997. As of the end of the 1997 fiscal year, the aggregate
number of shares of restricted stock held by the named executive
officers, and the value of such shares based on the closing price of the
Common Stock on the Nasdaq National Market as of that date, were as
follows: Mr. Miller, 75,000 shares, $496,875; Mr. Fine, 25,000 shares,
$165,625; Mr. Michner, 23,000 shares, $152,375; Mr. Cooper, 23,000
shares, $152,375; and Mr. Sachs, 23,000 shares, $152,375. The shares held
by Mr. Miller vested in full on January 12, 1998 upon the termination of
his employment with the Corporation in accordance with the provisions of
the Termination Agreement. The shares held by Mr. Cooper vested in full
on January 31, 1998 upon the termination of his employment with the
Corporation in accordance with the provisions of his Restricted Stock
Agreement. The shares held by Messrs. Fine, Michner and Sachs will vest
50% on September 26, 1998 and the remainder on September 26, 1999,
subject to certain forfeiture and acceleration provisions contained in
the Restricted Stock Agreements. Dividends, if any, will be paid on these
restricted shares at the same time and at the same rate as dividends are
paid to stockholders generally.
<F4> The options shown for 1995 were granted in February 1995. The number of
shares subject to each such option, along with the exercise price, was
subsequently adjusted, pursuant to the terms of the Corporation's 1992
Stock Option Plan, to reflect the June 1995 spin-off by the Corporation
of its stock in Dave & Buster's, Inc. As a result of such adjustment, the
number of shares subject to each option was increased by 33.1% and the
exercise price was reduced by 24.9%. Such options were granted with
respect to the Old Common Stock, and therefore were effectively
terminated as of September 26, 1997 when, pursuant to the Plan of
Reorganization, all shares of Old Common Stock were cancelled. The
options shown for 1997 were granted with respect to the New Common Stock
pursuant to the Corporation's 1997 Stock Option Plan.
<F5> Except as otherwise noted, the amounts shown were the amounts contributed
by the Corporation to the Edison Brothers Stores Savings Plan for the
accounts of the named individuals during such fiscal year (see footnote 1
above), plus, for 1997, a $474 award paid to each employee of the
Corporation in April of that year.
<F6> Mr. Honig commenced employment with the Corporation on January 12, 1998.
His annual salary is $700,000.
<F7> This amount consists of (a) a lump-sum hiring bonus of $600,000 paid in
connection with the commencement of Mr. Honig's employment with the
Corporation, as partial reimbursement for (i) the value of restricted
stock, discounted stock, stock options and bonus lost as a result of
leaving his former employer and (ii) the cost of returning certain
relocation benefits paid to him by his former employer, including
reimbursement of losses incurred by his former employer on the sale of
his house, and (b) a moving allowance of $60,000 (in addition to
reimbursement of documented relocation, temporary living and legal
expenses).
<F8> Mr. Miller left the employ of the Corporation on January 12, 1998.
<F9> Reflects the grant on May 11, 1995 of 50,000 shares of Old Common Stock,
with the aggregate value based on the closing price of the Old Common
Stock on the date of grant. All of these shares were cancelled as of
September 26, 1997 pursuant to the Plan of Reorganization.
<F10> The amount shown is comprised of the following elements: (a) $525
contributed by the Corporation to the Edison Brothers Stores Savings Plan
for Mr. Miller's account, (b) a $474 award paid to each employee of the
Corporation in April 1997, and (c) severance, tax gross-up and other
payments and benefits totaling $2,948,686 paid to or for the account of
Mr. Miller in connection with the termination of his employment on
January 12, 1998 under the terms of the Termination Agreement between Mr.
Miller and the Corporation (see "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements" at page 9 below).
7
<PAGE> 10
<F11> This option terminated on January 31, 1998 by reason of the termination
of Mr. Cooper's employment.
<F12> The amount shown is comprised of the following elements: (a) $600
contributed by the Corporation to the Edison Brothers Stores Savings Plan
for Mr. Cooper's account, (b) a $474 award paid to each employee of the
Corporation in April 1997, and (c) various payments made to or for the
account of Mr. Cooper in connection with the termination of his
employment on January 31, 1998 consisting of (i) a tax gross-up payment
of $132,402 in respect to the vesting of his restricted stock, payable
pursuant to his Restricted Stock Agreement, and (ii) severance, tax
gross-up and other payments and benefits totaling $965,506 payable under
the terms of the Employment Agreement between Mr. Cooper and the
Corporation, dated September 4, 1997 (see "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" at pages
10-11 below).
</TABLE>
STOCK OPTIONS
The following table provides information with respect to the grant of stock
options during the 1997 fiscal year to the named executive officers.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants<F1> for Options Term<F2>
- --------------------------------------------------------------------------------------------- -------------------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted(#) Fiscal Year ($/sh) Date 5%($) 10%($)
- ------------------- ------------ ------------ -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Lawrence E. Honig 100,000<F3> 12.5% $6.125 1/12/08 $385,500 $ 974,500
188,000<F3> 23.4% 6.125 1/12/08 724,740 1,832,060
Alan D. Miller -- -- -- -- -- --
Michael J. Fine 100,000 12.5% 5.58 9/26/07 351,000 889,000
Karl W. Michner 25,000 3.1% 5.58 9/26/07 87,750 222,250
David B. Cooper, Jr. 25,000 3.1% 5.58 9/26/07 87,750 222,250
Alan A. Sachs 15,000 1.9% 5.58 9/26/07 52,650 133,350
<FN>
<F1> Except as otherwise noted, all options granted to the named executive
officers were granted on September 26, 1997 (the date of the Corporation's
emergence from Chapter 11) pursuant to the Corporation's 1997 Stock Option
Plan. Since there was no established trading market for the Common Stock
as of that date (see "Background--Change of Control" at page 1 above),
the exercise price of the options was set at the average of the closing
prices of the Common Stock on the Nasdaq National Market over the first
twenty days of trading in the Common Stock following the Initial
Distribution Date (as defined in the Plan of Reorganization), which, as
subsequently determined, was $5.58 per share. The options become
exercisable in installments of 25% of the total grant on each of the first
through fourth anniversaries of the grant date, subject to acceleration
upon termination of employment by reason of death, disability or
retirement, or in the event of a change in control of the Corporation. The
options cease to be exercisable ten years after the date of grant, or
sooner if the optionee's employment terminates. In accordance with the
provisions of the grant, the option granted to Mr. Cooper terminated
without having been exercised on January 31, 1998 by reason of the
termination of his employment.
<F2> The amounts shown under the 5% and 10% columns in this table are the
result of calculations at the assumed rates of stock price appreciation
required by the Securities and Exchange Commission's rules. There can be
no assurance that the values shown will be attained. A 0% stock price
increase would result in the options having zero value. No gain to the
optionees is possible without an increase in stock price, which will
benefit all stockholders commensurately.
<F3> The options granted to Mr. Honig were granted pursuant to the
Corporation's 1997 Stock Option Plan on January 12, 1998, the date of his
commencement of employment with the Corporation, at an exercise price
equal to the closing price of the Common Stock on that date on the Nasdaq
National Market. The options were granted under two separate option
agreements, one for 100,000 shares ("Option A") and the other for
188,000 shares ("Option B"). Option A becomes exercisable in
installments of one-third of the total grant on each of the first through
third anniversaries of the grant date. Option B becomes exercisable in
full three years from the date of grant; however, if prior to that date
(i) the price of a share of Common Stock reaches $13.50 per share
("Target Price I"), the option becomes exercisable as to 100,000 of the
shares subject to the option, and (ii) the price of a share of Common
Stock reaches $18.00 per share ("Target Price II"), the option becomes
exercisable as to all of the shares subject to the option. For purposes of
the preceding sentence, the price of a share of Common Stock will not be
deemed to have reached either of the Target Prices unless the closing
price of the Common Stock on the Nasdaq National Market reaches the
specified Target Price and remains at or above such Target Price for a
minimum of twenty trading days within any period of thirty consecutive
trading days. Both Option A and Option B are subject to acceleration upon
termination of employment by reason of death, disability or retirement, or
in the event of a change in control of the Corporation. Both options
cease to be exercisable ten years after the date of grant, or sooner if
Mr. Honig's employment terminates.
</TABLE>
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<PAGE> 11
The following table provides information with respect to stock option
exercises during the 1997 fiscal year by the named executive officers and the
value of such officers' unexercised options as of the end of the fiscal year.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End(#) Fiscal Year-End($)<F1>
Shares Acquired ----------------------------- -----------------------------
Name on Exercise(#) Value Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence E. Honig -- -- -- 288,000 $0 $144,000
Alan D. Miller -- -- -- -- -- --
Michael J. Fine -- -- -- 100,000 0 104,500
Karl W. Michner -- -- -- 25,000 0 26,125
David B. Cooper, Jr. -- -- -- 25,000<F2> 0 26,125<F2>
Alan A. Sachs -- -- -- 15,000 0 15,675
<FN>
<F1> Aggregate value based on the closing price of the Common Stock on the last
trading day of the fiscal year less the exercise price.
<F2> The option granted to Mr. Cooper terminated on January 31, 1998 by reason
of the termination of his employment.
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
In June 1997, the Corporation announced that Alan D. Miller, its Chairman,
President and Chief Executive Officer, would be leaving the Corporation
following its emergence from Chapter 11. In contemplation of his departure, the
Corporation and Mr. Miller entered into an Employment Termination Agreement,
dated September 4, 1997 (the "Termination Agreement"). To ensure an orderly
management transition, it was stipulated in the Termination Agreement that Mr.
Miller would remain in his positions with the Corporation until the
commencement of employment of a successor Chief Executive Officer, at which
time he would resign (the "Termination Date"). The Termination Agreement
provided that upon the Corporation's emergence from Chapter 11, the Corporation
would pay to Mr. Miller a "restructuring" bonus of $1,500,000 and grant to
him 75,000 shares of Common Stock, restricted as to transferability until the
later of the Emergence Date or the Termination Date, plus a cash payment
sufficient to cover all federal, state or local income taxes payable by him in
respect of the vesting of such shares. It further provided that on the
Termination Date Mr. Miller would receive, in addition to any unpaid salary and
accrued vacation pay, a lump sum cash amount of $1,575,000 (representing three
years' base salary) plus $787,500 (representing his aggregate "target bonus"
under the Corporation's Executive Incentive Compensation Plan for the years
1997, 1998 and 1999). The Corporation also agreed to maintain for Mr. Miller's
continued benefit, for a period of three years from the Termination Date, all
life insurance, health and disability plans in which he was entitled to
participate immediately prior to the Termination Date (or, alternatively,
provide benefits substantially similar to those which he would otherwise have
been entitled to receive under such plans). It was also agreed that if any
payments or benefits payable by the Corporation to Mr. Miller pursuant to the
Termination Agreement were determined to be subject to any excise or similar
tax imposed by Sections 280G and 4999 of the Internal Revenue Code, or any
successor or comparable federal, state or local tax, the Corporation would (a)
pay Mr. Miller an additional sum such that the net amount retained by him after
payment of the excise tax would be the same amount he would have retained if no
such excise tax had been imposed and (b) cover the cost of any controversy with
any taxing authority regarding the imposition of such tax, including legal and
accounting fees, interest and penalties. The Termination Agreement required
that the Corporation's obligations set forth in the preceding sentence be
secured by an irrevocable stand-by letter of credit, to be kept in force
pending the receipt of a favorable private letter ruling from the Internal
Revenue Service regarding the applicability of such excise tax or other event
favorably resolving the potential excise tax liability. The Corporation further
agreed to reimburse Mr. Miller for any expenses incurred for outplacement
services, not to exceed $25,000, and for any legal fees incurred by him in
connection with the implementation of the Termination Agreement, not to exceed
$15,000. Finally, the Termination Agreement contained mutual releases by the
Corporation and Mr. Miller of any claims relating to his service as an officer
and director. As previously noted, Mr. Miller's employment by the Corporation
terminated on January 12, 1998.
Lawrence E. Honig succeeded Mr. Miller as Chairman of the Board, President
and Chief Executive Officer of the Corporation, effective January 12, 1998. In
connection therewith, the Corporation entered into an Employment Agreement with
Mr. Honig, dated that date (the "Employment Agreement"). The Employment
Agreement, which is
9
<PAGE> 12
for a term expiring on February 1, 2001, entitles Mr. Honig to a minimum base
salary of $700,000 per year; a lump sum hiring bonus of $600,000 (see page 7,
footnote 7 above); a moving allowance of $60,000 (in addition to reimbursement
of documented relocation and temporary living expenses); reimbursement of legal
fees incurred in connection with the negotiation and execution of the
Employment Agreement, not to exceed $10,000; participation in any executive
incentive compensation program of the Corporation; 50,000 shares of restricted
stock pursuant to the Corporation's 1998 Equity Incentive Plan; stock options
for an aggregate of 400,000 shares of Common Stock (options "A" and "B"
described above at page 8, footnote 3, and a third option for 112,000 shares
pursuant to the 1998 Equity Incentive Plan and otherwise on terms similar to
option "B"); and the receipt of additional stock options pursuant to the 1998
Equity Incentive Plan on January 12, 2001 and January 12, 2003, respectively
(assuming Mr. Honig continues to be employed by the Corporation through such
dates), each for 100,000 shares of Common Stock on terms similar to option
"A" (subject to earlier grant dates and immediate vesting in the event of a
"change in control" of the Corporation as defined in the 1998 Equity
Incentive Plan). The grants of restricted stock and stock options pursuant to
the 1998 Equity Incentive Plan are expressly contingent on stockholder approval
of the 1998 Equity Incentive Plan. (See Proposal Two at pages 15-19.) The
Employment Agreement further provides that if Mr. Honig's employment (a) is
terminated by the Corporation without cause ("cause" being defined as his
willful or repeated failure to perform his duties, willful misconduct that is
materially injurious to the Corporation, or certain other improper acts) or (b)
is terminated by Mr. Honig because the Corporation had either breached its
compensation obligations under the Employment Agreement or materially reduced
Mr. Honig's authority or functions, the Corporation shall (i) continue to pay
Mr. Honig his base salary for the remaining term of the Employment Agreement or
one year, whichever is greater (the "Payment Period"), (ii) pay to Mr. Honig
such annual cash incentive compensation, if any, to which he would otherwise
have been entitled had his employment continued through the end of the fiscal
year in which it terminated, and (iii) maintain for Mr. Honig's continued
benefit during the Payment Period (or until he obtains similar coverage by a
new employer, if earlier) all life insurance, health and disability plans in
which he was entitled to participate immediately prior to the termination of
his employment (or, alternatively, provide benefits substantially similar to
those to which he would otherwise have been entitled under such plans).
However, the Employment Agreement further states that if any of the payments or
benefits payable thereunder would constitute an "excess parachute payment"
within the meaning of Section 280G of the Internal Revenue Code, then the
payments and benefits to be paid or provided shall be reduced to the extent
necessary so that no portion of any such payment or benefit will constitute an
excess parachute payment. The Employment Agreement also contains provisions
requiring confidential treatment by Mr. Honig of proprietary information of the
Corporation and, under certain circumstances, post-employment restrictions on
Mr. Honig's ability to engage in any business competitive with that of the
Corporation, violation of either of which would result in forfeiture of any
unpaid termination benefits. If Mr. Honig's employment is terminated by the
Corporation for cause (as defined) or is terminated voluntarily by Mr. Honig
(other than because the Corporation had breached its compensation obligations
under the Employment Agreement or materially reduced his authority or
functions), Mr. Honig may be obligated, depending on the date of such
termination, to repay to the Corporation some or all of the hiring bonus he
received, as follows: if such termination occurs on or before January 12, 1999,
Mr. Honig must repay the entire hiring bonus; if the termination occurs on or
before January 12, 2000, Mr. Honig must repay two-thirds of the hiring bonus;
if the termination occurs on or before January 12, 2001, Mr. Honig must repay
one-third of the hiring bonus.
The Corporation is also party to employment agreements with certain other
of its officers, including Messrs. Fine, Michner, Cooper and Sachs (superseding
employment agreements previously entered into with them in June 1996). These
agreements were executed in September 1997, pursuant to the Plan of
Reorganization, and took effect on September 26, 1997 (the date of the
Corporation's emergence from Chapter 11). They provide for a two-year term of
employment beginning September 26, 1997 (three years in the case of Mr. Fine).
In the event a "change in control" (as defined in the agreements) occurs less
than eighteen months before the end of the employment term and at a time when
the individual is still employed by the Corporation, the employment term will
be extended for a period ending eighteen months after the occurrence of the
change in control. The agreements provide for the payment of a minimum yearly
base salary (Mr. Fine, $400,000; Mr. Michner, $350,000; Mr. Cooper, $330,000;
and Mr. Sachs, $285,000) and, in the case of Messrs. Fine and Michner, lump sum
cash bonuses of $500,000 and $100,000, respectively, payable August 1, 1998 (or
such earlier date as there occurs a change in control of the Corporation),
provided they are still employed by the Corporation as of that date (subject to
the right to receive such bonus upon termination of employment under certain
circumstances hereinafter described). If, during the term of the agreement, the
executive's employment is terminated by the Corporation other than for cause
(as defined in the agreements) or is terminated by the executive for "good
reason" (as defined), the executive will be entitled to (a) a lump sum payment
equal to the executive's monthly salary at the highest rate in effect at any
time between September 26, 1997 and the date of termination of employment,
multiplied by the greater of twelve or the number of months remaining under the
10
<PAGE> 13
agreement, plus (b) a lump sum payment equal to one-twelfth of the employee's
"target bonus" for the then-current fiscal year under the Corporation's
Executive Performance Incentive Compensation Plan, multiplied by the greater
of twelve or the number of months remaining under the agreement. Further, in
the event of termination without cause or for "good reason," the Corporation
is to maintain for the executive's continued benefit for the longer of the
unexpired term of the agreement or twelve months from the date of termination
(or until the executive obtains similar coverage by a new employer, if
earlier) all life insurance, health and disability plans in which the
executive was entitled to participate immediately prior to the termination of
the executive's employment (or, alternatively, provide benefits substantially
similar to those which the executive would otherwise have been entitled to
receive under such plans). If a "change in control" occurs after the end of
the employment term under the agreement but at a time when the executive is
still employed by the Corporation, and the executive's employment is then
terminated by the Corporation without cause or by the executive for "good
reason" within eighteen months after the occurrence of such change in
control, the executive will similarly be entitled to the payments and benefits
described above. "Cause" is defined in the agreements to include the willful
or repeated failure by the executive substantially to perform his duties, any
willful misconduct that is materially injurious to the Company, and certain
other illegal or immoral acts. "Good reason," prior to a change in control,
is defined as a reduction in base salary, mandatory geographic transfer, or
the assignment of any duties materially inconsistent with the individual's
status as an executive of the Corporation; "good reason," after the
occurrence of a change in control, means a reduction in salary, mandatory
geographic transfer, material change in benefits, diminution in duties or
powers, or the removal of the executive from any positions or offices held
immediately prior to the change in control. Each agreement further provides
that if any payments or benefits payable by the Corporation to the executive
pursuant to the agreement or any other plan or arrangement of the Corporation
are determined to be subject to an excise or similar tax pursuant to Sections
280G and 4999 of the Internal Revenue Code, or any successor or other
comparable federal, state or local tax, the Corporation will pay the executive
an additional sum such that the net amount retained by the executive after
payment of the excise tax is the same amount which would have been retained if
no such excise tax had been imposed. Legal fees and other expenses incurred by
the executive to enforce his rights under the agreement are to be reimbursed
by the Corporation unless a court expressly finds that the actions taken by
the executive in respect to the agreement were taken in bad faith or without a
reasonable basis. Mr. Cooper's employment by the Corporation was terminated
without cause on January 31, 1998.
RETIREMENT PLANS
In connection with the Plan of Reorganization, in 1997 the Corporation
terminated its existing Pension Plan (the "Prior Plan"), and in its stead
established, effective January 1, 1998, a fully funded, defined benefit pension
plan known as the Edison Brothers Stores Retirement Account Plan (the "New
Plan"). The Corporation has applied to the Internal Revenue Service to obtain
"tax-qualified" status for the New Plan and has no reason to believe that
such status will not be granted.
Each regular domestic employee of the Corporation or one of its
subsidiaries is eligible to participate in the New Plan. Participation
automatically begins when such employee has attained the age of 21 and
completed one year of service (as defined in the New Plan). Except as provided
in the next sentence, vesting of rights to a pension occurs upon the completion
of three years of service under the New Plan, which may include years of
service completed prior to attaining the age of 21. Employees who were vested
under the Prior Plan became vested under the New Plan upon its creation.
Under the New Plan, a notional account is established for each participant.
Thereafter, following the close of each fiscal year of the New Plan, the
account of such participant is credited in an amount equal to a predetermined
percentage of that participant's aggregate compensation for that fiscal year.
For purposes of this calculation, aggregate compensation includes salary,
commissions and bonuses, but does not include fringe benefits or distributions
under any stock option or stock bonus plan. The percentage applied ranges from
3% to 6% depending on the age of the participant. The applicable percentage is
doubled as to that portion of the participant's aggregate compensation, if any,
which exceeds the aggregate compensation subject to FICA taxation for such
fiscal year ($65,400 for 1997).
In addition, the account of each participant is credited annually in an
amount equal to the amount of the participant's account balance multiplied by
the then-average annual yield on 10-year U.S. Treasury securities.
Certain participants in the New Plan may be entitled to a minimum benefit
under the New Plan equal to the amount that would have been provided under the
defined benefit formula applicable under the Prior Plan.
11
<PAGE> 14
In the event a vested participant ceases to be employed by the Corporation,
such participant may receive payment of his or her account in the form of a
lump sum distribution, life annuity, or joint life and survivor annuity, or may
defer payment until normal retirement age.
Each employee who was vested under the Prior Plan at the time of
termination of the Prior Plan was required to elect either to transfer the lump
sum present value of his or her accrued benefit to the New Plan, or to have
such accrued benefit converted to an annuity to be purchased for the
participant from an insurance company.
The Internal Revenue Code imposes limits on the aggregate amount of
compensation for which contributions may be made under a tax-qualified plan,
including the New Plan. Accordingly, the Corporation has in effect an unfunded
excess benefits plan (the "Pension Restoration Plan") to pay from its general
assets to each affected participant that portion of the benefit which would
otherwise be paid to that participant under the New Plan were it not for such
limitation.
The aggregate estimated annual retirement benefits payable under the New
Plan and the Pension Restoration Plan in the form of a single life annuity
beginning at age 65 to each person named in the Summary Compensation Table on
page 6 who is still employed by the Corporation as of the date hereof is as
follows: Lawrence E. Honig, $205,872; Michael J. Fine, $208,188; Karl W.
Michner, $278,712; and Alan A. Sachs, $149,160. The foregoing calculation
assumes that each such person remains employed by the Corporation until age 65
and receives 3.5% annual salary increases. The foregoing calculation does not
take into account any payment under any executive performance incentive or
other bonus plan which may be in effect from time to time, as it is not
possible to predict the amounts, if any, that may be received by each such
person pursuant to any such plan.
In connection with the termination of their employment by the Corporation
on January 12, 1998 and January 31, 1998, respectively, Alan D. Miller and
David B. Cooper, Jr. received lump sum distributions of their respective
account balances under the New Plan and lump sum distributions pursuant to the
Pension Restoration Plan in total amounts as follows: Mr. Miller, $667,313; and
Mr. Cooper, $113,230.
REPORT ON EXECUTIVE COMPENSATION
The following report discusses the compensation policies applied by the
Compensation Committee of the Board of Directors in performing its functions in
respect to the compensation of the Corporation's executive officers for fiscal
1997. The members of the Compensation Committee who were responsible for the
Corporation's executive compensation policies for 1997 were Julian I. Edison
(Chairman), Bart A. Brown, Jr., Jane Evans and Craig D. Schnuck, all of whom
have since left the Board. The current members of the Compensation Committee of
the Board did not set and were not responsible for the policies described
below.
COMPENSATION PHILOSOPHY
The principal objectives of the Corporation's executive compensation
program have been to:
(1) Attract, motivate and retain highly qualified managers;
(2) Reward individual executives for their contribution to the attainment
of the Corporation's financial and strategic goals; and
(3) Align the interests of its executives with those of the shareholders.
In late 1993, the Corporation retained a professional compensation
consultant to review the Corporation's executive compensation program. Based on
the consultant's recommendations, in 1994 the Corporation restructured its
compensation program for its executive officers to more closely tie pay to
performance. It froze or dampened the rate of growth of base salaries;
introduced a variable cash compensation component in the form of an annual
performance-based bonus plan; and increased the frequency and amount of stock
options granted. That program has been carried forward.
SALARY
Each executive's base salary was reviewed at the end of the prior fiscal
year. In determining individual salaries for 1997, within the framework of the
restructured compensation program described above, the Committee considered the
recent financial performance of the Corporation, the particular executive's
position and scope of responsibilities, his or her individual performance and
achievements during the prior year (including separate divisional results, as
appropriate, and the accomplishment of or progress towards identified
managerial or strategic objectives and personal development goals), as well as
the executive's knowledge, experience, capabilities, and prospective future
contributions. There was no set weighting of these variables in determining
individual salaries.
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<PAGE> 15
ANNUAL CASH BONUS
The Edison Brothers Stores, Inc. 1997 Executive Performance Incentive
Compensation Plan provided for the payment of bonuses contingent on the
attainment of certain corporate and/or divisional financial goals established
by the Committee. Each executive selected by the Committee to participate for
1997 was assigned a target bonus award, expressed as a percentage of the
participant's base salary. Only a small proportion of participants received
bonuses in respect of 1997 performance.
STOCK OPTIONS
The Committee historically has favored a stock option program as a
long-term compensation vehicle that aligns the interests of management with
those of the stockholders. Since options gain value only to the extent that the
Corporation's stock price exceeds the option exercise price, the benefits
accruing to management through stock options are directly tied to how well
management creates increased value for the stockholders. This encourages a
continuing management focus on increasing profitability and stockholder value.
As part of the Plan of Reorganization, options were granted to all
executive officers of the Corporation (other than Alan D. Miller) upon the
Corporation's emergence from Chapter 11. The number of options granted to each
executive was determined by the Committee based on the same considerations used
in determining base salaries, as described above.
EMPLOYMENT AGREEMENTS
In September 1997, as contemplated in the Plan of Reorganization, the
Committee authorized the Corporation to enter into employment agreements with
certain of its key executives. The agreements entered into with the named
executive officers are described at pages 10-11 above.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to certain
executive officers in any tax year beginning on or after January 1, 1994.
Performance-based compensation will not be subject to the deduction limit if
certain requirements are met. To the extent feasible and consistent with the
primary objectives of the Corporation's executive compensation program, the
Corporation has sought to structure the performance-based portion of the
compensation of its executive officers in a manner that complies with Section
162(m).
1997 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Alan D. Miller served as Chairman of the Board, President and Chief
Executive Officer of the Corporation until January 12, 1998. In determining Mr.
Miller's compensation for 1997, the Committee used the same criteria described
in the Salary section above. Based on these factors (without any specific
weighting among them), the Committee established a base salary for Mr. Miller
of $525,000, effective April 1, 1997. All other compensation paid to Mr. Miller
for fiscal 1997 was paid pursuant to his pre-existing 1996 Employment Agreement
or the Termination Agreement which was executed following Committee approval in
anticipation of the Corporation's emergence from Chapter 11.
Lawrence E. Honig has served as Chairman of the Board, President and Chief
Executive Officer of the Corporation since January 12, 1998. Mr. Honig's
compensation for fiscal 1997 was negotiated with representatives of the Board
as part of the recruitment process. The terms of his employment, including
compensation, are set forth in the Employment Agreement between Mr. Honig and
the Corporation described at pages 9-10 above.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
Julian I. Edison, who, during a portion of the last fiscal year, was a
member of the Compensation Committee of the Board, was formerly an officer of
the Corporation.
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<PAGE> 16
STOCK PRICE PERFORMANCE
The following graphs show the cumulative total stockholder returns on the
Corporation's common stock during two periods (assuming a $100 investment in
the common stock at the beginning of each period and the reinvestment of all
dividends). The first period is from January 29, 1993 (the last trading day of
the Corporation's 1992 fiscal year) to June 30, 1997 (when trading in the
Corporation's Old Common Stock on the New York Stock Exchange was permanently
suspended); the second period is from December 12, 1997 (when the New Common
Stock issued by the Corporation following its emergence from Chapter 11 began
trading on the Nasdaq National Market) to January 30, 1998 (the last trading
day of the Corporation's 1997 fiscal year). (See "Background--Change in
Control" at page 1 above.) For the first of the two periods, the graph
includes the distribution by the Corporation to its shareholders of the common
stock owned by the Corporation in its former Dave & Buster's, Inc. subsidiary,
based on the assumption that the shares of Dave & Buster's received in the
distribution were sold on June 29, 1995, the effective date of the
distribution, and the proceeds immediately reinvested in shares of the
Corporation's common stock. Also presented in each graph for comparison are the
cumulative total stockholder returns for the same periods (assuming a $100
investment in each at the beginning of each period and the reinvestment of all
dividends) of the Standard & Poor's Retail Stores Index and the Standard &
Poor's 500 Stock Index.
[GRAPH]
<TABLE>
01/29/93 01/28/94 01/27/95 02/02/96 01/31/97 06/30/97 12/12/97 01/30/98
-------- -------- -------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBS 100 68.20 29.43 5.12 5.52 3.94 EPS 100 103.92
S&P Retail 100 95.22 87.09 93.52 108.47 135.70 S&P Retail 100 101.56
S&P 500 100 109.10 107.20 144.91 179.17 201.73 S&P 500 100 102.91
</TABLE>
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<PAGE> 17
2. APPROVAL OF THE 1998 EQUITY INCENTIVE PLAN
On February 26, 1998, the Board of Directors unanimously adopted, subject
to the approval of the Corporation's stockholders at the 1998 annual meeting,
the Edison Brothers Stores, Inc. 1998 Equity Incentive Plan (the "Plan"). The
Plan affords the Board the ability to design compensatory awards that are
responsive to the Corporation's needs, and includes authorization for stock
options, restricted shares, deferred shares and performance shares. The Plan
will supplement the Corporation's current compensation programs.
An affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the annual meeting and entitled to vote on the proposal
will constitute stockholder approval of the Plan.
The Board of Directors unanimously recommends a vote FOR the proposal.
The following summary of the principal provisions of the Plan is not
intended to be exhaustive and is qualified in its entirety by the terms of the
Plan, a copy of which is set forth as Exhibit A to this proxy statement.
Capitalized terms not otherwise defined herein shall have the same meanings as
in the Plan.
PURPOSE OF THE PLAN
The purpose of the Plan is to attract and retain consultants, officers and
other key employees for the Corporation and to provide to such persons
incentives and rewards for superior performance.
ELIGIBILITY
Consultants, officers and key employees of the Corporation and its
subsidiaries may be selected by the Board to receive awards under the Plan
(each, a "Participant").
AVAILABLE SHARES
Subject to adjustment as provided in the Plan, the number of shares of
Common Stock that may be issued or transferred under the Plan shall not exceed
in the aggregate 700,000 shares, of which no more than 200,000 shares may be
issued or transferred as Restricted Shares and no more than 700,000 shares may
be issued or transferred upon the exercise of Incentive Stock Options
("ISOs"). In addition, no Participant may be granted, in any calendar year,
(i) Option Rights, in the aggregate, for more than 700,000 shares of Common
Stock or (ii) awards of Performance Shares intended to qualify for exemption
under Section 162(m) of the Code of more than 700,000 shares of Common Stock.
OPTION RIGHTS
Option Rights may be granted under the Plan that entitle the Optionee to
purchase shares of Common Stock. Option Rights may be (a) options, including
ISO's, that are intended to qualify under particular provisions of the Code,
(b) options that are not intended to so qualify, or (c) combinations of the
foregoing. Each grant of Option Rights must specify (a) the number of shares of
Common Stock to which it pertains, (b) the Option Price per share (which may
not be less than the Market Value per Share on the Date of Grant, except that
the Option Price per share of any Option Rights granted to any executive
officer of the Corporation in connection with the negotiation and execution of
such officer's initial employment agreement with the Corporation may be the
lesser of (i) the Market Value per Share on the Date of Grant or (ii) the
Market Value per Share on the date immediately preceding the date on which the
Corporation publicly announces such officer's agreement to commence serving as
an executive officer of the Corporation), (c) the permitted manner of payment
of the Option Price (which may include payment (i) in cash or by check
acceptable to the Corporation, (ii) by the tender to the Corporation of shares
of Common Stock owned by the Optionee having an aggregate fair market value at
the time of exercise equal to the total Option Price, (iii) by delivery of
irrevocable instructions to a financial institution or broker to deliver
promptly to the Corporation sale or loan proceeds with respect to the shares
sufficient to pay the total Option Price, (iv) through the written election of
the Optionee to have shares of Common Stock withheld by the Corporation from
the shares otherwise to be received, with such withheld shares having an
aggregate fair market value on the date of exercise equal to the total Option
Price of the shares being purchased, or (v) by any combination of such payment
methods) and (d) the period of continuous service with the Corporation or other
conditions (including the satisfaction of Management Objectives) that may be
necessary before the Option Rights will become exercisable. No Option Right
shall be exercisable more than ten years from the Date of Grant. Successive
grants may be made to the same Optionee whether or not Option Rights previously
granted to such Optionee remain unexercised.
The Board may, at or after the Date of Grant of any Option Rights, grant
tax-offset bonus rights ("TOBRs") with respect to awards of Option Rights. A
TOBR will entitle the Optionee to receive from the Corporation upon exercise of
the related Option Right an amount of cash equal to (i) the excess, if any, of
the aggregate market price of
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<PAGE> 18
the shares of Common Stock acquired by the exercise of the Option Right on the
date of exercise over the aggregate Option Price of the shares of Common Stock
acquired by such exercise, multiplied by (ii) a percentage (either fixed or by
formula) determined by the Board. The Board shall determine all other terms and
provisions of any TOBR. No TOBR shall be assignable or transferable except to
the extent authorized by the Board.
Each grant of Option rights shall be evidenced by an agreement between the
Corporation and the Participant containing such terms and provisions,
consistent with the Plan, as the Board may approve.
RESTRICTED SHARES
A grant of Restricted Shares involves the immediate transfer by the
Corporation to a Participant of ownership of a specific number of shares of
Common Stock in consideration of the performance of services. The Participant
is immediately entitled to voting, dividend and other ownership rights in such
shares. The transfer may be made without additional consideration or in
consideration of a payment by the Participant that is less than the
then-current Market Value per Share, as the Board may determine.
Restricted Shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Internal Revenue Code of 1986, as
amended (the "Code") for a period to be determined by the Board at the Date
of Grant (subject to a shortening of the period, at the Board's discretion, in
the event of a Change in Control or other circumstances). In order to enforce
these forfeiture provisions, the transferability of Restricted Shares will be
prohibited or restricted in a manner and to the extent prescribed by the Board
for the period during which the forfeiture provisions continue.
A grant of Restricted Shares may specify Management Objectives that, if
achieved, will result in early termination of the restrictions applicable to
such shares. (See "Management Objectives" below.) Such grant may specify in
respect of such Management Objectives a minimum acceptable level of achievement
and may set forth a formula for determining the number of Restricted Shares on
which the restrictions will terminate if performance is at or above the minimum
level but falls short of full achievement of the specified Management
Objectives.
Each grant of Restricted Shares shall be evidenced by an agreement between
the Corporation and the Participant containing such terms and provisions,
consistent with the Plan, as the Board may approve.
DEFERRED SHARES
A grant of Deferred Shares constitutes an agreement by the Corporation to
deliver shares of Common Stock to the Participant in the future in
consideration of the performance of services, subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify. The
Deferral Period is determined by the Board at the Date of Grant (subject to a
shortening of the Deferral Period, at the Board's discretion, in the event of a
Change in Control or other circumstances). During the Deferral Period, the
Participant will have no right to transfer any rights under the award and no
right to vote the shares, but the Board may, at or after the Date of Grant,
authorize the payment of dividend equivalents on such shares on a current,
deferred or contingent basis, either in cash or in additional shares of Common
Stock. Awards of Deferred Shares may be made without additional consideration
or in consideration of a payment by the Participant that is less than the
Market Value per Share at the Date of Grant.
Each grant of Deferred Shares shall be evidenced by an agreement between
the Corporation and the Participant containing such terms and provisions,
consistent with the Plan, as the Board may approve.
PERFORMANCE SHARES
A Performance Share is a bookkeeping unit that records the equivalent of
one share of Common Stock. Performance Shares become payable to a Participant
upon achievement of specified Management Objectives. Each grant of Performance
Shares must specify Management Objectives which, if achieved, will result in
payment of the award, and each grant must specify in respect of such specified
Management Objectives a minimum acceptable level of achievement and a formula
for determining the number of Performance Shares that will be earned if
performance is at or above the minimum level but falls short of full
achievement of the specified Management Objectives. Before the Performance
Shares are deemed earned and paid, the Board must certify that the Management
Objectives have been satisfied. To the extent earned, the Performance Shares
will be paid to the Participant in cash, shares of Common Stock or any
combination thereof.
Each grant of Performance Shares shall be evidenced by an agreement between
the Corporation and the Participant containing such terms and provisions,
consistent with the Plan, as the Board may approve.
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<PAGE> 19
MANAGEMENT OBJECTIVES
A "Management Objective" is a measurable performance objective.
Management Objectives may be described in terms of either Corporation-wide
objectives or objectives that are related to the performance of the individual
Participant or the division, department, region or function within the
Corporation in which the Participant is employed. Management Objectives
applicable to any award to a Participant who is, or is determined by the Board
likely to become, a "covered employee" within the meaning of Section 162(m)
of the Code shall be based on specified levels of, or growth in, one or more of
the following criteria: market value; book value; earnings per share; market
share; operating profit; net income; cash flow; return on capital; return on
assets; return on equity; margins; stockholder return; sales or product volume
growth; quantifiable and objective productivity improvement; costs or expenses;
net assets; or debt/capital ratio. The Board may modify such Management
Objectives, in whole or in part, as the Board deems appropriate and equitable
in light of events and circumstances (such as changes in the Corporation's
business, operations or capital structure), except where such modification
would result in an award to a "covered employee" no longer qualifying as
performance-based compensation under Section 162(m) of the Code.
ADMINISTRATION AND AMENDMENTS
The Plan will be administered by the Board or by a committee of the Board
(or subcommittee thereof) consisting of not less than two Non-Employee
Directors. The grant of any award intended to qualify as performance-based
compensation under Section 162(m) of the Code (and any administrative
determinations in connection therewith) must be made only by a committee of the
Board (or subcommittee thereof) consisting of not less than two "outside
directors" (as defined under Section 162(m) of the Code) in a manner
consistent with the rules governing performance-based compensation thereunder.
The Board may amend the Plan in whole or in part without further approval
by the stockholders of the Corporation except where stockholder approval is
required by applicable law or the rules of the Nasdaq National Market (or, if
the Common Stock is not traded on the Nasdaq National Market, the principal
national securities exchange upon which the Common Stock is traded). No
amendment of the Plan may, without the written consent of a Participant to whom
awards under the Plan have been granted, adversely affect the rights of such
Participant under such awards, which rights shall include all rights of such
Participant under the Plan as it existed as of the date of grant of such
awards.
The Board may provide for special terms for awards to Participants who are
foreign nationals or who are employed by the Corporation or any of its
subsidiaries outside of the United States of America as the Board may consider
necessary or appropriate to accommodate differences in local law, tax policy or
custom.
TRANSFERABILITY
Except as otherwise determined by the Board, (a) no Option Right or other
derivative security granted under the Plan will be transferable by a
Participant other than by will or the laws of descent and distribution and (b)
Option Rights will be exercisable during the Optionee's lifetime only by the
Optionee or the Optionee's guardian or legal representative. Notwithstanding
the foregoing, subject to prior authorization by the Board, Option Rights
(other than ISOs) and other awards granted under the Plan may be transferred by
a Participant, without payment of consideration therefor by the transferee, to
certain members of such Participant's immediate family (or trusts for the
benefit of, or entities consisting solely of, members of such immediate
family), provided that no such transfer shall be effective unless (a) the
Participant has provided the Corporation with ten days' prior notice thereof,
(b) the transfer is thereafter effected in accordance with any applicable terms
and conditions set by the Board, and (c) the transferee has agreed to be
subject to the same terms and conditions under the Plan as the Participant.
The Board may specify at the date of grant that part or all of the shares
of Common Stock that are (a) to be issued or transferred by the Corporation
upon exercise of Option Rights, upon termination of the Deferral Period
applicable to Deferred Shares or upon payment under any grant of Performance
Shares or (b) no longer subject to the substantial risk of forfeiture and
restrictions on transfer referred to in the Plan, shall be subject to further
restrictions on transfer.
ADJUSTMENTS
The maximum number of shares that may be issued and delivered under the
Plan, the number of shares covered by outstanding Option Rights, Deferred
Shares and Performance Shares, the prices per share applicable thereto, and the
kind of shares covered thereby, are subject to adjustment in the event of stock
dividends, stock splits, combinations of shares, recapitalizations, mergers,
consolidations, spinoffs, reorganizations, liquidations, issuances of rights or
warrants, and similar events. In the event of any such transaction or event,
the Board, in its discretion, may provide in
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<PAGE> 20
substitution for any or all outstanding awards under the Plan such alternative
consideration as it, in good faith, may determine to be equitable in the
circumstances and may require the surrender of all awards so replaced.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax consequences of
certain transactions under the Plan based on federal income tax laws in effect
on January 1, 1998. This summary is not intended to be complete and does not
describe state or local tax consequences.
SECTION 162(m) CONSIDERATIONS
Section 162(m) of the Code disallows a publicly held corporation's
deduction for any compensation in excess of $1 million (per tax year) paid to
the corporation's chief executive officer or to any of the other four most
highly compensated executives, subject to certain exceptions. One of these
exceptions allows for the deduction of performance-based compensation in excess
of $1 million where certain criteria and procedural requirements are satisfied.
Under the Plan, awards of Option Rights generally are intended to qualify,
and awards of Restricted Shares and Performance Shares may be structured to
qualify, as performance-based compensation under Section 162(m) of the Code.
TAX CONSEQUENCES TO PARTICIPANTS
Non-Qualified Stock Options. In general, an Optionee will recognize no
income upon grant of a nonqualified Option Right, but will recognize ordinary
income upon exercise of the Option Right in an amount equal to the difference
between the Option Price paid for the shares and the fair market value of the
shares, if unrestricted, on the date of exercise. Upon sale of the shares
acquired pursuant to the exercise of a nonqualified Option Right, any increase
(or decrease) in the value of the shares after the date of exercise will be
treated as capital gain (or loss).
Incentive Stock Options. Subject to the effects of the Alternative Minimum
Tax, an Optionee will not recognize income upon either the grant or exercise of
an ISO. Upon sale of the shares, any increase (or decrease) in the value of the
shares after the date of exercise will be treated as capital gain (or loss).
However, if an Optionee disposes of the shares within two years from the date
of grant of the Option Right or within one year from the date of exercise (an
"Early Disposition"), the Optionee will realize ordinary income at the time
of such Early Disposition in an amount equal to the excess, if any, of the fair
market value of the shares on the date of exercise (or, if less, the amount
realized on the disposition of such shares) over the Option Price paid for the
shares. The excess, if any, of the amount realized on the Early Disposition of
such shares over the fair market value of the shares on the date of exercise
will be a capital gain.
Restricted Shares. A recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares (reduced by any amount paid by the Participant for such
Restricted Shares) at such time as the shares are no longer subject to
forfeiture or restrictions on transfer within the meaning of Section 83 of the
Code. However, a recipient may elect under Section 83(b) of the Code to include
in income in the year of grant the excess of the fair market value of such
shares (determined without regard to any restrictions thereon) on the date of
grant over the purchase price, if any, of such Restricted Shares.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of
unrestricted shares of Common Stock on the date that such shares are
transferred to the Participant under the award (reduced by any amount paid by
the Participant for such Deferred Shares), and the capital gains/loss holding
period for such shares will also commence on such date.
Performance Shares. No income generally will be recognized upon the grant
of Performance Shares. Upon payment in respect of the earn-out of Performance
Shares, the recipient generally will be required to include as taxable ordinary
income in the year of receipt an amount equal to the amount of cash received
and the fair market value of any unrestricted shares of Common Stock received.
TAX CONSEQUENCES TO THE CORPORATION
To the extent that a Participant recognizes ordinary income in the
circumstances described above, the Corporation will be entitled to a
corresponding deduction, provided that, among other things, the income meets
the test of reasonableness, is an ordinary and necessary business expense, is
not an "excess parachute payment" within the meaning of Section 280G of the
Code and is not disallowed by the $1,000,000 limitation on certain executive
compensation under Section 162(m) of the Code.
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<PAGE> 21
PLAN BENEFITS
It is not possible at this time to determine the benefits or amounts that
may be received by a Participant in the Plan. As described above, however,
pursuant to the Employment Agreement between the Corporation and Lawrence E.
Honig, the Board has granted, and has committed to grant in the future, Option
Rights and awards of Restricted Shares to Mr. Honig under the Plan. (See pages
9-10 above.)
As of April 24, 1998, the market value of the Corporation's Common Stock,
as determined by its closing price on that date on the Nasdaq National Market,
was $7.625 per share.
3. APPROVAL OF THE 1998 DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
On February 26, 1998, the Board of Directors unanimously adopted, subject
to the approval of the Corporation's stockholders at the 1998 annual meeting,
the Edison Brothers Stores, Inc. 1998 Deferred Stock Compensation Plan for
Non-Employee Directors (the "Deferred Stock Plan"). The Deferred Stock Plan
will allow directors who are not employees of the Corporation or any of its
subsidiaries or affiliates ("Non-Employee Directors") to defer their
directors' fees and receive such deferred compensation in the form of shares of
Common Stock of the Corporation following the termination of their service as
directors.
The purpose of the Deferred Stock Plan is to encourage Non-Employee
Directors to acquire a greater personal stake in the success of the Corporation
and thereby increase the identification of interests between such directors and
the stockholders of the Corporation.
An affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the annual meeting and entitled to vote on the proposal
will constitute stockholder approval of the Deferred Stock Plan.
The Board of Directors unanimously recommends a vote FOR this proposal.
The full text of the Deferred Stock Plan is set forth as Exhibit B to this
proxy statement. The following is a summary of the provisions of the Deferred
Stock Plan and is qualified by reference to the full text thereof.
Under the Deferred Stock Plan, each person who is a Non-Employee Director
on the date any annual retainer or meeting fees are payable to such director
will be eligible to defer receipt of all or any portion of such fees. To
participate in the Deferred Stock Plan, a Non-Employee Director must file a
written deferral election with the Secretary of the Corporation indicating the
portion (up to 100%) of the fees the director wishes to defer. Each Non-
Employee Director who is a member of the Board on the date of the 1998 annual
meeting of stockholders may make such a deferral election at any time prior to
that date, to take effect as of that date. Any Non-Employee Director who is
serving on the Board at that date who does not make a deferral election prior
thereto, or any person who first becomes a Non-Employee Director after that
date, may make a deferral election at any time before the commencement of any
subsequent calendar year, which election shall be effective as of the first day
of such calendar year.
Once a Non-Employee Director has made a deferral election, that election
will remain in effect unless the director revokes or modifies it by filing a
new deferral election. The change will be effective as of the first day of the
subsequent calendar year.
A "stock unit account" will be established for each participant in the
Deferred Stock Plan. At each fee payment date, the account will be credited
with a number of stock units (including fractional units) equal to the amount
of the fees deferred, divided by the fair market value of a share of Common
Stock on that date. If dividends are paid on the Common Stock, the stock unit
account will be credited with additional stock units in the same manner as if
dividends on actual shares of Common Stock were reinvested. Stock unit accounts
will also be adjusted to reflect any stock split, recapitalization or similar
occurrence.
A participant's stock unit account will be settled by delivering to the
participant a number of shares of Common Stock equal to the number of stock
units then credited to the account. Such delivery will be made on the first day
of the calendar month immediately following the month in which the participant
ceases to be a member of the Board of Directors, unless the participant has
elected (by so indicating on the participant's deferral election form) to defer
delivery until January 1 of the following year. A participant may also elect
(by so indicating on the deferral election form) to have the delivery of Common
Stock made in up to ten annual installments. If a participant elects to have
the delivery made in annual installments, the number of shares of Common Stock
delivered in each installment will be determined by dividing the number of
stock units credited to the participant's stock unit account on the date of
payment of such installment by the number of remaining unpaid installments. If
a lump sum payment or the final installment payment would result in the
issuance of a fractional share of Common Stock, cash in lieu of such fractional
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<PAGE> 22
share will be paid to the participant based on the market value of a share of
Common Stock on the day immediately preceding the date of such payment. A
participant's stock unit account will continue to be credited with dividends
paid on the Common Stock and will remain subject to adjustment in the event of
a stock split or recapitalization until the entire balance of the stock unit
account has been distributed. A participant may change the manner in which his
or her stock unit account is to be distributed by filing a new deferral
election form with the Secretary of the Corporation, but only with the prior
consent of the Board or the committee of the Board administering the Deferred
Stock Plan and only if the new election is filed at least six months before the
date the participant ceases to be a member of the Board.
A participant may designate one or more beneficiaries to receive payment of
the participant's stock unit account in the event the participant dies before
receiving full payment. If a participant fails to designate a beneficiary, or
if all designated beneficiaries die before complete payment is made, any
remaining unpaid amounts will be paid in one lump sum to the participant's
estate.
The stock unit accounts established under the Deferred Stock Plan will be
merely bookkeeping entries evidencing unfunded and unsecured general
obligations of the Corporation. The Corporation will not be required to reserve
or otherwise set aside shares of Common Stock for the payment of its
obligations under the Deferred Stock Plan. A participant's interest in any fees
deferred under the Deferred Stock Plan will be that of a general creditor of
the Corporation.
The Deferred Stock Plan will be administered by the Board of Directors or a
committee of its members appointed by the Board. Subject to the express
provisions of the Deferred Stock Plan, the committee will have complete
authority to make all determinations necessary for its administration. The
Board may amend or terminate the Deferred Stock Plan at any time, but no such
action taken without a participant's consent may adversely affect the rights of
such participant with respect to any stock units credited to his or her stock
unit account at the time of such amendment or termination.
It is not possible at this time to determine the benefits or amounts that
will be received by any director who participates in the Deferred Stock Plan.
4. APPROVAL OF THE 1998 RESTRICTED STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS
On April 15, 1998, the Board of Directors unanimously adopted, subject to
the approval of the Corporation's stockholders at the 1998 annual meeting, the
Edison Brothers Stores, Inc. 1998 Restricted Stock Plan for Non-Employee
Directors (the "Restricted Stock Plan"). The purpose of the Restricted Stock
Plan is to provide ownership of the Corporation's Common Stock to non-employee
members of the Board of Directors in order to improve the Corporation's ability
to attract and retain highly qualified individuals to serve as directors of the
Corporation, to provide competitive remuneration for Board service, and to
strengthen the commonality of interest between directors and stockholders.
An affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the annual meeting and entitled to vote on the proposal
will constitute stockholder approval of the Restricted Stock Plan.
The Board of Directors unanimously recommends a vote FOR this proposal.
The full text of the Restricted Stock Plan is set forth as Exhibit C to
this proxy statement. The following is a summary of the provisions of the
Restricted Stock Plan and is qualified by reference to the full text thereof.
Under the Restricted Stock Plan, each person who is a non-employee director
of the Corporation at the close of business on the date the Restricted Stock
Plan is approved by the Corporation's stockholders will automatically be
granted on that date 7,500 shares of Restricted Stock. Each person who first
becomes a non-employee director of the Corporation after such date will
automatically be granted, on the date such person becomes a non-employee
director, 7,500 shares of Restricted Stock.
A grant of Restricted Stock will constitute an immediate transfer of
ownership of the shares, in consideration of the performance of services,
entitling the recipient to voting, dividend and other ownership rights in such
shares, subject to the risk of forfeiture and restrictions on transfer
hereinafter described.
The shares of Restricted Stock will be subject to forfeiture during a
specified period (the "Restricted Period"). The Restricted Period will begin
on the date of grant and will expire with respect to one-third of the total
shares granted on each of the first three anniversaries of the date of grant.
The Restricted Period will expire immediately with respect to all shares of
Restricted Stock held by a non-employee director in the event of (i) the
non-employee
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<PAGE> 23
director's death or Disability (as defined in the Restricted Stock Plan) or
(ii) a Change in Control (as defined in the Restricted Stock Plan). If a
non-employee director ceases to be a member of the Board of Directors before
the Restricted Period has expired with respect to any portion of the grant, all
of the shares of Restricted Stock with respect to which the Restricted Period
has not expired will be forfeited.
During the Restricted Period, the Restricted Stock will not be transferable
by the non-employee director. All certificates issued for Restricted Stock will
be held by the Secretary of the Corporation until the expiration of the
Restricted Period, at which time the certificates will be delivered to the
non-employee director to whom such Restricted Stock was issued.
Unless the shares of Common Stock available for issuance under the
Restricted Stock Plan are then registered under the Securities Act of 1933, as
amended, each grant of Restricted Stock will require that the non-employee
director to whom such Restricted Stock is granted represent to the Corporation
in writing that the Restricted Stock is being acquired for investment for the
non-employee director's own account and not with a view to resale or
distribution.
The Restricted Stock Plan will be administered by the Compensation
Committee of the Board of Directors, unless the administration is expressly
assumed by the Board pursuant to resolution.
Each grant of Restricted Stock will be evidenced by an agreement between
the Corporation and the non-employee director containing such terms and
conditions, consistent with the Restricted Stock Plan, as the Compensation
Committee of the Board may approve.
Subject to adjustment for changes in the capitalization of the Corporation
as provided therein, a maximum of 75,000 shares of Restricted Stock may be
granted under the Restricted Stock Plan. Any shares of Restricted Stock that
are forfeited or surrendered or cancelled for any reason will again be
available for issuance under the Restricted Stock Plan. The number of shares of
Restricted Stock that will actually be granted under the Restricted Stock Plan
depends on the number of non-employee directors elected by the Corporation's
stockholders at the 1998 annual meeting and subsequent annual meetings, and
therefore cannot be determined with certainty.
The Restricted Stock Plan may be amended, suspended or terminated at any
time by the Board of Directors, provided that any amendment that must be
approved by the stockholders of the Corporation in order to comply with
applicable law or the rules of the Nasdaq National Market (or, if the Common
Stock is not then traded on the Nasdaq National Market, the rules of any
national securities exchange upon which the Common Stock is then traded), will
not be effective unless and until such approval has been obtained. No amendment
of the Restricted Stock Plan may, without the written consent of a non-employee
director to whom Restricted Stock has been granted under the Restricted Stock
Plan, adversely affect the rights of such non-employee director with respect to
such Restricted Stock.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the federal income tax
consequences of transactions under the Restricted Stock Plan based on federal
income tax laws in effect on January 1, 1998. This summary is not intended to
be complete and does not describe state or local tax consequences.
A recipient of Restricted Stock generally will be subject to tax at
ordinary income rates on the fair market value of the Restricted Stock at such
time as the shares are no longer subject to forfeiture or restrictions on
transfer within the meaning of Section 83 of the Internal Revenue Code.
However, a recipient may elect under Section 83(b) of the Internal Revenue Code
to include in income in the year of grant the fair market value of the shares
(determined without regard to any restrictions thereon) on the date of grant.
To the extent a non-employee director recognizes ordinary income in the
circumstances described above, the Corporation will generally be entitled to a
corresponding deduction.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the Corporation and any persons owning more than ten percent
of the Corporation's Common Stock to report their ownership of the
Corporation's Common Stock to the Securities and Exchange Commission. Based on
its review of the reports filed by such persons, and on written representations
by certain of such persons that no reports on Form 5 were required to be filed
by them, the Corporation believes that all Section 16(a) reporting requirements
for its 1997 fiscal year were complied with by its officers, directors and
greater than ten percent stockholders.
STOCKHOLDER PROPOSALS
FOR 1999 ANNUAL MEETING
STOCKHOLDER PROPOSALS FOR INCLUSION IN THE PROXY STATEMENT
In order to be considered for inclusion in the Corporation's proxy
statement for the annual meeting of stockholders to be held in 1999, all
stockholder proposals must be received by the Secretary of the Corporation on
or before January 1, 1999. Any such proposal must meet the applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder.
OTHER STOCKHOLDER PROPOSALS AND NOMINATIONS
The Corporation's Amended and Restated By-Laws prescribe the procedures a
stockholder must follow to nominate directors for election at an annual meeting
or to bring other business (other than that included in the Corporation's proxy
statement) before an annual meeting. The By-Laws provide that the presiding
officer of the meeting shall refuse to recognize the nomination of any person
as a director or any other proposal by a stockholder not made in compliance
with these procedures. The following summary of these procedures is qualified
by reference to the By-Laws, a copy of which may be obtained, without charge,
upon written request to the Secretary of the Corporation.
A stockholder who intends to nominate a director for election at an annual
meeting of stockholders must give timely written notice to the Secretary of the
Corporation. To be timely, such notice must be received at least ninety days
prior to the anniversary date of the immediately preceding annual meeting;
however, if the date of the annual meeting is advanced by more than thirty days
from such anniversary date, then the notice must be received not later than ten
days following the date on which notice of the meeting was mailed to
stockholders. The notice must contain certain information, as specified in the
By-Laws, regarding the stockholder giving the notice and each person whom the
stockholder intends to nominate.
A stockholder who wishes to bring other business before an annual meeting
must similarly give timely written notice to the Secretary of the Corporation,
setting forth, as to each matter the stockholder proposes to bring before the
annual meeting, (a) a brief description of the matter, (b) the name and address
of the stockholder making the proposal, (c) the number of shares of Common
Stock beneficially owned by such stockholder and (d) any material interest of
the stockholder in such matter.
ADDITIONAL INFORMATION
On January 8, 1998, upon the recommendation of the Audit Committee of the
Board of Directors, the Board selected Arthur Andersen LLP to serve as the
Corporation's independent public accountants for the 1997 fiscal year.
Ernst & Young LLP was dismissed as the Corporation's independent public
accountants effective that same day. The reports of Ernst & Young on the
Corporation's consolidated financial statements for each of the two years in
the period ended February 1, 1997 contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principle, other than as to the Corporation's ability to continue as
a going concern and a change in its method of accounting for the impairment of
long-lived assets and for long-lived assets to be disposed of as disclosed in
the notes to the consolidated financial statements.
During the Corporation's two fiscal years ended February 1, 1997 and the
subsequent interim period through January 8, 1998, there were no disagreements
("Disagreements"), as defined in Item 304(a)(1)(iv) and the Instructions to
Item 304 of Regulation S-K promulgated pursuant to the Securities Exchange Act
of 1934, as amended, between the Corporation and Ernst & Young on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which Disagreements if not resolved to Ernst & Young's
satisfaction would have caused Ernst & Young to make reference thereto in
connection with its report.
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<PAGE> 25
Ernst & Young has furnished a letter addressed to the Securities and
Exchange Commission stating that it agrees with the above statements. A copy of
such letter is filed as an exhibit to the Corporation's Form 8-K Current
Report, dated January 14, 1998.
At no time prior to its engagement of Arthur Andersen did the Corporation
consult Arthur Andersen regarding the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Corporation's financial statements.
Representatives of Arthur Andersen are expected to be present at the annual
meeting, with the opportunity to make a statement if they desire to do so, and
to be available to respond to appropriate questions.
It is expected that the Audit Committee, at its meeting to be held on or
about June 10, 1998, will recommend, and that the Board of Directors will
approve, the reappointment of Arthur Andersen as independent public accountants
for the Corporation for the 1998 fiscal year.
The Corporation's Annual Report including financial statements for the 52
weeks ended January 31, 1998 is simultaneously herewith being mailed to all
holders of Common Stock of record as of April 21, 1998, the record date for the
determination of stockholders entitled to vote at the annual meeting.
THE CORPORATION WILL FURNISH WITHOUT CHARGE A COPY OF ITS MOST RECENT FORM
10-K REPORT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION TO ANY
STOCKHOLDER OF RECORD OR BENEFICIAL OWNER OF SHARES MAKING A WRITTEN REQUEST
THEREFOR ADDRESSED TO THE SECRETARY, EDISON BROTHERS STORES, INC., P.O. BOX
14020, ST. LOUIS, MISSOURI 63178.
EDISON BROTHERS STORES, INC.
Alan A. Sachs
Secretary
Dated: May 5, 1998
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<PAGE> 26
Exhibit A
EDISON BROTHERS STORES, INC.
1998 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of the 1998 Equity Incentive Plan is to attract and
retain consultants, officers and other key employees for Edison Brothers
Stores, Inc., a Delaware corporation and its Subsidiaries, and to provide to
such persons incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Board" means the Board of Directors of the Company and, to the extent of
any delegation by the Board to a committee (or subcommittee thereof) pursuant
to Section 14 of this Plan, such committee (or subcommittee).
"Change in Control" shall have the meaning provided in Section 10 of this
Plan.
"Chapter 11 Case" means the case commenced by the Company on November 3,
1995 under Chapter 11 of Title 11 of the United States Code in the United
States Bankruptcy Court in the State of Delaware (Case No. 95-1354 (PJW)).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Stock" means the Common Stock, par value $0.01 per share, of the
Company authorized and issued pursuant to the terms of the plan of
reorganization of the Company under Chapter 11 of Title 11 of the United States
Code as confirmed by the Bankruptcy Court in the Chapter 11 Case or any
security into which such shares of Common Stock may be changed by reason of any
transaction or event of the type referred to in Section 9 of this Plan.
"Company" means Edison Brothers Stores, Inc., a Delaware corporation.
"Covered Employee" means a Participant who is, or is determined by the
Board likely to become, a "covered employee" within the meaning of Section
162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which a grant of
Option Rights, or Performance Shares or a grant or sale of Restricted Shares or
Deferred Shares shall become effective (which date shall not be earlier than
the date on which the Board takes action with respect thereto).
"Deferral Period" means the period of time during which Deferred Shares
are subject to deferral limitations under Section 6 of this Plan.
"Deferred Shares" means an award made pursuant to Section 6 of this Plan
of the right to receive shares of Common Stock at the end of a specified
Deferral Period.
"Director" means a member of the Board of Directors of the Company.
"Eligible Transferee" means (i) one or more members of the Participant's
Immediate Family, (ii) one or more trusts established solely for the benefit of
one or more members of such Participant's Immediate Family, (iii) one or more
corporations or limited liability companies in which the only equity holders
are members of such Participant's Immediate Family, or (iv) one or more
partnerships in which the only partners are members of such Participant's
Immediate Family.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, as such law, rules and regulations may be
amended from time to time.
"Immediate Family" has the meaning ascribed thereto in Rule 16a-1(e)
under the Exchange Act (or any successor rule to the same effect) as in effect
from time to time.
"Incentive Stock Options" means Option Rights that are intended to
qualify as "incentive stock options" under Section 422 of the Code or any
successor provision.
"Management Objectives" means the measurable performance objective or
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or, when so determined by the Board, Option
Rights, Restricted Shares, Deferred Shares and dividend credits pursuant to
this Plan. Management Objectives may be described in terms of Company-wide
objectives or objectives that are related to the performance of the individual
Participant or of the Subsidiary, division, department, region or function
within the Company or Subsidiary in which the Participant is employed. The
Management Objectives may be made relative to the performance of other
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corporations. The Management Objectives applicable to any award to a Covered
Employee shall be based on specified levels of or growth in one or more of the
following criteria:
1. market value;
2. book value;
3. earnings per share;
4. market share;
5. operating profit;
6. net income;
7. cash flow;
8. return on capital;
9. return on assets;
10. return on equity;
11. margins;
12. shareholder return;
13. sales or product volume growth;
14. quantifiable and objective productivity improvement;
15. costs or expenses;
16. net assets; or
17. debt/capital ratio.
If the Board determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts its business, or other events or circumstances render the
Management Objectives unsuitable, the Board may in its discretion modify such
Management Objectives or the related minimum acceptable level of achievement,
in whole or in part, as the Board deems appropriate and equitable, except in
the case of a Covered Employee where such action would result in the loss of
the otherwise available exemption of the award under Section 162(m) of the
Code. In such case, the Board shall not make any modification of the Management
Objectives or minimum acceptable level of achievement.
"Market Value per Share" means, as of any particular date, the average of
the highest and lowest selling prices of a share of Common Stock as reported
for that date (or, if no prices are quoted for that date, for the last
preceding date for which such prices are quoted) on the New York Stock
Exchange, or, if the Common Stock is not then listed on the New York Stock
Exchange, on such other national securities exchange on which the Common Stock
is listed or, if not so listed, then on the Nasdaq National Market. If, as of a
particular date, the Common Stock is not listed or quoted on any national
securities exchange or on the Nasdaq National Market, then the Market Value per
Share of a share of Common Stock as of such date shall be determined according
to such criteria as the Board in good faith shall deem appropriate.
"Non-Employee Director" means a person who is a "non-employee director"
within the meaning of Rule 16b-3.
"Optionee" means the optionee named in an agreement evidencing an
outstanding Option Right.
"Option Price" means the purchase price payable on exercise of an Option
Right.
"Option Right" means the right to purchase shares of Common Stock upon
exercise of an option granted pursuant to Section 4 of this Plan.
"Outside Director" means a person who is an "outside director" within
the meaning of Section 162(m) of the Code.
"Participant" means a person who is selected by the Board to receive
benefits under this Plan and who is at the time a consultant, an officer, or
other key employee of the Company or any one or more of its Subsidiaries, or
who has agreed to commence serving in any of such capacities.
"Performance Period" means, in respect of a Performance Share, a period
of time established pursuant to Section 7 of this Plan within which the
Management Objectives relating to such Performance Share are to be achieved.
"Performance Share" means a bookkeeping entry that records the equivalent
of one share of Common Stock awarded pursuant to Section 7 of this Plan.
"Plan" means this Edison Brothers Stores, Inc. 1998 Equity Incentive
Plan.
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"Restricted Shares" means shares of Common Stock granted or sold pursuant
to Section 5 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 5 has
expired.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act (or any successor
rule to the same effect) as in effect from time to time.
"Subsidiary" means a corporation, company or other entity (i) more than
50 percent of whose outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority) are, or (ii)
which does not have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association) but more than 50
percent of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive
Stock Options, "Subsidiary" means any corporation in which at the time the
Company owns or controls, directly or indirectly, more than 50 percent of the
total combined voting power represented by all classes of stock issued by such
corporation.
"Voting Power" means, at any time, the total votes relating to the
then-outstanding securities entitled to vote generally in the election of
Directors.
3. SHARES AVAILABLE UNDER THE PLAN.
(a) Subject to adjustment as provided in Section 3(b) and Section 9 of this
Plan, the number of shares of Common Stock that may be issued or
transferred (i) upon the exercise of Option Rights, (ii) as Restricted
Shares and released from substantial risks of forfeiture thereof, (iii)
as Deferred Shares, (iv) in payment of Performance Shares that have
been earned, or (v) in payment of dividend equivalents paid with
respect to awards made under the Plan, shall not exceed in the
aggregate 700,000 shares of Common Stock. Such shares may be shares of
original issuance or treasury shares or a combination of the foregoing.
(b) The number of shares available in Section 3(a) above shall be adjusted
to account for shares relating to awards that expire, are forfeited or
are transferred, surrendered or relinquished upon the payment of any
Option Price by the transfer to the Company of shares of Common Stock
or upon satisfaction of any withholding amount. Upon payment in cash of
the benefit provided by any award granted under this Plan, any shares
that were covered by that award shall again be available for issue or
transfer hereunder.
(c) Notwithstanding anything to the contrary in this Section 3 or elsewhere
in this Plan, and subject to adjustment as provided in Section 9 of
this Plan, (i) the aggregate number of shares of Common Stock actually
issued or transferred by the Company upon the exercise of Incentive
Stock Options shall not exceed 700,000 shares of Common Stock; (ii) no
Participant shall be granted Option Rights, in the aggregate, for more
than 700,000 shares of Common Stock during any calendar year; and (iii)
the number of shares issued as Restricted Shares shall not in the
aggregate exceed 200,000 shares of Common Stock.
(d) Notwithstanding any other provision of this Plan to the contrary, in no
event shall any Participant in any calendar year receive an award of
Performance Shares intended to qualify for exemption under Section
162(m) of the Code of more than 700,000 shares of Common Stock.
(e) The method of counting shares subject to the limits described in
subsection (ii) of Section 3(c) and Section 3(d) shall conform to any
requirements applicable to performance-based compensation under Section
162(m) of the Code.
4. OPTION RIGHTS. The Board may, from time to time and upon such terms and
conditions as it may determine, authorize the granting to Participants of
options to purchase shares of Common Stock. Each such grant may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each grant shall specify the number of shares of Common Stock to which
it pertains subject to the limitations set forth in Section 3 of this
Plan.
(b) (i) Except as provided in subsection (ii) of this Section 4(b), each
grant shall specify an Option Price per share, which may not be
less than the Market Value per Share on the Date of Grant.
(ii) The Option Price per share of any Option Rights granted to any
executive officer of the Company in connection with the negotiation
and execution of such officer's initial employment agreement with
the Company may not be less than the lesser of (x) the Market Value
per Share on the Date of Grant, or (y)
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the Market Value per Share on the date immediately prior to the
date on which the Company publicly announces such officer's
agreement to commence serving as an executive officer of the
Company.
(c) Each grant shall specify whether the Option Price shall be payable (i)
in cash or by check acceptable to the Company, (ii) by the tender to
the Company of shares of Common Stock owned by the Optionee and
registered in the name of the Optionee having an aggregate fair market
value on the date of exercise equal to the total Option Price, such
fair market value to be determined based on the Market Value per Share
on the date of exercise, (iii) by delivery of irrevocable instructions
to a financial institution or broker to deliver promptly to the Company
sale or loan proceeds with respect to the shares sufficient to pay the
total Option Price, (iv) through the written election of the Optionee
to have shares of Common Stock withheld by the Company from the shares
otherwise to be received, with such withheld shares having an aggregate
fair market value on the date of exercise equal to the total Option
Price of the shares being purchased, or (v) by any combination of the
payment methods specified in clauses (i) through (iv) hereof.
(d) Successive grants may be made to the same Participant whether or not
any Option Rights previously granted to such Participant remain
unexercised.
(e) Each grant shall specify the period or periods of continuous service by
the Optionee with the Company or any Subsidiary, if any, or other
conditions (including the satisfaction of Management Objectives) that
may be necessary before the Option Rights or installments thereof will
become exercisable and may provide for the earlier exercise of such
Option Rights in the event of a Change in Control or other
circumstances.
(f) Option Rights granted under this Plan may be (i) options, including,
without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are
not intended so to qualify, or (iii) combinations of the foregoing.
(g) The Board may, at or after the Date of Grant of any Option Rights
(other than Incentive Stock Options), provide for the payment of
dividend equivalents to the Optionee on either a current or deferred or
contingent basis or may provide that such equivalents shall be credited
against the Option Price.
(h) No Option Right shall be exercisable more than 10 years from the Date
of Grant.
(i) The Board, in its sole discretion, may grant tax-offset bonus rights
("TOBRs") with respect to awards of Option Rights. Such TOBRs may be
granted to an Optionee at the time of the grant of the related Option
Right or subsequent thereto. A TOBR shall entitle the Optionee to
receive from the Company upon exercise of the related Option Right an
amount of cash equal to (i) the excess, if any, of the aggregate market
price of the shares of Common Stock acquired by the exercise of the
Option Right on the date of exercise over the aggregate Option Price of
the shares of Common Stock acquired by such exercise multiplied by (ii)
a percentage (either fixed or by formula) determined solely by the
Board. The Board shall determine all other terms and provisions of any
TOBR. No TOBR shall be assignable or transferable except to the extent
authorized by the Board.
(j) Each grant of Option Rights shall be evidenced by an agreement executed
on behalf of the Company by a duly authorized officer and delivered to
and accepted by the Optionee and shall contain such terms and
provisions, consistent with this Plan, as the Board may approve.
5. RESTRICTED SHARES. The Board may authorize the grant or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate transfer of the
ownership of shares of Common Stock to the Participant in consideration
of the performance of services, entitling such Participant to voting,
dividend and other ownership rights, but subject to the substantial
risk of forfeiture and restrictions on transfer hereinafter referred
to.
(b) Each such grant or sale may be made without additional consideration or
in consideration of a payment by such Participant that is less than
Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted Shares
covered by such grant or sale shall be subject to a "substantial risk
of forfeiture" within the meaning of Section 83 of the Code for a
period to be determined by the Board at the Date of Grant, except (if
the Board shall so determine) in the event of a Change in Control or
other circumstances.
(d) Each such grant or sale shall provide that during the period for which
such substantial risk of forfeiture is to continue, the transferability
of the Restricted Shares shall be prohibited or restricted in the
manner and to the extent prescribed by the Board at the Date of Grant
(which restrictions may include, without limitation,
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rights of repurchase or first refusal in the Company or provisions
subjecting the Restricted Shares to a continuing substantial risk of
forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management Objectives that,
if achieved, will result in termination or early termination of the
restrictions applicable to such shares. Each grant may specify in
respect of such Management Objectives a minimum acceptable level of
achievement and may set forth a formula for determining the number of
Restricted Shares on which restrictions will terminate if performance
is at or above the minimum level but falls short of full achievement of
the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require that any or all
dividends or other distributions paid thereon during the period of such
restrictions be automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced by an
agreement executed on behalf of the Company by a duly authorized
officer and delivered to and accepted by the Participant and shall
contain such terms and provisions, consistent with this Plan, as the
Board may approve. Unless otherwise directed by the Board, all
certificates representing Restricted Shares shall be held in custody by
the Company until all restrictions thereon shall have lapsed, together
with a stock power or powers executed by the Participant in whose name
such certificates are registered, endorsed in blank and covering such
Shares.
6. DEFERRED SHARES. The Board may authorize the granting or sale of
Deferred Shares to Participants. Each such grant or sale may utilize any or all
of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by the Company
to deliver shares of Common Stock to the Participant in the future in
consideration of the performance of services, but subject to the
fulfillment of such conditions during the Deferral Period as the Board
may specify.
(b) Each such grant or sale may be made without additional consideration or
in consideration of a payment by such Participant that is less than the
Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral Period as
determined by the Board at the Date of Grant except (if the Board shall
so determine) in the event of a Change in Control or other
circumstances.
(d) During the Deferral Period, the Participant shall have no right to
transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them,
but the Board may, at or after the Date of Grant, authorize the payment
of dividend equivalents on such Shares on either a current or deferred
or contingent basis, either in cash or in additional shares of Common
Stock.
(e) Each grant or sale of Deferred Shares shall be evidenced by an
agreement executed on behalf of the Company by a duly authorized
officer and delivered to and accepted by the Participant and shall
contain such terms and provisions, consistent with this Plan, as the
Board may approve.
7. PERFORMANCE SHARES. The Board may authorize the granting of Performance
Shares that will become payable to a Participant upon achievement of specified
Management Objectives. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements, contained in
the following provisions:
(a) Each grant shall specify the number of Performance Shares to which it
pertains, which number may be subject to adjustment to reflect changes
in compensation or other factors; provided, however, that no such
adjustment shall be made in the case of a Covered Employee where such
action would result in the loss of the otherwise available exemption of
the award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance Share shall be
such period of time as shall be determined by the Board at the time of
grant, except (if the Board shall so determine) in the event of a
Change in Control or other circumstances; provided, however, that no
acceleration determination shall be made in the case of a Covered
Employee where such action would result in the loss of the otherwise
available exemption of the award under Section 162(m) of the Code.
(c) Any grant of Performance Shares shall specify Management Objectives
which, if achieved, will result in payment or early payment of the
award, and each grant shall specify in respect of such specified
Management Objectives a minimum acceptable level of achievement and
shall set forth a formula for determining the number of Performance
Shares that will be earned if performance is at or above the minimum
level but falls short of full achievement of the specified Management
Objectives. The grant of Performance Shares shall specify that, before
the Performance Shares shall be earned and paid, the Board must certify
that the Management Objectives have been satisfied.
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(d) Each grant shall specify the time and manner of payment of Performance
Shares that have been earned. Any grant may specify that the amount
payable with respect thereto may be paid by the Company in cash, in
shares of Common Stock or in any combination thereof and may either
grant to the Participant or retain in the Board the right to elect
among those alternatives.
(e) Any grant of Performance Shares may specify that the amount payable
with respect thereto may not exceed a maximum specified by the Board at
the Date of Grant.
(f) The Board may, at or after the Date of Grant of Performance Shares,
provide for the payment of dividend equivalents to the holder thereof
on either a current or deferred or contingent basis, either in cash or
in additional shares of Common Stock.
(g) Each grant of Performance Shares shall be evidenced by an agreement
executed on behalf of the Company by a duly authorized officer and
delivered to and accepted by the Participant and shall contain such
terms and conditions, consistent with this Plan, as the Board may
approve.
8. TRANSFERABILITY.
(a) Except as otherwise determined by the Board, but subject to the
provisions of Section 8(c), no Option Right or other derivative
security granted under the Plan shall be transferable by a Participant
other than by will or the laws of descent and distribution. Except as
otherwise determined by the Board, Option Rights shall be exercisable
during the Optionee's lifetime only by the Optionee or by the
Optionee's guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or all of the
shares of Common Stock that are (i) to be issued or transferred by the
Company upon the exercise of Option Rights, upon the termination of the
Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or (ii) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to
in Section 5 of this Plan, shall be subject to further restrictions on
transfer.
(c) Notwithstanding the provisions of Section 8(a), but subject to the
prior authorization by the Board (which may be a general
authorization), Option Rights (other than Incentive Stock Options),
Restricted Shares, Deferred Shares and Performance Shares shall be
transferable by a Participant, without payment of consideration
therefor by the transferee, to any Eligible Transferee; provided,
however, that (i) no such transfer shall be effective unless ten (10)
days' prior notice thereof is delivered to the Company and such
transfer is thereafter effected in accordance with any terms and
conditions that shall have been made applicable thereto by the Company
or the Board and (ii) any such Eligible Transferee shall be subject to
the same terms and conditions hereunder as the Participant.
9. ADJUSTMENTS. The Board shall make or provide for such adjustments in the
numbers of shares of Common Stock covered by outstanding Option Rights,
Deferred Shares, and Performance Shares granted hereunder, in the Option Price,
and in the kind of shares covered thereby, as the Board, in its sole
discretion, exercised in good faith, may determine is equitably required to
prevent dilution or enlargement of the rights of Participants or Optionees that
otherwise would result from (a) any stock dividend, stock split, combination of
shares, recapitalization or other change in the capital structure of the
Company, or (b) any merger, consolidation, spin-off, split-off, spin-out,
split-up, reorganization, partial or complete liquidation or other distribution
of assets, issuance of rights or warrants to purchase securities, or (c) any
other corporate transaction or event having an effect similar to any of the
foregoing. Moreover, in the event of any such transaction or event, the Board,
in its discretion, may provide in substitution for any or all outstanding
awards under this Plan such alternative consideration as it, in good faith, may
determine to be equitable in the circumstances and may require in connection
therewith the surrender of all awards so replaced. The Board may also make or
provide for such adjustments in the numbers of shares specified in Section 3 of
this Plan as the Board in its sole discretion, exercised in good faith, may
determine is appropriate to reflect any transaction or event described in this
Section 9; provided, however, that any such adjustment to the number specified
in Section 3(c)(i) shall be made only if and to the extent that such adjustment
would not cause any Option Right intended to qualify as an Incentive Stock
Option to fail so to qualify.
10. CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control"
shall mean the occurrence at any time of any of the following events:
(i) any "person" or "group" (as such terms are used in Section 13(d)
of the Exchange Act) becomes the "beneficial owner" (as determined
pursuant to Rules 13d-3 and 13d-5 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company having more than
33% of the total Voting Power of the Company;
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(ii) at any time during any 24-month period, individuals who at the
beginning of such period constituted the Board (together with any new
directors whose election, or nomination for election by the
stockholders of the Company, to the Board was approved by a majority
of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board then in office;
(iii) the Board approves an agreement providing for the sale, lease,
transfer or other disposition of all or substantially all of the
assets of the Company, in one transaction or a series of related
transactions, to any "person" or "group" (as such terms are used
in Section 13(d) of the Exchange Act) other than a wholly-owned
subsidiary of the Company;
(iv) the Board approves an agreement providing for the merger or
consolidation of the Company with another corporation, other than a
merger in which the Company would be the surviving corporation and
which would result in (a) securities having more than 50% of the total
Voting Power of the surviving or resulting corporation being
"beneficially owned" (as determined pursuant to Rules 13d-3 and
13d-5 under the Exchange Act) by the holders of the capital stock of
the Company immediately prior to such merger and (b) no "person" or
"group" (as such terms are used in Section 13(d) of the Exchange
Act) "beneficially owning" (as determined pursuant to Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, securities
having more than 33% of the total Voting Power of the surviving or
resulting corporation; or
(v) the Board approves a plan for the liquidation or dissolution of the
Company.
11. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Board may provide
for the elimination of fractions or for the settlement of fractions in cash.
12. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements
satisfactory to the Company for payment of the balance of such taxes required
to be withheld, which arrangements (in the discretion of the Board) may include
relinquishment of a portion of such benefit.
13. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as
having been approved and adopted in the same manner as this Plan. No such
special terms, supplements, amendments or restatements, however, shall include
any provisions that are inconsistent with the terms of this Plan as then in
effect unless this Plan could have been amended to eliminate such inconsistency
without further approval by the stockholders of the Company.
14. ADMINISTRATION OF THE PLAN.
(a) (i) Subject to subsection (ii) of this Section 14(a), this Plan shall
be administered by the Board, which may from time to time delegate
all or any part of its authority under this Plan to a committee of
the Board (or subcommittee thereof) consisting of not less than
two Non-Employee Directors appointed by the Board.
(ii) Awards of Option Rights are, and certain awards of Restricted
Shares and Performance Shares may be, intended to qualify as
performance-based compensation under Section 162(m) of the Code.
The grant of such awards, and the administration thereof and any
determinations to be made in connection therewith, shall be carried
out only by a committee of the Board (or subcommittee thereof)
consisting of not less than two Outside Directors appointed by the
Board. Such committee shall grant such awards in a manner
consistent with the rules governing performance-based compensation
under Section 162(m) of the Code.
(b) To the extent of any delegation described in subsection (a) of this
Section 14, references in this Plan to the Board shall be deemed to be
references to any such committee or subcommittee. The interpretation
and construction by the Board of any provision of this Plan or of any
agreement, notification or document evidencing the grant of Option
Rights, Restricted Shares, Deferred Shares or Performance Shares and
any determination by the Board pursuant to any provision of this Plan
or of any such agreement, notification or
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document shall be final and conclusive. No member of the Board shall be
liable for any such action or determination made in good faith.
15. AMENDMENTS, ETC.
(a) The Board may at any time and from time to time amend the Plan in whole
or in part; provided, however, that (i) any amendment which must be
approved by the stockholders of the Company in order to comply with
applicable law or the rules of the Nasdaq National Market or, if the
Common Stock is not traded on the Nasdaq National Market, the principal
national securities exchange upon which the Common Stock is traded or
quoted, shall not be effective unless and until such approval has been
obtained and (ii) no amendment of this Plan may, without the written
consent of a Participant to whom awards under the Plan have been
granted, adversely affect the rights of such Participant under such
awards, which rights shall include all rights of such Participant under
the Plan as it existed as of the Date of Grant of such awards.
Presentation of this Plan or any amendment hereof for stockholder
approval shall not be construed to limit the Company's authority to
offer similar or dissimilar benefits under other plans without
stockholder approval.
(b) The Board also may permit Participants to elect to defer the issuance
of shares of Common Stock or the settlement of awards in cash under the
Plan pursuant to such rules, procedures or programs as it may establish
for purposes of this Plan. The Board also may provide that deferred
issuances and settlements include the payment or crediting of dividend
equivalents or interest on the deferral amounts.
(c) The Board may condition the grant of any award or combination of awards
authorized under this Plan on the surrender or deferral by the
Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Company or a Subsidiary to the
Participant.
(d) In case of termination of employment by reason of death, disability or
normal or early retirement, or in the case of hardship or other special
circumstances, of a Participant who holds an Option Right not
immediately exercisable in full, or any Restricted Shares as to which
the substantial risk of forfeiture or the prohibition or restriction on
transfer has not lapsed, or any Deferred Shares as to which the
Deferral Period has not been completed, or any Performance Shares which
have not been fully earned, or who holds shares of Common Stock subject
to any transfer restriction imposed pursuant to Section 8(b) of this
Plan, the Board may, in its sole discretion, accelerate the time at
which such Option Right may be exercised or the time at which such
substantial risk of forfeiture or prohibition or restriction on
transfer will lapse or the time when such Deferral Period will end or
the time at which such Performance Shares will be deemed to have been
fully earned or the time when such transfer restriction will terminate
or may waive any other limitation or requirement under any such award.
(e) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Company or any
Subsidiary, nor shall it interfere in any way with any right the
Company or any Subsidiary would otherwise have to terminate such
Participant's employment or other service at any time.
(f) To the extent that any provision of this Plan would prevent any Option
Right that was intended to qualify as an Incentive Stock Option from
qualifying as such, that provision shall be null and void with respect
to such Option Right. Such provision, however, shall remain in effect
for other Option Rights and there shall be no further effect on any
provision of this Plan.
16. TERMINATION. No grant shall be made under this Plan after the tenth
anniversary (the "Termination Date") of the date on which this Plan is first
approved by the stockholders of the Company, but all grants made on or prior to
the Termination Date shall continue in effect thereafter subject to the terms
thereof and of this Plan.
17. INVESTMENT PURPOSE. Each award granted under the Plan shall be granted
only on the condition that all purchases of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution, except that
the Board may make such provision in awards granted under the Plan as it deems
necessary or advisable for the release of such condition upon registration with
the Securities and Exchange Commission of the shares available for issuance
under the Plan, or upon the happening of any other contingency warranting the
release of such condition.
18. EFFECTIVE TIME. The Plan shall become effective as of the date of Board
approval (the "Effective Date"), subject to the approval of the Company's
stockholders within twelve (12) months after the Effective Date; provided,
however, that notwithstanding anything herein to the contrary, all awards
intended to qualify as performance-based compensation under Section 162(m) of
the Code made prior to such stockholder approval shall (a) not vest or be
exercisable until such approval shall have been obtained, and (b) be void if
such approval has not been obtained by the end of such twelve-month period.
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Exhibit B
EDISON BROTHERS STORES, INC.
1998 DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
INTRODUCTION
1.1 PURPOSE OF THE PLAN. The Edison Brothers Stores, Inc. 1998 Deferred
Stock Compensation Plan for Non-Employee Directors (the "Plan"), by allowing
fees payable to such Directors to be deferred and received in the form of
Common Stock of the Company, is intended to encourage such Directors to acquire
a greater personal stake in the success of the Company and thereby increase the
identification of interests between such Directors and the stockholders of the
Company.
1.2 EFFECTIVE DATE. The Plan shall be subject to approval by the
stockholders of the Company at the Company's 1998 Annual Meeting of
Stockholders, and if so approved, shall become effective on the date of such
approval.
ARTICLE II
DEFINITIONS
2.1 "Board" means the Board of Directors of the Company.
2.2 "Committee" means the Board or a committee of the Board comprised of
two or more Outside Directors appointed by the Board to administer the Plan.
2.3 "Common Stock" means the Common Stock of the Company, par value $.01
per share.
2.4 "Company" means Edison Brothers Stores, Inc., a Delaware corporation,
or any successor thereto.
2.5 "Deferral Election" means a written election to defer Fees under the
Plan.
2.6 "Director" means a member of the Board who is not an employee of the
Company or any of its subsidiaries or affiliates. For purposes of the Plan, an
employee is an individual whose wages are subject to the withholding of federal
income tax under Section 3401 of the Internal Revenue Code of 1986, as amended.
2.7 "Effective Date" means the date on which the Plan is approved by the
stockholders of the Company as provided in Section 1.2.
2.8 "Fee Payment Date" means the date Fees would otherwise have been paid
to a Participant.
2.9 "Fees" means any retainer or meeting fees payable to a Director for
serving as a member of the Board or of any committee thereof. Fees shall not
include any expenses paid directly or through reimbursement.
2.10 "Market Value," when used with reference to a share of Common Stock
as of a particular date, means the closing price of a share of Common Stock as
reported for that date (or, if no prices are quoted for that date, for the last
preceding date for which such prices are quoted) on the New York Stock
Exchange, or, if the Common Stock is not then listed on the New York Stock
Exchange, on such other national securities exchange on which the Common Stock
is listed or, if not so listed, then on the Nasdaq National Market. If, as of a
particular date, the Common Stock is not listed or quoted on any national
securities exchange or on the Nasdaq National Market, then the Market Value of
a share of Common Stock as of such date shall be determined according to such
criteria as the Committee in good faith shall deem appropriate.
2.11 "Outside Director" means a member of the Board who is a
"non-employee director" as such term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
2.12 "Participant" means a Director who defers Fees under Article V of
the Plan.
2.13 "Secretary" means the Secretary of the Company.
2.14 "Shares" means shares of Common Stock.
2.15 "Stock Units" means the credits to a Participant's Stock Unit
Account under Article V of the Plan.
2.16 "Stock Unit Account" means the account established by the Company
pursuant to Section 5.5.
2.17 "Termination of Service" means termination of service as a member of
the Board for any reason.
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ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have complete authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, and to make all other determinations necessary or
desirable for the administration of the Plan. The decisions of the Committee
with respect to the matters set forth in this Article III shall be final and
binding on all interested parties.
ARTICLE IV
ELIGIBILITY
Each person who is a Director on a Fee Payment Date shall be eligible to
defer Fees payable on such date in accordance with Article V of the Plan. If
any Director subsequently becomes an employee of the Company or any of its
subsidiaries, but does not incur a Termination of Service, such Director shall
continue as a Participant with respect to Fees previously deferred, but shall
cease eligibility with respect to all future Fees, if any, earned while an
employee.
ARTICLE V
DEFERRAL ELECTIONS
5.1 GENERAL RULE. Each Director may, in lieu of receipt of Fees, defer all
or part of such Fees in accordance with this Article V, provided that such
Director is eligible under Article IV of the Plan to defer such Fees on the Fee
Payment Date.
5.2 TIMING OF ELECTION. Each Director who is serving on the Board on the
Effective Date may make a Deferral Election at any time prior to that date,
which election shall be effective as of the Effective Date. Any Director who is
serving on the Board on the Effective Date who does not make a Deferral
Election prior to the Effective Date, and any person who is not serving as a
Director on the Effective Date but thereafter becomes a Director, may make a
Deferral Election at any time before the commencement of any subsequent
calendar year, which election shall be effective as of the first day of such
calendar year.
5.3 DURATION OF ELECTION. A Deferral Election shall apply to Fees payable
after the date such Deferral Election becomes effective and shall be deemed to
be continuing unless the Participant revokes or modifies such Deferral Election
by filing a new Deferral Election before the first day of any subsequent
calendar year, which new Deferral Election shall be effective as of the first
day of such calendar year, subject to the last sentence of Section 6.1 of the
Plan.
5.4 FORM OF ELECTION. A Deferral Election shall be made by completing and
filing with the Secretary a notice of election in the form specified by the
Committee. A Deferral Election shall set forth (a) the portion (up to 100%) of
Fees to be deferred by the Participant, and (b) when the payout shall be made
or commence, and whether it shall be delivered in a lump sum or according to an
installment schedule as provided in Section 6.1 of the Plan.
5.5 STOCK UNIT ACCOUNT. The Company shall establish a Stock Unit Account
for each Participant. On each Fee Payment Date, each Participant's Stock Unit
Account shall be credited with a number of Stock Units equal to the portion of
the Fee payable on such Fee Payment Date deferred by such Participant, divided
by the Market Value of a Share on such Fee Payment Date. Fractional Stock Units
shall be calculated to three decimal places and credited cumulatively.
5.6 CREDITING OF DIVIDENDS. If a dividend or distribution is paid on the
Common Stock in cash or in property other than Shares, then on the date of
payment of the dividend or distribution the Stock Unit Account of each
Participant shall be credited with that number of Stock Units (including
fractional units) equal to the number of Stock Units credited to the account as
of the record date for such dividend or distribution, times the cash amount of
the dividend paid or the fair market value of the property distributed per
Share, divided by the Market Value of a Share on the date such dividend or
distribution is paid.
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ARTICLE VI
SETTLEMENT OF STOCK UNIT ACCOUNTS
6.1 PAYMENT OPTIONS. A Participant's Stock Unit Account is to be settled by
delivering to the Participant a number of Shares equal to the number of Stock
Units then credited to the Participant's Stock Unit Account. Such delivery
shall be made in one lump sum on, or as soon as administratively feasible
after, the first day of the calendar month immediately following the month in
which the Participant incurs a Termination of Service; provided, however, that,
in lieu thereof, a Participant may elect (a) to have the delivery of Shares in
settlement of his or her Stock Unit Account made or commence (as the case may
be) on, or as soon as administratively feasible after, January 1 of the year
immediately following the date on which the Participant incurs a Termination of
Service, and/or (b) to have the delivery of Shares in settlement of his or her
Stock Unit Account made in annual installments over a period not to exceed ten
years following the date of the first such payment. If a Participant elects to
have the delivery made in annual installments, the number of Shares delivered
in each such installment shall be determined by multiplying (i) the number of
Stock Units credited to the Stock Unit Account on the date of payment of such
installment by (ii) a fraction, the numerator of which is one and the
denominator of which is the number of remaining unpaid installments.
Notwithstanding the foregoing, if an election made by a Participant would
result in the delivery of Shares in installments of fewer than 100 Shares per
annum, then all of the Shares to be delivered to the Participant in settlement
of his or her Stock Unit Account shall be delivered in one lump sum. If a lump
sum payment or the final installment payment hereunder would result in the
issuance of a fractional Share, cash in lieu of such fractional Share shall be
paid to the Participant based on the Market Value of a Share on the day
immediately preceding the date of such payment. A Participant's Stock Unit
Account shall continue to be credited with dividends or distributions paid on
the Common Stock pursuant to Section 5.6 and shall be subject to adjustment
pursuant to Article IX until the entire balance of the Stock Unit Account has
been distributed. The election described in this Section 6.1 shall be made when
a Deferral Election is filed under Article V. A Participant may change the
manner in which his or her Stock Unit Account is to be distributed by filing a
new Deferral Election with the Secretary, provided, however, that (a) such
change may be made only with the prior consent of the Committee and (b) the new
Deferral Election must be filed at least six months before the date on which
the Participant incurs a Termination of Service.
6.2 PAYMENT UPON DEATH OF A PARTICIPANT. If a Participant dies before the
entire balance of his or her Stock Unit Account has been distributed, the
balance of the Participant's Stock Unit Account shall be paid in a lump sum, as
soon as administratively feasible after the Participant's death, to the
beneficiary designated by the Participant under Article VIII.
ARTICLE VII
UNFUNDED STATUS
The interest of each Participant in any Fees deferred under the Plan (and
any Stock Units or Stock Unit Account relating thereto) shall be solely that of
a general creditor of the Company. Stock Unit Accounts, and Stock Units
credited thereto, shall at all times be maintained by the Company only as
bookkeeping entries evidencing unfunded and unsecured general obligations of
the Company. The Company shall not be required to acquire, reserve, segregate
or otherwise set aside Shares for the payment of its obligations under the
Plan, but shall make available as and when required a sufficient number of
Shares to meet the needs of the Plan.
ARTICLE VIII
DESIGNATION OF BENEFICIARY
Each Participant may designate, on a form provided by the Committee, one or
more beneficiaries to receive payment of the Participant's Stock Unit Account
if the Participant dies before receiving full payment. The Company may rely
upon the most recent beneficiary designation, provided that such form was
executed by the Participant or his or her legal representative and filed with
the Secretary prior to the Participant's death. If the Participant fails to
designate a beneficiary, or if all designated beneficiaries of the Participant
die before complete payment is made hereunder, any remaining unpaid amounts
shall be paid in one lump sum to the estate of the Participant.
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ARTICLE IX
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
The number of Stock Units credited to each Participant's Stock Unit Account
shall be proportionately adjusted to reflect any dividend or other distribution
on the outstanding Shares payable in Shares or any split or consolidation of
the Shares. If the outstanding Shares shall be changed into or exchangeable for
a different class or classes of securities of the Company or securities of
another corporation, whether through reorganization, reclassification,
recapitalization, merger, consolidation or otherwise, then, in a manner that
the Committee deems equitable, there shall be substituted for each Share to be
delivered upon settlement of Stock Unit Accounts the number and kind of shares
of stock or other securities into which each outstanding Share shall be so
changed or for which each such Share shall be exchanged.
ARTICLE X
GENERAL PROVISIONS
10.1 NO STOCKHOLDER RIGHTS CONFERRED. Nothing contained in the Plan will
confer upon any Participant or beneficiary any rights of a Stockholder of the
Company, unless and until Shares are actually issued or transferred to such
Participant or beneficiary in accordance with Article VI.
10.2 SERVICE AS DIRECTOR. Nothing in this Plan shall be construed as
conferring any right upon any Director to continue as a member of the Board.
10.3 CHANGES TO THE PLAN. The Board may at any time amend, suspend or
terminate the Plan, provided that no amendment, suspension or termination of
the Plan may, without the written consent of an affected Participant, adversely
affect the rights of such Participant with respect to any Stock Units credited
to his or her Stock Unit Account at the time of such amendment, suspension or
termination.
10.4 COMPLIANCE WITH LAWS. The obligation of the Company to issue or
deliver Shares under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such Shares, if deemed necessary or appropriate by counsel for the
Company, (ii) the condition that the Shares shall have been listed (or
authorized for listing upon official notice of issuance) upon each stock
exchange or national quotation system, if any, on which shares of the Common
Stock may then be listed, and (iii) such other conditions or requirements as,
in the opinion of the Company's counsel, may be necessary to comply with all
other applicable laws, regulations, rules and orders then in effect.
10.5 NON-ALIENABILITY OF BENEFITS. Neither a Participant nor any
beneficiary designated by such Participant may alienate, assign, transfer,
pledge, sell or encumber any Stock Unit, Stock Unit Account or any benefit or
right under the Plan, nor shall any Stock Unit, Stock Unit Account or any
benefit or right under the Plan be subject to the claims of any creditors of
any Participant or designated beneficiary.
10.6 GOVERNING LAW. The validity, construction and effect of the Plan will
be governed by (i) the Delaware General Corporation Law, and (ii) to the extent
applicable, the laws (other than the corporation laws) of the State of
Missouri.
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Exhibit C
EDISON BROTHERS STORES, INC.
1998 RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
Edison Brothers Stores, Inc., a Delaware corporation (the "Company"),
hereby establishes the Edison Brothers Stores, Inc. 1998 Restricted Stock Plan
for Non-Employee Directors (the "Plan").
1. PURPOSE. The purpose of the Plan is to provide ownership of the
Company's common stock to non-employee members of the Board of Directors in
order to improve the Company's ability to attract and retain highly qualified
individuals to serve as directors of the Company, to provide competitive
remuneration for Board service, and to strengthen the commonality of interest
between directors and stockholders.
2. EFFECTIVE DATE. The Plan shall be subject to approval by the
stockholders of the Company at the Company's 1998 Annual Meeting of
Stockholders, and, if so approved, shall become effective on the date of such
approval.
3. DEFINITIONS. As used in the Plan,
(a) "Board" means the Board of Directors of the Company.
(b) "Change in Control" shall mean the occurrence of any of the
following events:
(i) any "person" or "group" (as such terms are used in Section
13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) becomes the "beneficial owner" (as determined
pursuant to Rules 13d-3 and 13d-5 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company having
more than 33% of the total voting power of all classes of capital
stock of the Company entitled to vote generally in the election of
directors of the Company;
(ii) at any time during any 24-month period, individuals who at the
beginning of such period constituted the Board (together with any
new directors whose election, or nomination for election by the
stockholders of the Company, to the Board was approved by a
majority of the directors then still in office who either were
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board then in office;
(iii) the Board approves an agreement providing for the sale, lease,
transfer or other disposition of all or substantially all of the
assets of the Company, in one transaction or a series of related
transactions, to any "person" or "group" (as such terms are
used in Section 13(d) of the Exchange Act) other than a
wholly-owned subsidiary of the Company;
(iv) the Board approves an agreement providing for the merger or
consolidation of the Company with another corporation, other than a
merger in which the Company would be the surviving corporation and
which would result in (x) securities having more than 50% of the
total voting power of all classes of capital stock entitled to vote
generally in the election of directors of the surviving or
resulting corporation being "beneficially owned" (as determined
pursuant to Rules 13d-3 and 13d-5 under the Exchange Act) by the
holders of the capital stock of the Company immediately prior to
such merger and (y) no "person" or "group" (as such terms are
used in Section 13(d) of the Exchange Act) "beneficially owning"
(as determined pursuant to Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, securities having more than 33% of
the total voting power of all classes of capital stock entitled to
vote generally in the election of directors of the surviving or
resulting corporation; or
(v) the Board approves a plan for the liquidation or dissolution of the
Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(d) "Committee" means the Compensation Committee of the Board and, to
the extent the administration of this Plan has been assumed by the
Board pursuant to Section 9, the Board.
(e) "Common Stock" means the common stock of the Company, par value
$0.01 per share.
(f) "Date of Grant" means the date on which Restricted Stock is granted
to a Director.
(g) "Disability" means an inability to perform the duties of a member of
the Board by reason of a medically determined physical or mental
impairment which has existed for a continuous period of at least 26
weeks.
(h) "Director" means a member of the Board who is not an employee of the
Company or any Subsidiary.
(i) "Effective Date" means the date on which the Plan is approved by the
stockholders of the Company as provided in Section 2.
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(j) "Restricted Period" means the period of time from the Date of Grant
of Restricted Stock until the risk of forfeiture expires with respect
to such Restricted Stock, as specified in Section 6.
(k) "Restricted Stock" means shares of Common Stock granted pursuant to
Section 5 as to which the Restricted Period has not expired.
(l) "Rule 16b-3" means Rule 16b-3 of the Securities and Exchange
Commission (or any successor rule to the same effect) as in effect
from time to time.
(m) "Subsidiary" means any corporation with respect to which the Company
owns or controls, directly or indirectly, not less than 50% of the
total voting power of all classes of stock entitled to vote generally
in the election of directors of such corporation.
4. SHARES AVAILABLE UNDER PLAN. Subject to adjustment as provided in
Section 7, the total number of shares of Common Stock which may be granted as
Restricted Stock under the Plan shall not exceed 75,000. Such shares may be
shares of original issuance or treasury shares or a combination of the
foregoing. Any shares of Restricted Stock that are forfeited or surrendered or
cancelled for any reason will again be available for issuance under the Plan.
5. GRANTS OF RESTRICTED STOCK.
(a) Each person who is a Director at the close of business on the
Effective Date shall automatically be granted on that date 7,500
shares of Restricted Stock. Each person who first becomes a Director
after the Effective Date shall automatically be granted, on the date
such person first becomes a Director, 7,500 shares of Restricted
Stock.
(b) Each grant of Restricted Stock shall constitute an immediate transfer
of the ownership of shares of Common Stock to the Director in
consideration of the performance of services, entitling such Director
to voting, dividend and other ownership rights, but subject to the
substantial risk of forfeiture and restrictions on transfer
hereinafter referred to.
(c) Each grant of Restricted Stock shall be made without additional
consideration.
(d) Each grant of Restricted Stock shall provide that the shares of
Restricted Stock covered by such grant will be subject to forfeiture
if the Director ceases to be a member of the Board during the
Restricted Period.
(e) Each grant of Restricted Stock shall provide that during the
Restricted Period the Restricted Stock shall not be transferable.
(f) Unless the shares of Common Stock for issuance under the Plan are then
registered under the Securities Act of 1933, as amended, each grant of
Restricted Stock shall require that the Director to whom such
Restricted Stock is granted represent to the Company in writing that
the Restricted Stock is being acquired for investment for the
Director's own account and not with a view to the sale or distribution
thereof.
(g) All certificates issued for Restricted Stock shall be held by the
Secretary of the Company until the expiration of the Restricted Period
applicable to such Restricted Stock, at which time the certificates
shall be delivered to the Director to whom such Restricted Stock was
issued. If any Restricted Stock must be transferred back to the
Company pursuant to this Plan, the Secretary of the Company shall take
appropriate action to cancel the related certificates.
(h) Each grant of Restricted Stock shall be evidenced by an agreement duly
executed on behalf of the Company and delivered to and accepted by the
Director containing such terms and provisions, consistent with this
Plan, as the Committee may approve.
6. RESTRICTED PERIOD.
(a) The Restricted Period will begin on the Date of Grant and will expire
(subject to earlier expiration pursuant to Section 6(b)) with respect
to one-third of the shares of Restricted Stock covered by the grant on
the first anniversary of the Date of Grant, with respect to an
additional one-third of the shares of Restricted Stock covered by the
grant on the second anniversary of the Date of Grant and with respect
to the remaining one-third of the shares of Restricted Stock covered
by the grant on the third anniversary of the Date of Grant (each, a
"Vesting Date"), provided that the Director has remained a member of
the Board for the entire period from the Date of Grant to the relevant
Vesting Date, or to the date specified in Section 6(b), if applicable.
If the Director ceases to be a member of the Board during the
Restricted Period, all of the shares of Restricted Stock with respect
to which the Restricted Period has not expired will be forfeited and
all right, title and interest of the Director to such shares will
terminate without further obligation on the part of the Company.
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(b) The Restricted Period will immediately expire with respect to all
shares of Restricted Stock held by a Director in the event of (i) the
Director's death or Disability or (ii) a Change in Control.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If, by reason of a stock
dividend, stock split, combination of shares, recapitalization, spinoff,
split-up, merger, consolidation or otherwise, the outstanding shares of Common
Stock shall be changed into or exchangeable for a different number or class of
shares of common stock or other securities of the Company or securities of
another corporation, then (a) the aggregate number and/or type of securities
available for grant under the Plan as set forth in Section 4 shall be
appropriately adjusted and (b) there shall be substituted for each share of
Restricted Stock the number and type of securities into which each outstanding
share of Common Stock shall be so changed or for which each such share of
Common Stock shall be exchanged.
8. FRACTIONAL SHARES. The Company will not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Committee may
provide for the elimination of fractions or for the settlement of fractions in
cash.
9. ADMINISTRATION OF THE PLAN. Unless the administration of the Plan has
been expressly assumed by the Board pursuant to a resolution of the Board, the
Plan will be administered by the Committee, which at all times will consist of
not less than two directors appointed by the Board, each of whom will be a
"non-employee director" within the meaning of Rule 16b-3. The interpretation
by the Committee of any provision of the Plan or of any agreement or document
evidencing the grant of Restricted Stock, and any determination by the
Committee pursuant to the Plan or any such agreement or document, will be final
and binding on all interested parties.
10. CHANGES TO THE PLAN. The Board may at any time amend, suspend or
terminate the Plan, provided that (i) any amendment which must be approved by
the stockholders of the Company in order to comply with applicable law or the
rules of the Nasdaq National Market (or, if the Common Stock is not then traded
on the Nasdaq National Market, the rules of any national securities exchange
upon which the Common Stock is then traded) shall not be effective unless and
until such approval has been obtained and (ii) no amendment, suspension or
termination of the Plan may, without the written consent of a Director to whom
Restricted Stock has been granted under the Plan, adversely affect the rights
of such Director with respect to such Restricted Stock, which rights shall
include all rights of the Director under the Plan as it existed as of the Date
of Grant of such Restricted Stock.
11. SERVICE AS DIRECTOR. Nothing in this Plan shall be construed as
conferring any right upon any Director to continue as a member of the Board.
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<PAGE> 41
EDISON BROTHERS STORES, INC.
1998 ANNUAL MEETING
Proxy Solicited by Board of Directors
The undersigned stockholder of Edison Brothers Stores, Inc. hereby appoints
H. Michael Hecht, Lawrence E. Honig and Randolph I. Thornton, Jr., and each of
them, as proxies of the undersigned, with power of substitution in each, to vote
at the annual meeting of stockholders of the Corporation to be held at 501 North
Broadway, St. Louis, Missouri, on June 10, 1998 at 11 o'clock A.M., and at any
adjournments thereof, all shares held of record by the undersigned as of April
21, 1998 in the manner designated on the reverse side hereof as to the matters
listed thereon, and in their discretion as to such other matters as may properly
arise.
(Continued and to be signed and dated on the reverse side.)
^ FOLD AND DETACH HERE ^
<PAGE> 42
1. Election of Six Directors
Nominees: Jeffrey A. Cole, Jacob W. Doft, H. Michael Hecht,
Lawrence E. Honig, Randolph I. Thornton, Jr., Stephen E. Watson
FOR all WITHHOLD AUTHORITY
nominees listed above to vote for all
(except as marked to nominess listed
the contrary at right) above
/ / / /
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space below.)
--------------------------------------------------------------
2. Approval of 1998 Equity Incentive Plan
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of 1998 Deferred Stock Compensation Plan for Non-Employee Directors
FOR AGAINST ABSTAIN
/ / / / / /
4. Approval of 1998 Restricted Stock Plan for Non-Employee Directors
FOR AGAINST ABSTAIN
/ / / / / /
This proxy, when properly executed, will be voted as directed
herein. If no direction is given as to one or more proposals,
then this proxy will be voted FOR the proposal(s).
Dated: , 1998
-------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
(Signature of Stockholder)
(Please sign exactly as name appears at left)
^ FOLD AND DETACH HERE ^
<PAGE> 43
APPENDIX
Page 14 of the printed Proxy Statement contains two Comparison of
Cumulative Total Return graphs. The information within the graphs is depicted
in the tables immediately following graphs.
